HF4812

Purpose

• The bill changes how pension adjustment revenue is calculated and distributed to school districts, with a focus on increasing support for the St. Paul Teachers Retirement Fund Association. It also updates rules about how much total pension adjustment revenue the state can provide in certain years, and extends eligibility to cooperative units.

Main provisions

• Pension adjustment revenue formula
  • Revenue for a school district is the sum of two parts:
  • Part A: The greater of zero or the product of (the difference between the district’s adjustment under a 2012 statute for fiscal year 2014 per adjusted pupil unit and the state average adjustment for fiscal year 2014 per adjusted pupil unit) multiplied by the district’s adjusted pupil units for the fiscal year.
  • Part B: The product of salaries paid to district employees who were members of the Teachers Retirement Association (TRA) and the St. Paul Teachers Retirement Fund Association (SPTRFA) for the prior fiscal year, multiplied by the district’s pension adjustment rate for the fiscal year.
• Pension adjustment rates
  • Independent School District No. 625 (St. Paul) rate:
  • 2.3% for fiscal year 2023
  • 2.5% for fiscal years 2024 and 2025
  • 3.25% for fiscal years 2026 and 2027
  • 5.95% for fiscal year 2027 and later
  • Rates for all other districts:
  • 1.25% for fiscal year 2025
  • 2.31% for fiscal year 2026 and later
• Caps and prorating (state total revenue)
  • For fiscal year 2025, the total state pension adjustment revenue cannot exceed the amount calculated for fiscal year 2024; the commissioner must prorate to stay within the maximum.
  • For fiscal years 2026 and 2027, the total pension adjustment revenue is not prorated (i.e., the full calculated amount applies).
  • For fiscal year 2028 and later, the total cannot exceed the 2027 amount; the commissioner must prorate to stay within the maximum.
• Cooperative units
  • A cooperative unit qualifies for pension adjustment revenue as if it were a district, and the revenue (aid) generated by the cooperative unit must be paid to the cooperative unit.
• Related statute amendments
  • The bill also modifies related provisions in Minnesota statutes (including sections referenced for 354A.12 and 354A.29) to align with these changes.

How it changes existing law

• Introduces a two-part calculation for pension adjustment revenue (an adjusted pupil unit-based component and a payroll-based component) tied to district pension-eligible employees.
• Sets differentiated pension adjustment rates for St. Paul versus other districts, with substantially higher future rates for St. Paul.
• Establishes year-by-year rules for caps and prorating of total state pension adjustment revenue, affecting how much money is available to districts in certain years.
• Expands eligibility to cooperative units, ensuring they receive pension adjustment revenue as if they were districts.

Potential fiscal/implementation notes

• The bill creates a structured ramp and caps on total state pension adjustment revenue, which could shift funds among districts year to year and change how much SPTRFA and other districts receive.
• The higher rates for St. Paul could increase funding to SPTRFA relative to other districts, particularly in later years.
• Implementation will require administrative updates to calculate and prorate revenue under the new formulas, and to treat cooperative units equivalently to districts for this revenue.

Relevant impacts and affected entities

• Affects Independent School District No. 625 (St. Paul) by increasing its pension adjustment rate in multiple years.
• Affects all other districts by setting a different, default pension adjustment rate starting in fiscal year 2025.
• Affects cooperative units by making them eligible to receive pension adjustment revenue.

Relevant Terms - Pension adjustment revenue - St. Paul Teachers Retirement Fund Association (SPTRFA) - Independent School District No. 625 (St. Paul) - Teachers Retirement Association (TRA) - adjusted pupil units - per adjusted pupil unit - pension adjustment rate - fiscal year - cooperative unit - prorate - state total pension adjustment revenue - Minnesota Statutes 126C.10 - 2014 per adjusted pupil unit - district payroll/salaries for TRA/SPTRFA members