Proposal would modify compensatory education revenue formula

The state’s compensatory education revenue formula provides additional funding to school districts to support students who are not meeting state standards.

It was the focus of an Office of the Legislative Auditor report last year, which determined it has some gaps and made recommendations on how to address them.

In response to that report and stakeholder engagement, HF1144, as amended, would make several modifications to the compensatory revenue formula.

The bill, sponsored by Rep. Sandra Feist (DFL-New Brighton), was held over Wednesday by the House Education Finance Committee for possible omnibus bill inclusion. The companion, SF1356, awaits action by the Senate Education Finance and Policy Committee. Sen. Justin Eichorn (R-Grand Rapids) is the sponsor.

“Now more than ever, especially coming out of a global pandemic, we can address the staggering opportunity gap by making these changes,” Feist said. “These changes ensure a more equitable distribution of compensatory revenue, that we’re focusing resources on our most vulnerable students, and using these critical resources effectively.”

The OLA report indicated that the state provides approximately $551 million annually to school districts in compensatory revenue.

It’s a concentration formula based on each school building’s count of students who are eligible for free or reduced-price meals. As the concentration of students eligible for free or reduced-price meals increases, the aid per compensatory pupil also increases, according to the nonpartisan House Research Department.

However, under current law, the concentration level does not increase once 80% of the students at the school site are eligible for free or reduced-price meals. The bill would remove that cap.

“Removing the cap would benefit students across the state ensuring that all students get the critical resources they need,” Feist said.

It would also lower the percentage of funds districts can move to schools that didn’t generate the revenue. Currently, a school board may adopt a resolution to reallocate up to 50% of the revenue for eligible uses across the district. The bill would lower that to 20%. Proponents say this will better ensure students that generate the aid benefit from it.

Additional measures in the bill would:

• require compensatory revenue to be spent on evidence-based practices;
• allow students with free or reduced-price meal status to maintain that status as long as they are enrolled at that site, regardless of fluctuations in family income; and
• modify requirements for school sites that provide free meals to all enrolled students through the federal Community Eligibility Provision.

Finally, an impact of distance and hybrid learning has been that fewer students who are eligible for free and reduced-price meals submitted their paperwork to qualify. Because this is the only measure by which compensatory aid is calculated, school leaders are concerned revenue will decline, but the need for the additional services for low-income students will remain. To address this, the bill includes a hold-harmless component for fiscal year 2022 only.