ELY — The Ely Public School’s financial hole just got bigger.
Superintendent Anne Oelke told school board members at Monday’s study session that the district’s budget reduction target has grown from the $500,000 figure presented two weeks ago to approximately $600,000, primarily driven by new payroll costs, declining enrollment, and a troubling drop in compensatory education funding.
“I wish I had better news than this for everybody today, but I just don’t,” Oelke said.
The revision came as the board reviewed updated projections heading into a pivotal April 13 decision on whether to move to a four-day school week.

Why the number grew
Several factors pushed the budget target upward. The district is entering bargaining with two large employee unions this year, and salary step increases are built into existing contracts. A new state-mandated paid medical leave payroll tax adds costs the state did not offset with additional funding. And money the state provides based on the number of low-income students has dropped significantly as the state shifted from paper applications to direct certification, reducing the district’s ability to track and project that funding. Over two years, Oelke said, that line item has declined by roughly $116,000.
Meanwhile, the district’s weighted enrollment figure that actually determines state funding is projected to fall by 21 students next year. Because graduating seniors are weighted more heavily in the state formula than incoming kindergarteners, the loss of 38 seniors and the arrival of only around 20 new kindergarteners represents a disproportionate revenue hit.

A lifeline
Oelke did share some good news. The Ely Educational Foundation has pledged nearly $215,000 to help the district manage its reductions, enough to stave off some of the deeper program cuts under consideration, at least for now.
Oelke was careful to frame the donation as a bridge, not a solution. 
“I am so appreciative,” she said, “but I want to caution all of us that this is not a consistent revenue stream. This is help through some difficult times, and we cannot lose sight that it will have to be reduced eventually.”
With the foundation donation added to the district’s current reduction list of roughly $321,000, the combined total reaches about $535,000, still approximately $64,000 short of the $600,000 target, and is only achievable if the four-day school week is part of the package.
The choice the board faces
Without a four-day week, Oelke made clear, the math falls apart. Stripping out the roughly $195,000 in savings that the schedule change would generate leaves the district about $261,000 short. That gap would have to be filled through deeper cuts to staff, electives, classroom support, and programs across every department.
“We would have to look at special education caseloads, reducing teaching staff in elementary or middle school, cutting more administration and spreading those duties across remaining staff,” Oelke said. “We’re gonna have to eventually do all of these deeper cuts. It’s just a question of when.”
High school programming presents a particular dilemma. Large class sizes in the upper grades limit where cuts can safely be made, but reducing electives carries its own risk. Students who can’t find courses they want at Ely may simply enroll online or through Post-Secondary Enrollment Options, taking their state funding with them. 
She gave the example of a student wanting to go to a four-year university, many of which require foreign language credits. Should the high school decide to no longer offer Spanish classes, that student would likely enroll elsewhere.
PSEO participation is already projected to rise from about 42 percent of juniors and seniors this year to around 56 percent next year, a trend that itself reduces district revenue.
“If we reduce electives, we are almost negatively impacting our enrollment, and we know that enrollment is our revenue,” Oelke said. “So that’s a hard line to keep walking.”

Community survey results
Oelke also shared results from the community and family survey, which drew 358 responses. About 75 percent of respondents were parents of current students, with the remainder split between students and community members.
Among those who expressed a clear opinion, 77.4 percent indicated support for a four-day week, while 16.2 percent expressed opposition. The largest category of concerns centered on Friday child care, particularly for two-income and single-parent households. Academic instruction time and the length of the school day were the next most commonly raised issues.
Oelke said the district is in conversations with Ely Community Resource about a potential Friday child care and enrichment program that would run during school hours on the day off.

State funding outlook darkens
Adding urgency to the local deliberations, Oelke said the state funding picture is not improving. Gov. Tim Walz’s preliminary budget forecast does not include new supplemental funding for school districts. The state is also weighing further reductions to special education transportation reimbursement, a concern for Ely, which buses students to an alternative learning center in Virginia daily. Walz’s budget may also restructure literacy aid funding in ways that could disadvantage districts with few English learners, like Ely.
She did point to two potential longer-term revenue opportunities: ongoing negotiations with Minnesota North College over PSEO cost-sharing, and a legislative push to redirect seasonal recreational property tax revenue back to the school districts where those properties are located. If that measure passes, Oelke said she would recommend asking voters to raise the district’s operating levy — currently at $327 per pupil versus a statewide average of about $1,100 — in a way that would cost most taxpayers little or nothing given the offsetting property tax reduction. Both scenarios, she acknowledged, remain outside the district’s control.

Decision expected April 13
The board is expected to receive a formal recommendation from Oelke at its April 13 meeting. If a four-day week is approved, the district must file an application with the state by April 24 and issue teaching assignments to staff by May 15.