K12 Education Finance Presentation K12 Education Finance Division

K-12 Education Finance Presentation K-12 Education Finance Division Minnesota House of Representatives

Highlights of ’ 08 session For FY 09: • Added $51 per pupil unit to each district’s general education revenue • Authorized one-time fund transfer of up to $51 per pupil unit from reserved for operating capital account to general fund balance • Increased maximum lease levy from $100 to $150 per pupil • Authorized levy to replace funds lost due to Local Collaborative Time Study audit 5/28/08 Minnesota House of Representatives 2

Highlights of ’ 08 session For Fiscal Year 2010 and later: • Removes general education aid offset of Permanent School Fund (PSF) money, providing school districts with additional $30 million annually, roughly $36 per resident student (about $30 per AMCPU). 5/28/08 Minnesota House of Representatives 3

Education Finance Reform Process & Background Governor Pawlenty convened a task force in the fall of 2003 to examine Minnesota’s education funding system. The task force developed school finance data based on professional judgment panels. The task force issued an initial report in the summer of 2004 and then disbanded. P. S. Minnesota was formed to carry on the work of the task force. P. S. Minnesota is non-partisan coalition of Minnesota education and parent groups united to advocate for adequate and sustainable public education funding. P. S. Minnesota convened a series of meetings, and working with a consultant, interested school groups, and citizens, developed an education funding framework based on nine characteristics. The 2007 Legislature established a school funding task force consisting of the Commissioner of Education and House and Senate members to further study Minnesota’s school finance system and build on the recommendations of P. S. Minnesota. Even though the funding for the task force was vetoed by the Governor, the school funding task force held several meetings but never officially adopted a report. The legislative co-chairs of the task force, Representative Mindy Greiling and Senator Terri Bonhoff, introduced HF 4178/SF 3828 toward the end of the 2008 session, reflecting their views of how the P. S. Minnesota funding characteristics could be implemented. 5/28/08 Minnesota House of Representatives 4

HF 4178 Goals • • • Adequate funding for all public school students Equitable funding formulas More fair funding system Simplified funding system Scalable to allow for phase-in over time 5/28/08 Minnesota House of Representatives 5

HF 4178 Characteristics • Sets basic per pupil formula high enough to cover districts’ basic instructional needs while having other component formulas match specific additional needs • Fully funds state’s share of special education costs • Increases options for school district facility needs • Restores equalization in school property tax system 5/28/08 Minnesota House of Representatives 6

A Closer Look at HF 4178 Funding Formula Details 5/28/08 Minnesota House of Representatives 7

All Students Counted as 1. 0 • All students – including kindergarteners – count as 1. 0 pupil. • Ends current pupil weighting by grade level. • Continues to fund school districts and charter schools based on number of students served, not on number of pupils resident to the district. 5/28/08 Minnesota House of Representatives 8

Basic Formula Allowance Increased • Increases basic formula allowance from $5, 124 per adjusted marginal cost pupil unit to $7, 500 per adjusted pupil. • Indexes basic formula allowance to rate of inflation, as measured by the GDP implicit price deflator for state and local services. 5/28/08 Minnesota House of Representatives 9

Compensatory Revenue • Compensatory revenue provides additional money to schools that serve students from low socioeconomic backgrounds. • Expands with all students eligible for free or reduced meals generating an added $2, 500 (33% of the formula allowance). • Concentration factor increases maximum compensatory revenue to 40% of the formula allowance. • Concentration is calculated on a district level, not a site level. 5/28/08 Minnesota House of Representatives 10

Limited English Proficiency Revenue Expanded • Links LEP funding amounts to the basic formula allowance. • Sets new LEP formula equal to the total uncapped LEP count times 20% of the formula allowance. • Eliminates current LEP funding limit of 5 years for any one student. 5/28/08 Minnesota House of Representatives 11

New Declining Revenue Formula • Creates new component of general education revenue called “declining enrollment revenue. ” • This revenue equals the greater of zero or formula allowance times the difference between the three-year average enrollment and the current year enrollment. • Under current law, a portion of a single year’s loss in enrollment is built into each district’s pupil count. 5/28/08 Minnesota House of Representatives 12

