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• What’s proposed:
  Extend the *“hold-harmless” provision for compensatory revenue for one additional year (FY 2026).
• Cost:
  • $39.8M in FY 2026
  • $4.4M in FY 2027
  • Total: ~$44.3M (General Fund)
  • Plus $94,000 (one-time) to create a compensatory revenue working group.
• Why was this needed:
  • Free School Meals eliminated incentives for families to submit income forms.
  • Compensatory revenue now relies on Direct Certification data, which:
    • Is new
    • Has reporting errors
    • Has only two years of unreliable data
  • Medicaid eligibility changes post-pandemic may further distort counts.
• What the hold-harmless does:
  • Prevents schools from losing compensatory funding due to flawed or unstable data
  • Keeps funding consistent while data is validated
  • About 54% of school sites benefited from the prior hold-harmless
• Working group (FY 2026 only):
  • 10 members
  • Meets Aug–Dec 2026
  • Reports to Legislature January 2027
  • Tasked with recommending a long-term, stable compensatory formula
• Impact on schools and students:
  • Maintains funding for services like:
    • Reading and remedial instruction
    • Counseling and social work
    • English Learners
    • Special education
  • Gives districts time to plan without sudden funding drops
• Bottom line:
  This is a temporary stabilization measure, not a permanent fix, meant to:
  • Avoid unintended funding losses
  • Validate new poverty measures
  • Buy time to redesign the formula correctly

*“hold-harmless” means:

Schools are protected from losing funding because of a formula or data change, even if the new calculation would otherwise give them less money.

Plain-English explanation

“If the new formula would give you less money than before, you keep the higher amount anyway.”

Minnesota changed how compensatory revenue is calculated.

The new method relies more on Direct Certification data, which is new, uneven, and still unreliable.

A hold-harmless provision says: