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Zero-Based Budgeting: A Step to Solving MPS’s Financial Crisis?

Writer's picture: Shayla OwodunniShayla Owodunni
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The uncomfortable truth: Minneapolis Public Schools (MPS) is staring down an $84 million budget deficit for the 2025-26 school year.

While this challenge is significant, we are not without options. As your at-large MPS school board candidate, I believe the only way to navigate this successfully is through transparency, community engagement, and proven financial strategies. It's safe to say the current approach to budgeting simply won’t cut it anymore. We need something that forces us to take a hard look at every dollar we spend.


My starting point? Adopt elements of Zero-Based Budgeting (ZBB)—a "clean-up" budgeting approach that requires us to start from scratch every year and justify every expense. I am not calling it the end-all, be-all potion to make our woes disappear, but this methodology could be our starting point. It's a rigorous, transparent approach in the face of ongoing challenges related to state funding, enrollment, and all-around financial pressures. In this post, I’ll explain why I believe adopting elements of ZBB could be the right fit for MPS at this stage in the game, and how it stacks up against the Priority-Based Budgeting (PBB) model we’re currently using.


This blog is the first in a series where we will take a dip into MPS’s financial crisis and explore innovative solutions, starting with ZBB. Over the next few entries, I’ll share my brainstorm of ideas including a potential financial task force, corporate partnerships, and community engagement strategies that can help Minneapolis reclaim its financial health without sacrificing educational quality.


Before I embark on a task I always ask myself, "Has this been done before?" I take comfort in knowing we are not the first to face such challenges. In fact, for better or worse, we are in good company across the nation.


So with that, let's talk this through, shall we?


 

WHY ZBB IS DIFFERENT FROM PRIORITY-BASED BUDGETING (PBB)


TL;DR

  • Priority-Based Budgeting (PBB): MPS builds its budget based on previous years' spending. The district adjusts amounts incrementally, without a full review of whether previous programs are still as necessary or impactful.


  • Zero-Based Budgeting (ZBB): ZBB takes an entirely fresh approach every year. Rather than assuming existing programs need to continue receiving the same or more funding, ZBB requires every department to start from zero and justify every single dollar requested. This process eliminates assumptions and allows the district to realign spending based on current needs, making the budget process more transparent and responsive.



The Priority-Based Budgeting Model:

MPS currently follows a Priority-Based Budgeting (PBB) model. Under this system, each department’s previous budget is used as the starting point for the next year’s budget. Funds are allocated based on priorities that have been pre-determined, making incremental adjustments from year to year. While this may seem like a practical way to budget, the PBB model has inherent flaws when it comes to addressing the scale of the crisis MPS now faces.


Key Limitations of PBB:

  1. Inefficiencies May Remain Hidden: With PBB, departments and programs don’t need to justify their entire budget; they only justify additional funding. This allows redundancies and inefficiencies to persist, often continuing to fund programs and initiatives that may no longer align with the district’s current needs or priorities.

  2. Rigid Structure: PBB locks MPS into funding legacy programs and initiatives without reevaluating their current relevance or effectiveness. Even if some programs aren’t working, PBB makes it difficult to shift resources elsewhere because it assumes that past spending decisions were correct.

  3. Can Prove Inadequate for a Crisis: When you’re facing an $84 million deficit, there’s not much wiggle room for assumptions. The budget process needs to account for the reality that past spending may not reflect current needs, especially in the wake of a financial crisis.


Enter Zero-Based Budgeting (ZBB):

With Zero-Based Budgeting, there are no assumptions. Each department starts its budget at zero and must justify every expense, every year. This creates a far more transparent and accountable system, ensuring that every dollar spent is directly tied to student outcomes and the district’s most urgent needs. Maybe a few years' worth of analysis would do our district some good?


"The first budgeting question is, “Are inputs reasonable given the expected output?” This method seeks to create greater transparency in how line items are arrived at by requiring detailed justifications of line-item requests in lieu of pointing to prior years’ allocations as the justification."

I think that is a valid question to ask?

"Any form of ZBB entails digging into the details of the budget as a starting point. While there is potential value to this, as the advantages of ZBB attest, it does color the role of elected decision makers. With the zero-line item approach to ZBB, it means that elected officials are asked to use detailed operational information in order to make their budget decisions, rather than using the bigger-picture strategic questions to which elected officials are best suited."

I think this is where a community financial task force would be a significant strength, bringing together community leaders, financial experts, and parents to provide oversight and guidance as we tackle the deficit and ensure transparency.

 

A LACK OF TRANSPARENCY ALWAYS HAS CONSEQUENCES


Similar to us, San Diego Unified School District (SDUSD) is currently facing a new $176 million budget deficit.

San Diego Unified school board president Shana Hazan acknowledges what’s gone wrong in the past when it comes to transparency. “Leaders didn't share information about potential cuts early in the year because there was a desire to protect our staff and community from discomfort,” Hazan said.

In my opinion, discomfort is a lot easier to stomach when it is served early.


