Bill Text: MN HF345 | 2011-2012 | 87th Legislature | Introduced

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Bill Title: School finance system modified, new education funding framework created, and income tax schedule changes made.

Sponsorship: Partisan Bill (Democrat 29)

Status: (Introduced - Dead) 2011-02-10 - Author added Clark [HF345 Detail]

Download: Minnesota-2011-HF345-Introduced.html

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A bill for an act

relating to education finance; modifying the school finance system; creating a
new education funding framework; making changes to income tax schedules;
amending Minnesota Statutes 2010, sections 123B.53, subdivision 5; 124D.4531;
124D.59, subdivision 2; 124D.65, subdivision 5; 125A.76, subdivision 5;
125A.79, subdivision 7; 126C.01, by adding subdivisions; 126C.05, subdivisions
1, 3, 5, 6, 8, 16, 17; 126C.10, subdivisions 1, 2, 2a, 3, 4, 6, 13, 14, 18, by adding
subdivisions; 126C.13, subdivisions 4, 5; 126C.17, subdivisions 1, 5, 6; 126C.20;
126C.40, subdivision 1; 127A.51; proposing coding for new law in Minnesota
Statutes, chapters 123B; 126C; repealing Minnesota Statutes 2010, sections
123B.54; 123B.57, subdivisions 3, 4, 5; 123B.591; 125A.76, subdivision 4;
125A.79, subdivision 6; 126C.10, subdivisions 2b, 13a, 13b, 24, 25, 26, 27, 28,
29, 30, 31, 31a, 31b, 32, 33, 34, 35, 36; 126C.12; 126C.126; 127A.50.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

    Section 1. Minnesota Statutes 2010, section 123B.53, subdivision 5, is amended to read:
    Subd. 5. Equalized debt service levy. (a) The equalized debt service levy of a
district equals the sum of the first tier equalized debt service levy and the second tier
equalized debt service levy.
(b) A district's first tier equalized debt service levy equals the district's first tier debt
service equalization revenue times the lesser of one or the ratio of:
(1) the quotient derived by dividing the adjusted net tax capacity of the district for
the year before the year the levy is certified by the adjusted pupil units in the district for
the school year ending in the year prior to the year the levy is certified; to
(2) $3,200 100 percent of the statewide adjusted net tax capacity equalizing factor.
(c) A district's second tier equalized debt service levy equals the district's second tier
debt service equalization revenue times the lesser of one or the ratio of:
(1) the quotient derived by dividing the adjusted net tax capacity of the district for
the year before the year the levy is certified by the adjusted pupil units in the district for
the school year ending in the year prior to the year the levy is certified; to
(2) $8,000 200 percent of the statewide adjusted net tax capacity equalizing factor.
EFFECTIVE DATE.This section is effective for taxes payable in 2013 and later.

    Sec. 2. [123B.555] SCHOOL BOND AGRICULTURAL CREDIT.
    Subdivision 1. Eligibility. All class 2a, 2b, and 2c property under section 273.13,
subdivision 23, except for property consisting of the house, garage, and immediately
surrounding one acre of land of an agricultural homestead, is eligible to receive the credit
under this section.
    Subd. 2. Credit amount. For each qualifying property, the school bond agricultural
credit is equal to 66 percent of the property's eligible net tax capacity multiplied by the
school debt tax rate determined under section 275.08, subdivision 1b.
    Subd. 3. Credit reimbursements. The county auditor shall determine the tax
reductions allowed under this section within the county for each taxes payable year and
shall certify that amount to the commissioner of revenue as a part of the abstracts of tax
lists submitted under section 275.29. Any prior year adjustments shall also be certified on
the abstracts of tax lists. The commissioner shall review the certifications for accuracy,
and may make such changes as are deemed necessary, or return the certification to the
county auditor for correction. The credit under this section must be used to reduce the
school district net tax capacity-based property tax as provided in section 273.1393.
    Subd. 4. Payment. The commissioner of revenue shall certify the total of the tax
reductions granted under this section for each taxes payable year within each school
district to the commissioner of education, who shall pay the reimbursement amounts to
each school district as provided in section 273.1392.
EFFECTIVE DATE.This section is effective for taxes payable in 2013 and later.

    Sec. 3. Minnesota Statutes 2010, section 124D.4531, is amended to read:
124D.4531 CAREER AND TECHNICAL LEVY AID.
    Subdivision 1. Career and technical levy aid. (a) A district with a career and
technical program approved under this section for the fiscal year in which the levy is
certified may levy an amount is eligible for aid equal to the lesser of:
(1) $80 $240 times the district's average daily membership in grades 10 through 12
for the current fiscal year in which the levy is certified; or
(2) 25 percent of approved expenditures in the previous fiscal year in which the
levy is certified for the following:
(i) salaries paid to essential, licensed personnel providing direct instructional
services to students in that fiscal year for services rendered in the district's approved
career and technical education programs;
(ii) contracted services provided by a public or private agency other than a Minnesota
school district or cooperative center under subdivision 7;
(iii) necessary travel between instructional sites by licensed career and technical
education personnel;
(iv) necessary travel by licensed career and technical education personnel for
vocational student organization activities held within the state for instructional purposes;
(v) curriculum development activities that are part of a five-year plan for
improvement based on program assessment;
(vi) necessary travel by licensed career and technical education personnel for
noncollegiate credit-bearing professional development; and
(vii) specialized vocational instructional supplies.
(b) Up to ten percent of a district's career and technical levy aid may be spent on
equipment purchases. Districts using the career and technical levy aid for equipment
purchases must report to the department on the improved learning opportunities for
students that result from the investment in equipment.
(c) The district must recognize the full amount of this levy as revenue for the fiscal
year in which it is certified.
    Subd. 2. Allocation from cooperative centers and intermediate districts. For
purposes of this section, a cooperative center or an intermediate district must allocate its
approved expenditures for career and technical education programs among participating
districts.
    Subd. 3. Levy Aid guarantee. Notwithstanding subdivision 1, the career and
technical education levy aid for a district is not less than the lesser of:
(1) the district's career and technical education levy authority revenue for the
previous fiscal year; or
(2) 100 percent of the approved expenditures for career and technical programs
included in subdivision 1, paragraph (b), for the prior fiscal year in which the levy is
certified.
    Subd. 4. District reports. Each district or cooperative center must report data to the
department for all career and technical education programs as required by the department
to implement the career and technical levy formula.
    Subd. 5. Allocation from districts participating in agreements for secondary
education or interdistrict cooperation. For purposes of this section, a district with a
career and technical program approved under this section that participates in an agreement
under section 123A.30 or 123A.32 must allocate its levy authority under this section
among participating districts.
EFFECTIVE DATE.This section is effective for aid payments for fiscal year
2014 and thereafter.

