Saturday, October 17, 2026

Minnesota's Increased Compensatory Funding Must be Accompanied by Robust State Supportive Accountability

The legislature has finally implemented significant compensatory funding increases to take effect in 2026 and 2027. But without major systemic improvements to assure effective use of those funds, the increased funding will fail to make adequate improvements in educational results. My last post described what the Minnesota Legislature is doing to increase compensatory revenue. This post is about what it is not yet doing. Minnesota has no effective system to make sure that more compensatory money turns into better teaching and learning for the students who generate it.

Too many low income students, too many English language learners, and too many students of color are being failed by the current system. Recent history illustrates the need for more robust state accountability for proper use of state funding. Our public school districts are largely free of fraud: but it has become increasingly recognized that when the state creates a supportive infrastructure and accountability, significant educational improvements may follow. Under what I call Minnesota’s radical local option approach, the state largely abdicates its responsibility for delivering the adequate education that the constitution requires. How the money is used, and whether it works, is treated as almost entirely a local decision. Compensatory education has some statutory limits, but there is no meaningful mechanism to enforce those limits. And, there are powerful forces at the local level that dilute the maximum benefit of this new money. Advocates for students who are advantaged have outsized power in many districts. The collective bargaining process tends to support distributing new funds to all employees equally, and to translate new funding to increased compensation to all employees, whether or not they serve compensatory-eligible students, instead of buying additional staff and new programs.

Minnesota’s radical local control system is unconstitutional and ineffective for the students who need education the most. The Minnesota Constitution does not allow the state to step aside. It makes a thorough and efficient system of public schools the Legislature’s duty. Unless the Legislature pairs a full, robust increase in compensatory funding with systemic and supportive accountability, these students will continue to be denied an adequate education and Minnesota’s violation of the constitution will persist. The 2027 compensatory education funding reforms, and the task force recommendations, present a genuine opportunity for Minnesota to fix our broken system.

A real increase, with three contingencies

If the Legislature and the new governor fully fund the 2027 compensatory education legislation, districts serving low-income students will see a significant improvement in compensatory funding. But whether that improvement reaches students depends on three things.

  1. Appropriation. The Legislature can decline to appropriate the authorized amount. A formula on paper buys nothing.
  2. Dilution. A variety of local district practices can shrink the share of the money that actually benefits the students who generate it. I describe three of them below.
  3. Effectiveness. Even money spent directly on the targeted students can be spent on practices that do not work.

The Legislature controls the first contingency directly. The last two are where Minnesota has chosen to look away.

Progressive on paper, because of two cities

Minnesota’s reputation for progressive school funding rests largely on the extra funding Minneapolis and St. Paul from local property tax referendum revenue. That is the central finding of Bruce Baker’s new analysis, Minnesota’s Equal Educational Opportunity Problem (October 2026).

In national rankings, Minnesota placed 5th of 50 states in 2024 for the progressiveness of state and local revenue. However, Baker reran the numbers without Minneapolis and St. Paul, because those two cities have very high local referendum support. Including Minneapolis and St. Paul, the “average district” with 30 percent child poverty receives 35 percent more state and local revenue per pupil than a district with no poverty. Without Minneapolis and St. Paul, the advantage computed for the other districts falls to 9 percent. Across 2009 to 2024, the two cities account for roughly three-quarters of the state’s progressiveness. The rest of the state falls way short of Minnesota’s reputation for progressive funding.

The cause is the property tax referendum system. State aid is modestly progressive everywhere. But high-poverty districts outside the two cities raise $2,784 less per pupil in local revenue than the lowest-poverty districts, which cancels the state’s extra aid almost exactly. Minneapolis and St. Paul voters have approved generous operating levies. Much of outstate Minnesota cannot match them, especially the districts serving high rates of poverty and non-white students.

My home district, St. Cloud, shows what that means for real students. In Baker’s 2024 data, St. Cloud was 70 percent free and reduced-price lunch eligible, and 40 percent Black. In the test year, it spent $17,140 per pupil, about $3,200 more than neighboring Sartell-St. Stephen. But St. Cloud spent only 55 percent of what Baker’s cost model estimates it would need to reach national-average outcomes. Sartell-St. Stephen spent 120 percent. In other words, Sartell had more money than it needed to acheive national aerage outcomes. Although St. Cloud spends more than Sartell, St. Cloud is far less adequately funded, because its students need more, a problem that is exacerbated because the District is not using referendum supported funding. (Keep in mind that Baker’s national-average-outcomes test is a very low bar, far lower than MCA or NAEP proficiency levels, and well under Minnesota’s constitutional test.)

That is the context for compensatory revenue. Outside the two cities, it is one of the few tools the state has to direct money to need without relying on local voters.

