HF3371

HF3371 (Legislative Session 94 (2025-2026))

Local optional revenue increased for school districts with limited referendum revenue authority, and money appropriated.

AI Generated Summary

Purpose

This bill aims to increase local optional revenue for school districts that have limited ability to raise money through referenda. It changes how local optional revenue and the related levies are calculated, tying them to student counts (adjusted pupil units) and to market-value metrics, with phased rules for years 2023 through 2027 and beyond. It also clarifies how aid is calculated when districts choose to levy less than the maximum allowed.

Main provisions

Local optional revenue
- Defined as the sum of three tiers:
- First tier: 300 times the district’s adjusted pupil units.
- Second tier: 424 times the district’s adjusted pupil units.
- Third tier: the greater of zero or (adjusted pupil units × [100 − operating referendum revenue per adjusted pupil unit]).
Local optional levy
- Defined as the sum of three tiers of levy corresponding to the three revenue tiers.
- First tier levy: first tier revenue × min(1, (referendum market value per resident pupil unit) ÷ 880,000).
- Second tier levy: based on a tiered formula for years 2023–2027, using a cap (the threshold) that changes by year:
- 2023: referendum market value per resident pupil unit ÷ 548,842
- 2024: referendum market value per resident pupil unit ÷ 510,000
- 2025: referendum market value per resident pupil unit ÷ 626,450
- 2026: referendum market value per resident pupil unit ÷ 642,038
- 2027 and later: referendum market value per resident pupil unit ÷ 671,345
- In all cases, the multiplier is the lesser of 1 and the above ratio.
- Third tier levy: third tier revenue × min(1, (referendum market value per resident pupil unit) ÷ 880,000).
- The local optional levy must be spread based on referendum market value. Districts may levy less than the maximum permitted.
Local optional aid
- Calculated as local optional revenue minus local optional levy.
- If a district’s actual levy for any tier is less than the tier’s maximum levy limit, aid for that tier is proportionally reduced.

Significant changes to existing law

Replaces or revises the method for calculating local optional revenue and its three tiers, tying them to adjusted pupil units and a new structure for the third tier.
Introduces a year-by-year schedule for the second tier levy thresholds, linking levy capacity to updated market value per resident pupil unit.
Requires that all local optional levies be spread on referendum market value and introduces a proportional reduction rule for aid if levies fall short of maximum limits.
Clarifies the relationship between local optional revenue, local optional levy, and local optional aid, providing a mechanism to adjust aid when actual levies are not at maximum.

How this affects districts

Districts with limited referendum revenue authority may gain a more defined and potentially larger local optional revenue stream, depending on pupil counts and market value metrics.
Levy authority becomes more closely tied to property wealth (market value per resident pupil unit), which can change how much a district can levy each year.
Aid is automatically adjusted if districts choose to levy less than the maximum allowed, maintaining fiscal balance.

Trade-offs and considerations

Revenue levels depend on adjusted pupil units and market value per resident pupil unit, which can vary by district and over time.
Districts in wealthier areas may have higher levy capacity due to market value metrics, while districts with lower market values may rely more on state aid or other funding.
The phased thresholds imply gradual changes over several fiscal years, allowing districts to adapt.

Relevant Terms - local optional revenue - local optional levy - first tier / second tier / third tier - adjusted pupil units - operating referendum revenue per adjusted pupil unit - referendum market value per resident pupil unit - maximum levy limit - local optional aid - levy proportional reduction - spread on referendum market value

Bill text versions

Introduction PDF PDF file

Actions

Date	Chamber	Where	Type	Name	Committee Name
February 17, 2026	House		Action	Introduction and first reading, referred to	Education Finance

Citations

[
  {
    "analysis": {
      "added": [
        "Defines local optional revenue as the sum of first, second, and third tier local optional revenue; sets first tier at 300 times adjusted pupil units; second tier at 424 times adjusted pupil units; third tier as the greater of zero or the product of adjusted pupil units and the difference between 100 and the district's operating referendum revenue per adjusted pupil unit.",
        "Defines a district's local optional levy as the sum of its first, second, and third tier local optional levy and the second tier local optional levy; establishes formulas for calculating these levies, including multipliers tied to referendum market value per resident pupil unit.",
        "Specifies phased levy calculations for fiscal years 2023 through 2027 and later, with different target ratios (e.g., 548,842; 510,000; 626,450; 642,038; 671,345) used in the second tier levy calculations for successive years.",
        "Requires the local optional levy to be spread on referendum market value and allows districts to levy less than the permitted amount.",
        "Defines local optional aid as local optional revenue minus local optional levy, with proportional reductions in aid if a district’s actual levy is less than the maximum levy limit for a tier."
      ],
      "removed": [
        "No explicit removals are stated in the text beyond replacing the existing subdivision 2e with a new framework."
      ],
      "summary": "This bill amends Minnesota Statutes 2024 section 126C.10, subdivision 2e, to redefine local optional revenue and levies for school districts with limited referendum revenue authority, establishing a three-tier structure for local optional revenue and corresponding levy and aid calculations, with phased adjustments through fiscal years 2023–2027 and later.",
      "modified": [
        "Subd. 2e is rewritten to replace prior language with a structured, tiered approach to local optional revenue and levy, including new numeric multipliers, year-by-year levy formulas, and an explicit relationship between revenue, levy, and aid."
      ]
    },
    "citation": "126C.10",
    "subdivision": "Subd. 2e"
  }
]