1.1 	A bill for an act
1.2 	relating to education finance; modifying the school finance system; creating a 
1.3 	new education funding framework;amending Minnesota Statutes 2006, sections 
1.4 	123B.53, subdivision 5; 123B.57, subdivision 4; 123B.59, subdivision 1; 
1.5 	123B.591, subdivisions 2, 3; 124D.59, subdivision 2; 124D.65, subdivision 
1.6 	5; 125A.79, subdivision 7; 126C.01, by adding subdivisions; 126C.05, 
1.7 	subdivisions 3, 5, 6, 8, 16, 17; 126C.10, subdivisions 1, 2a, 3, 4, 6, 13, 18, by 
1.8 	adding subdivisions; 126C.13, subdivision 5; 126C.17, subdivision 1; 126C.20; 
1.9 	126C.40, subdivision 1; Minnesota Statutes 2007 Supplement, sections 125A.76, 
1.10 	subdivision 5; 126C.05, subdivision 1; 126C.10, subdivision 2; 126C.13, 
1.11 	subdivision 4; proposing coding for new law in Minnesota Statutes, chapters 
1.12 	123B; 126C; repealing Minnesota Statutes 2006, sections 126C.10, subdivisions 
1.13 	13a, 13b, 25, 26, 27, 28, 29, 30, 31, 31a, 31b, 32, 33, 35, 36; 126C.12; 127A.50; 
1.14 	Minnesota Statutes 2007 Supplement, sections 123B.54; 125A.76, subdivision 4; 
1.15 	125A.79, subdivision 6; 126C.10, subdivisions 2b, 24, 34; 126C.126.
1.16 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.17 	Section 1. Minnesota Statutes 2006, section 123B.53, subdivision 5, is amended to read:
1.18 		Subd. 5.Equalized debt service levy. (a) The equalized debt service levy of a 
1.19 	district equals the sum of the first tier equalized debt service levy and the second tier 
1.20 	equalized debt service levy.
1.21 	(b) A district's first tier equalized debt service levy equals the district's first tier debt 
1.22 	service equalization revenue times the lesser of one or the ratio of:
1.23 	(1) the quotient derived by dividing the adjusted net tax capacity of the district for 
1.24 	the year before the year the levy is certified by the adjusted pupil units in the district for 
1.25 	the school year ending in the year prior to the year the levy is certified; to
1.26 	(2) $3,200 100 percent of the statewide adjusted net tax capacity equalizing factor.
1.27 	(c) A district's second tier equalized debt service levy equals the district's second tier 
1.28 	debt service equalization revenue times the lesser of one or the ratio of:
2.1 	(1) the quotient derived by dividing the adjusted net tax capacity of the district for 
2.2 	the year before the year the levy is certified by the adjusted pupil units in the district for 
2.3 	the school year ending in the year prior to the year the levy is certified; to
2.4 	(2) $8,000 150 percent of the statewide adjusted net tax capacity equalizing factor.

2.5 	EFFECTIVE DATE. This section is effective for taxes payable in 2009 and later.

2.6 	Sec. 2. [123B.555] SCHOOL BOND AGRICULTURAL CREDIT.
2.7 		Subdivision 1.Eligibility. All class 2 property under section 273.13, subdivision 23, 
2.8 	except for (1) property consisting of the house, garage, and immediately surrounding one 
2.9 	acre of land of an agricultural homestead, and (2) property classified under section 273.13, 
2.10 	subdivision 23, paragraph (b), clause (4), is eligible to receive the credit under this section.
2.11 		Subd. 2.Credit amount. For each qualifying property, the school bond agricultural 
2.12 	credit is equal to 20 percent of the property's eligible net tax capacity multiplied by the 
2.13 	school debt tax rate determined under section 275.08, subdivision 1b.
2.14 		Subd. 3.Credit reimbursements. The county auditor shall determine the tax 
2.15 	reductions allowed under this section within the county for each taxes payable year and 
2.16 	shall certify that amount to the commissioner of revenue as a part of the abstracts of tax 
2.17 	lists submitted under section 275.29. Any prior year adjustments shall also be certified on 
2.18 	the abstracts of tax lists. The commissioner shall review the certifications for accuracy, 
2.19 	and may make such changes as are deemed necessary, or return the certification to the 
2.20 	county auditor for correction. The credit under this section must be used to reduce the 
2.21 	school district net tax capacity-based property tax as provided in section 273.1393.
2.22 		Subd. 4.Payment. The commissioner of revenue shall certify the total of the tax 
2.23 	reductions granted under this section for each taxes payable year within each school 
2.24 	district to the commissioner of education, who shall pay the reimbursement amounts to 
2.25 	each school district as provided in section 273.1392.

2.26 	EFFECTIVE DATE. This section is effective for taxes payable in 2009 and later.

2.27 	Sec. 3. Minnesota Statutes 2006, section 123B.57, subdivision 4, is amended to read:
2.28 		Subd. 4.Health and safety levy. To receive health and safety revenue, a district may 
2.29 	levy an amount equal to the district's health and safety revenue as defined in subdivision 3 
2.30 	multiplied by the lesser of one, or the ratio of the quotient derived by dividing the adjusted 
2.31 	net tax capacity of the district for the year preceding the year the levy is certified by the 
2.32 	adjusted marginal cost pupil units in the district for the school year to which the levy is 
2.33 	attributable, to $2,935 100 percent of the statewide tax capacity equalizing factor.

