HF1989

Purpose of the Bill

The purpose of this bill is to revise the funding framework for schools in Minnesota by increasing the local optional revenue (LOR) available to school districts. This aims to provide districts with more financial flexibility and resources, which can be used to improve educational infrastructure and services.

Main Provisions

• Local Optional Revenue Calculation: The bill adjusts the formula used to calculate both the first and second tiers of local optional revenue. This new formula takes into account different fiscal years to determine the total revenue a district can collect based on the number of adjusted pupil units.

• First and Second Tier Allowances:

  • The first tier local optional allowance will increase to $550 by fiscal year 2027, remaining fixed for 2025 and 2026 at $300.
  • From fiscal year 2028 onwards, the allowances will be adjusted using a formula based on the general education basic formula allowance.
  • The second tier allowance will be $424 until 2027 and then will also adjust based on the general education basic formula allowance starting in fiscal year 2028.

• Local Optional Levy Adjustments:

  • The bill specifies how a district's local optional levy should be calculated, which includes separate equalizing factors for the first and second tier levies that vary by fiscal year.
  • Districts can opt to levy less than the maximum permitted amount.

• Equalizing Factors: These factors are used to determine a district's ability to levy taxes relative to its property wealth, with specific values assigned for each fiscal year through 2029.

Significant Changes to Existing Law

• Increase in Allowances: The increments in local optional revenue allowances represent a significant change, starting in fiscal year 2027, aimed at raising the baseline financial support available to school districts.

• Annual Adjustments: The provision to adjust allowances annually based on the general education basic formula is new, establishing a dynamically adjusting funding mechanism for future years.

• Updated Equalizing Factors: The new equalizing factors recalibrate how property wealth impacts school district funding, allowing greater equity between districts of varying affluence.

Relevant Terms

local optional revenue, school district funding, first tier, second tier, local optional allowance, local optional levy, equalizing factor, referendum market value, general education revenue, fiscal year adjustments