SF4860

Purpose

• Update how pension adjustment revenue is calculated and distributed to Minnesota school districts, with a focus on increasing pension adjustment revenue for St. Paul Public Schools (Independent School District No. 625). The change affects how districts receive funds tied to retirement system costs for teachers.

Main provisions

• Definition of pension adjustment revenue:
  • For each district, revenue equals the sum of two parts: 1) The greater of zero or the product of:
    • The difference between the district’s adjustment under the 2012 law (127A.50, subdivision 1) for fiscal year 2014 per adjusted pupil unit (APU) and the state average adjustment under the same 2012 law for fiscal year 2014 per APU, times the district’s adjusted pupil units for the fiscal year. 2) The product of:
    • Salaries paid to district employees who were members of the Teachers Retirement Association (TRA) and the St. Paul Teachers Retirement Fund Association (SPTRFA) for the prior fiscal year, and
    • The district’s pension adjustment rate for the fiscal year.
• Pension adjustment rates:
  • St. Paul ISD 625: 2.3% (FY 2023); 2.5% (FY 2024 and FY 2025); 3.25% (FY 2026 and beyond through FY 2027); 5.95% (FY 2027 and later).
  • All other districts: 1.25% (FY 2025); 2.31% (FY 2026 and later).
• Revenue caps and proration:
  • FY 2025: The total pension adjustment revenue for all districts must not exceed the amount calculated for FY 2024; the state must prorate to stay within the maximum.
  • FY 2026 and FY 2027: No proration; total must follow the specified calculation.
  • FY 2028 and later: The total must not exceed the amount calculated for FY 2027; prorating applies to stay within the maximum.
• Cooperative units:
  • Cooperative units (as defined by law) qualify for pension adjustment revenue as if they were districts, and the aid generated must be paid to the cooperative unit.

Significant changes to existing law

• Establishes a new two-part calculation for pension adjustment revenue, tying district revenue to both historical adjustments per APU and current district employee retirement-related salaries multiplied by district-specific rates.
• Creates district-specific pension adjustment rates, notably a higher rate for St. Paul (625) than for other districts, with staged increases over multiple fiscal years.
• Introduces annual caps and prorating rules to limit total pension adjustment revenue in early years and governs how the caps are applied in later years.
• Extends eligibility for pension adjustment revenue to cooperative units, ensuring these units receive funding as if they were independent districts.

Key terms used in the bill

• pension adjustment revenue
• pension adjustment rate
• St. Paul Teachers Retirement Fund Association (SPTRFA)
• Teachers Retirement Association (TRA)
• Independent School District No. 625 (St. Paul)
• adjusted pupil unit (APU)
• cooperative unit

Practical effect

• The bill shifts and increases pension-related funding for St. Paul’s district and related retirement costs, while setting phased-in rates for other districts and adding cooperative units into the funding mechanism. It also introduces safeguards (caps and prorating) to control total state funding for pension adjustments over time.

Relevant Terms pension adjustment revenue, pension adjustment rate, St. Paul Teachers Retirement Fund Association, Teachers Retirement Association, Independent School District No. 625, St. Paul, adjusted pupil units, APU, cooperative unit, prorate, fiscal year, 127A.50.