3.1 	EFFECTIVE DATE. This section is effective for taxes payable in 2009 and later.

3.2 	Sec. 4. Minnesota Statutes 2006, section 123B.59, subdivision 1, is amended to read:
3.3 		Subdivision 1.To qualify. (a) An independent or special school district qualifies to 
3.4 	participate in the alternative facilities bonding and levy program if the district has:
3.5 	(1) more than 66 students per grade;
3.6 	(2) over 1,850,000 square feet of space and the average age of building space is 15 
3.7 	years or older or over 1,500,000 square feet and the average age of building space is 
3.8 	35 years or older;
3.9 	(3) insufficient funds from projected health and safety revenue and capital facilities 
3.10 	revenue to meet the requirements for deferred maintenance, to make accessibility 
3.11 	improvements, or to make fire, safety, or health repairs; and
3.12 	(4) (2) a ten-year facility plan approved by the commissioner according to 
3.13 	subdivision 2.
3.14 	(b) An independent or special school district not eligible to participate in the 
3.15 	alternative facilities bonding and levy program under paragraph (a) qualifies for limited 
3.16 	participation in the program if the district has:
3.17 	(1) one or more health and safety projects with an estimated cost of $500,000 or 
3.18 	more per site that would qualify for health and safety revenue except for the project size 
3.19 	limitation in section 123B.57, subdivision 1, paragraph (b); and 
3.20 	(2) insufficient funds from capital facilities revenue to fund those projects.

3.21 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
3.22 	and later.

3.23 	Sec. 5. Minnesota Statutes 2006, section 123B.591, subdivision 2, is amended to read:
3.24 		Subd. 2.Deferred maintenance revenue. The deferred maintenance revenue for an 
3.25 	eligible school district equals the product of $60 $100 times the adjusted marginal cost 
3.26 	pupil units for the school year times the lesser of one or the ratio of the district's average 
3.27 	age of building space to 35 years.

3.28 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
3.29 	and later.

3.30 	Sec. 6. Minnesota Statutes 2006, section 123B.591, subdivision 3, is amended to read:
3.31 		Subd. 3.Deferred maintenance levy. To obtain deferred maintenance revenue for 
3.32 	fiscal year 2008 and later, a district may levy an amount not more than the product of its 
4.1 	deferred maintenance revenue for the fiscal year times the lesser of one or the ratio of its 
4.2 	adjusted net tax capacity per adjusted marginal cost pupil unit to $5,900 100 percent of 
4.3 	the statewide adjusted net tax capacity equalizing factor.

4.4 	EFFECTIVE DATE. This section is effective for taxes payable in 2009 and later.

4.5 	Sec. 7. Minnesota Statutes 2006, section 124D.59, subdivision 2, is amended to read:
4.6 		Subd. 2.Pupil of limited English proficiency. (a) "Pupil of limited English 
4.7 	proficiency" means a pupil in kindergarten through grade 12 who meets the following 
4.8 	requirements:
4.9 	(1) the pupil, as declared by a parent or guardian first learned a language other than 
4.10 	English, comes from a home where the language usually spoken is other than English, or 
4.11 	usually speaks a language other than English; and
4.12 	(2) the pupil is determined by developmentally appropriate measures, which might 
4.13 	include observations, teacher judgment, parent recommendations, or developmentally 
4.14 	appropriate assessment instruments, to lack the necessary English skills to participate 
4.15 	fully in classes taught in English.
4.16 	(b) Notwithstanding paragraph (a), a pupil in grades 4 through 12 who was enrolled 
4.17 	in a Minnesota public school on the dates during the previous school year when a 
4.18 	commissioner provided assessment that measures the pupil's emerging academic English 
4.19 	was administered, shall not be counted as a pupil of limited English proficiency in 
4.20 	calculating limited English proficiency pupil units under section 126C.05, subdivision 
4.21 	17, and shall not generate state limited English proficiency aid under section 124D.65, 
4.22 	subdivision 5, unless the pupil scored below the state cutoff score on an assessment 
4.23 	measuring emerging academic English provided by the commissioner during the previous 
4.24 	school year. 
4.25 	(c) Notwithstanding paragraphs (a) and (b), a pupil in kindergarten through grade 12 
4.26 	shall not be counted as a pupil of limited English proficiency in calculating limited English 
4.27 	proficiency pupil units under section 126C.05, subdivision 17, and shall not generate state 
4.28 	limited English proficiency aid under section 124D.65, subdivision 5, if:
4.29 	(1) the pupil is not enrolled during the current fiscal year in an educational program 
4.30 	for pupils of limited English proficiency in accordance with sections 124D.58 to 124D.64; 
4.31 	or
4.32 	(2) the pupil has generated five or more years of average daily membership in 
4.33 	Minnesota public schools since July 1, 1996.

5.1 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
5.2 	and later.

5.3 	Sec. 8. Minnesota Statutes 2006, section 124D.65, subdivision 5, is amended to read:
5.4 		Subd. 5.School district LEP revenue. (a) A district's limited English proficiency 
5.5 	programs revenue equals the product of: (1) $700 in fiscal year 2004 and later times .2;
5.6 	(2) the basic formula allowance for that year; and (3) the greater of 20 or the adjusted 
5.7 	marginal cost average daily membership of eligible pupils of limited English proficiency 
5.8 	enrolled in the district during the current fiscal year.
5.9 	(b) A pupil ceases to generate state limited English proficiency aid in the school 
5.10 	year following the school year in which the pupil attains the state cutoff score on a 
5.11 	commissioner-provided assessment that measures the pupil's emerging academic English.

5.12 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
5.13 	and later.

5.14 	Sec. 9. Minnesota Statutes 2007 Supplement, section 125A.76, subdivision 5, is 
5.15 	amended to read:
5.16 		Subd. 5.School district special education aid.  A school district's special education 
5.17 	aid for fiscal year 2008 and later equals the state total special education aid times the ratio 
5.18 	of the district'sits initial special education aid to the state total initial special education aid. 

5.19 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
5.20 	and later.

5.21 	Sec. 10. Minnesota Statutes 2006, section 125A.79, subdivision 7, is amended to read:
5.22 		Subd. 7.District special education excess cost aid. A district's special education 
5.23 	excess cost aid for fiscal year 2002 and later equals the state total special education excess 
5.24 	cost aid times the ratio of the district's its initial excess cost aid to the state total initial 
5.25 	excess cost aid.

5.26 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
5.27 	and later.

5.28 	Sec. 11. Minnesota Statutes 2006, section 126C.01, is amended by adding a subdivision 
5.29 	to read:
5.30 		Subd. 2a.Adjusted net tax capacity equalizing factor. The adjusted net tax 
5.31 	capacity equalizing factor equals the quotient derived by dividing the total adjusted net 
6.1 	tax capacity of all school districts in the state for the year before the year the levy is 
6.2 	certified by the total number of adjusted marginal cost pupil units in the state for the 
6.3 	current school year.