Compensatory money is now growing much faster than the basic formula

Until recently, compensatory revenue grew at about the same rate as the basic formula. From FY2023 to FY2025 the basic formula allowance rose about 6 percent, and compensatory revenue per pupil at the top of the scale rose about 7 percent. That kept existing programs running. It did not buy new ones.

FY2025 to FY2027 breaks that pattern. Over those two years the basic formula allowance rises about 5.5 percent. Compensatory revenue per compensatory pupil will rise 44 percent in buildings at or below 80 percent concentration, and up to 79 percent at the top.

FY2025 FY2027 (current law) Increase
Basic formula allowance, per pupil $7,281 $7,683 5.5%
Compensatory revenue per compensatory pupil, 100% concentration $3,865 $6,936 79%
Compensatory revenue per compensatory pupil, 80% concentration $3,865 $5,549 44%

Consider a hypothetical high-poverty building of 100 students, with 80 eligible for free lunch and 20 for reduced-price lunch. Its compensatory revenue rises from about $347,900 in FY2025 to about $561,800 in FY2027. That is about $214,000 more, or roughly $2,100 per eligible student, a 62 percent increase. Under the Task Force proposal, which would count reduced-price students fully, the increase over FY2025 would be about $346,000, or roughly $3,500 per student.

Those amounts are way larger, if fully funded, than in previous years. The current-law increase equals about 28 percent of the basic formula allowance; the Task Force recommendation would increase about 45 percent. In a building of four classrooms, $214,000 to $346,000 could pay for two or three additional interventionists, or several well-trained paraprofessionals, or high-dosage tutoring for every student with money left for coaching.

(This example assumes the building’s eligible-student count holds steady. In buildings where counts fell after the shift to universal meals and direct certification, part of the higher rate only offsets lower counts.)

So the question this post asks is simple. Will that money buy more high quality staff and more effective programming for these students? Nothing in Minnesota’s current system requires that it does.

Money matters when it is used well

The research is strong that extra funding, used persistently and reliably for effective practices, improves student achievement. Bruce Baker and Drew Knight’s 2025 review for the Albert Shanker Institute, Does Money Matter in Education?, summarizes it. Funding increases improve outcomes and cuts reduce them. And money matters more, often several times more, for children in poverty and in communities where states have historically underinvested.

Linda Darling-Hammond reaches the same conclusion from the states that have actually improved. States that built lasting success did it through patient, systemic investment, she writes: funding schools based on student need, preparing and supporting teachers seriously, and building coherent instructional systems rather than chasing single reforms.

The words used well carry the weight. Money alone is not a lever. It pays for the levers.

The potential is there; the results are not

Minnesota’s low-income students have tremendous potential. Schools that serve them well prove it. But statewide, Minnesota districts are largely failing to realize that potential.

  • Minnesota’s low-income 4th graders fell from 27th of 50 states in NAEP reading in 2013 to 46th in 2022 (Baker, 2026).
  • Minnesota’s income-adjusted achievement gaps rank among the five widest in the nation (Baker, 2026).
  • The Office of the Legislative Auditor found in 2022 that Minnesota’s achievement gaps are some of the largest in the nation.
  • In 2025, only 32.8 percent of Minnesota students eligible for free or reduced-price meals met grade-level standards in reading on the MCA, and only 26.4 percent in math. Statewide, 49.5 percent of all students met the reading standard and 45.0 percent the math standard.

Minnesota’s long record of weak accountability

Minnesota has never had a serious system for ensuring that compensatory money is used effectively. The state’s own auditor has said so twice.

The 2020 compensatory revenue evaluation. The Office of the Legislative Auditor (OLA) found that schools use compensatory revenue for a broad range of programs, but its statewide impacts are unknown. For 80 percent of the revenue, no data showed how spending lined up with the uses the law allows. Forty-two percent of surveyed districts did not know how many students their compensatory programs served. Some superintendents told OLA that because compensatory revenue frees up general fund dollars to spend elsewhere, potentially all students benefit. That is a description of supplanting.

OLA also suggested -- without any foundation -- that requiring districts to prove compensatory revenue raised achievement was unrealistic. It recommended a substitute: districts should report whether their compensatory programs follow best practices. The Legislature adopted that idea in its weakest form. Districts now self-report best-practice consistency, but apparently no one is assigned to review the reports, and nothing happens to a district that reports poor practice. This issue applies to both traditional public schools and charters.

The 2022 achievement gap evaluation. OLA examined the Department of Education’s role under the World’s Best Workforce law, the state’s main accountability framework. It found that the department had not annually monitored district progress, as the statute required. It had not listed the districts that failed to meet their goals in its reports to the Legislature. The statute gave the department authority to direct up to 2 percent of a failing district’s general education revenue toward improvement strategies. At the time, the department had used it once, in 2018. Superintendents called the reporting a “checkbox activity.” I believe that the current leadership at the Department of Education favors increased accountability, but there is no support at the legislature, in the Governor’s office, or in the Attorney General’s office for real accountability, despite the constitutional requirement of a thorough and efficient system.

