MARSHALL — The COVID-19 pandemic had an unprecedented impact on schools. It also added complexity to Marshall Public Schools’ budget process, said Business Services Director Dion Caron.

Some of the effects of the pandemic mean projected decreases in the school district’s revenue. Together with uncertainties about state funding increases for schools, it means MPS is projecting a $798,317 deficit in its general fund for the 2021-22 school year.

Caron presented a preliminary budget for the district at Monday’s Marshall School Board meeting. The school board will take action on approving a 2021-22 budget before the end of June, when the current school fiscal year ends.

MPS’s revenue is affected by a variety of factors, including student enrollment and the number of students receiving free and reduced-price lunches, Caron said. Up through the 2018-19 school year, the Marshall district had seen increases in student enrollment. But over the past two years, enrollment numbers have declined, going from 2,481 students in 2018-19 to to 2,430 in 2020-21.

“We explained last year we saw some leveling off, and we experienced it again in 2021,” Caron told school board members. “We feel a little bit of that has to do with COVID.” Caron said MPS is expecting a slight increase in enrollment in 2021-22.

The number of students receiving free and reduced-price lunches also declined for the past school year.

“This year is a direct result of our free breakfast and lunch,” which was offered this school year with the help of federal programs, Caron said.

“It was a great thing for our students and families to have,” he said. However, fewer families applying for free and reduced-price meals last fall meant the district will also receive less compensatory revenue from the state. MPS was projected to receive around $536,000 less in compensatory revenue funding for 2021-22, he said.

“I just want to point out this is not a problem of Marshall Public Schools. This is a statewide problem,” Caron said. Families have been less likely to apply for free and reduced-price lunches because meals have already been free this past year.

Another impact on revenue is uncertainty over what kind of increases to general education funding will be set by the Minnesota Legislature.

“Obviously, we’re waiting for our legislature to act. There’s a lot of things out there between the House, the Senate and the governor,” Caron said. “Putting together this preliminary budget, we used the guidelines the board approved back in December,” which accounted for a 1% funding increase, he said. A 1% increase would result in about $165,000 less revenue for MPS, he said. Together with decreases in compensatory revenue, the district was anticipating a total of $702,716 less in revenue for 2021-22.

MPS will have about $1.54 million in federal relief funds in the budget in the 2021-22 school year. However, Caron said that having those funds doesn’t offset the challenge of having reduced revenue from other sources. He said relief funds will help with costs that were part of MPS’s COVID-19 response, like supplies, technology and additional staff positions like a custodian and a nurse’s aide.

If MPS continues to have deficits in the future, it might be time to discuss an operating referendum, Caron said. But at the same time, he said, the district had a lot to celebrate this year including the end of COVID-19 restrictions and the construction of the new Southview Elementary and a building addition at Park Side Elementary.

The preliminary 2021-22 budget will go before the school board for approval at its next June meeting, Caron said.