6.4 	EFFECTIVE DATE. This section is effective for taxes payable in 2009 and later.

6.5 	Sec. 12. Minnesota Statutes 2006, section 126C.01, is amended by adding a 
6.6 	subdivision to read:
6.7 		Subd. 12.Location equity index. (a) A school district's wage equity index equals 
6.8 	each district's composite wage level divided by the statewide average wage for the same 
6.9 	period. The composite wage level for a school district equals the sum of 80 percent of the 
6.10 	district's county wage level and 20 percent of the district's economic development region 
6.11 	composite wage level. The composite wage level is computed by using the most recent 
6.12 	three-year weighted wage data with the coefficient  weights set at 0.83 for the most recent 
6.13 	year, 0.33 for the prior year, and -0.16 for the second prior year.
6.14 	(b) a school district's housing equity index equals the ratio of each district's county 
6.15 	median home value to the statewide median home value.
6.16 	(c) a school district's location equity index equals the greater of one, or the sum of 
6.17 	(i) 0.65 times the district's wage equity index, and (ii) 0.35 times the district's housing 
6.18 	equity index.
6.19 	(d) The commissioner of education annually must recalculate the indexes in this 
6.20 	section. For purposes of this subdivision, the commissioner must locate a school district 
6.21 	with boundaries that cross county borders in the county that generates the highest location 
6.22 	equity index for that district.

6.23 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
6.24 	and later.

6.25 	Sec. 13. Minnesota Statutes 2007 Supplement, section 126C.05, subdivision 1, is 
6.26 	amended to read:
6.27 		Subdivision 1.Pupil unit. Pupil units for each Minnesota resident pupil under the 
6.28 	age of 21 or who meets the requirements of section 120A.20, subdivision 1, paragraph (c), 
6.29 	in average daily membership enrolled in the district of residence, in another district under 
6.30 	sections 123A.05 to 123A.08, 124D.03, 124D.08, or 124D.68; in a charter school under 
6.31 	section 124D.10; or for whom the resident district pays tuition under section 123A.18, 
6.32 	123A.22, 123A.30, 123A.32, 123A.44, 123A.488, 123B.88, subdivision 4, 124D.04, 
7.1 	124D.05, 125A.03 to 125A.24, 125A.51, or 125A.65, shall be counted according to this 
7.2 	subdivision. 
7.3 	(a) A prekindergarten pupil with a disability who is enrolled in a program approved 
7.4 	by the commissioner and has an individual education plan is counted as the ratio of the 
7.5 	number of hours of assessment and education service to 825 times 1.25 with a minimum 
7.6 	average daily membership of 0.28, but not more than 1.25 pupil units. 
7.7 	(b) A prekindergarten pupil who is assessed but determined not to be disabled is 
7.8 	counted as the ratio of the number of hours of assessment service to 825 times 1.25. 
7.9 	(c) A kindergarten pupil with a disability who is enrolled in a program approved 
7.10 	by the commissioner is counted as the ratio of the number of hours of assessment and 
7.11 	education services required in the fiscal year by the pupil's individual education program 
7.12 	plan to 875, but not more than one.
7.13 	(d) A kindergarten pupil who is not included in paragraph (c) is counted as .612 1.0
7.14 	pupil units.
7.15 	(e) A pupil who is in any of grades 1 to 3 is counted as 1.115 1.0 pupil units for 
7.16 	fiscal year 2000 and thereafter. 
7.17 	(f) A pupil who is any of grades 4 to 6 is counted as 1.06 1.0 pupil units for fiscal 
7.18 	year 1995 and thereafter. 
7.19 	(g) A pupil who is in any of grades 7 to 12 is counted as 1.3 1.0 pupil units.
7.20 	(h) A pupil who is in the postsecondary enrollment options program is counted as 
7.21 	1.3 1.0 pupil units.

7.22 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
7.23 	and later.

7.24 	Sec. 14. Minnesota Statutes 2006, section 126C.05, subdivision 3, is amended to read:
7.25 		Subd. 3.Compensation revenue pupil units. Compensation revenue pupil units 
7.26 	for fiscal year 1998 and thereafter must be computed according to this subdivision.
7.27 	(a) The compensation revenue concentration percentage for each building in a 
7.28 	district equals the product of 100 times the ratio of:
7.29 	(1) the sum of the number of pupils enrolled in the building district eligible to 
7.30 	receive free lunch plus one-half of the pupils eligible to receive or reduced priced lunch on 
7.31 	October 1 of the previous fiscal year; to
7.32 	(2) the number of pupils enrolled in the building district on October 1 of the 
7.33 	previous fiscal year.
8.1 	(b) The compensation revenue pupil weighting factor for a building equals the 
8.2 	lesser of one or the quotient obtained by dividing the building's compensation revenue 
8.3 	concentration percentage by 80.0.
8.4 	(c) The compensation revenue pupil units for a building district equals the product of:
8.5 	(1) the sum of the number of pupils enrolled in the building district eligible to 
8.6 	receive free lunch and one-half of the pupils eligible to receive or reduced priced lunch on 
8.7 	October 1 of the previous fiscal year; times
8.8 	(2) the compensation revenue pupil weighting factor for the building; times
8.9 	(3) .60 district.
8.10 	(d) Notwithstanding paragraphs (a) to (c), for charter schools and contracted 
8.11 	alternative programs in the first year of operation, compensation revenue pupil units shall 
8.12 	be computed using data for the current fiscal year. If the charter school or contracted 
8.13 	alternative program begins operation after October 1, compensatory revenue pupil units 
8.14 	shall be computed based on pupils enrolled on an alternate date determined by the 
8.15 	commissioner, and the compensation revenue pupil units shall be prorated based on the 
8.16 	ratio of the number of days of student instruction to 170 days.
8.17 	(e) The percentages in this subdivision must be based on the count of individual 
8.18 	pupils and not on a building average or minimum.