    Sec. 4. Minnesota Statutes 2010, section 124D.59, subdivision 2, is amended to read:
    Subd. 2. Pupil of limited English proficiency. (a) "Pupil of limited English
proficiency" means a pupil in kindergarten through grade 12 who meets the following
requirements:
(1) the pupil, as declared by a parent or guardian first learned a language other than
English, comes from a home where the language usually spoken is other than English, or
usually speaks a language other than English; and
(2) the pupil is determined by developmentally appropriate measures, which might
include observations, teacher judgment, parent recommendations, or developmentally
appropriate assessment instruments, to lack the necessary English skills to participate
fully in classes taught in English.
(b) Notwithstanding paragraph (a), a pupil in grades 4 through 12 who was enrolled
in a Minnesota public school on the dates during the previous school year when a
commissioner provided assessment that measures the pupil's emerging academic English
was administered, shall not be counted as a pupil of limited English proficiency in
calculating limited English proficiency pupil units under section 126C.05, subdivision
17 , and shall not generate state limited English proficiency aid under section 124D.65,
subdivision 5 , unless the pupil scored below the state cutoff score on an assessment
measuring emerging academic English provided by the commissioner during the previous
school year.
(c) Notwithstanding paragraphs (a) and (b), a pupil in kindergarten through grade 12
shall not be counted as a pupil of limited English proficiency in calculating limited English
proficiency pupil units under section 126C.05, subdivision 17, and shall not generate state
limited English proficiency aid under section 124D.65, subdivision 5, if:
(1) the pupil is not enrolled during the current fiscal year in an educational program
for pupils of limited English proficiency in accordance with sections 124D.58 to 124D.64;
or.
(2) the pupil has generated five or more years of average daily membership in
Minnesota public schools since July 1, 1996.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 5. Minnesota Statutes 2010, section 124D.65, subdivision 5, is amended to read:
    Subd. 5. School district LEP revenue. (a) A district's limited English proficiency
programs revenue equals the product of: (1) $700 in fiscal year 2004 and later times .2;
(2) the basic formula allowance for that year; and (3) the greater of 20 or the adjusted
marginal cost average daily membership of eligible pupils of limited English proficiency
enrolled in the district during the current fiscal year.
(b) A pupil ceases to generate state limited English proficiency aid in the school
year following the school year in which the pupil attains the state cutoff score on a
commissioner-provided assessment that measures the pupil's emerging academic English.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 6. Minnesota Statutes 2010, section 125A.76, subdivision 5, is amended to read:
    Subd. 5. School district special education aid. A school district's special education
aid for fiscal year 2008 and later equals the state total special education aid times the ratio
of the district's its initial special education aid to the state total initial special education aid.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 7. Minnesota Statutes 2010, section 125A.79, subdivision 7, is amended to read:
    Subd. 7. District special education excess cost aid. A district's special education
excess cost aid for fiscal year 2002 and later equals the state total special education excess
cost aid times the ratio of the district's its initial excess cost aid to the state total initial
excess cost aid.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 8. Minnesota Statutes 2010, section 126C.01, is amended by adding a subdivision
to read:
    Subd. 2a. Adjusted net tax capacity equalizing factor. The adjusted net tax
capacity equalizing factor equals the quotient derived by dividing the total adjusted net tax
capacity of all school districts in the state for the year before the year the levy is certified
by the total number of adjusted pupil units in the state for the current school year.
EFFECTIVE DATE.This section is effective for taxes payable in 2013 and later.

    Sec. 9. Minnesota Statutes 2010, section 126C.01, is amended by adding a subdivision
to read:
    Subd. 3a. Referendum market value equalizing factor. The referendum market
value equalizing factor equals the quotient derived by dividing the total referendum
market value of all school districts in the state for the year before the year the levy is
certified by the total number of resident pupil units in the state for the current school year.
EFFECTIVE DATE.This section is effective for taxes payable in 2013 and later.

