The Case for Adequate Cost-Based Education Funding in Minnesota

Post 3 of 8 • Minnesota Education Finance Reform

This is the third post in an eight-part series on reforming Minnesota's K–12 education finance system, based on the Research Appendix drafted for the 2025 MDE Task Force on Education Finance. Post 1 introduced the series; Post 2 surveyed twenty years of unheeded warnings. This post makes the case for adequate, cost-based funding.

Minnesota's Unfinished Business: The Case for Adequate, Cost-Based Funding

We know education costs more for some students than others. Why won't Minnesota calculate how much more?

By Gerald Von Korff • jvonkorff.com

In 2004, Minnesota's Governor-appointed task force took an important step: it authorized a nationally recognized consulting firm to conduct a comprehensive study of how much money Minnesota districts actually need to provide every student with the opportunity to achieve state standards. The study was nearly complete when the Governor terminated the work. The adequacy study was never finished. The recommendations were never implemented.

In the two decades since, Minnesota has remained one of the only states in the country that launched — and then abandoned — such a study. Other states, including Kansas, Kentucky, New York, New Jersey, Washington, Illinois, Maryland, Wyoming, and many others, have not only completed adequacy studies but built their entire school finance systems around their findings. Minnesota has not. Ironically, Minnesota's funding is, in many respects fairer than many other states. It may well be that it would take less money in Minnesota to reach adequate funding for the students Minnesota now leaves behind. But that's not an argument for ignoring what it actually costs to meet the constitutional standard: enough funding to afford each student with an adequate education that meets all state standards. On the contrary, it means that if Minnesota would allocate enough funding, and pair that with effective practices and accountability, it should be easier to reform our broken school finance system.

This post explains what an adequacy study is, what it would likely reveal about Minnesota's funding levels, and why rebuilding the state's basic funding formula on a true cost basis is the essential first step in closing the achievement gap.

What Is a Funding Adequacy Study?

An adequacy study asks a simple but powerful question: how much does it actually cost to provide each student with a genuine opportunity to achieve state academic standards?

This is different from asking how much money Minnesota is currently spending, or what neighboring states spend, or what the Legislature is willing to appropriate. Those questions describe what is happening. An adequacy study asks what should be happening — and calculates the price.

There are two major methodologies used in adequacy studies. The first, called the Evidence-Based Funding approach, assembles educators and experts to identify the specific programs, staffing levels, and services that research shows are effective, then calculates the cost of providing them in each district. This approach has been used in Illinois, Wyoming, Arkansas, and many other states.

The second, developed by scholars over decades including Dr. Bruce Baker of the University of Miami, is an econometric cost model that uses statistical analysis of actual student outcomes — graduation rates, test scores, long-term earnings — to estimate what funding levels are associated with achieving defined outcome targets. This approach, used in a landmark 2021 national study, has the advantage of being grounded in real-world results rather than theoretical program designs.

Both approaches reach similar conclusions about Minnesota: the state is significantly underfunding the districts and students who need the most resources.

What the 2004 Taxpayers Association Study Found

Even the business-funded 2004 Taxpayers Association study — which used conservative assumptions and was explicitly skeptical of large funding increases — found that the cost of an adequate education in Minnesota varied from roughly $6,200 to over $14,000 per student depending on student characteristics. That is a more than two-to-one ratio.

The same study found that Minneapolis was underfunded by an estimated $138 million — more than $3,000 per student — even by its conservative standards. And that was in 2002 dollars. The authors acknowledged that their study was only intended to "illustrate the approach" and explicitly stated it could not be used as the basis for actual policy without further work. And that is exactly what this post advocates: that Minnesota must marshall all the evidence, develop evidence based cost estimates, and provide adequate funding with accountability guardrails to assure that districts are using adequate funding to deliver an adequate education to the students we are now leaving behind.

In other words, even the most fiscally conservative adequacy analysis available confirmed that Minnesota's highest-need districts were dramatically underfunded. And that study is now more than twenty years old.

What the 2021 Rutgers Study Found

The most rigorous recent national analysis, conducted by Dr. Baker's team at Rutgers and published by the Shanker Foundation in 2021, estimated the additional funding each Minnesota district would need to bring students to national average outcomes — a standard less demanding than full proficiency for all students.