8.19 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
8.20 	and later.

8.21 	Sec. 15. Minnesota Statutes 2006, section 126C.05, subdivision 5, is amended to read:
8.22 		Subd. 5.Adjusted pupil units. (a) Adjusted pupil units for a district or charter 
8.23 	school means the sum of:
8.24 	(1) the number of pupil units served, according to subdivision 7, plus
8.25 	(2) pupil units according to subdivision 1 for whom the district or charter school 
8.26 	pays tuition under section 123A.18, 123A.22, 123A.30, 123A.32, 123A.44, 123A.488, 
8.27 	123B.88, subdivision 4, 124D.04, 124D.05, 125A.03 to 125A.24, 125A.51, or 125A.65, 
8.28 	minus 
8.29 	(3) pupil units according to subdivision 1 for whom the district or charter school 
8.30 	receives tuition under section 123A.18, 123A.22, 123A.30, 123A.32, 123A.44, 123A.488, 
8.31 	123B.88, subdivision 4, 124D.04, 124D.05, 125A.03 to 125A.24, 125A.51, or 125A.65. 
8.32 	(b) Adjusted marginal cost pupil units means the greater of:
8.33 	(1) the sum of .77 times the pupil units defined in paragraph (a) for the current school 
8.34 	year and .23 times the pupil units defined in paragraph (a) for the previous school year; or
9.1 	(2) the number of adjusted pupil units defined in paragraph (a) for the current school 
9.2 	year.

9.3 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
9.4 	and later.

9.5 	Sec. 16. Minnesota Statutes 2006, section 126C.05, subdivision 6, is amended to read:
9.6 		Subd. 6.Resident pupil units. (a) Resident pupil units for a district means the 
9.7 	number of pupil units according to subdivision 1 residing in the district.
9.8 	(b) Resident marginal cost pupil units means the greater of:
9.9 	(1) the sum of .77 times the pupil units defined in paragraph (a) for the current year 
9.10 	and .23 times the pupil units defined in paragraph (a) for the previous school year; or
9.11 	(2) the number of resident pupil units defined in paragraph (a) for the current school 
9.12 	year.

9.13 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
9.14 	and later.

9.15 	Sec. 17. Minnesota Statutes 2006, section 126C.05, subdivision 8, is amended to read:
9.16 		Subd. 8.Average daily membership. (a) Membership for pupils in grades 
9.17 	kindergarten through 12 and for prekindergarten pupils with disabilities shall mean the 
9.18 	number of pupils on the current roll of the school, counted from the date of entry until 
9.19 	withdrawal. The date of withdrawal shall mean the day the pupil permanently leaves 
9.20 	the school or the date it is officially known that the pupil has left or has been legally 
9.21 	excused. However, a pupil, regardless of age, who has been absent from school for 15 
9.22 	consecutive school days during the regular school year or for five consecutive school days 
9.23 	during summer school or intersession classes of flexible school year programs without 
9.24 	receiving instruction in the home or hospital shall be dropped from the roll and classified 
9.25 	as withdrawn. Nothing in this section shall be construed as waiving the compulsory 
9.26 	attendance provisions cited in section 120A.22. Average daily membership equals the 
9.27 	sum for all pupils of the number of days of the school year each pupil is enrolled in the 
9.28 	district's schools divided by the number of days the schools are in session. Days of 
9.29 	summer school or intersession classes of flexible school year programs are only included 
9.30 	in the computation of membership for pupils with a disability not appropriately served 
9.31 	primarily in the regular classroom. A student must not be counted as more than 1.2 pupils 
9.32 	in average daily membership under this section. When the initial total average daily 
10.1 	membership exceeds 1.2 for a pupil enrolled in more than one school district during the 
10.2 	fiscal year, each district's average daily membership must be reduced proportionately. 
10.3 	(b) A student must not be counted as more than one pupil in average daily 
10.4 	membership except for purposes of section 126C.10, subdivision 2a. 
10.5 	(c) For purposes of section 126C.10, subdivision 2a, only, a pupil's average daily 
10.6 	membership is counted as 1.0 once a kindergarten or elementary pupil has received 960 
10.7 	hours of instruction during the school year and as 1.0 once a secondary student has 
10.8 	received 1,050 hours of instruction during the school year.

10.9 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
10.10 	and later.

10.11 	Sec. 18. Minnesota Statutes 2006, section 126C.05, subdivision 16, is amended to read:
10.12 		Subd. 16.Free and reduced priced lunches. The commissioner shall determine 
10.13 	the number of children eligible to receive either a free or reduced priced lunch on October 
10.14 	1 each year. Children enrolled in a building on October 1 and determined to be eligible to 
10.15 	receive free or reduced price lunch by December 15 of that school year shall be counted 
10.16 	as eligible on October 1 for purposes of subdivision 3. The commissioner may use 
10.17 	federal definitions for these purposes and may adjust these definitions as appropriate. 
10.18 	The commissioner may adopt reporting guidelines to assure accuracy of data counts and 
10.19 	eligibility. Districts shall use any guidelines adopted by the commissioner.

10.20 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
10.21 	and later.

10.22 	Sec. 19. Minnesota Statutes 2006, section 126C.05, subdivision 17, is amended to read:
10.23 		Subd. 17.LEP pupil units. (a) Limited English proficiency pupil units for fiscal 
10.24 	year 2004 and thereafter shall be determined according to this subdivision.
10.25 	(b) The limited English proficiency concentration percentage for a district equals the 
10.26 	product of 100 times the ratio of:
10.27 	(1) means the number of eligible pupils of limited English proficiency in average 
10.28 	daily membership enrolled in the district during the current fiscal year; to
10.29 	(2) the number of pupils in average daily membership enrolled in the district.
10.30 	(c) The limited English proficiency pupil units for each eligible pupil of limited 
10.31 	English proficiency in average daily membership equals the lesser of one or the quotient 
10.32 	obtained by dividing the limited English proficiency concentration percentage for the 
10.33 	pupil's district of enrollment by 11.5.
11.1 	(d) (b) Limited English proficiency pupil units shall be counted by the district of 
11.2 	enrollment.
11.3 	(e) (c) Notwithstanding paragraph (d) (b), for the purposes of this subdivision, 
11.4 	pupils enrolled in a cooperative or intermediate school district shall be counted by the 
11.5 	district of residence.
11.6 	(f) (d) For the purposes of this subdivision, the terms defined in section 124D.59
11.7 	have the same meaning. 