    Sec. 10. Minnesota Statutes 2010, section 126C.01, is amended by adding a
subdivision to read:
    Subd. 5a. Location equity index. (a) A school district's location equity index
equals each district's composite wage level divided by the statewide average wage for the
same period. The composite wage level for a school district equals the sum of 50 percent
of the district's county wage level and 50 percent of the district's economic development
region composite wage level. The composite wage level is computed by using the most
recent three-year weighted wage data.
(b) A school district's location equity index must not be less than .9 or greater than
1.05.
(c) The commissioner of education annually must recalculate the indexes in this
section. For purposes of this subdivision, the commissioner must locate a school district
with boundaries that cross county borders in the county that generates the highest location
equity index for that district.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 11. Minnesota Statutes 2010, section 126C.05, subdivision 1, is amended to read:
    Subdivision 1. Pupil unit. Pupil units for each Minnesota resident pupil under the
age of 21 or who meets the requirements of section 120A.20, subdivision 1, paragraph (c),
in average daily membership enrolled in the district of residence, in another district under
sections 123A.05 to 123A.08, 124D.03, 124D.08, or 124D.68; in a charter school under
section 124D.10; or for whom the resident district pays tuition under section 123A.18,
123A.22 , 123A.30, 123A.32, 123A.44, 123A.488, 123B.88, subdivision 4, 124D.04,
124D.05 , 125A.03 to 125A.24, 125A.51, or 125A.65, shall be counted according to this
subdivision.
    (a) A prekindergarten pupil with a disability who is enrolled in a program approved
by the commissioner and has an individual education plan is counted as the ratio of the
number of hours of assessment and education service to 825 times 1.25 with a minimum
average daily membership of 0.28, but not more than 1.25 pupil units.
    (b) A prekindergarten pupil who is assessed but determined not to be disabled is
counted as the ratio of the number of hours of assessment service to 825 times 1.25.
    (c) A kindergarten pupil with a disability who is enrolled in a program approved
by the commissioner is counted as the ratio of the number of hours of assessment and
education services required in the fiscal year by the pupil's individual education program
plan to 875, but not more than one.
    (d) A kindergarten pupil who is not included in paragraph (c) is counted as .612 1.0
pupil units.
    (e) A pupil who is in any of grades 1 to 3 is counted as 1.115 1.0 pupil units for
fiscal year 2000 and thereafter.
    (f) A pupil who is any of grades 4 to 6 is counted as 1.06 1.0 pupil units for fiscal
year 1995 and thereafter.
    (g) A pupil who is in any of grades 7 to 12 is counted as 1.3 1.0 pupil units.
    (h) A pupil who is in the postsecondary enrollment options program is counted as
1.3 1.0 pupil units.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 12. Minnesota Statutes 2010, section 126C.05, subdivision 3, is amended to read:
    Subd. 3. Compensation revenue pupil units. Compensation revenue pupil units
for fiscal year 1998 and thereafter must be computed according to this subdivision.
(a) The compensation revenue concentration percentage for each building in a
district equals the product of 100 times the ratio of:
(1) the sum of the number of pupils enrolled in the building district eligible to receive
free lunch plus one-half of the pupils eligible to receive reduced priced or reduced-price
lunch on October 1 of the previous fiscal year; to
(2) the number of pupils enrolled in the building district on October 1 of the
previous fiscal year.
(b) The compensation revenue pupil weighting factor for a building equals the
lesser of one or the quotient obtained by dividing the building's compensation revenue
concentration percentage by 80.0.
(c) The compensation revenue pupil units for a building district equals the product of:
(1) the sum of the number of pupils enrolled in the building district eligible to receive
free lunch and one-half of the pupils eligible to receive reduced priced or reduced-price
lunch on October 1 of the previous fiscal year; times
(2) the compensation revenue pupil weighting factor for the building; times
(3) .60 district.
(d) Notwithstanding paragraphs (a) to (c), for charter schools and contracted
alternative programs in the first year of operation, compensation revenue pupil units shall
be computed using data for the current fiscal year. If the charter school or contracted
alternative program begins operation after October 1, compensatory revenue pupil units
shall be computed based on pupils enrolled on an alternate date determined by the
commissioner, and the compensation revenue pupil units shall be prorated based on the
ratio of the number of days of student instruction to 170 days.
(e) The percentages in this subdivision must be based on the count of individual
pupils and not on a building average or minimum.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 13. Minnesota Statutes 2010, section 126C.05, subdivision 5, is amended to read:
    Subd. 5. Adjusted pupil units. (a) Adjusted pupil units for a district or charter
school means the sum of:
(1) the number of pupil units served, according to subdivision 7, plus
(2) pupil units according to subdivision 1 for whom the district or charter school
pays tuition under section 123A.18, 123A.22, 123A.30, 123A.32, 123A.44, 123A.488,
123B.88, subdivision 4 , 124D.04, 124D.05, 125A.03 to 125A.24, 125A.51, or 125A.65,
minus
(3) pupil units according to subdivision 1 for whom the district or charter school
receives tuition under section 123A.18, 123A.22, 123A.30, 123A.32, 123A.44, 123A.488,
123B.88, subdivision 4 , 124D.04, 124D.05, 125A.03 to 125A.24, 125A.51, or 125A.65.
(b) Adjusted marginal cost pupil units means the greater of:
(1) the sum of .77 times the pupil units defined in paragraph (a) for the current school
year and .23 times the pupil units defined in paragraph (a) for the previous school year; or
(2) the number of adjusted pupil units defined in paragraph (a) for the current school
year.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 14. Minnesota Statutes 2010, section 126C.05, subdivision 6, is amended to read:
    Subd. 6. Resident pupil units. (a) Resident pupil units for a district means the
number of pupil units according to subdivision 1 residing in the district.
(b) Resident marginal cost pupil units means the greater of:
(1) the sum of .77 times the pupil units defined in paragraph (a) for the current year
and .23 times the pupil units defined in paragraph (a) for the previous school year; or
(2) the number of resident pupil units defined in paragraph (a) for the current school
year.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 15. Minnesota Statutes 2010, section 126C.05, subdivision 8, is amended to read:
    Subd. 8. Average daily membership. (a) Membership for pupils in grades
kindergarten through 12 and for prekindergarten pupils with disabilities shall mean the
number of pupils on the current roll of the school, counted from the date of entry until
withdrawal. The date of withdrawal shall mean the day the pupil permanently leaves
the school or the date it is officially known that the pupil has left or has been legally
excused. However, a pupil, regardless of age, who has been absent from school for 15
consecutive school days during the regular school year or for five consecutive school days
during summer school or intersession classes of flexible school year programs without
receiving instruction in the home or hospital shall be dropped from the roll and classified
as withdrawn. Nothing in this section shall be construed as waiving the compulsory
attendance provisions cited in section 120A.22. Average daily membership equals the
sum for all pupils of the number of days of the school year each pupil is enrolled in the
district's schools divided by the number of days the schools are in session. Days of
summer school or intersession classes of flexible school year programs are only included
in the computation of membership for pupils with a disability not appropriately served
primarily in the regular classroom. A student must not be counted as more than 1.2 pupils
in average daily membership under this section. When the initial total average daily
membership exceeds 1.2 for a pupil enrolled in more than one school district during the
fiscal year, each district's average daily membership must be reduced proportionately.
(b) A student must not be counted as more than one pupil in average daily
