Minnesota School Finance: A Guide for Legislators

1 Minnesota School finance : A Guide for Legislators About this Publication This guidebook explains how public elementary and secondary schools are funded in Minnesota . By Tim Strom, Legislative Analyst October 2021 Contents Executive Summary .. 1 Introduction .. 2 School finance Terminology .. 11 Property Tax System Terminology .. 17 Counting Students .. 19 General Education 21 School Transportation .. 43 Capital finance .. 45 Special Education .. 57 American Indian 62 Community, Early Childhood, and Adult Education .. 65 Cooperative Programs .. 79 Dual Enrollment Programs .. 82 Charter Schools .. 85 School Desegregation and Integration .. 88 Career and Technical Education .. 92 State 95 Miscellaneous Funds for Education .. 99 Income Tax Deductions and Credits .. 109 Taconite Revenue for School Districts.

2 111 Tax Relief Aids and Aids in Lieu of Taxes .. 118 Teacher Retirement .. 121 Postemployment Benefits .. 125 School District Accounting .. 127 Appendix .. 136 This publication was prepared by Tim Strom, a legislative analyst specializing in the area of K-12 education finance . Questions can be addressed to Tim at 651-296-1886. Minnesota house Research department provides nonpartisan legislative, legal, and information services to the Minnesota house of Representatives. This document can be made available in alternative formats. | 651-296-6753 | 155 State Office Building | St. Paul, MN 55155 List of Tables Table 1: Characteristics of Minnesota Independent School Districts, 2019-2020 .. 5 Table 2: Characteristics of Minnesota Charter Schools, 6 Table 3: School Enrollment 1959-60 to 2024-25 by School Type.

3 7 Table 4: Minnesota School Enrollment 1960 to 2020 Actual; 2021 to 2029 Estimated .. 10 Table 5: General Education Formula Increases 1989 to 2023 .. 12 Table 6: Education Acronyms .. 15 Table 7: Enrollment Weights by Grade .. 20 Table 8: General Education Revenue Components Excluding Referendum Revenue .. 21 Table 9: Basic Education Formula Allowances .. 22 Table 10: Compensatory Revenue Characteristics for Selected School Buildings for the 2021-22 School Year .. 26 Table 11: English Learner Revenue Characteristics for Selected School Districts 2021-22 School Year .. 27 Table 12: Equity Revenue 32 Table 13: Pension Adjustment Aid Entitlement .. 34 Table 14: Characteristics of Largest and Smallest School 35 Table 15: Revenue Reserved for Class Size Reduction.

4 36 Table 16: General Education Program Aid Entitlement and Levy .. 38 Table 17: Referendum Revenue Allowances and Equalizing Factors .. 41 Table 18: Referendum Revenue Amounts .. 41 Table 19: Permanent School Fund Endowment and Income .. 42 Table 20: Debt Service Equalizing Factors .. 47 Table 21: Debt Service Equalization Aid Calculation for a Hypothetical District .. 47 Table 22: Total Statewide Debt Service Amounts; Regular and Enhanced Equalization Aid .. 48 Table 23: School Building Bond Agricultural Credit .. 49 Table 24: Capital Project Levy .. 49 Table 25: Maximum Effort Bond Sales .. 52 Table 26: Long-Term Facilities Maintenance Revenue; Appropriation and Levy .. 54 Table 27: Building Lease Levy Amounts .. 55 Table 28: Telecommunications/Internet Access Aid.

5 56 Table 29: Special Education Unduplicated Child Count by Disability Category (All Ages) as of December 1, 2020 .. 57 Table 30: Special Education Appropriations .. 61 Table 31: Tribal Contract School Estimated Enrollment and Initial Estimated Aid Entitlement for FY 22 .. 64 Table 32: Appropriations for American Indian Programs .. 64 Table 33: Community Education Revenue .. 66 Table 34: Programs for Adults with Disabilities .. 67 Table 35: Early Childhood Family Education 68 Table 36: Early Childhood Home-visiting Program .. 68 Table 37: School Readiness Aid .. 70 Table 38: Early Learning Scholarships; Maximum Amounts for FY 22 .. 72 Table 39: Early Learning Scholarship Appropriations .. 73 Table 40: Developmental Screening Aid .. 74 Table 41: Head Start Revenue.