11.8 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
11.9 	and later.

11.10 	Sec. 20. [126C.09] EDUCATION FUNDING FRAMEWORK.
11.11 		Subdivision 1.Basic formula framework; general classroom funding. The 
11.12 	general classroom funding for each school district equals the sum of the district's general 
11.13 	education basic revenue, extended time revenue, compensatory revenue, LEP revenue, 
11.14 	referendum replacement revenue, and special education revenue.
11.15 		Subd. 2.District instructional services. A school district's instructional services 
11.16 	revenue equals the sum of its operating sparsity revenue, location equity revenue, and 
11.17 	declining enrollment revenue.
11.18 		Subd. 3.District support services. A school district's support services revenue 
11.19 	equals the sum of its operating capital revenue, deferred maintenance revenue, health 
11.20 	and safety revenue, alternative facilities revenue, integration revenue, and transportation 
11.21 	revenue.

11.22 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
11.23 	and later.

11.24 	Sec. 21. Minnesota Statutes 2006, section 126C.10, subdivision 1, is amended to read:
11.25 		Subdivision 1.General education revenue. (a) For fiscal year 2006 and later
11.26 	through 2009, the general education revenue for each district equals the sum of the 
11.27 	district's basic revenue, extended time revenue, gifted and talented revenue, basic skills 
11.28 	revenue, training and experience revenue, secondary sparsity revenue, elementary sparsity 
11.29 	revenue, transportation sparsity revenue, total operating capital revenue, equity revenue, 
11.30 	alternative teacher compensation revenue, and transition revenue.
11.31 	(b) For fiscal years 2010 and later, a school district's general education revenue 
11.32 	equals the sum of its basic revenue, extended time revenue, declining enrollment revenue, 
11.33 	basic skills revenue, location equity revenue, referendum replacement revenue, secondary 
12.1 	sparsity revenue, elementary sparsity revenue, transportation revenue, and total operating 
12.2 	capital revenue.

12.3 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
12.4 	and later.

12.5 	Sec. 22. Minnesota Statutes 2007 Supplement, section 126C.10, subdivision 2, is 
12.6 	amended to read:
12.7 		Subd. 2.Basic revenue. (a) The basic revenue for each district equals the formula 
12.8 	allowance times the adjusted marginal cost pupil units for the school year. 
12.9 	(b) The formula allowance for fiscal year 2007 is $4,974. The formula allowance for 
12.10 	fiscal year 2008 is $5,074 and the formula allowance for fiscal year 2009 and subsequent 
12.11 	years is $5,124.
12.12 	(c) The formula allowance for fiscal year 2010 is $7,500. The formula allowance 
12.13 	for fiscal year 2011 and later equals the formula allowance for the previous year times 
12.14 	the sum of 1 and the greater of zero or the ratio of implicit price deflator, as defined in 
12.15 	section 275.70, subdivision 2, for the most recent year to the implicit price deflator for 
12.16 	the previous year.

12.17 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
12.18 	and later.

12.19 	Sec. 23. Minnesota Statutes 2006, section 126C.10, subdivision 2a, is amended to read:
12.20 		Subd. 2a.Extended time revenue. (a) A school district's extended time revenue 
12.21 	is equal to the product of $4,601 the formula allowance for that year and the sum of 
12.22 	the adjusted marginal cost pupil units of the district for each pupil in average daily 
12.23 	membership in excess of 1.0 and less than 1.2 according to section 126C.05, subdivision 8. 
12.24 	(b) A school district's extended time revenue may be used for extended day 
12.25 	programs, extended week programs, summer school, and other programming authorized 
12.26 	under the learning year program.

12.27 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
12.28 	and later.

12.29 	Sec. 24. Minnesota Statutes 2006, section 126C.10, is amended by adding a 
12.30 	subdivision to read:
12.31 		Subd. 2c.Declining enrollment revenue. A school district's declining enrollment 
12.32 	revenue equals the greater of zero or the product of: (1) the basic formula allowance for 
13.1 	that year; and (2) the difference between the mean average adjusted pupil units for the 
13.2 	three preceding years and the adjusted pupil units for the current year.

13.3 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
13.4 	and later.

13.5 	Sec. 25. Minnesota Statutes 2006, section 126C.10, is amended by adding a 
13.6 	subdivision to read:
13.7 		Subd. 2d.Location equity revenue. A school district's location equity revenue 
13.8 	equals the product of:
13.9 	(1) .50;
13.10 	(2) the basic formula allowance for that year;
13.11 	(3) the district's adjusted marginal cost pupil units for that year; and
13.12 	(4) the district's location equity index minus one.

13.13 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
13.14 	and later.

13.15 	Sec. 26. Minnesota Statutes 2006, section 126C.10, is amended by adding a 
13.16 	subdivision to read:
13.17 		Subd. 2e.Referendum replacement revenue. A school district's referendum 
13.18 	replacement revenue equals $500 times the district's adjusted pupil units for that year.

13.19 	EFFECTIVE DATE. This section is effective for fiscal year 2010 and later.

13.20 	Sec. 27. Minnesota Statutes 2006, section 126C.10, subdivision 3, is amended to read:
13.21 		Subd. 3.Compensatory education revenue. (a) The compensatory education 
13.22 	revenue for each building in the district equals the greater of: (1) $2,500 times the district's 
13.23 	enrollment of students eligible for free or reduced price meals under section 126C.05, 
13.24 	subdivision 3, paragraph (a), clause (1); or (2) 40 percent of  the formula allowance minus 
13.25 	$415 times the compensation revenue pupil units computed according to section 126C.05, 
13.26 	subdivision 3. Revenue shall be paid to the district and must be allocated according to 
13.27 	section 126C.15, subdivision 2. 
13.28 	(b) When the district contracting with an alternative program under section 124D.69
13.29 	changes prior to the start of a school year, the compensatory revenue generated by pupils 
13.30 	attending the program shall be paid to the district contracting with the alternative program 
13.31 	for the current school year, and shall not be paid to the district contracting with the 
13.32 	alternative program for the prior school year. 
14.1 	(c) When the fiscal agent district for an area learning center changes prior to the start 
14.2 	of a school year, the compensatory revenue shall be paid to the fiscal agent district for the 
14.3 	current school year, and shall not be paid to the fiscal agent district for the prior school year.