membership except for purposes of section 126C.10, subdivision 2a.
(c) For purposes of section 126C.10, subdivision 2a, only, a pupil's average daily
membership is counted as 1.0 once a kindergarten or elementary pupil has received 960
hours of instruction during the school year and as 1.0 once a secondary student has
received 1,050 hours of instruction during the school year.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 16. Minnesota Statutes 2010, section 126C.05, subdivision 16, is amended to read:
    Subd. 16. Free and reduced-price lunches. The commissioner shall determine the
number of children eligible to receive either a free or reduced-price lunch on October 1
each year. Children enrolled in a building on October 1 and determined to be eligible to
receive free or reduced-price lunch by December 15 of that school year shall be counted
as eligible on October 1 for purposes of subdivision 3. The commissioner may use
federal definitions for these purposes and may adjust these definitions as appropriate.
The commissioner may adopt reporting guidelines to assure accuracy of data counts and
eligibility. Districts shall use any guidelines adopted by the commissioner.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 17. Minnesota Statutes 2010, section 126C.05, subdivision 17, is amended to read:
    Subd. 17. LEP pupil units. (a) Limited English proficiency pupil units for fiscal
year 2004 and thereafter shall be determined according to this subdivision.
(b) The limited English proficiency concentration percentage for a district equals the
product of 100 times the ratio of:
(1) means the number of eligible pupils of limited English proficiency in average
daily membership enrolled in the district during the current fiscal year; to.
(2) the number of pupils in average daily membership enrolled in the district.
(c) The limited English proficiency pupil units for each eligible pupil of limited
English proficiency in average daily membership equals the lesser of one or the quotient
obtained by dividing the limited English proficiency concentration percentage for the
pupil's district of enrollment by 11.5.
(d) (b) Limited English proficiency pupil units shall be counted by the district of
enrollment.
(e) (c) Notwithstanding paragraph (d) (b), for the purposes of this subdivision,
pupils enrolled in a cooperative or intermediate school district shall be counted by the
district of residence.
(f) (d) For the purposes of this subdivision, the terms defined in section 124D.59
have the same meaning.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 18. [126C.09] EDUCATION FUNDING FRAMEWORK.
    Subdivision 1. Basic formula framework; general classroom funding. The
general classroom funding for each school district equals the sum of the district's general
education basic revenue, extended time revenue, compensatory revenue, LEP revenue,
referendum replacement revenue, and special education revenue.
    Subd. 2. District instructional services. A school district's instructional services
revenue equals the sum of its operating sparsity revenue, location equity revenue, and
declining enrollment revenue.
    Subd. 3. District support services. A school district's support services revenue
equals the sum of its operating capital revenue, alternative facilities revenue, integration
revenue, and transportation revenue.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 19. Minnesota Statutes 2010, section 126C.10, subdivision 1, is amended to read:
    Subdivision 1. General education revenue. (a) For fiscal year 2006 and later
through 2013, the general education revenue for each district equals the sum of the
district's basic revenue, extended time revenue, gifted and talented revenue, basic skills
revenue, training and experience revenue, secondary sparsity revenue, elementary sparsity
revenue, transportation sparsity revenue, total operating capital revenue, equity revenue,
alternative teacher compensation revenue, and transition revenue.
(b) For fiscal years 2014 and later, a school district's general education revenue
equals the sum of its basic revenue, extended time revenue, declining enrollment revenue,
basic skills revenue, location equity revenue, referendum replacement revenue, secondary
sparsity revenue, elementary sparsity revenue, transportation revenue, and total operating
capital revenue.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 20. Minnesota Statutes 2010, section 126C.10, subdivision 2, is amended to read:
    Subd. 2. Basic revenue. (a) The basic revenue for each district equals the formula
allowance times the adjusted marginal cost pupil units for the school year.
(b) The formula allowance for fiscal year 2007 is $4,974. The formula allowance
for fiscal year 2008 is $5,074 and the formula allowance for fiscal year years 2009 and
subsequent years to 2013 is $5,124.
(c) The formula allowance for fiscal year 2014 is $7,500. The formula allowance
for fiscal year 2015 and later equals the formula allowance for the previous year times
the sum of 1.0 and the greater of zero or the ratio of implicit price deflator, as defined in
section 275.70, subdivision 2, for the most recent year to the implicit price deflator for
the previous year.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 21. Minnesota Statutes 2010, section 126C.10, subdivision 2a, is amended to read:
    Subd. 2a. Extended time revenue. (a) A school district's extended time revenue
is equal to the product of $4,601 the formula allowance for that year and the sum of
the adjusted marginal cost pupil units of the district for each pupil in average daily
membership in excess of 1.0 and less than 1.2 according to section 126C.05, subdivision 8.
(b) A school district's extended time revenue may be used for extended day
programs, extended week programs, summer school, and other programming authorized
under the learning year program.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 22. Minnesota Statutes 2010, section 126C.10, is amended by adding a
subdivision to read:
    Subd. 2c. Declining enrollment revenue. A school district's declining enrollment
revenue equals the greater of zero or the product of: (1) the basic formula allowance for
that year; and (2) the difference between the mean average adjusted pupil units for the
three preceding years and the adjusted pupil units for the current year.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 23. Minnesota Statutes 2010, section 126C.10, is amended by adding a
subdivision to read:
    Subd. 2d. Location equity revenue. A school district's location equity revenue
equals the product of:
(1) .50;
(2) the basic formula allowance for that year;
(3) the district's adjusted pupil units for that year; and
(4) the district's location equity index minus .9.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 24. Minnesota Statutes 2010, section 126C.10, is amended by adding a
subdivision to read:
    Subd. 2e. Referendum replacement revenue. A school district's referendum
replacement revenue equals $500 times the district's adjusted pupil units for that year.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 25. Minnesota Statutes 2010, section 126C.10, subdivision 3, is amended to read:
    Subd. 3. Compensatory education revenue. (a) The compensatory education
revenue for each building in the district equals the greater of: (1) $2,500 times the district's
enrollment of students eligible for free or reduced-price meals under section 126C.05,
subdivision 3, paragraph (a), clause (1); or (2) 40 percent of the formula allowance minus
$415 times the compensation revenue pupil units computed according to section 126C.05,
subdivision 3 . Revenue shall be paid to the district and must be allocated according to
section 126C.15, subdivision 2.
(b) When the district contracting with an alternative program under section 124D.69
changes prior to the start of a school year, the compensatory revenue generated by pupils
attending the program shall be paid to the district contracting with the alternative program
for the current school year, and shall not be paid to the district contracting with the
alternative program for the prior school year.
(c) When the fiscal agent district for an area learning center changes prior to the start
of a school year, the compensatory revenue shall be paid to the fiscal agent district for the
current school year, and shall not be paid to the fiscal agent district for the prior school year.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 26. Minnesota Statutes 2010, section 126C.10, subdivision 4, is amended to read:
    Subd. 4. Basic skills revenue. A school district's basic skills revenue equals the
