1.1 	A bill for an act
1.2 	relating to education finance; requiring school
1.3 	districts to direct at least 65 percent of their
1.4 	operating revenue directly to regular instruction;
1.5 	amending Minnesota Statutes 2004, sections 123B.10,
1.6 	subdivision 1; 123B.77, subdivision 4.
1.7 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.8 	Section 1. Minnesota Statutes 2004, section 123B.10,
1.9 	subdivision 1, is amended to read:
1.10 		Subdivision 1.Budgets. (a) By October 1, every board
1.11 	must publish revenue and expenditure budgets for the current
1.12 	year and the actual revenues, expenditures, fund balances for
1.13 	the prior year and projected fund balances for the current year
1.14 	in a form prescribed by the commissioner.
1.15 	(b) The expenditure data must clearly identify the portion
1.16 	of the total spending that is directed toward regular
1.17 	instruction.  If the percent of classroom spending for the
1.18 	previous year fell below 65 percent of total operating
1.19 	expenditures for the previous year, the district must describe
1.20 	the activities that it is undertaking in the current year to
1.21 	ensure that at least 65 percent of the district's total
1.22 	operating expenditures are directed to regular instruction.
1.23 	(c) The forms prescribed must be designed so that year to
1.24 	year comparisons of revenue, expenditures and fund balances can
1.25 	be made.  These budgets, reports of revenue, expenditures and
1.26 	fund balances must be published in a qualified newspaper of
2.1 	general circulation in the district.
2.2 	
EFFECTIVE DATE. This section is effective July 1, 2005.

2.3 	Sec. 2. Minnesota Statutes 2004, section 123B.77,
2.4 	subdivision 4, is amended to read:
2.5 		Subd. 4.Budget approval. (a) Prior to July 1 of each
2.6 	year, the board of each district must approve and adopt its
2.7 	revenue and expenditure budgets for the next school year. The
2.8 	expenditure budget must direct at least 65 percent of the
2.9 	proposed total operating expenditures to regular instruction.
2.10 	The budget document so adopted must be considered an
2.11 	expenditure-authorizing or appropriations document.  No funds
2.12 	shall be expended by any board or district for any purpose in
2.13 	any school year prior to the adoption of the budget document
2.14 	which authorizes that expenditure, or prior to an amendment to
2.15 	the budget document by the board to authorize the expenditure.
2.16 	(b) Expenditures of funds in violation of this subdivision
2.17 	shall be considered unlawful expenditures.
2.18 	(c) Prior to the appropriation of revenue for the next
2.19 	school year in the initial budget, the board shall inform the
2.20 	principal or other responsible administrative authority of each
2.21 	site of the amount of general education and referendum revenue
2.22 	that the Department of Education estimates will be generated by
2.23 	the pupils in attendance at each site.  For purposes of this
2.24 	subdivision, a district may adjust the department's estimates
2.25 	for school building openings, school building closings, changes
2.26 	in attendance area boundaries, or other changes in programs or
2.27 	student demographics not reflected in the department's
2.28 	calculations.  A district must report to the department any
2.29 	adjustments it makes according to this subdivision in the
2.30 	department's estimates of compensatory revenue generated by the
2.31 	pupils in attendance at each site, and the department must use
2.32 	the adjusted compensatory revenue estimates in preparing the
2.33 	report required under section 123B.76, subdivision 3, paragraph
2.34 	(c).
2.35 	(d) For purposes of this section, "total operating
2.36 	expenditures" and "regular instruction" have the meanings given
3.1 	them under the uniform financial accounting and reporting
3.2 	standards.  Total operating expenditures include all operating
3.3 	expenditures incurred for the benefit of elementary and
3.4 	secondary education during that school year, except capital
3.5 	expenditures.  Construction and debt service expenditures are
3.6 	nonoperating expenditures.
3.7 	
EFFECTIVE DATE. This section is effective July 1, 2005.