14.4 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
14.5 	and later.

14.6 	Sec. 28. Minnesota Statutes 2006, section 126C.10, subdivision 4, is amended to read:
14.7 		Subd. 4.Basic skills revenue. A school district's basic skills revenue equals the 
14.8 	sum of:
14.9 	(1) compensatory revenue under subdivision 3; plus
14.10 	(2) limited English proficiency revenue under section 124D.65, subdivision 5; plus
14.11 	(3) $250 times the limited English proficiency pupil units under section 126C.05, 
14.12 	subdivision 17. 

14.13 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
14.14 	and later.

14.15 	Sec. 29. Minnesota Statutes 2006, section 126C.10, subdivision 6, is amended to read:
14.16 		Subd. 6.Definitions. The definitions in this subdivision apply only to subdivisions 
14.17 	7 and 8.
14.18 	(a) "High school" means a public secondary school, except a charter school under 
14.19 	section 124D.10, that has pupils enrolled in at least the 10th, 11th, and 12th grades. If 
14.20 	there is no high school in the district and the school is at least 19 15 miles from the next 
14.21 	nearest school, the commissioner must designate one school in the district as a high school 
14.22 	for the purposes of this section.
14.23 	(b) "Secondary average daily membership" means, for a district that has only one 
14.24 	high school, the average daily membership of pupils served in grades 7 through 12. For a 
14.25 	district that has more than one high school, "secondary average daily membership" for 
14.26 	each high school means the product of the average daily membership of pupils served in 
14.27 	grades 7 through 12 in the high school, times the ratio of six to the number of grades 
14.28 	in the high school.
14.29 	(c) "Attendance area" means the total surface area of the district, in square miles, 
14.30 	divided by the number of high schools in the district. For a district that does not operate 
14.31 	a high school and is less than 19 miles from the nearest operating high school, the 
14.32 	attendance area equals zero.
15.1 	(d) "Isolation index" for a high school means the square root of 55 percent of the 
15.2 	attendance area plus the distance in miles, according to the usually traveled routes, 
15.3 	between the high school and the nearest high school. For a district in which there is located 
15.4 	land defined in section 84A.01, 84A.20, or 84A.31, the distance in miles is the sum of: 
15.5 	(1) the square root of one-half of the attendance area; and
15.6 	(2) the distance from the border of the district to the nearest high school.
15.7 	(e) "Qualifying high school" means a high school that has an isolation index greater 
15.8 	than 23 and that has secondary average daily membership of less than 400.
15.9 	(f) "Qualifying elementary school" means a public elementary school, except a 
15.10 	charter school under section 124D.10, that is located 19 miles or more from the nearest 
15.11 	elementary school or from the nearest elementary school within the district and, in either 
15.12 	case, has an elementary average daily membership of an average of 20 or fewer per grade.
15.13 	(g) "Elementary average daily membership" means, for a district that has only 
15.14 	one elementary school, the average daily membership of pupils served in kindergarten 
15.15 	through grade 6. For a district that has more than one elementary school, "average daily 
15.16 	membership" for each school means the average daily membership of pupils served in 
15.17 	kindergarten through grade 6 multiplied by the ratio of seven to the number of grades 
15.18 	in the elementary school.

15.19 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
15.20 	and later.

15.21 	Sec. 30. Minnesota Statutes 2006, section 126C.10, subdivision 13, is amended to read:
15.22 		Subd. 13.Total operating capital revenue. (a) Total operating capital revenue for 
15.23 	a district equals the amount determined under paragraph (b) or (c), plus $73 $100 times 
15.24 	the adjusted marginal cost pupil units for the school year. The revenue must be placed in a 
15.25 	reserved account in the general fund and may only be used according to subdivision 14.
15.26 	(b) Capital revenue for a district equals $100 times the district's maintenance cost 
15.27 	index times its adjusted marginal cost pupil units for the school year.
15.28 	(c) The revenue for a district that operates a program under section 124D.128, is 
15.29 	increased by an amount equal to $30 times the number of marginal cost adjusted pupil 
15.30 	units served at the site where the program is implemented.

15.31 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
15.32 	and later.

15.33 	Sec. 31. Minnesota Statutes 2006, section 126C.10, subdivision 18, is amended to read:
16.1 		Subd. 18.Transportation sparsity revenue allowance. (a) A district's 
16.2 	transportation sparsity allowance equals the greater of zero or the result of the following 
16.3 	computation:
16.4 	(i) Multiply the formula allowance according to subdivision 2, by .1469.
16.5 	(ii) Multiply the result in clause (i) by the district's sparsity index raised to the 
16.6 	26/100 power.
16.7 	(iii) Multiply the result in clause (ii) by the district's density index raised to the 
16.8 	13/100 power.
16.9 	(iv) Multiply the formula allowance according to subdivision 2, by .0485.
16.10 	(v) Subtract the result in clause (iv) from the result in clause (iii).
16.11 	(b) Transportation sparsity revenue is equal to the transportation sparsity allowance 
16.12 	times the adjusted marginal cost pupil units.

