1.1 	A bill for an act
1.2 	relating to education finance; creating an education
1.3 	price index; amending Minnesota Statutes 2004, section
1.4 	126C.10, subdivisions 2, 6; proposing coding for new
1.5 	law in Minnesota Statutes, chapter 126C.
1.6 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.7 	Section 1. Minnesota Statutes 2004, section 126C.10,
1.8 	subdivision 2, is amended to read:
1.9 		Subd. 2.Basic revenue. (a) The basic revenue for each
1.10 	district equals the formula allowance times the adjusted
1.11 	marginal cost pupil units for the school year. The formula
1.12 	allowance for fiscal year 2001 is $3,964.  The formula allowance
1.13 	for fiscal year 2002 is $4,068.The formula allowance for
1.14 	fiscal year 2003 through fiscal year 2005 is $4,601.
1.15 	(b) The formula allowance for fiscal year 2006 and
1.16 	subsequent years is $4,601 the formula allowance for the
1.17 	previous fiscal year times the education price index for that
1.18 	year.
1.19 	
EFFECTIVE DATE. This section is effective for revenue for
1.20 	fiscal year 2006.

1.21 	Sec. 2. Minnesota Statutes 2004, section 126C.10,
1.22 	subdivision 6, is amended to read:
1.23 		Subd. 6.Definitions.  The definitions in this
1.24 	subdivision apply only to subdivisions 7 and 8.
1.25 	(a) "High school" means a secondary school that has pupils
2.1 	enrolled in at least the 10th, 11th, and 12th grades.  If there
2.2 	is no secondary school in the district that has pupils enrolled
2.3 	in at least the 10th, 11th, and 12th grades, and the school is
2.4 	at least 19 miles from the next nearest school, the commissioner
2.5 	must designate one school in the district as a high school for
2.6 	the purposes of this section.
2.7 	(b) "Secondary average daily membership" means, for a
2.8 	district that has only one high school, the average daily
2.9 	membership of pupils served in grades 7 through 12.  For a
2.10 	district that has more than one high school, "secondary average
2.11 	daily membership" for each high school means the product of the
2.12 	average daily membership of pupils served in grades 7 through 12
2.13 	in the high school, times the ratio of six to the number of
2.14 	grades in the high school.
2.15 	(c) "Attendance area" means the total surface area of the
2.16 	district, in square miles, divided by the number of high schools
2.17 	in the district.  For a district that does not operate a high
2.18 	school and is less than 19 miles from the nearest operating high
2.19 	school, the attendance area equals zero.
2.20 	(d) "Isolation index" for a high school means the square
2.21 	root of 55 percent of the attendance area plus the distance in
2.22 	miles, according to the usually traveled routes, between the
2.23 	high school and the nearest high school.  For a district in
2.24 	which there is located land defined in section 84A.01, 84A.20,
2.25 	or 84A.31, the distance in miles is the sum of:
2.26 	(1) the square root of one-half of the attendance area; and
2.27 	(2) the distance from the border of the district to the
2.28 	nearest high school.
2.29 	(e) "Qualifying high school" means a high school that has
2.30 	an isolation index greater than 23 and that has secondary
2.31 	average daily membership of less than 400.
2.32 	(f) "Qualifying elementary school" means an elementary
2.33 	school that is located 19 miles or more from the nearest
2.34 	elementary school or from the nearest elementary school within
2.35 	the district and, in either case, has an elementary average
2.36 	daily membership of an average of 20 or fewer per grade.
3.1 	(g) "Elementary average daily membership" means, for a
3.2 	district that has only one elementary school, the average daily
3.3 	membership of pupils served in kindergarten through grade 6.
3.4 	For a district that has more than one elementary school,
3.5 	"average daily membership" for each school means the average
3.6 	daily membership of pupils served in kindergarten through grade
3.7 	6 multiplied by the ratio of seven to the number of grades in
3.8 	the elementary school.
3.9 	(h) "Education price index" means a measure of the relative
3.10 	wage rates across Minnesota school districts.  The index must be
3.11 	determined according to section 126C.115.
3.12 	
EFFECTIVE DATE. This section is effective July 1, 2005.

3.13 	Sec. 3. [126C.115] EDUCATION PRICE INDEX.
3.14 		Subdivision 1.Index. For fiscal years 2006 and later,
3.15 	the education price index equals the annual average weekly wage
3.16 	as calculated by the Department of Employment and Economic
3.17 	Development under the ES-202 program.  The education price index
3.18 	for each school district equals the greater of one, or the index
3.19 	number for that district's region divided by the state annual
3.20 	average weekly wage.
3.21 		Subd. 2.Phase-in. For fiscal year 2006, the education
3.22 	price index equals 25 percent of the index amount in excess of
3.23 	one.  For fiscal year 2007, the education price index equals 50
3.24 	percent of the index amount in excess of one.  For fiscal year
3.25 	2008, the education price index equals 75 percent of the index
3.26 	amount in excess of one.
3.27 		Subd. 3.Regions. For fiscal years 2006 and later, the
3.28 	Department of Education, in consultation with the Department of
3.29 	Employment and Economic Development, shall determine the
3.30 	appropriate education price index regions in the state and
3.31 	assign each school district to a region.  At a minimum, the
3.32 	regions must include regions for the metropolitan area, the St.
3.33 	Cloud area, the Duluth area, and the Rochester area.  Regions
3.34 	may otherwise be based on county borders or economic development
3.35 	regions.
3.36 		Subd. 4.Annual computation. The Department of Education
4.1 	shall calculate the education price index every year based on
4.2 	the most recent annual report of average weekly wages as
4.3 	calculated by the Department of Employment and Economic
4.4 	Development through the ES-202 program.
4.5 	
EFFECTIVE DATE. This section is effective for revenue for
4.6 	fiscal year 2006.