School district joins surge for funding from PSF and a referendum

News | Published on August 20, 2026 at 5:49pm EDT | Author: Chad Koenen

By Robert Williams

Editor

At the November polls, local voters will decide on two different ways to increase funding for schools by way of an operating referendum and a proposed constitutional amendment to modernize the Permanent School Fund (PSF), change how annual payouts are calculated, and increase school district funding without raising taxes.

The last line was reiterated multiple times at the Frazee-Vergas School Board meeting Monday, Aug. 10, in discussing both ballot questions with members of administration and the board voicing support for the amendment and a referendum.

“It has zero tax impact,” said Superintendent Terry Karger. “It does not raise any taxes, but yet by redoing the formula and it’s now grown to $2.3 billion, they can afford to look to give a little more to public schools and other schools, as well.”

The PSF uses revenue from the sale of timber, minerals and land on 2.5 million acres of School Trust Lands to fund school districts and charter schools. The trust lands were federal land grants established when Minnesota became a state in 1858.

The trust has more than doubled over the past two decades, growing from $675 million in 2010 to $2.3 billion in 2025.

Voters must select the yes option on the ballot question to vote in support of the amendment. That is important because in Minnesota leaving a constitutional amendment question blank on the ballot automatically counts as a no vote.

“It’s a good thing for public schools; it’s a good thing for Frazee-Vergas,” Karger said. “We should encourage (voters) to please vote yes and don’t skip over it because that’s a no vote. Allow them to redo the formula, allow them to give more money to public schools from this trust that’s been on the books forever. Other schools are doing what we’re doing tonight—talking about it, but again zero tax impact and we will receive additional funds through the reorganizing of the formula that they use.”

Should voters approve the amendment, the distribution of funding to schools will increase from the current 2-2.5 percent of interests and dividends only to 4.5 percent of the fund’s average market value.

Currently, the former percentage contributes around $68 per pupil per district in 2025. A yes vote would up that amount to an estimated $91 per pupil per district beginning in 2027.

On the ballot, voters will see definitions of a yes vote approves and allows the updated distribution formula to take effect in 2027, while a no vote keeps the current constitutional language and current distribution framework in place.

Post-Secondary

The board approved the Post-Secondary Enrollment Options (PSEO) Agreement for the 2026-2027 School Year with Minnesota State Community and Technical College campuses at Detroit Lakes, Fergus Falls, Moorhead, Wadena and M State Online at $230.96 per credit.

Operating referendum

The board also passed a resolution to Increase the General Education Revenue of the school district by putting an operating referendum on the ballot also. Legislative changes have allowed season rec monies to be returned to districts that have an existing operating referendum.

The school board determined and declared that it is necessary and expedient for the District to increase its general education revenue by $993.83 per adjusted pupil unit.

This is another way to increase funding without increasing taxes, but it is a little trickier.

There are three ways schools get revenue: Basic State Formula or Compensatory Aid; Local Operating Revenue (LOR), or an Operating Referendum (OR).

Compensatory Aid is based on a formula and a dollar amount. Each child is valued with a set dollar amount. Last year, the LOR was $724 per pupil. That is broken down into three different categories where the district gets half of the $724 for kindergarten students, the full amount for grades 1-6 and 1.2 times the amount for grades 7-12 ($868.80).

The adjustment by age of student is basically an assumption of higher costs to teach older students, more supplies, etc.

One way in which the district loses some of this funding is the PSEO program where students can get a post-secondary education while in high school.

“I truly believe PSEO is the right and good thing for kids,” said Karger.

The LOR funds of $868.80 are not provided to the district for each student that participates in PSEO as they are not full-time students.

“It goes against us financially, but yes, it’s still the right thing to do,” said Karger.

Enrollment is a huge factor for funding.

“If they’re here a full day, it matters,” said Karger.

The last time the Frazee-Vergas School District held an operating referendum was 2012, when voters approved a $700-per-pupil operating levy to replace an expiring $1,000-per-pupil levy. Prior to that, an operating levy increase was voted on and passed in November 2007.

Karger addressed a referendum on the November ballot next.

The school board has the ability to set the LOR at a maximum of $724 per pupil.

“That’s the max you can ask for and collect that monies from the tax base,” Karger said.

LOR complements Compensatory Aid. Those two equate to $622,930 in revenue at a tax impact of $96 for a $150,000 as an example.

Under an LOR plus Compensatory Aid everyone pays their fair share. A referendum is collected from the tax base without contributions from “seasonal rec” residents. Seasonal rec refers to seasonal recreational residential property—commonly known as cabins or second homes. Rural and cabin-heavy school districts use this classification to manage local tax burdens through state funding programs.

“Their contribution went to the state, not to us,” said Karger.

Due to changes in legislation last spring, season rec money still goes to the state, but it will be returned to the district as state aid if the district has an operating referendum.

Karger reiterated that a referendum is mandatory to get the seasonal rec money as state aid.

“If you’re a school district and you already had an operating referendum you’re doing jumping jacks; that’s a good deal,” said Karger. “You just got state aid and you didn’t have to do anything. Unfortunately, that’s not us because we don’t have an operating referendum.”