16.13 	EFFECTIVE DATE. This section is effective for fiscal year 2010 and later.

16.14 	Sec. 32. Minnesota Statutes 2006, section 126C.10, is amended by adding a 
16.15 	subdivision to read:
16.16 		Subd. 18a.Transportation revenue. (a) A school district's transportation revenue 
16.17 	equals the sum of its transportation sparsity revenue, hazardous transportation revenue, 
16.18 	and bus purchase revenue.
16.19 	(b) A school district's transportation sparsity revenue equals its transportation 
16.20 	sparsity allowance times its adjusted pupil units for that year.
16.21 	(c) A school district hazardous transportation aid equals the amount necessary to 
16.22 	provide transportation services to students facing hazardous transportation conditions. A 
16.23 	district's hazardous transportation aid must not exceed 20 percent of the district's total 
16.24 	regular to and from school transportation costs for that year. For any year, a school 
16.25 	district may receive aid under this paragraph only after the school board has considered 
16.26 	the comprehensive plan for hazardous transportation submitted by the district's pupil 
16.27 	transportation safety committee at a regularly scheduled meeting of the school board.  The 
16.28 	comprehensive plan may not be adopted until after the board has allowed the public 
16.29 	reasonable time to testify on the plan.
16.30 	(d) A school district's bus purchase revenue equals five percent of the district's 
16.31 	spending on transportation services for the previous fiscal year.

16.32 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
16.33 	and later.

17.1 	Sec. 33. [126C.115] INNOVATION REVENUE.
17.2 	A school district must use its innovation revenue to incorporate peer-reviewed, 
17.3 	research-based measures and practices to improve academic performance. If a school 
17.4 	district's student growth in academic performance as measured by a growth-based, 
17.5 	value-added system is below the established progress levels, the district must file a plan 
17.6 	with the commissioner describing the district's proposed uses of its innovation revenue. 
17.7 	Once the plan has been approved, the district must spend its innovation revenue in 
17.8 	accordance with that plan.

17.9 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
17.10 	and later.

17.11 	Sec. 34. Minnesota Statutes 2007 Supplement, section 126C.13, subdivision 4, is 
17.12 	amended to read:
17.13 		Subd. 4.General education aid. For fiscal years 2007 and later, A district's general 
17.14 	education aid is the sum of the following amounts equals its:
17.15 	(1) general education revenue, excluding equity revenue, total operating capital 
17.16 	revenue, alternative teacher compensation revenue, and transition revenue;
17.17 	(2) operating capital aid under section 126C.10, subdivision 13b;
17.18 	(3) equity aid under section 126C.10, subdivision 30;
17.19 	(4) alternative teacher compensation aid under section 126C.10, subdivision 36;
17.20 	(5) transition aid under section 126C.10, subdivision 33; for that year;
17.21 	(6) (2) shared time aid under section 126C.01, subdivision 7;
17.22 	(7) (3) referendum aid under section 126C.17, subdivisions 7 and 7a; and
17.23 	(8) (4) online learning aid according to section 124D.096.

17.24 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
17.25 	and later.

17.26 	Sec. 35. Minnesota Statutes 2006, section 126C.13, subdivision 5, is amended to read:
17.27 		Subd. 5.Uses of revenue. Except as provided in sections 126C.10, subdivision 
17.28 	14; 126C.12; and 126C.15,(a) General education revenue may be used during the 
17.29 	regular school year and the summer for general and special school purposes and for 
17.30 	prekindergarten programs except as limited by paragraph (b). 
17.31 	(b) General education revenue set-asides include:
17.32 	(1) 1.0 percent of basic revenue must be used only for gifted and talented activities 
17.33 	consistent with section 120B.15;
18.1 	(2) 1.5 percent of basic revenue must be used only to implement a district's 
18.2 	innovative revenue program activities under section 126C.115;
18.3 	(3) 0.5 percent of basic revenue must be spent for career and technical services in 
18.4 	the same manner as funds raised under section 124D.4531;
18.5 	(4) basic skills revenue must be used according to section 126C.15; and
18.6 	(5) operating capital revenue must be spent according to section 126C.10, 
18.7 	subdivision 14.

18.8 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
18.9 	and later.

18.10 	Sec. 36. Minnesota Statutes 2006, section 126C.17, subdivision 1, is amended to read:
18.11 		Subdivision 1.Referendum allowance. (a) For fiscal year 2003 and later, a district's 
18.12 	initial referendum revenue allowance equals the sum of the allowance under section 
18.13 	126C.16, subdivision 2, plus any additional allowance per resident marginal cost pupil 
18.14 	unit authorized under subdivision 9 before May 1, 2001, for fiscal year 2002 and later, 
18.15 	plus the referendum conversion allowance approved under subdivision 13, minus $415. 
18.16 	For districts with more than one referendum authority, the reduction must be computed 
18.17 	separately for each authority. The reduction must be applied first to the referendum 
18.18 	conversion allowance and next to the authority with the earliest expiration date. A 
18.19 	district's initial referendum revenue allowance may not be less than zero. 
18.20 	(b) For fiscal year 2003, a district's referendum revenue allowance equals the initial 
18.21 	referendum allowance plus any additional allowance per resident marginal cost pupil unit 
18.22 	authorized under subdivision 9 between April 30, 2001, and December 30, 2001, for 
18.23 	fiscal year 2003 and later.
18.24 	(c) For fiscal year 2004 and later, A district's referendum revenue allowance equals 
18.25 	the sum of:
18.26 	(1) the product of (i) the ratio of the resident marginal cost pupil units the district 
18.27 	would have counted for fiscal year 2004 under Minnesota Statutes 2002, section 126C.05, 
18.28 	to the district's resident marginal cost pupil units for fiscal year 2004, times (ii) thegreater 
18.29 	of zero or the district's initial referendum allowance plus any additional allowance per 
18.30 	resident marginal cost pupil unit authorized under subdivision 9 between April 30, 2001, 
18.31 	and May 30, 2003, for fiscal year 2003 and later 2010 less $500, plus 
18.32 	(2) any additional allowance per resident marginal cost pupil unit authorized under 
18.33 	subdivision 9 after May 30, 2003 2008, for fiscal year 2005 2010 and later.

19.1 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
19.2 	and later.

19.3 	Sec. 37. Minnesota Statutes 2006, section 126C.20, is amended to read:
19.4 	126C.20 ANNUAL GENERAL EDUCATION AID APPROPRIATION.
19.5 	There is annually appropriated from the general fund to the department the amount
19.6 	amounts necessary for: (1) general education aid; (2) special education aid; (3) debt 
19.7 	service aid; and (4) the school bond agricultural credit. This amount These amounts must 
19.8 	be reduced by the amount of any money specifically appropriated for the same purpose 
19.9 	in any year from any state fund.

