What the Legislature required the Commission to do
In the 2025 special session, the Legislature directed the Commissioner of Education to convene a Blue Ribbon Commission on Special Education. The Commission was to produce an action plan that would cut state special education aid by $250 million per biennium, beginning July 1, 2027, while still maintaining a free appropriate public education (FAPE) for students with disabilities. Laws of Minnesota 2025, 1st Spec. Sess. ch. 10, art. 7.
The charge was dressed in the language of reform. The statute listed five goals: administrative efficiencies and shared services, reducing cost drivers such as transportation and tuition billing, reducing paperwork, reforming the funding formula, and slowing cost growth. But the operative requirement was the dollar target.
The Legislature also built in a penalty. Section 8 of the same article directs Minnesota Management and Budget to assume a $250 million reduction in special education aid in its forecasts. If the 2027 Legislature does not enact savings of that size based on the Commission's recommendations, the Commissioner of Education must cut the special education cross subsidy aid factor under Minn. Stat. § 125A.76, subd. 2e, by whatever amount is needed to make up the difference. In other words, the cut happens automatically unless the Legislature either finds the savings elsewhere or repeals the provision.
What the Commission did
The Commission's first and unanimous recommendation was that the Legislature not make the cuts at all. It urged repeal of the contingent reduction in section 8, concluding that it could find no way to cut at this level while upholding FAPE for every student. Its September 2026 report, prepared with Wilder Research, says plainly that the cuts will harm students, families, and schools whether they come through its own menu or the default.
The Commission had 18 members: an MDE designee, four legislative appointees, and thirteen gubernatorial appointees drawn from districts, intermediate districts, cooperatives, Education Minnesota, PACER, disability advocates, and EdFinMN. It met from October 2025 through September 2026 and worked through subcommittees, ratings, and elimination votes.
Having recommended repeal, the Commission complied with its charge and offered four cuts that together reach the target:
| Recommendation | Savings per biennium |
|---|---|
| Move ADSIS out of the special education formula into a capped per-student allocation | $130,526,396 |
| Move non-IEP transportation (FIN 728) to a separate stream at 60% reimbursement, capped at $60 million | $99,438,083 |
| Eliminate Special Education Charter Tuition Aid | $15,061,025 |
| Eliminate the remaining Hold Harmless provision | $10,256,278 |
| Total | $255,281,782 |
The Commission was openly uneasy with its own menu. The FIN 728 item pays for transporting students experiencing homelessness, students in care and treatment programs, and students with Section 504 transportation plans. One member called it a forced choice between students with disabilities and students experiencing homelessness, and the report urges legislators not to adopt it unless absolutely necessary. Saint Paul's superintendent estimated that the FIN 728 and ADSIS changes alone would cost her district more than $9 million a year.
The Commission also recommended measures that save no money in the biennium but might slow growth over time: adopting PELSB's licensure recommendations, acting on existing paperwork-reduction proposals, expanding early identification and Full-Service Community Schools, and reducing barriers to Medicaid billing. Commission member Ramona Springis-Doss added a pointed observation in her letter. The real cost drivers, she wrote, include chronic federal underfunding and Minnesota requirements that exceed federal law, and only the Legislature can address them.
Enrollment and costs keep rising
More Minnesota students receive special education every year, and the share of all students receiving it is at a historic high. According to MDE data in the Commission's report, enrollment from birth through age 22 rose from 140,748 in 2017-18 to 173,188 in 2025-26, an increase of 23 percent. Nearly all of the growth was among school-age students.
The growth is not a product of rising overall enrollment, which has been roughly flat. The share has climbed for decades. The Office of the Legislative Auditor reported 7.4 percent in 1977, 10.9 percent in 1996, 11.9 percent in 1999-2000, and 13.6 percent in 2010-11. MDE's statistics summaries show 166,982 students receiving special education in 2024-25 against roughly 905,800 PreK-12 public school students, or about 18.4 percent. Autism is the fastest-growing category: OLA reports that students with autism as their primary disability now number nearly 30,000, up 71 percent.
Costs have grown faster than revenue. Special education expenditures were $2.745 billion in FY 2021 and are projected at $4.498 billion by FY 2029. Dedicated state and federal special education revenue is projected at $3.981 billion that year. The difference, the cross subsidy, must be covered from districts' general education revenue.
The 2023 Legislature cut that gap substantially by raising the cross subsidy aid factor from 6.43 percent to 44 percent for FY 2024 through 2026 and 50 percent for FY 2027 and later. Even so, the Commission's figures project a remaining cross subsidy of about $517 million in FY 2029, before any default cut.
What the default cut would do to districts
The Commission's report does not tell the Legislature how the default cut would fall on districts. It treats the default only as something to avoid. The statute answers the question anyway.
A district's cross subsidy reduction aid equals its prior-year initial special education cross subsidy times a single statewide aid factor. The initial cross subsidy is the district's special education spending, including transportation, minus its special education aid and the general education revenue attributable to students served outside the regular classroom more than 60 percent of the day. The default cut works by lowering that one factor. Every district therefore loses the same percentage of its own unreimbursed special education costs, and the dollars lost track the size of each district's deficit, not its enrollment.