If the district shifts to a referendum, the per pupil rate increases from $724 to $993.83; state aid increases immensely because of the season rec funds from $9,419 to $241,583 for a total of $856,093 in revenue. All the while, the tax burden for a $150,000 home remains at $96.

“If this was to go through and the voters were to vote for it we would increase (revenue) with no increase in tax,” said Karger. “What our tax payers are paying does not change.”

With the referendum, funding goes from school board control under the LOR to voter control under the referendum.

“Our voters need to pass this in order for us to tap into the state aid,” said Karger.

However, the election process will add some difficulty at the ballot box. On the ballot, there will be a line in bold text stating verbatim, “By voting “yes” on this ballot question, you are voting for a property tax increase.”

“There is no tax impact,” Karger said. “In either one of these scenarios you pay exactly the same.”

Voters need to approve for the season rec money to be returned to the district, which it would receive in fiscal year 2028 (next school year).

“You’re looking at almost a quarter-of-a-million dollar revenue for the district with again, zero tax impact,” Karger said.

The state recognizes the increase via referendum but does not recognize the under-levying of the LOR, which is why the tax increase statement is on the ballot.

“It’s not going to say on there we are dropping the LOR so there is no tax impact,” Karger said.

Yes votes are imperative, the same as the PSF amendment vote above. A non-answer also equates to a no vote.

Other schools are going to the ballot box for more funds through this program, Pequot Lakes and Perham are two of the most recent to announce an upcoming referendum.

For more information on Seasonal Recreation Property Tax Base Replacement Aid visit: mreavoice.org/seasonalrec/

Board members discussed the confusing nature of the vote but reiterated no tax impact multiple times in preparation for discussing it with members of the public in the future.

The school board passed the resolution for the operating referendum unanimously.

MyGender Dolls

Superintendent Karger addressed MyGender Dolls, a play tool developed by researchers at the Eli Coleman Institute for Sexual and Gender Health at the University of Minnesota. Designed for children ages 4 to 10, the project features customizable figures with interchangeable clothing, accessories, and anatomical parts intended to help gender-diverse children express their identities.

Karger clarified the program is not legislation, nor is it driven by the Department of Education.

The district has a policy to bring in such a program that must meet specific criteria and be reviewed. He also made it plainly clear that the program is not in the Frazee-Vergas district.

Budget

The board approved a Budget & Facilities recommendation of budget reduction and cost-containment recommendations for fiscal year 2028 directing the Superintendent and Administration to begin the development of a list of proposed expenditure reductions and cost-containment measures to address the District’s projected $1.5 million budget deficit. The list will include options for percentage-based reductions to athletics and extracurricular activities expenditures, with specific reduction targets to be determined by the Board.

Karger and District Business Manager Chrissy Clapsaddle are working on future budget planning. The resolution is the board basically instructing the duo to officially begin finding reductions and savings.

The budget committee also discussed beginning the superintendent search. Karger is retiring at the end of the school year.

Also discussed was the watering of the football field and getting on a specific program to bring down the monthly water bill. The new track surface also needs some repairs. Other discussed additions were a press box to be constructed for the varsity softball field and a storage building by the baseball field.

Enrollment

The district received the enrollment applications for enrollment out of the district to: Detroit Lakes (1), and into district (1).

High school

Principal Jason Smith clarified enrollment numbers reporting for the coming year, his fourth in Frazee.

There are two different sets of numbers reported, one that is higher as it includes inactive students. Smith told the board he has consistently given them the latter. For this year, Smith will be reporting the actual enrollment numbers with inactive students excluded. This accounts for roughly 5-10 students, according to Smith.

He clarified the reporting to avert what could be perceived as a significant dip in numbers, or a downward trend, when it is merely the exclusion of inactive students. The actual enrollment numbers are the same.

Hornet Pride

Monetary Donations:

Bell State Bank- Custom Card Donation- $25

Summer Rec 2026:

Pemberton Law- $250

Pizza Ranch-DL- $150

Pizza Ranch- Perham- $150

Spanky’s Stone Hearth- $100

Fraternal Order of Eagles- $500

Swimming Lessons Summer 2026 – Vergas Lions Club- $300

In-Kind Donations: l

Hornet Kids (formerly Latch Key)

KLN- Licorice

Staffing

Head Wrestling Coach Michael Miller is returning to lead the Hornets on the mat this season. Earlier this summer, he resigned from his co-head coaching position as a technicality before he could be hired as the full-time head coach.

The cross country teams will have new coaches at the helm after the approval of the hiring of Co-Head Cross Country Coaches Jim Jacobson and Heather Schmid.

The school board also approved the following:

• Hiring a 7-12 Science Teacher Madison Schell

• Hiring a Licensed School Social Worker Rebecca Matejka

• Hiring a JH Football Coach Patrick Starbeck

• Resignation of a C-Team Boys Basketball Coach Alex Magaard

• Resignation of the Native American Education Program Coordinator, Student Council Advisor, and Co-Concession Stand Coordinator Dani Adams

• Resignation of a Paraprofessional Catherine Hiemenz

• Resignation of a Paraprofessional Callista Sanders

• Resignation of a C-Squad Girls Basketball Coach Daniel Stiel

Tax Levy

Each year the board is required to set levy dates for the fiscal year. The following dates for setting the levy for 2026, payable in 2027, fall within the recommended guidelines:

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