The special session omnibus education finance bill balances the E-12 budget with a zero- dollar target in the next biennium and a $420 million cut target in fiscal years 2028-29, mainly by creating a Blue Ribbon Commission on special education to find $250 million of savings in the tails. School districts will continue to benefit from the formula tied to inflation in 2026-27 and into the future. Nonpublic pupil aid is not eliminated or reduced in the E12 bill and the Governor’s compensatory aid hold harmless will provide an additional $55 million next biennium before a compensatory aid task force provides recommendations on how to continue appropriating compensatory aid. (HF 5)
Key Provisions:
Education Funding Linked to Inflation
The E12 bill will continue the linkage of the basic education formula allowance to inflation, currently $7,281 per student, in the next biennium and into the future. The formula is linked to the CPI-U beginning in fiscal year 2026 with a statutory minimum annual increase of 2% and a maximum increase of 3%. The fiscal year 2026 forecasted increase in the formula based on inflation is 2.74% and 3% in 2027. This provides $8.4 billion in 2026 and $8.7 billion in 2027 in general education aid to schools.
Compensatory Revenue
The E12 bill provides $55 million next year to hold school districts harmless from prospective decreases in compensatory revenue based on the lack of applications for educational benefits (paper forms) being a component of the compensatory formula. School districts have reported a loss of approximately $50 million statewide due to the lack of paper forms being a part of the compensatory formula calculation.
In fiscal year 2026 only, compensatory revenue for each school building will be calculated based on the greater of a school district building’s actual compensatory revenue in fiscal year 2026 or the building’s actual compensation revenue in fiscal year 2024. The E12 bill also creates a compensatory revenue task force to examine the compensatory formula, make recommendations on altering the formula calculation, and report to the legislature.
Compensatory reform will also provide additional flexibility for school districts to allocate up to 40% of compensatory revenue on a district wide basis. Under current law, districts are only allowed to allocate 20% on a districtwide basis and 80% of revenue must be used at specific school sites generating the revenue.
Unemployment Insurance for Hourly School Employees
Beginning in the summer of 2024, the legislature authorized E12 hourly school employees to access unemployment insurance (UI) benefits and provided $135 million to compensate districts for these costs. The estimated cost of providing UI benefits to hourly school employees is approximately $70 million per year.
The E12 bill provides an additional $100 million, one-time, to ensure school districts are compensated for their expenses to reimburse the UI Trust Fund through fiscal year 2027. The agreement to fund UI for hourly school employees was agreed upon by legislative leadership with a cut of $77 million to the Northern Lights Express high speed rail project from the Twin Cities to Duluth. (HF 1143)
Blue Ribbon Commission on Special Education
A new Blue Ribbon Commission will be tasked with finding $250 million in savings in statewide special education expenses. If the full savings is not found by the commission and passed into law by the next Legislature, there will be a corresponding reduction in SPED cross subsidy aid to meet the $250 million tails cut target. The commission will be comprised of 18 members, including four legislators and the remainder appointed by the Governor with expertise in special education administration.
Charter School Reform
Charter school board members, authorizers, and administrators will be subject to more stringent ethical and accountability standards.
Charter school board members and administrators will be required to complete statements of economic interest and will be subject to the state’s gift ban.
Charter school authorizers will be required to participate in annual Department of Education-approved training and include performance review information in their annual reports.
Charter school boards will be required to record and post board meetings on their websites, and publish additional information about charter contracts, school performance reviews, notices to terminate, and financial statements.
Charter school board members are prohibited from serving on more than one charter school board and their compensation is limited to the amount provided to public school board members within the same school district.
‘Long-term facilities maintenance charter school aid’ is reallocated at current levels as ‘additional general education revenue’ since charters are already able to use this aid for any general education purpose.
Student Attendance and Absenteeism
The E12 bill incorporates the recommendations of the bipartisan Student Attendance and Truancy Legislative Study Group that met over the interim to address student absenteeism. The legislation attempted to standardize how schools collect and disseminate information related to student attendance.
The bill clarifies that an application to excuse a child from school attendance may be made to a truant officer or other school official designated by the principal.