sum of:
(1) compensatory revenue under subdivision 3; plus
(2) limited English proficiency revenue under section 124D.65, subdivision 5; plus
(3) $250 times the limited English proficiency pupil units under section 126C.05,
subdivision 17 .
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 27. Minnesota Statutes 2010, section 126C.10, subdivision 6, is amended to read:
    Subd. 6. Definitions. The definitions in this subdivision apply only to subdivisions
7 and 8.
(a) "High school" means a public secondary school, except a charter school under
section 124D.10, that has pupils enrolled in at least the 10th, 11th, and 12th grades. If
there is no high school in the district and the school is at least 19 15 miles from the next
nearest school, the commissioner must designate one school in the district as a high school
for the purposes of this section.
(b) "Secondary average daily membership" means, for a district that has only one
high school, the average daily membership of pupils served in grades 7 through 12. For a
district that has more than one high school, "secondary average daily membership" for
each high school means the product of the average daily membership of pupils served in
grades 7 through 12 in the high school, times the ratio of six to the number of grades
in the high school.
(c) "Attendance area" means the total surface area of the district, in square miles,
divided by the number of high schools in the district. For a district that does not operate
a high school and is less than 19 15 miles from the nearest operating high school, the
attendance area equals zero.
(d) "Isolation index" for a high school means the square root of 55 percent of the
attendance area plus the distance in miles, according to the usually traveled routes,
between the high school and the nearest high school. For a district in which there is located
land defined in section 84A.01, 84A.20, or 84A.31, the distance in miles is the sum of:
(1) the square root of one-half of the attendance area; and
(2) the distance from the border of the district to the nearest high school.
(e) "Qualifying high school" means a high school that has an isolation index greater
than 23 and that has secondary average daily membership of less than 400.
(f) "Qualifying elementary school" means a public elementary school, except a
charter school under section 124D.10, that is located 19 15 miles or more from the nearest
elementary school or from the nearest elementary school within the district and, in either
case, has an elementary average daily membership of an average of 20 or fewer per grade.
(g) "Elementary average daily membership" means, for a district that has only
one elementary school, the average daily membership of pupils served in kindergarten
through grade 6. For a district that has more than one elementary school, "average daily
membership" for each school means the average daily membership of pupils served in
kindergarten through grade 6 multiplied by the ratio of seven to the number of grades
in the elementary school.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 28. Minnesota Statutes 2010, section 126C.10, subdivision 13, is amended to read:
    Subd. 13. Total operating capital and technology revenue. (a) Total operating
capital revenue for a district equals: (1) $50 times the adjusted pupil units for the school
year for technology purposes; (2) for any district not participating in the alternative
facilities program under section 123B.59, $600 times the adjusted pupil units for deferred
maintenance and health and safety purposes under sections 123B.57 and 123B.59; (3) the
amount determined under paragraph (b) or (c), plus $73; and (4) $100 times the adjusted
marginal cost pupil units for the school year. The revenue must be placed in a reserved
account in the general fund and may only be used according to subdivision 14.
(b) Capital revenue for a district equals $100 times the district's maintenance cost
index times its adjusted marginal cost pupil units for the school year.
(c) The revenue for a district that operates a program under section 124D.128, is
increased by an amount equal to $30 times the number of marginal cost adjusted pupil
units served at the site where the program is implemented.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 29. Minnesota Statutes 2010, section 126C.10, subdivision 14, is amended to read:
    Subd. 14. Uses of total operating capital revenue. Technology revenue may only
be used for purposes in clauses (18), (19), (21), (23), and (24). Total operating capital
revenue may be used only for the following purposes:
(1) to acquire land for school purposes;
(2) to acquire or construct buildings for school purposes;
(3) to rent or lease buildings, including the costs of building repair or improvement
that are part of a lease agreement;
(4) to improve and repair school sites and buildings, and equip or reequip school
buildings with permanent attached fixtures, including library media centers;
(5) for a surplus school building that is used substantially for a public nonschool
purpose;
(6) to eliminate barriers or increase access to school buildings by individuals with a
disability;
(7) to bring school buildings into compliance with the State Fire Code adopted
according to chapter 299F;
(8) to remove asbestos from school buildings, encapsulate asbestos, or make
asbestos-related repairs;
(9) to clean up and dispose of polychlorinated biphenyls found in school buildings;
(10) to clean up, remove, dispose of, and make repairs related to storing heating fuel
or transportation fuels such as alcohol, gasoline, fuel oil, and special fuel, as defined
in section 296A.01;
(11) for energy audits for school buildings and to modify buildings if the audit
indicates the cost of the modification can be recovered within ten years;
(12) to improve buildings that are leased according to section 123B.51, subdivision 4;
(13) to pay special assessments levied against school property but not to pay
assessments for service charges;
(14) to pay principal and interest on state loans for energy conservation according to
section 216C.37 or loans made under the Douglas J. Johnson Economic Protection Trust
Fund Act according to sections 298.292 to 298.298;
(15) to purchase or lease interactive telecommunications equipment;
(16) by board resolution, to transfer money into the debt redemption fund to: (i)
pay the amounts needed to meet, when due, principal and interest payments on certain
obligations issued according to chapter 475; or (ii) pay principal and interest on debt
service loans or capital loans according to section 126C.70;
(17) to pay operating capital-related assessments of any entity formed under a
cooperative agreement between two or more districts;
(18) to purchase or lease computers and related materials, copying machines,
telecommunications equipment, and other noninstructional equipment;
(19) to purchase or lease assistive technology or equipment for instructional
programs;
(20) to purchase textbooks;
(21) to purchase new and replacement library media resources or technology;
(22) to purchase vehicles;
(23) to purchase or lease telecommunications equipment, computers, and related
equipment for integrated information management systems for:
(i) managing and reporting learner outcome information for all students under a
results-oriented graduation rule;
(ii) managing student assessment, services, and achievement information required
for students with individual education plans; and
(iii) other classroom information management needs; and
(24) to pay personnel costs directly related to the acquisition, operation, and
maintenance of telecommunications systems, computers, related equipment, and network
and applications software.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 30. Minnesota Statutes 2010, section 126C.10, subdivision 18, is amended to read:
    Subd. 18. Transportation sparsity revenue allowance. (a) A district's
transportation sparsity allowance equals the greater of zero or the result of the following
computation:
(i) Multiply the formula allowance according to subdivision 2, by .1469.
(ii) Multiply the result in clause (i) by the district's sparsity index raised to the
26/100 power.
(iii) Multiply the result in clause (ii) by the district's density index raised to the
13/100 power.
(iv) Multiply the formula allowance according to subdivision 2, by .0485.
(v) Subtract the result in clause (iv) from the result in clause (iii).
(b) Transportation sparsity revenue is equal to the transportation sparsity allowance
times the adjusted marginal cost pupil units.
EFFECTIVE DATE.This section is effective for fiscal year 2014 and later.