6 75 Table 42: School -age Care Program .. 76 Table 43: Adult Basic Education Programs .. 78 Table 44: Consolidation Transition Revenue .. 79 Table 45: Concurrent Enrollment Aid .. 84 Table 46: Charter School General Education, Special Education, and Building Lease Aid .. 86 Table 47: Achievement and Integration Maximum Revenue for Fiscal Year 2022 .. 89 Table 48: Integration Revenue Allowances Per Pupil Fiscal Years 2001 to 2013 .. 89 Table 49: Estimated Appropriations and Levies for Integration Activities Based on 100% Aid Entitlement; Amounts for Aid Fiscal Year .. 90 Table 50: Appropriations for Other Integration Funding Programs .. 91 Table 51: Funding Formulas for Career and Technical Revenue .. 92 Table 52: Career and Technical Revenue .. 93 Table 53: Appropriations for ServeMinnesota and the Minnesota Reading and Math Corps.

7 94 Table 54: Direct Appropriations for the Minnesota State Academies for the Deaf and Blind .. 95 Table 55: Minnesota Center for Arts Education .. 97 Table 56: Q-Comp Revenue .. 99 Table 57: Literacy Incentive Aid .. 100 Table 58: Abatement Aid and Levy .. 101 Table 59: Nonpublic School Student Aid .. 103 Table 60: Shared Time Programs .. 103 Table 61: Nonpublic Pupil Transportation .. 104 Table 62: State and Federal Funds for School Nutrition Programs .. 106 Table 63: Safe Schools Levy .. 107 Table 64: Miscellaneous Levy Amounts .. 108 Table 65: Estimated Cost to State in Foregone Tax Revenue .. 110 Table 66: Estimated Taconite Revenue Used to Reduce School District Levies .. 112 Table 67: Estimated Taconite Revenue Used to Equalize Referendum Levies .. 113 Table 68: Taconite Revenue for Building Maintenance: Cents per Ton 113 Table 69: Iron Range School Account.

8 114 Table 70: Iron Range School Consolidation and Cooperatively Operated School Account Distributions Awarded to School Districts .. 115 Table 71: Taconite Debt Service Assistance Provided by Enacted Laws .. 117 Table 72: Property Tax Credits Reducing School District Levies for Taxes Payable in 2020 (Fiscal Year 2021) .. 120 Table 73: Membership Counts, Fund Assets, and Liabilities by Retirement Plan .. 122 Table 74: Employee and Employer Contribution Rates (Fiscal Years) .. 123 Table 75: Social Security and Medicare Employer Contribution Rates .. 124 Table 76: Postemployment Benefit Levies .. 126 Table 77: School Funds .. 127 Table 78: Aid Payment Percentage .. 129 Table 79: Example of Appropriation Payments .. 130 Table 80: Relationship Among the Years .. 132 Table 81: Metered Payments.

9 134 Table 82: General Education Levy .. 136 Table 83: Total Statewide Debt Service Amounts; Regular and Enhanced Equalization Aid .. 137 Table 84: Health and Safety Revenue .. 138 Table 85: Alternative Facilities Revenue .. 139 Table 86: Maximum Effort Bond Sales .. 139 Table 87: Cooperative Facilities Grants .. 140 Table 88: Building Lease Levy Restrictions .. 141 Table 89: Estimated Appropriations and Levies for Integration Activities Based on 100% Aid Entitlement; Amounts for Aid Fiscal Year .. 142 Table 90: Appropriations for Other Integration Funding Programs .. 143 Table 91: Safe Schools Levy .. 144 Minnesota School finance Minnesota house Research department Page 1 Executive Summary Minnesota s School finance system provides funds to operate the state s public elementary and secondary schools.

10 The bulk of Minnesota s support for elementary and secondary education is distributed to School districts and charter schools through the general education revenue program, which provides money for the current operating expenditures of the districts. The state s remaining appropriations are provided through special purpose or categorical aids, such as special education aid and local property tax relief aids. The state legislature also controls the amount each School district can levy through limits on the amounts and type of property tax levies. The purpose of this Guide is to describe the programs that provide funding for Minnesota s School districts and charter schools. The Guide provides program descriptions, financial information, and some historical background for each School funding program.