History of Declining Enrollment Adjustments in Minnesota School Finance

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1 This dcument is made available electrnically by the Minnesta Legislative Reference Library as part f an nging digital archiving prject. Divisin f Schl Finance August 2018 Histry f Declining Enrllment Adjustments in Minnesta Schl Finance Trends in Ttal Public Schl Enrllment Minnesta public schls experienced wide swings in ttal enrllment between 1960 and 2000 as the baby bm, baby bust and baby bmlet wrked their way thrugh the elementary and secndary educatin system. The chart belw shws the state ttal Average Daily Membership (ADM) in prekindergarten (E) thrugh grade 12 in Minnesta public schls (schl districts and charter schls) fr Fiscal Year (FY) 1960-FY

2 Trends in E-12 ADM by grade level gruping fr FY 1982-FY 2017 are shwn in the chart belw. The mix f elementary and secndary schl students has varied ver time as enrllment grwth and decline makes its way thrugh the grade levels. Histry f Declining Enrllment Funding The swings in public schl enrllment have varied widely amng districts. Sme districts experienced grwing enrllment in years when there was a significant reductin in state ttal enrllment, while thers experienced rapid decline in enrllment. Districts with declining enrllment face difficult budget decisins. As enrllment declines, it is difficult t reduce staffing prprtinately, especially in smaller schl districts where there may be nly ne class fr each elementary grade level in a cmmunity and nly ne sectin f specialized secndary curses. And, as teacher layffs are made, the average cst per teacher ges up because f the last in, first ut system fr teacher layffs. In additin, fixed csts fr building peratins and maintenance are difficult t reduce as enrllment declines in the shrt run. T address these issues, a variety f declining enrllment funding measures have been enacted in Minnesta law since 1971, as utlined belw: 2

3 1971 Funding fr declining enrllment initiated. Fr districts with declining pupil units frm the prir year, funding is based n tw-year average f pupil units (50 percent f current year and 50 percent f prir year). (Effective fr FY 1972-FY 1975.) 1975 Pupil unit calculatin fr districts with declining enrllment changed t 60 percent f prir year pupil units plus 40 percent f current year pupil units, except that frmula remains tw-year average fr districts whse bundaries are cterminus with a city f the first class. (Effective fr FY ) 1977 Pupil unit calculatin fr districts with declining enrllment changed t the greater f: (a) 60 percent f prir year pupil units plus 40 percent f current year pupil units, r (b) three-year average (current year plus tw prir years/3). (Effective fr FY 1978.) 1978 Pupil unit calculatin fr districts with declining enrllment changed t the greater f: (a) 60 percent f prir year pupil units plus 40 percent f current year pupil units, r (b) 3.25-year average (current year plus tw prir years plus 25 percent f third prir year/3.25). (Effective fr FY 1979.) 1979 Pupil unit calculatin fr districts with declining enrllment changed t the greater f: (a) 60 percent f prir year pupil units plus 40 percent f current year pupil units, r (b) fur-year average (current year plus three prir years/4). (Fr FY 1980 nly.) Beginning in FY 1981, declining enrllment pupil units are eliminated and districts receive Replacement Revenue based n the amunt the district wuld have received per pupil unit under the FY 1980 frmula in FY 1981, adjusted fr the change in the frmula allwance and change in district pupil units (PU). Replacement revenue is an equalized levy; the equalizing factr was set at 100 percent f the general educatin equalizing factr (same aid/levy mix as basic revenue). FY 1982: FY 1981 Revenue/FY 1981 PU * ($1,354/$1,265) * FY 1982 PU FY 1983: FY 1981 Revenue/FY 1981 PU * ($1,416/$1,265) * FY 1983 PU FY 1984: FY 1981 Revenue/FY 1981 PU * ($1,475/$1,265) * FY 1984 PU 1983 Replacement Revenue eliminated. New five-tier frmula established, effective FY N funding specifically fr declining enrllment. New frmula includes training and experience (T&E) revenue, which crrelates with ld declining enrllment funding. Fifth tier f new frmula is a hld-harmless, guaranteeing all districts they will receive at least a $25/PU increase ver the amunt they wuld have received under the previus frmula One-time declining pupil unit aid prvided fr FY 1994 nly equal t 23 percent f the decline in pupil units between FY 1993 and FY 1994 times the FY 1994 basic frmula allwance. (Equivalent t the 77 percent minus 23 percent marginal cst pupil unit calculatin (see 1999), except that it applied nly t the basic frmula revenue) Separate T&E revenue frmula eliminated; $130 added t basic frmula; districts that received mre than $130/PU f T&E revenue receive psitive Transitin Revenue; districts that received less than $130 receive negative transitin revenue, which phases ut ver five years. 3

4 1997 T&E reestablished as separate funding categry; $130 frmula rll-in and T&E prtin f transitin revenue are eliminated beginning in FY 1999; T&E funding frzen based n FY 1997 data and phases ut as teachers emplyed by the district in FY 1997 leave the district Marginal cst pupil units, defined as 90 percent f current year PU and 10 percent f prir year PU, used in general educatin calculatins fr all districts, whether pupil units are declining r grwing. (Effective fr FY 2000.) 2000 Marginal cst pupil units fr districts with declining pupil units changed t 77 percent f current year pupil units plus 23 percent f prir year pupil units. Fr districts with grwing pupil units, 100 percent f current year pupil units are used. (Effective beginning FY 2001.) 2013 Marginal cst pupil units eliminated. Declining enrllment revenue established, beginning FY Fr districts with a decline in adjusted pupil units (pupil units served) frm the prir year, declining enrllment revenue equals 28 percent f the general educatin frmula allwance times the reductin in adjusted pupil units between the prir year and the current year. The state ttal declining enrllment revenue (in millins) fr each year f the current declining enrllment frmula is shwn in the graph belw. 4

5 The average declining enrllment revenue per student in ADM varies significantly by district type, as shwn in the chart belw fr FY 2017, the last year fr which final data are available. 5