    Sec. 31. Minnesota Statutes 2010, section 126C.10, is amended by adding a
subdivision to read:
    Subd. 18a. Transportation revenue. (a) A school district's transportation revenue
equals the sum of its transportation sparsity revenue, hazardous transportation revenue,
and bus purchase revenue.
(b) A school district's transportation sparsity revenue equals its transportation
sparsity allowance times its adjusted pupil units for that year.
(c) A school district's hazardous transportation aid equals the amount necessary to
provide transportation services to students facing hazardous transportation conditions. A
district's hazardous transportation aid must not exceed 20 percent of the district's total
regular to and from school transportation costs for that year. For any year, a school
district may receive aid under this paragraph only after the school board has considered
the comprehensive plan for hazardous transportation submitted by the district's pupil
transportation safety committee at a regularly scheduled meeting of the school board. The
comprehensive plan may not be adopted until after the board has allowed the public
reasonable time to testify on the plan.
(d) A school district's bus purchase revenue equals five percent of the district's
spending on transportation services for the previous fiscal year.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 32. [126C.115] INNOVATION REVENUE.
    (a) A school district must use its innovation revenue to implement evidence-based
innovation premised on research-based curriculum and instruction and other education
programs and practices, including best teaching practices, that are known to improve
academic performance for diverse groups of students. If a school district demonstrates
low growth and needs to improve students' current achievement and educational growth,
as measured by a growth-based value-added system under section 120B.35, the school
district must submit a plan to the commissioner, developed in consultation with interested
parents, that describes how the district proposes to use its innovation revenue to
supplement state reading requirements under section 120B.12, subdivision 1, and state
math and science requirements under section 120B.023, subdivision 2, paragraphs (b) and
(d), and improve student outcomes. The plan must:
    (1) identify specific education goals, consistent with this section, and the indicators
to demonstrate progress toward achieving those goals, which may include a value-added
assessment model under section 120B.35;
    (2) supplement current district initiatives that may transform district programs,
practices, and processes sufficient to significantly improve student outcomes; and
    (3) demonstrate how innovation revenue helps narrow and eliminate differences in
student academic achievement in reading, math, and science based on student measures of
mobility, attendance, race and ethnicity, gender, English language learner status, eligibility
for free or reduced-price lunch, and special education, among other outcomes.
    (b) After transmitting its plan to the commissioner, a district must spend its
innovation revenue effectively and efficiently, consistent with its plan. A school district
that submits an innovation revenue plan under paragraph (a) must report annually by June
30 to the commissioner and post on the district's official Web site reliable and accessible
information and supporting longitudinal data showing the amount of progress the district
made in the immediately preceding school year and previous school years in realizing its
innovation revenue goals. The commissioner must analyze the data from the annual
district reports and post the analysis on the department's official Web site.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 33. Minnesota Statutes 2010, section 126C.13, subdivision 4, is amended to read:
    Subd. 4. General education aid. For fiscal years 2007 and later, A district's general
education aid is the sum of the following amounts equals its:
    (1) general education revenue, excluding equity revenue, total operating capital
revenue, alternative teacher compensation revenue, and transition revenue;
    (2) operating capital aid under section 126C.10, subdivision 13b;
    (3) equity aid under section 126C.10, subdivision 30;
    (4) alternative teacher compensation aid under section 126C.10, subdivision 36;
    (5) transition aid under section 126C.10, subdivision 33 for that year;
    (6) (2) shared time aid under section 126C.01, subdivision 7;
    (7) (3) referendum aid under section 126C.17, subdivisions 7 and 7a; and
    (8) (4) online learning aid according to section 124D.096.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 34. Minnesota Statutes 2010, section 126C.13, subdivision 5, is amended to read:
    Subd. 5. Uses of revenue. Except as provided in sections 126C.10, subdivision
14 ; 126C.12; and 126C.15, (a) General education revenue may be used during the
regular school year and the summer for general and special school purposes and for
prekindergarten programs except as limited by paragraph (b).
(b) General education revenue set-asides include:
(1) 1.0 percent of basic revenue must be used only for gifted and talented activities
consistent with section 120B.15;
(2) 5.0 percent of basic revenue must be used only to implement a district's
innovation revenue program activities under section 126C.115;
(3) basic skills revenue must be used according to section 126C.15; and
(4) operating capital revenue must be spent according to section 126C.10,
subdivision 14.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 35. Minnesota Statutes 2010, section 126C.17, subdivision 1, is amended to read:
    Subdivision 1. Referendum allowance. (a) For fiscal year 2003 and later, a district's
initial referendum revenue allowance equals the sum of the allowance under section
126C.16, subdivision 2, plus any additional allowance per resident marginal cost pupil
unit authorized under subdivision 9 before May 1, 2001, for fiscal year 2002 and later,
plus the referendum conversion allowance approved under subdivision 13, minus $415.
For districts with more than one referendum authority, the reduction must be computed
separately for each authority. The reduction must be applied first to the referendum
conversion allowance and next to the authority with the earliest expiration date. A
district's initial referendum revenue allowance may not be less than zero.
(b) For fiscal year 2003, a district's referendum revenue allowance equals the initial
referendum allowance plus any additional allowance per resident marginal cost pupil unit
authorized under subdivision 9 between April 30, 2001, and December 30, 2001, for
fiscal year 2003 and later.
(c) For fiscal year 2004 and later, A district's referendum revenue allowance equals
the sum of:
(1) the product of (i) the ratio of the resident marginal cost pupil units the district
would have counted for fiscal year 2004 under Minnesota Statutes 2002, section 126C.05,
to the district's resident marginal cost pupil units for fiscal year 2004, times (ii) the greater
of zero or the district's initial referendum allowance plus any additional allowance per
resident marginal cost pupil unit authorized under subdivision 9 between April 30, 2001,
and May 30, 2003, for fiscal year 2003 and later 2014 less $500, plus
(2) any additional allowance per resident marginal cost pupil unit authorized under
subdivision 9 after May 30, 2003 2013, for fiscal year 2005 2014 and later.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 36. Minnesota Statutes 2010, section 126C.17, subdivision 5, is amended to read:
    Subd. 5. Referendum equalization revenue. (a) For fiscal year 2003 and later,
A district's referendum equalization revenue equals the sum of the first tier referendum
equalization revenue and the second tier referendum equalization revenue.
(b) A district's first tier referendum equalization revenue equals the district's first
tier referendum equalization allowance times the district's resident marginal cost pupil
units for that year.
(c) For fiscal year 2006, a district's first tier referendum equalization allowance
equals the lesser of the district's referendum allowance under subdivision 1 or $500. For