19.10 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
19.11 	and later.

19.12 	Sec. 38. Minnesota Statutes 2006, section 126C.40, subdivision 1, is amended to read:
19.13 		Subdivision 1.To lease building or land. (a) When an independent or a special 
19.14 	school district or a group of independent or special school districts finds it economically 
19.15 	advantageous to rent or lease a building or land for any instructional purposes or 
19.16 	administrative purpose, or for school storage or furniture repair, and it determines that 
19.17 	the operating capital revenue authorized under section 126C.10, subdivision 13, is 
19.18 	insufficient for this purpose, it may apply to the commissioner for permission to make 
19.19 	an additional capital expenditure levy for this purpose. An application for permission to 
19.20 	levy under this subdivision must contain financial justification for the proposed levy, the 
19.21 	terms and conditions of the proposed lease, and a description of the space to be leased 
19.22 	and its proposed use.
19.23 	(b) The criteria for approval of applications to levy under this subdivision must 
19.24 	include: the reasonableness of the price, the appropriateness of the space to the proposed 
19.25 	activity, the feasibility of transporting pupils to the leased building or land, conformity 
19.26 	of the lease to the laws and rules of the state of Minnesota, and the appropriateness of 
19.27 	the proposed lease to the space needs and the financial condition of the district. The 
19.28 	commissioner must not authorize a levy under this subdivision in an amount greater than 
19.29 	the cost to the district of renting or leasing a building or land for approved purposes. 
19.30 	The proceeds of this levy must not be used for custodial or other maintenance services. 
19.31 	A district may not levy under this subdivision for the purpose of leasing or renting a 
19.32 	district-owned building or site to itself.
20.1 	(c) For agreements finalized after July 1, 1997, a district may not levy under this 
20.2 	subdivision for the purpose of leasing: (1) a newly constructed building used primarily 
20.3 	for regular kindergarten, elementary, or secondary instruction; or (2) a newly constructed 
20.4 	building addition or additions used primarily for regular kindergarten, elementary, or 
20.5 	secondary instruction that contains more than 20 percent of the square footage of the 
20.6 	previously existing building.
20.7 	(d) Notwithstanding paragraph (b), a district may levy under this subdivision for the 
20.8 	purpose of leasing or renting a district-owned building or site to itself only if the amount 
20.9 	is needed by the district to make payments required by a lease purchase agreement, 
20.10 	installment purchase agreement, or other deferred payments agreement authorized by law, 
20.11 	and the levy meets the requirements of paragraph (c). A levy authorized for a district by 
20.12 	the commissioner under this paragraph may be in the amount needed by the district to 
20.13 	make payments required by a lease purchase agreement, installment purchase agreement, 
20.14 	or other deferred payments agreement authorized by law, provided that any agreement 
20.15 	include a provision giving the school districts the right to terminate the agreement 
20.16 	annually without penalty.
20.17 	(e) The total levy under this subdivision for a district for any year must not exceed 
20.18 	$100 $150 times the resident pupil units for the fiscal year to which the levy is attributable.
20.19 	(f) For agreements for which a review and comment have been submitted to the 
20.20 	Department of Education after April 1, 1998, the term "instructional purpose" as used in 
20.21 	this subdivision excludes expenditures on stadiums.
20.22 	(g) The commissioner of education may authorize a school district to exceed the 
20.23 	limit in paragraph (e) if the school district petitions the commissioner for approval. The 
20.24 	commissioner shall grant approval to a school district to exceed the limit in paragraph (e) 
20.25 	for not more than five years if the district meets the following criteria:
20.26 	(1) the school district has been experiencing pupil enrollment growth in the 
20.27 	preceding five years;
20.28 	(2) the purpose of the increased levy is in the long-term public interest;
20.29 	(3) the purpose of the increased levy promotes colocation of government services; 
20.30 	and
20.31 	(4) the purpose of the increased levy is in the long-term interest of the district by 
20.32 	avoiding over construction of school facilities.
20.33 	(h) A school district that is a member of an intermediate school district may include 
20.34 	in its authority under this section the costs associated with leases of administrative and 
20.35 	classroom space for intermediate school district programs. This authority must not 
21.1 	exceed $25 $50 times the adjusted marginal cost pupil units of the member districts. This 
21.2 	authority is in addition to any other authority authorized under this section.
21.3 	(i) In addition to the allowable capital levies in paragraph (a), a district that is a 
21.4 	member of the "Technology and Information Education Systems" data processing joint 
21.5 	board, that finds it economically advantageous to enter into a lease purchase agreement for 
21.6 	a building for a group of school districts or special school districts for staff development 
21.7 	purposes, may levy for its portion of lease costs attributed to the district within the total 
21.8 	levy limit in paragraph (e).

21.9 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010 
21.10 	and later.

21.11 	Sec. 39. REVISOR'S INSTRUCTION.
 21.12 	In the next and subsequent editions of Minnesota Statutes, the Revisor of Statutes 
21.13 	shall change all references to "adjusted marginal cost pupil units" to "adjusted pupil units" 
21.14 	and all references to "resident marginal cost pupil units" to "resident pupil units."

21.15 	EFFECTIVE DATE. This section is effective July 1, 2009.

21.16 	Sec. 40.  REPEALER.
 21.17 	(a) Minnesota Statutes 2006, sections 126C.10, subdivisions 13a, 13b, 25, 26, 27, 
21.18 	28, 29, 30, 31, 31a, 31b, 32, 33, 35, and 36; 126C.12; and 127A.50, are repealed.
21.19 	(b) Minnesota Statutes 2007 Supplement, sections 123B.54; 125A.76, subdivision 4; 
21.20 	125A.79, subdivision 6; 126C.10, subdivisions 2b, 24, and 34; and 126C.126, are repealed.

21.21 	EFFECTIVE DATE. This section is effective for revenue for fiscal year 2010.