Legislature maintains support for education, but future is cloudier

A student exits a school bus as they arrive to Creative Arts Secondary School on Thursday, Jan. 9, 2025, in Saint Paul, Minn. (Ellen Schmidt/Minnesota Reformer)
Democratic legislators and Gov. Tim Walz played defense on education funding this year, trying to preserve as many of their 2023 legislative gains as possible without pursuing bold new goals.
The K-12 education bill, passed Monday, includes $25.7 billion for schools during the next two years, an increase of 4.8% over the current biennium. Although spending on education will increase in aggregate, the bill includes cuts to special education and libraries, as well as social workers, nurses and counselors.
Overall, the 2025 Legislature passed a mostly status quo budget.
With dark clouds on state government's fiscal horizon, the future of public schools, educators and students will be determined to a great extent by the 2026 election.
Special education aid is shouldering the largest portion of cuts to the education budget. The state will reduce the amount it reimburses school districts for special education transportation services by $15 million next school year and $28 million the following school year. Walz was first to propose the cuts.
Federal law protects services to special education students from cuts. The reductions in state aid means school districts will have to make cuts outside of special education — or find new local revenue — to make up for the lost state aid.
The budget agreement also creates a commission to explore ways to cut state spending on special education in the next biennium. The bill sets a target of $250 million per year in cuts for fiscal years 2028 and 2029. But that comes after the next election — and the potential for a different balance of power. The next Legislature won't be bound by this one and can ignore the plan to cut special education funding.
Legislation approved in 2023 finally began chipping away at the nearly $800 million gap that school districts faced each year in funding for special education. That gap is commonly referred to as the 'cross-subsidy' because districts pull money from their general per-pupil formula money to cover their unreimbursed costs for special education services. On average, districts were spending 12% of their general per-pupil aid to cover unreimbursed special education costs, with the amount varying from less than 5% to more than 20% in some districts.
The cuts to special education funding come at the same time that districts face uncertainty about the future of federal aid for special education.
Minnesota school districts can continue to expect an annual increase of at least 2% in basic per-pupil aid. The education bill preserves a provision enacted in 2023 that indexes the formula to inflation, with a minimum annual increase of 2% and a maximum of 3%. The per-pupil formula accounts for about two-thirds of all state funding for K-12 education.
For the upcoming fiscal year, the basic formula is $7,481 per pupil, a 2.7% increase from the current year. In fiscal year 2027, the amount will increase to $7,705. The state will spend $17.2 billion on general formula aid in the 2026-2027 biennium.
Overall, state funding makes up 64% of education spending in Minnesota, with federal funding providing 8%, and the balance made up by local funding.
The state will also continue to provide funding for universal school meals. The cost is expected to grow from $584 million in the 2024-2025 biennium to $659 million in 2026-2027, or 13%.
Hourly school workers, like paraprofessionals, bus drivers and culinary workers, will continue to be eligible to collect unemployment insurance during the summer. Minnesota was the first state in the nation to provide this benefit when it was enacted in 2023. House Republicans pushed to eliminate the program, while unions representing the workers, including SEIU and Education Minnesota, lobbied their DFL allies to preserve the program.
The state expects to have paid out $102 million from the initial $135 million set aside in 2023 to fund the program by the end of the fiscal year. Walz proposed adding another $40 million to the program. At the end of the regular session, the Legislature approved an additional $100 million to fund the benefit by canceling funding for the Northern Lights express train to Duluth.
This sets up a conundrum in the future, with Democratic lawmakers seeking to stand with the workers — and the unions that represent them — while also confronting rising costs for school districts or the state or some combination. Unlike for salaried school workers, like principals and teachers, the current law does not allow districts to directly levy local taxpayers for the cost of the unemployment benefits for hourly workers.
The state will delay for one more year changes to how it calculates what's known as compensatory revenue, a form of state aid linked to the number and concentration of low-income students under federal poverty guidelines. For next school year, compensatory revenue sent to school districts will receive a boost of $55 million.
Under current law, the state was supposed to eliminate the use of paper forms for counting qualifying students, starting next school year. Instead of paper forms, the state would use enrollment in other government programs — like Medical Assistance and SNAP — to determine if a child is low income and thus qualifies their school district for more help. But going away from paper forms would mean that some students who meet the qualifications, but don't participate in programs like SNAP or Medicaid, wouldn't be included in the funding formula.
The Legislature will also form a task force to make recommendations about how to change the low income student formula in the future.
The state will cut nearly $20 million of aid to schools that support libraries, and an additional $29 million in aid for social workers, school nurses and counselors. The cuts roll back some of the increases in funding the Democratic trifecta made in 2023.
School library aid was first enacted in 2023, providing districts with $16.11 per pupil or $40,000 per year, whichever is greater. Starting next year, library aid will be reduced by 34% per pupil, and the minimum amount of aid per school district will be cut in half, from $40,000 per year to $20,000 per year.
The 2023 education law would have almost tripled the per-pupil amount next year for nurses, counselors and social workers. Instead, the per-pupil funding will only double to $34.32. Smaller school districts will continue to receive a minimum of $40,000 per year in aid.

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