fiscal year 2007, a district's first tier referendum equalization allowance equals the lesser
of the district's referendum allowance under subdivision 1 or $600.
For fiscal year 2008 and later, (b) A district's first tier referendum equalization
allowance equals the lesser of the district's referendum allowance under subdivision 1
or $700.
(d) (c) A district's second tier referendum equalization revenue equals the district's
second tier referendum equalization allowance times the district's resident marginal cost
pupil units for that year.
(e) For fiscal year 2006, a district's second tier referendum equalization allowance
equals the lesser of the district's referendum allowance under subdivision 1 or 18.6 percent
of the formula allowance, minus the district's first tier referendum equalization allowance.
For fiscal year 2007 and later, (d) A district's second tier referendum equalization
allowance equals the lesser of the district's referendum allowance under subdivision 1 or
26 percent of the formula allowance, minus the district's first tier referendum equalization
allowance.
(f) (e) Notwithstanding paragraph (e) (d), the second tier referendum allowance for a
district qualifying for secondary sparsity revenue under section 126C.10, subdivision 7, or
elementary sparsity revenue under section 126C.10, subdivision 8, equals the district's
referendum allowance under subdivision 1 minus the district's first tier referendum
equalization allowance.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 37. Minnesota Statutes 2010, section 126C.17, subdivision 6, is amended to read:
    Subd. 6. Referendum equalization levy. (a) For fiscal year 2003 and later,
A district's referendum equalization levy equals the sum of the first tier referendum
equalization levy and the second tier referendum equalization levy.
(b) A district's first tier referendum equalization levy equals the district's first tier
referendum equalization revenue times the lesser of one or the ratio of the district's
referendum market value per resident marginal cost pupil unit to $476,000 100 percent of
the statewide referendum market value equalizing factor.
(c) A district's second tier referendum equalization levy equals the district's second
tier referendum equalization revenue times the lesser of one or the ratio of the district's
referendum market value per resident marginal cost pupil unit to $270,000 60 percent of
the statewide referendum market value equalizing factor.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 38. Minnesota Statutes 2010, section 126C.20, is amended to read:
126C.20 ANNUAL GENERAL EDUCATION AID APPROPRIATION.
There is annually appropriated from the general fund to the department the amount
amounts necessary for: (1) general education aid; (2) special education aid; (3) debt
service aid; and (4) the school bond agricultural credit. This amount These amounts must
be reduced by the amount of any money specifically appropriated for the same purpose
in any year from any state fund.
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 39. Minnesota Statutes 2010, section 126C.40, subdivision 1, is amended to read:
    Subdivision 1. To lease building or land. (a) When an independent or a special
school district or a group of independent or special school districts finds it economically
advantageous to rent or lease a building or land for any instructional purposes or
administrative purpose, or for school storage or furniture repair, and it determines that
the operating capital revenue authorized under section 126C.10, subdivision 13, is
insufficient for this purpose, it may apply to the commissioner for permission to make
an additional capital expenditure levy for this purpose. An application for permission to
levy under this subdivision must contain financial justification for the proposed levy, the
terms and conditions of the proposed lease, and a description of the space to be leased
and its proposed use.
    (b) The criteria for approval of applications to levy under this subdivision must
include: the reasonableness of the price, the appropriateness of the space to the proposed
activity, the feasibility of transporting pupils to the leased building or land, conformity
of the lease to the laws and rules of the state of Minnesota, and the appropriateness of
the proposed lease to the space needs and the financial condition of the district. The
commissioner must not authorize a levy under this subdivision in an amount greater than
the cost to the district of renting or leasing a building or land for approved purposes.
The proceeds of this levy must not be used for custodial or other maintenance services.
A district may not levy under this subdivision for the purpose of leasing or renting a
district-owned building or site to itself.
    (c) For agreements finalized after July 1, 1997, a district may not levy under this
subdivision for the purpose of leasing: (1) a newly constructed building used primarily
for regular kindergarten, elementary, or secondary instruction; or (2) a newly constructed
building addition or additions used primarily for regular kindergarten, elementary, or
secondary instruction that contains more than 20 percent of the square footage of the
previously existing building.
    (d) Notwithstanding paragraph (b), a district may levy under this subdivision for the
purpose of leasing or renting a district-owned building or site to itself only if the amount
is needed by the district to make payments required by a lease purchase agreement,
installment purchase agreement, or other deferred payments agreement authorized by law,
and the levy meets the requirements of paragraph (c). A levy authorized for a district by
the commissioner under this paragraph may be in the amount needed by the district to
make payments required by a lease purchase agreement, installment purchase agreement,
or other deferred payments agreement authorized by law, provided that any agreement
include a provision giving the school districts the right to terminate the agreement
annually without penalty.
    (e) The total levy under this subdivision for a district for any year must not exceed
$150 times the resident pupil units for the fiscal year to which the levy is attributable.
    (f) For agreements for which a review and comment have been submitted to the
Department of Education after April 1, 1998, the term "instructional purpose" as used in
this subdivision excludes expenditures on stadiums.
    (g) The commissioner of education may authorize a school district to exceed the
limit in paragraph (e) if the school district petitions the commissioner for approval. The
commissioner shall grant approval to a school district to exceed the limit in paragraph (e)
for not more than five years if the district meets the following criteria:
    (1) the school district has been experiencing pupil enrollment growth in the
preceding five years;
    (2) the purpose of the increased levy is in the long-term public interest;
    (3) the purpose of the increased levy promotes colocation of government services;
and
    (4) the purpose of the increased levy is in the long-term interest of the district by
avoiding over construction of school facilities.
    (h) A school district that is a member of an intermediate school district may include
in its authority under this section the costs associated with leases of administrative and
classroom space for intermediate school district programs. This authority must not
exceed $43 $50 times the adjusted marginal cost pupil units of the member districts. This
authority is in addition to any other authority authorized under this section.
    (i) In addition to the allowable capital levies in paragraph (a), a district that is a
member of the "Technology and Information Education Systems" data processing joint
board, that finds it economically advantageous to enter into a lease purchase agreement for
a building for a group of school districts or special school districts for staff development
purposes, may levy for its portion of lease costs attributed to the district within the total
levy limit in paragraph (e).
EFFECTIVE DATE.This section is effective for revenue for fiscal year 2014
and later.

