Education committee OKs proposed shakeup of distribution, use of compensatory revenue

School districts in Minnesota primarily receive state funding through the general education basic formula. However, numerous factors can enhance a district’s level of state aid, such as size of the student body or extent of transportation expenses.

One of the largest contributing factors, however, is qualification for compensatory revenue.

“Compensatory revenue is designated funds to help students who are underprepared to learn and not meeting academic performance standards,” said Rep. Sandra Feist (DFL-New Brighton). This funding has historically been targeted at students living in districts with high poverty rates.

She sponsors HF1547, which would make major changes in calculating how this revenue is distributed and how those dollars can be utilized by local schools.

The House Education Policy Committee approved the measure Wednesday, sending it to the House Education Finance Committee on a split-voice vote.

The impetus for this bill lies in the consequences of another DFL educational proposal – HF5. That bill, which would institute universal no-cost school meals statewide, would render obsolete certain paperwork that low-income families currently fill out to qualify for free and reduced-price school meals.

However, those forms are used to calculate many other things in the educational sphere – including the amount of compensatory revenue distributed to school districts.

Feist’s bill would modify the method for allocating this revenue. First, by utilizing a direct match with other means-tested programs, such as Medicaid, the state estimates it can reach 90% of students they aim to target with this revenue.

In order to reach the last 10%, the bill calls for an “undercount adjustment” by adding three numbers: percentage of English-learner enrollment for the previous year; percentage of low-income students who submitted now-discontinued paper forms for the final time during Fall 2022; and percentage of highly mobile or homeless enrollment for the previous year.

While this revenue is given on a district-by-district basis, the revenue is generated based on calculations made at individual school sites within those districts. So, in an effort to ensure the awarded revenue reaches the targeted students, the bill would require local districts to spend at least 70% of the revenue at the generating sites. Current state statute requires only 50%.

Additionally, the list of acceptable uses for compensatory revenue would be narrowed from 12 to seven distinct items starting in fiscal year 2024. Included on this list are remedial classes, truancy reduction programs, and bilingual education. Feist believes this will best support students being targeted by this funding.

Feist further noted much of the bill’s language grew out of recommendations from a 2020 report by the Office of the Legislative Auditor. She also emphasized that the current form of the bill is a starting point, and she will be soliciting further input before the next committee stop.

Rep. Peggy Bennett (R-Albert Lea) cautioned members against providing districts more compensatory revenue without tracking if it’s actually improving academic performance, in light of slipping reading and math test scores in recent years.

“Additional funding is awesome, but we need to make sure it’s smart funding,” she said.