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HF 4980

Calculation of compensatory aid for fiscal year 2027 modified, allocation of compensatory aid for fiscal year 2028 modified, and money appropriated.

2025-2026 Regular Session Introduced by Pete Johnson and 1 co-sponsor

HF 4980 reforms compensatory education funding by changing calculation method from 2024–26 style to a 2027-and-on method, with statewide targets and 80/20 building allocation flexi

Author added Johnson, P.
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Bill Summary · HF 4980

Summary of HF 4980 (2025-2026) – Minnesota

Purpose and Intent

HF 4980 seeks to modify how compensatory education aid is calculated for fiscal year 2027 and how compensatory aid is allocated for fiscal year 2028. The bill also includes appropriations language related to general education aid. The overall aim is to adjust funding formulas to ensure target statewide levels are met and to provide flexibility for districts to allocate funds across buildings and programs.

Key Provisions

Section 1: Calculation of Compensatory Education Revenue (Minnesota Statutes 2025 Supplement, §126C.10, subd. 3)

  • Background and baseline (historical context): The statute previously used a multi-step method to determine compensatory revenue, referencing historic totals and per-building calculations.
  • Fiscal year 2024–2026 method: For 2024–2026, compensatory revenue per building equals the formula allowance minus $839 times the compensatory revenue pupil units.
  • Fiscal year 2027 and later: New method where compensatory revenue for each building equals its compensatory pupils multiplied by the building compensatory allowance.
  • Inter-year changes when alternative programs or area learning centers change: If a district contracts with an alternative program or changes the fiscal agent for an area learning center, compensatory revenue follows the status for the current year rather than the prior year.
  • Minimum statewide targets and adjustments:
    • For FY 2026, if the total calculated under the 2024–2026 method falls short of $838,947,000, the commissioner must proportionally increase revenue to each building to meet that statewide total.
    • For FY 2027 and later, if the total calculated under the 2027-and-on method falls short of $857,152,000, the commissioner must proportionally increase revenue to each building to meet that statewide total.
  • Building minimum or floor in FY 2027: For FY 2027 only, each building’s revenue cannot be less than the greater of:
    • The amount calculated under the new method, or
    • A “building minimum” defined as the 2026 compensatory revenue for the building, adjusted by enrollment changes between Oct 1, 2025 and Oct 1, 2024, and capped at 0.90 multiplier.

Section 2: Building Allocation of Compensatory Revenue (Minnesota Statutes 2025 Supplement, §126C.15, subd. 2)

  • Allocation to buildings (80% rule): Districts/cooperatives must allocate at least 80% of compensatory revenue to the school buildings where the generating students are served, unless a district has a waiver permitting alternative allocation by student performance measures.
  • Flexibility cap (up to 20%): Up to 20% of compensatory revenue may be allocated to school sites under a board-adopted plan, and may be spent on students in any grade (including prekindergarten or school readiness programs) for purposes aligned with statutory objectives.
  • Definitions and special cases:
    • “Building” is the education site as defined in law.
    • Revenue generated by students in a cooperative unit is paid to the cooperative unit.
  • Adjustments due to district changes: Districts may reallocate compensatory revenue among sites in response to openings/closings, attendance changes, boundaries shifts, or program/student demographic changes; adjustments must be reported to the department and included in its mandated reporting.
  • Temporary broadening (FY 2026–2028): For fiscal years 2026, 2027, and 2028 only, districts may allocate up to 40% of compensatory revenue to school sites under a board-adopted plan (in addition to the 80% minimum and 20% flexible allocation).

Section 3: Appropriation

  • A placeholder appropriation of unspecified amount in FY 2027 from the general fund to the Commissioner of Education for additional general education aid.

Who Is Affected

  • Minnesota school districts and cooperatives that receive compensatory education aid.
  • Districts with alternative programs under §124D.69 and area learning centers impacted by changes in fiscal agents or coordinators.
  • School sites/buildings where compensatory funds are allocated and reallocated.

Timeline and Procedural Notes

  • Effective calculations apply beginning in fiscal year 2026 for some transitional provisions, with a major shift to the new FY 2027 method for compensatory revenue calculation.
  • Proportional adjustments are mandated if statewide targets ($838.947 million for 2026; $857.152 million for 2027+) are not met by the new formulas.
  • The bill was referred to the House Education Finance Committee and introduced by Rep. Virnig (with a co-sponsor).

If you’d like, I can provide a side-by-side comparison of current law vs. HF 4980’s proposed changes or a plain-language one-page explainer.

Compiled from official sources — confirm details with the bill’s official record.

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