 

ZERO-BASED BUDGETING PERKS


1. Greater Accountability:

Zero-Based Budgeting may increase accountability at every level of the district by requiring each dollar to be fully justified. This will ensure that funds are allocated based on current needs rather than historical spending patterns. In contrast, PBB may allow underperforming or outdated programs to continue receiving funding without a thorough review.


2. Eliminating Redundancies:

ZBB could help MPS identify programs that no longer serve a critical function or are duplicative. For instance, if a program is providing the same services as another department or school initiative, ZBB will reveal those overlaps, allowing MPS to streamline its operations and free up funds for more critical needs. This could lead to millions in savings without negatively impacting the quality of education.


3. Alignment with Current Needs:

ZBB would require MPS to focus on what matters most right now: meeting the needs of our students today, not just continuing the priorities of yesterday. In a district facing a massive budget shortfall, this flexibility is key to adapting to our rapidly changing demands, such as declining enrollment, evolving student needs, or even new technological advancements.


4. Enhanced Public Transparency:

One of the strongest aspects of ZBB is the clear, detailed financial picture it provides. Every budget line item is scrutinized, and the process can be made public, offering greater insight for parents, teachers, and community members into how and why money is being spent. This level of transparency fosters trust, especially when hard decisions need to be made to address the deficit.


 

A DECENT FINANCIAL CRISIS MANAGEMENT TOOL


Transparent budgeting models have proven to be a valuable tool for districts navigating financial shortfalls; though long-term, sustainable success requires continuous oversight and adaptability. While not widely implemented across U.S. school districts, ZBB elements and similar approaches have been used during times of financial crisis to reallocate resources and prioritize student outcomes.


Atlanta Public Schools (APS)

During a significant budget crisis, APS adopted a budgeting model with Zero-Based Budgeting elements. Atlanta Public Schools implemented a rigorous, transparent ZBB model that reallocated resources toward high-impact programs such as literacy and special education, and focused on eliminating unnecessary expenditures. In their most recent budget executive summary it is noted that,

The fiscal year 2024 general fund budget not only outlines the APS revenue and expenditure plan for school year 2023-2024 but will also continue to follow a student-focused funding model that provides resources based on student attributes, and continue a zero-based budgeting model to the district departments to promote focus on key priorities.

One of the most significant outcomes of this approach was the rebuilding of community trust. By increasing transparency and ensuring that every dollar spent was justified in the context of student success, APS successfully closed budget gaps while improving the quality of educational services. This method, which parallels some of the goals of ZBB, is a model worth considering for Minneapolis Public Schools as we navigate our own financial challenges. Worth looking into?


 


THE RISK OF STATUTORY OPERATING DEBT (SOD)


As MPS faces this budget crisis, it’s critical to understand the consequences if we don’t act. MPS is on the verge of entering Statutory Operating Debt (SOD), which happens when a district’s deficit exceeds 2.5% of the general fund. If this threshold is crossed, the state steps in and takes over key financial decisions—removing control from local decision-makers, including the school board. This could result in even more drastic cuts, including potential school closures, without community input.


Implementing ZBB is a proactive way to avoid SOD and preserve local control over MPS’s financial future. We need to act now to ensure that we can continue making decisions that reflect the values and needs of Minneapolis families.


 

IDEAS FOR THE PATH FORWARD: PART I OF IV


As we embark on this series, ZBB is just the beginning. Over the next few weeks, I’ll be discussing:

  • Corporate Partnerships and Community Engagement: How local businesses (i.e. Target, Best Buy, UnitedHealth Group, etc. etc.?) can provide funding for critical MPS programs (e.g. Technology).

  • Grants and Supplemental Funding: How to expand MPS’s grant-writing capabilities to secure additional revenue for key initiatives.

  • Leasing Underutilized Properties: What is the plan for our underutilized properties? How many are there? Where are they? While we wait for answers, can we strategically explore options to lease under-enrolled or unused school properties to community organizations, nonprofits, or local businesses to generate additional income?

  • Financial Task Force: The potential formation of a community financial task force made up of local financial experts, parents, and educators. This task force would guide MPS through the budget crisis and provide transparency, ensuring that community voices are at the heart of financial decision-making.


NEXT UP?: A COMMUNITY FINANCIAL TASK FORCE

In Part 2 of this blog series, I’ll dive into what the future may look like in action, with the idea of forming a Community Financial Task Force. Given the complex decisioning ahead, I feel this will be key to ensuring long-term sustainability. This task force would bring together financial experts, parents, educators, and community leaders to provide advice and oversight as MPS navigates its financial challenges—ensuring accountability and fostering trust along the way.


Stay tuned for more thoughts on how this task force can help guide MPS through implementing ZBB and building a transparent, efficient budgeting process. We're here to solve problems so it's time to start somewhere!

 

FURTHER READING


  1. Statutory Operating Debt in Minneapolis Public Schools

    • Minneapolis Public Schools is facing a significant financial challenge, with a looming $84 million deficit that may push the district into statutory operating debt (SOD). Read more here.


 

What are your thoughts? I believe the only way out of this is to face the current challenges head on, together.


Until next time,


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