The statewide magnitude is $125 million a year. MDE has projected the annual initial cross subsidy at roughly $1 billion, so the 50 percent factor implies about $500 million a year in cross subsidy aid. The default cut would take back about a quarter of it. The factor would fall from 50 percent to somewhere in the high 30s, and each district would absorb roughly another tenth of its unreimbursed special education costs from its general fund. Spread across all PreK-12 students, the average is about $135 to $140 per pupil per year. These figures are estimates derived from MDE's projections; actual district amounts will depend on MDE's final calculations.
Averages conceal the pattern. Districts with the largest deficits per pupil take the largest cuts per pupil. MDE's estimates for 2022-23 show how widely the deficits vary:
| District group | Adjusted net cross subsidy per pupil, FY 2023 (est.) |
|---|---|
| Minneapolis and St. Paul | $1,411 |
| Other metro, inner ring | $1,241 |
| Other metro, outer ring | $1,074 |
| Non-metro, 2,000+ students | $1,042 |
| Non-metro, 1,000–2,000 students | $919 |
| Statewide | $953 |
St. Cloud has long sat near the top. In 2017 its per-pupil cross subsidy was $1,282, the third largest in the state, against a statewide average of $820.
The districts that will lose the most share several characteristics. They identify more students and serve more students with intensive needs. They place more students in separate settings or intermediate districts. They pay heavy contracted transportation costs. And they bear tuition-billing costs for resident students who attend charter schools or other districts. Minneapolis officials have said that tuition billing accounts for more than $600 per pupil of their cross subsidy.
The largest per-pupil cuts will land on the core cities and on regional centers such as St. Cloud. These are the districts that enroll the highest concentrations of low-income students, students of color, and English learners. The relationship is not uniform statewide; affluent inner-ring suburbs also carry large deficits, and small rural districts carry the smallest. But at the top of the distribution, the default cut falls hardest where student need is greatest.
Another failure to honor the Skeen mandate
The default cut is one more example of the Legislature's failure to honor the constitutional mandate recognized in Skeen v. State, 505 N.W.2d 299 (Minn. 1993): to provide every district with enough funding to give each student an adequate education that meets all state standards. Article XIII, section 1 of the Minnesota Constitution assigns that duty to the Legislature. In Cruz-Guzman v. State, 916 N.W.2d 1 (Minn. 2018), the Supreme Court confirmed that the courts can enforce it.
The special education cross subsidy patently violates that mandate. The Legislature requires districts to provide special education, then funds only part of the cost and forces districts to make up the rest from general education revenue. That revenue is the money the Legislature itself provides to educate every other student. In 2022-23, MDE estimated the adjusted net cross subsidy at $826 million statewide, 10.9 percent of general education revenue before referendum levies, and 14.1 percent in Minneapolis and St. Paul.
It is a mistake to think the cross subsidy chiefly harms students with disabilities. Their services are written into IEPs and enforceable under federal law; districts must provide them whatever the budget. The students who absorb the shortfall are the non-special education students with higher educational needs, whose interventions, class sizes, reading support, and language services are funded from the general fund that the cross subsidy drains. Those students are disproportionately students of color, low-income students, and English learners. They are also concentrated in exactly the districts, the core cities and regional centers like St. Cloud, that carry the largest deficits and would take the largest default cuts.
The Legislature's own Commission unanimously told it not to do this. Repealing section 8 is the minimum the 2027 Legislature owes Minnesota's students. Meeting the Skeen mandate requires more: a funding system built on what an adequate education actually costs, rather than one that balances the state's budget by shifting unfunded mandates onto the students least able to bear them.
Sources
- Blue Ribbon Commission on Special Education, Recommendations to the Minnesota Legislature (Sept. 2026), prepared by Wilder Research for MDE.
- Laws 2025, 1st Spec. Sess. ch. 10, art. 7, § 8, as reproduced in S.F. 3909 (2026); see also House Research summary of H.F. 4114.
- 2023 conference committee amendment to Minn. Stat. § 125A.76, subd. 2e (44 and 50 percent aid factors).
- MDE, Fiscal Note, H.F. 18 (Jan. 18, 2023) (projected initial cross subsidy and aid at 6.43 percent).
- MDE, Special Education Funding and Data Reference Guide, Section 2.
- MDE, Estimated 2022-23 Special Education Cross Subsidy, General Education and Referendum Revenue.
- MDE, Special Education Cross-Subsidies FY 2017.
- MinnPost, What does Minnesota's new special-ed aid mean for districts with the largest shortfalls? (June 2019).
- Office of the Legislative Auditor, Special Education (1997) and Special Education (2013); ASD Services in Public Schools topic background (Nov. 2025).
- Legislative Reference Library, Minnesota Education Statistics Summary, 2024-25 data.
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