The 2026 Compensatory Revenue Task Force failed to recognize the need for supportive accountability. The Task Force—discussed in the first post in this series—had a chance to propose a fix and declined. Its main accountability recommendation is a short narrative in each district’s annual report explaining how compensatory money is spent, plus an MDE summary of “promising practices.” It incorrectly said measuring effectiveness was not feasible and not its role. It recommended no outcome measures, no targets, no state review, and no consequences. The result will be more funding without a corresponding increase in educational improvement.

Three local practices that blunt compensatory funding

1. Bargaining away the increase. Districts and unions typically treat all new revenue, compensatory increases included, as one pool from which settlements are negotiated. When compensatory funding grows at roughly the rate of the basic formula, that is ordinary cost growth. If used entirely to raise everyone’s salary, the district is then staffed exactly as before and delivers the same programs as before, at a higher price.

Adequate compensation is important to attract and reward quality teaching, but overwhelming evidence supports the conclusion that merely increasing compensation will not solve Minnesota’s dismal results for the students who generate compensatory and ELL funding. Delivering an adequate education requires fair compensation for staff but it also requires robust growth in the quantity of staff serving those students along with robust improvements in effective practices. If compensatory funding grows many times faster, as it will from FY2025 to FY2027, absorbing it into across-the-board compensation would pervert the purpose of compensatory funding.

If we want a payoff for the extra compensatory funding, the extra increases must then be allocated to the students who generate it and that funding must translate into major improvements in the delivery of education.

Massachusetts offers a warning. After its 2019 Student Opportunity Act, the ten districts with the largest aid increases raised teacher spending by $156 million over three years. Their teacher headcount rose only 7 percent, or 751 teachers. The Massachusetts Taxpayers Foundation asserted that most of the new money supported salary increases rather than new hiring and reforms implementing effective practices.

2. Supplanting. Supplanting means using targeted money to replace spending the district would otherwise make from its general fund, rather than adding to total spending for the target students. Federal Title I has long carried a “supplement, not supplant” rule, and a comparability test so that high-poverty schools get their fair share of base funding before Title I is added.

However, Minnesota has no comparable mechanism. Although its statute restricts what compensatory dollars may be coded to, it does not define a baseline, require maintenance of effort, or bar a district from cutting a building’s general fund allocation by the amount of its compensatory revenue. It appears that a district can comply fully and still let compensatory money carry costs that basic revenue used to carry.

When supplanting occurs, the result is that compensatory money does not improve programs for the target students. It merely reduces the basic funding that supports them. Administrators sometimes say compensatory money “buys” teachers because without it they would have laid people off. That claim concedes the point: the money is doing the work the basic formula was supposed to do.

3. Diversion. Minnesota law expressly allows districts to spread compensatory revenue away from the buildings that generate it. Ordinarily at least 80 percent must go to the generating buildings, and up to 20 percent may be reallocated under a school board plan. For fiscal years 2026, 2027, and 2028, the Legislature has raised the reallocation limit to 40 percent. Reallocated money may serve students in any grade, in any building.

Diversion dilutes the impact precisely where the formula concentrates money most heavily. The current formula sends the most money per pupil to the highest-poverty buildings. Allowing districts to move 40 percent of it elsewhere works against that design.

Abdication has a political cost and a constitutional one

If Minnesota refuses to take responsibility at the state level to assure that compensatory money is used, that will ultimately undermine support for the money itself. Legislators who vote for a large increase will be asked what it bought. If the honest answer is “we don’t know,” or continuation of the same programs at a higher cost, the next increase will be harder to win, and the current one easier to cut.

Abdicating state responsibility for delivery of an adequate education also violates the Constitution. Article XIII, section 1 makes it the Legislature’s duty to establish “a general and uniform system of public schools” and to “secure a thorough and efficient system of public schools throughout the state.” In Cruz-Guzman v. State (2018), the Minnesota Supreme Court held that the clause’s adequacy guarantee has a qualitative component, and that claims under it are for the courts to hear.

That duty belongs to the state. The Legislature may delegate the running of schools to local boards. It cannot delegate away its responsibility for the result. A system in which the state sends targeted money to districts, asks nothing about whether it reaches the targeted students, and does nothing when it does not, is neither uniform nor thorough and efficient.

There is one area of K-12 education that has robust accountability, and that is special education. When a school district fails to provide special education that meets all state standards, it may be subject to state audits, administrative intervention and administrative appeals by parents. The rationale is that special education students come to school with special needs, and they deserve an adequate education which otherwise would not be met.

