Excerpts from October 2007

Minnesota School Finance, a Guide for Legislators




Public education in the United States is the legal responsibility of state government. In Minnesota, as in most states, the state constitution charges the legislature with responsibility for public schools: The stability of a republican form of government depending mainly upon the intelligence of the people, it is the duty of the legislature to establish a general and uniform system of public schools:  

The stability of a republican form of government depending mainly upon the intelligence of the people, it is the duty of the legislature to establish a general and uniform system of public schools.The legislature shall make such provisions by taxation or otherwise as will secure a thorough and efficient system of public schools throughout the state.(Minn. Const., art. XIII, § 1)

Minnesota delegates responsibility for the actual operation of schools to local school districts whose powers and duties are prescribed by state statute. Historically, the property taxes levied by the school boards governing these school districts have been the primary source of revenue for running schools. Some time after 1900, property taxes were supplemented by limited amounts of state appropriations for aid to school districts. By 1970-71, the Minnesota state foundation aid program provided all districts a flat grant per pupil unit (a pupil unit is a weighted enrollment measure) and provided some districts an additional “equalized” amount which varied inversely with a district’s property valuation. Under this system, state aid funded about 43 percent of the cost of running schools, and school expenditures per
pupil varied widely from district to district. Local property taxes rose rapidly in all districts in the late 1960s, and the tax rate for schools also varied widely among districts.

The 1971 Legislature addressed these disparities by substantially increasing the amount of equalized state foundation aid per pupil unit and imposing a uniform statewide limit on the property tax rate for schools. The 1973 Legislature eliminated flat grants and established a system whereby the amount of foundation aid program revenue available per pupil unit to low-spending districts would be increased to the state average over a six-year period. From 1973 to 1983, the legislature adjusted the foundation aid formula several times making it more responsive to differences among districts and altering the relationship between local tax effort and state aid, without changing the formula’s basic structure.

The 1983 Legislature enacted a new foundation aid program that became effective in the 1984-85 school year. The new program replaced several components of the previous foundation aid formula (i.e., discretionary, replacement, grandfather, and low-fund balance aids and levies) with five tiers of optional aids and levies. The main characteristics of the new five-tier program were equal access to revenues, recognition of some specific cost differences, and more discretion on the part of school boards in choosing the necessary level of revenue.

The 1987 Legislature replaced the foundation aid program with a modified House Research Department funding formula called the general education revenue program, effective for the 1988-89 school year. General education formula components have remained relatively stable since 1989. In general, each
component reflects school district funding needs in different areas and is based on pupil counts and the extent of need for each school district. For fiscal year 2008 and later, each school district’s general education revenue is the sum of the following components  

General education revenue is the primary source of general operating funds for Minnesota’s 340 school districts and 145 charter schools. Operating expenses of the district include employee salaries, fringe benefits, and supply costs. School districts also receive state appropriations through categorical aids, which are funds designated for specific purposes (such as special education and school integration/desegregation).