    Sec. 40. Minnesota Statutes 2010, section 127A.51, is amended to read:
127A.51 STATEWIDE AVERAGE REVENUE.
By October 1 of each year the commissioner must estimate the statewide average
adjusted general revenue per adjusted marginal cost pupil unit and the disparity in adjusted
general revenue among pupils and districts by computing the ratio of the 95th percentile
to the fifth percentile of adjusted general revenue. The commissioner must provide that
information to all districts.
If the disparity in adjusted general revenue as measured by the ratio of the 95th
percentile to the fifth percentile increases in any year, the commissioner shall recommend
to the legislature options for change in the general education formula that will limit the
disparity in adjusted general revenue to no more than the disparity for the previous
school year. The commissioner must submit the recommended options to the education
committees of the legislature by January 15.
For purposes of this section and section 126C.10, adjusted general revenue means:
(1) for fiscal year 2002, the sum of basic revenue under section 126C.10, subdivision
2 ; supplemental revenue under section 126C.10, subdivisions 9 and 12; transition revenue
under section 126C.10, subdivision 20; referendum revenue under section 126C.17; and
equity revenue under section 126C.10, subdivisions 24a and 24b; and
(2) for fiscal year 2003 and later through 2013, the sum of basic revenue under
section 126C.10, subdivision 2; referendum revenue under section 126C.17; and equity
revenue under section 126C.10, subdivisions 24a and 24b.; and
(3) for fiscal year 2014 and later, the sum of basic revenue under section 126C.10,
subdivision 2, and referendum revenue under section 126C.17.
EFFECTIVE DATE.This section is effective for fiscal year 2014 and later.

    Sec. 41. REVISOR'S INSTRUCTION.
The revisor of statutes shall change all references to "adjusted marginal cost pupil
units" to "adjusted pupil units" and all references to "resident marginal cost pupil units"
to "resident pupil units."
EFFECTIVE DATE.This section is effective July 1, 2014.

    Sec. 42. REPEALER.
Minnesota Statutes 2010, sections 123B.54; 123B.57, subdivisions 3, 4, and 5;
123B.591; 125A.76, subdivision 4; 125A.79, subdivision 6; 126C.10, subdivisions 2b,
13a, 13b, 24, 25, 26, 27, 28, 29, 30, 31, 31a, 31b, 32, 33, 34, 35, and 36; 126C.12;
126C.126; and 127A.50, are repealed.
EFFECTIVE DATE.This section is effective for fiscal year 2014.