But other students, disproportionately lower income students, English language learners and students of color, come to school with disadvantages as well. There is no principled reason that meeting their needs should be a local option. I don’t suggest that the solution is to create the elaborate enforcement system that exists for special education students. The state has an obligation to implement supportive accountability systems to assure that they receive the adequate education the constitution requires and it is time to address how the state is going to meet that responsibility.

What other states are trying

A number of states are now beginning to pair increased funding for high-need students with state planning, review, and support. It remains to be seen whether these states will implement these concepts effectively. Massachusetts requires district plans under its Student Opportunity Act and reviews them at the state level. Maryland created an independent review board. Tennessee reviews district progress each year. California assigns “differentiated assistance” to districts whose student groups are struggling. The national education nonprofit Bellwether has drawn these approaches together in a framework for state fiscal accountability, Beyond the Bottom Line (May 2025). Its premise is that money alone does not improve student achievement, but how it is used can. The framework has four parts: sound basic fiscal rules; district spending plans tied to academic goals; transparent spending and outcome data; and state capacity to support districts, with tiered help and intervention for those that struggle. Bellwether notes that most states have built academic accountability systems but not fiscal ones. It cites Minnesota’s compensatory revenue as an example of a “light-touch” approach: one that is extraordinarily lenient for districts that are failing to make adequate progress.

The movement to implement robust state accountability and support systems is a new trend, so no state can yet show proven results from pairing compensatory funding with accountability. The early evidence mostly shows how hard it is. Massachusetts could tie only 59 percent of its new reform-related aid to planned evidence-based programs, and only 25 percent of its total aid increase, because district plans did not match financial reports.

What Maryland is attempting. Compare Maryland’s Blueprint for Maryland’s Future. An independent Accountability and Implementation Board reviews and approves every district’s implementation plan, tracks spending to confirm required funding reaches the intended students, and can withhold funds. Its record is mixed: districts met only two of five FY2025 implementation goals, and the board recently paused its school-visit teams. An independent evaluation is due to the governor and General Assembly in January 2027. But Maryland has built the machinery to ask whether the money is working. Minnesota has not.

The strongest example comes from a different direction: a state that made systemic improvement in one subject a state responsibility with a focus on reading. That state is Mississippi.

In her March 2026 article Improving Student Achievement: What Red and Blue States Are Doing Right, Linda Darling-Hammond describes what Mississippi did. It is often summarized as a switch to phonics. She shows it was far more:

  • A state-defined literacy approach. The state set out a research-based literacy block: explicit daily instruction in foundational skills, plus daily writing, reading and discussing books, vocabulary, and comprehension.
  • Staffing to make it work. Kindergarten and first-grade classrooms of up to 24 students are expected to include trained teaching assistants, so teachers can spend most of their time with small groups.
  • Assessment and intervention. Students are regularly assessed, and specific interventions are put in place for those who need them.
  • State capacity. The department of education created a literacy division and sends trained literacy coaches to high-need schools.
  • Sustained money. Per-pupil spending rose 73 percent from 2016-17 to 2025-26, with teacher raises in 2022 and again last year, and an 18 percent raise for teaching assistants.

The result: Mississippi ranked 46th in 4th-grade reading in 2006 and reached the national average by 2019. In 2024 it ranked first in the nation on demographically adjusted 4th- and 8th-grade reading and math scores. Both rankings are based on the National Assessment of Educational Progress (NAEP), the federal test given to samples of students in every state, which Darling-Hammond calls the nation’s most reliable long-term measure of achievement. The 2024 ranking uses an Urban Institute analysis that adjusts each state’s NAEP scores for student demographics, such as poverty, English learner status, and disability. That adjustment lets states serving very different populations be compared fairly. It does not change how students actually scored. On unadjusted 2024 scores, Mississippi still ranked 35th in 8th-grade math and 41st in 8th-grade reading. Mississippi is not yet a top performer. But its students outperform what their demographics would predict by more than any other state’s, and their results are improving significantly.

Mississippi is beginning to implement a system of both support and accountability. The state defined what effective practice looks like, paid for it, built its own capacity to support it, and watched whether it worked. While Minnesota has a poorly funded program for the very lowest performing schools, Minnesota lacks systemic, supportive accountability.

This is a critcal time form Minnesota to reconsider its abdication of state responsibility for support and accountability. If actually funded by the 2027 legislature, Minnesota is about to make perhaps the largest increase in compensatory funding in its history. If the Legislature does not pair it with that kind of state responsibility, the increase will be absorbed, and the students who generate it will keep waiting, and opponents will charge that Minnesota has shown that increasing funding does not make a difference.

Sources

at No comments:
Subscribe to: Posts (Atom)

Minnesota's Increased Compensatory Funding Must be Accompanied by Robust State Supportive Accountability

The legislature has finally implemented significant compensatory funding increases to take effect in 2026 and 2027. But without major syst...