The findings were striking. The least adequately funded districts in Minnesota included not only Minneapolis and St. Paul, but also Greater Minnesota districts like Worthington, St. Cloud, Chisholm, and Mabel-Canton, as well as suburban districts like Columbia Heights and Brooklyn Center. The pattern was unmistakable: districts serving higher concentrations of students of color, English Learners, students experiencing poverty, and students experiencing homelessness were systematically the most inadequately funded.

"Minnesota students who are English Learners, students of color — particularly Black students — and students experiencing poverty are significantly more likely to be enrolled in school districts where funding is below adequate."
— Summary of the 2021 Rutgers/Shanker National Study as applied to Minnesota

Why the Basic Formula Doesn't Work

Minnesota's basic education funding formula provides a uniform per-pupil amount to every district, with some categorical supplements for specific populations. The problem is that the basic formula was never set at a level derived from a rigorous analysis of what education actually costs. It was set — and has been incrementally adjusted — based on what the Legislature was willing to spend, not on what students need.

The 2004 Governor's Task Force put the principle clearly: education funding must "cover the full-dollar costs of ensuring Minnesota public school students have an opportunity to achieve state-specified academic standards." That standard has never been met.

Moreover, simply increasing the basic formula uniformly cannot remedy the specific deficits affecting special education, English Learner education, and education for students from low-income families. The 2004 Task Force recognized this explicitly: a uniform increase helps every district equally, but it does not address the disproportionate needs of districts serving the most disadvantaged students.

The core problem in plain terms: Minnesota currently sets its education funding based on what it is willing to spend, not on what it actually costs to deliver proficiency-level education to all students. Until those two numbers are aligned, the achievement gap cannot close — because the state is systematically under-resourced in the districts serving students who need the most support.

What a Genuine Adequacy Study Would Do

A properly designed adequacy study — the kind that was begun but never finished in 2004 — would accomplish several things.

First, it would establish an evidence-based cost estimate for providing every Minnesota student with a genuine opportunity to achieve state standards. This would give the Legislature an objective foundation for its funding decisions, replacing the current practice of incremental adjustments to a historically arbitrary baseline.

Second, it would quantify the cost differentials between students and districts, providing a principled basis for the categorical weights and supplements that are supposed to account for higher-need students. Right now, those weights are essentially political compromises. An adequacy study would replace them with research-grounded cost estimates.

Third, it would establish accountability: if the state commits to funding education at the level the adequacy study determines is necessary, it becomes much harder to justify underfunding without confronting the direct consequences for student outcomes.

What Other States Have Done

Minnesota is an outlier. Dozens of states have conducted comprehensive adequacy studies and rebuilt their finance systems around the findings. Some of the most instructive examples:

Wyoming has contracted with a consulting team to recalibrate its education funding model every five years since 2005. Its finance system is explicitly designed to fund the programs and staffing levels that research identifies as effective. The system is regularly updated as costs change and new evidence emerges.

Illinois enacted a landmark Evidence-Based Funding reform in 2017, creating a professional review panel to regularly recalibrate the state's funding model and a balanced accountability committee to monitor outcomes. The reform has driven hundreds of millions of new dollars to the state's most underfunded districts.

Maryland, after commissioning a comprehensive adequacy study, enacted the Blueprint for Maryland's Future in 2021 — committing to a $3.9 billion increase in education funding over ten years, paired with accountability provisions and a mandate to implement effective practices. The Blueprint's five pillars — early childhood education, high-quality teachers, college and career readiness, additional resources for high-need students, and accountability — represent exactly the kind of comprehensive approach Minnesota needs.

In each of these cases, the adequacy study was not the end of the process — it was the beginning. It provided the factual foundation for legislative action.

The Ask: Finish What Was Started in 2004

Minnesota's first immediate priority should be to commission the adequacy study that was terminated twenty years ago. The study should use both the Evidence-Based Funding methodology and the econometric approach pioneered by Dr. Baker's team, so that the Legislature has the benefit of both perspectives. It should be completed within eighteen months and used as the basis for rebuilding the basic funding formula.

This is not a radical ask. It is, in fact, the minimum that responsible governance requires: before deciding how much to spend on education, determine how much it actually costs.

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Next in the series → Post 4 of 8

Funding Students, Not Just Schools — Even if Minnesota sets its overall funding at the right level, the money won't reach the students who need it most without a dramatic overhaul of how funding is weighted for student characteristics. The next post explains why per-pupil funding must reflect the real, higher cost of educating children facing poverty, language barriers, disability, and other challenges — and what that means in practice.