It requires school principals to issue and keep records of attendance excuses and requires principals to report to superintendents information about students who are unexpectedly not re-enrolled for the current school year. Superintendents are required to immediately make such information available to counties.
School districts are required to notify local welfare agencies of any student dropped from their roll for unexcused absences exceeding 15 consecutive days and to contact the student’s family to encourage reenrollment.
Special Education
$4 million is provided to intermediate school districts to continue the special education apprenticeship program, which recruits and mentors paraprofessionals and other school staff to obtain special education teacher licensure.
The E12 bill books $43 million in savings in 2026-27 and $48 million in 2028-29 by lowering the initial reimbursement of special education transportation aid from 100% to 95% of eligible costs for 2026 and 90% of eligible costs for 2027 and later. This proposal is intended to curtail spending growth in special education expenses and ensure schools are appropriately compensated for special education transportation.
The lower reimbursement rates will trigger special education cross subsidy aid payments, which will mitigate these reductions and effectively provide reimbursement rates at 95% in 2027 and later.
The agreement reduces the state-paid tuition reimbursement of unfunded charter school special education costs from ten percent to six percent of the charter school’s unreimbursed costs. 80% of a charter school’s unreimbursed special education costs continue to be billed to each student’s resident school district. This is another attempt to curtail growth in special education spending.
Student Support Personnel Aid (SSPA)
The E12 bill reduces the expansion of student support personnel aid, which amounts to a $28 million cut in 2026-27 and $23 million cut in 2028-29.
Currently, SSPA is $17/student in 2025 and is set to increase to $48/student in 2026. This proposal will reduce the aid increase to $30/student in 2026 and 2027, and $34/student in 2028 and later to realize savings to meet the tails budget target.
The proposal also expands the permitted uses of student support personnel aid to allow cooperatives to share revenue generated by home districts and allows districts with declining enrollment to use support aid to retain staff that would otherwise be laid off due to budget constraints.
It also allows up to $5,000 per year in SSPA to be used to cover the costs of providing training or job-embedded coaching or travel for SSPA staff between school sites.
Long-Term Facilities Maintenance Roof Repair
The E12 agreement provides flexibility in long-term facilities maintenance revenue by allowing school districts to include roof repair and replacement costs totaling $100,000 or more per site in a district’s annual long-term facilities maintenance (LTFM) revenue authority. For most districts, this authority will increase revenues potentially available for roof repair and replacement and free up money for other deferred maintenance projects. (SF 1198)
Cardiac Emergency Response Plans
The E12 bill provides $880k to help school districts purchase AEDs to be made available in school buildings and for school-sanctioned athletic events. Schools will be required to adopt a model policy for cardiac emergency response plans. This funding will help save lives and ensure every school district is prepared for cardiac emergencies. (SF 1457)
Math Corps
The E12 bill provides an additional $1 million for Math Corps, which provides critical tutoring services to ensure every student is grade-level proficient in math. Math Corps is a tutoring program that focuses on improving students’ math skills, particularly for those struggling with foundational math concepts. It’s a partnership between the federal government, through AmeriCorps, and states like Minnesota, where it’s operated by ServeMinnesota. The program uses AmeriCorps members to provide tutoring support to students in grades 4-8, helping them develop the math skills needed for future success in school and careers. (SF 1323)
Registered Teacher Apprenticeship Program
The E12 bill provides $3.5 million in 2026 and 2027 for mentoring, induction, and retention incentive grants to recruit and retain Minnesota teachers. The program is a competitive grant application process and is intended to recruit teachers of color and American Indian teachers.
Did not pass:
Paid Student Teaching
Various proposals to provide Minnesota’s student teachers with a salary or stipend instead of serving without compensation did not pass this session. A student-teacher pilot program appropriated $6.5 million last session to provide $6,800 stipends to student teachers with varying levels of success. Efforts to provide a refundable student teacher tax credit were also not able to pass this session.
Nonpublic Pupil Aid Reductions
Nonpublic pupil aid flows through public school districts for services to private schools to help fund student transportation, curriculum, school counselors, and school nurses. The final K12 bill does not include cuts or the elimination of nonpublic pupil aid or nonpublic transportation aid.