Location Equity Index Revenue Established • Location Equity Index (LEI) increases funding for school districts in counties with above-average cost of living as measured through wage and housing data. • Sets the formula equal to 50% of the basic formula allowance times the greater of 1. 0 or the county index for that school district. 5/28/08 Minnesota House of Representatives 13

Sparsity Revenue Modified • Goes to small, geographically isolated school districts. • Lowers the minimum sparsity distance from 19 to 15 miles. • Keeps requirements that qualifying schools both serve a small number of students and are a minimum distance from the next nearest school. 5/28/08 Minnesota House of Representatives 14

Reserves Created • 1. 5% for Innovation Revenue programs. • 1% for Gifted & Talented programs. • 0. 5% for added career & technical programs (this reserve is in addition to the current levy for the program). • Maintains existing reserves for basic skills programs; operating capital; staff development. 5/28/08 Minnesota House of Representatives 15

Streamlines General Education Revenue Eliminates the following revenue components: • T&E (training and experience); • Equity; • Transition; • Pension offset; • Gifted & Talented; • Q-Comp. 5/28/08 Minnesota House of Representatives 16

Referendum Revenue Offset Created • Offsets $500 per pupil of each district’s referendum revenue and adds $500 per pupil to each district’s general education revenue. 5/28/08 Minnesota House of Representatives 17

Special Education Revenue • Removes statewide special education basic revenue cap so each school district receives from the state the full formula amount of 68% of its eligible special education costs. • Removes statewide cap on excess cost revenue. 5/28/08 Minnesota House of Representatives 18

Pupil Transportation Needs • Creates new hazardous pupil transportation aid – Districts determine hazardous conditions – Total aid limited to not more than 20% of district’s to and from transportation costs • State aid of 5% of district’s total transportation costs for bus purchase.

School Facility Needs • Authorizes every school board to levy for the cost of deferred maintenance needs (now only the very largest school districts can do so). • Increases debt service equalization aid. • Provides an agricultural school bond credit to lessen the impact of school building projects on agricultural lands. 5/28/08 Minnesota House of Representatives 20

Property Tax Reductions • Enhanced equalization levels established for the major school funding formulas • Equalizing factors indexed to the statewide growth in tax base. • School taxes reduced by eliminating the levies for operating capital, equity, transition, and Qcomp, by enhancing equalization levels, and by offsetting $500 per pupil of referendum revenue. 5/28/08 Minnesota House of Representatives 21

General Education Components Current Law vs. HF 4178 Component Basic Revenue Current Law HF 4178 Revenue Increase (in thousands) 4, 886, 785 6, 153, 306 1, 266, 521 Extended Time Revenue 55, 634 89, 886 34, 232 Compensatory Revenue 346, 726 661, 046 314, 320 LEP Revenue 40, 304 80, 316 40, 012 T&E Revenue 1, 767 0 -1, 7670 0 155, 962 Operating Sparsity 22, 596 33, 018 10, 422 Transportation Sparsity 60, 963 76, 538 15, 575 194, 812 189, 769 -5, 043 94, 950 0 -94, 450 0 410, 220 11, 445 0 -11, 445 Gifted and Talented Reserve 0 $61, 533 Declining Enrollment Revenue 0 73, 450 Transition Revenue 29, 745 0 -29, 745 Pension Adjustment -30, 692 0 30, 692 Referendum Revenue 724, 239 313, 904 -410, 338 92, 979 0 -92, 979 LEI Revenue Operating Capital Equity Referendum Offset Revenue Gifted and Talented Q-Comp Revenue 5/28/08 Minnesota House of Representatives 22

Online Resources HF 4178, the proposed amendments, and a district-by-district spreadsheet of proposed revenue by school district are available online by searching House File 4178 on the Minnesota House of Representatives website’s home page or by going directly to the following webpage: http: //www. house. leg. state. mn. us/billnum. asp? Billnumber=hf 4178&ls_year=85& session_year=2007&session_number=0 Detailed descriptions of Minnesota’s current school finance system can be found here: http: //www. house. leg. state. mn. us/hrd/issinfo/ed_k 12. htm#FIN and here: http: //www. house. leg. state. mn. us/fiscal/files/07 fined. pdf 5/28/08 Minnesota House of Representatives 23