HF4980

Purpose

• To change how compensatory education funding is calculated and distributed to school districts and cooperatives, starting in fiscal years 2024–2028, and to provide an additional appropriation in 2027 to support general education.

Main Provisions

• Revisions to how compensatory education revenue is calculated at each building:

  • FY2024–FY2026: building revenue is based on a formula involving the building’s compacted “formula allowance” minus a deduction related to compensatory pupil units.
  • FY2027 and later: building revenue equals the number of compensatory pupils times the building’s compensatory allowance.
  • If districts switch to or from an alternative program, or shift the fiscal agent for an area learning center, the compensatory revenue goes to the current (not previous) district or agent for the current year.
  • If the total calculated revenue is too low in certain years, the commissioner must adjust totals so statewide building revenue reaches a specified minimum (e.g., $838,947,000 for 2026; $857,152,000 for 2027 and beyond).
  • For FY2027, if the calculated building revenue is not high enough, the governor must use the greater of (a) the calculated amount under the new method, or (b) a “building minimum amount” based on previous year data and enrollment changes.

• Building minimum amount (FY2027 only):

  • The minimum is tied to the building’s FY2026 revenue multiplied by the enrollment ratio (the October 1, 2025 enrollment divided by the October 1, 2024 enrollment), with a specific floor/ceiling rule in place.

• Building-level allocation rules (described in Section 2):

  • At least 80% of compensatory revenue must go to the school buildings where the generating students are served, unless a district has permission to allocate by student performance measures.
  • Up to 20% can be allocated to school sites under a school-board-approved plan; those funds must be used for the purposes listed in the statute and may serve any grade, including prekindergarten.
  • A building is defined as an education site (consistent with existing definitions).
  • Revenue generated by students at a cooperative unit goes to the cooperative unit.
  • Districts can reallocate compensatory revenue among sites if there are openings/closings or changes in attendance areas or demographics; districts must report changes to the department, which will use adjusted allocations in required reporting.
  • In fiscal years 2026–2028, districts may allocate up to 40% of compensatory revenue to school sites under the board plan (instead of the standard 80/20 split).

• New appropriation (FY2027):

  • The bill appropriates funding from the general fund to the commissioner of education for additional general education aid in fiscal year 2027.

How this Changes Existing Law

• Changes the formula for calculating compensatory education revenue at the building level for most years, and adds minimum statewide revenue guarantees if calculations fall short.
• Adds flexibility to reallocate funds between buildings and other school sites in response to changes in enrollment, openings/closings, or program shifts, with reporting requirements.
• Introduces a temporary higher flexibility (up to 40%) in the allocation of compensatory revenue to school sites for 2026–2028.
• Establishes a new funding appropriation in 2027 to support general education.

Potential Impacts

• Districts may adjust how they distribute compensatory funds across buildings, with more potential flexibility in the near term (2026–2028).
• Some building-level funding guarantees may be preserved or increased to meet minimum statewide totals, even if local calculations are lower.
• Changes could affect planning for prekindergarten and early grade supports, given the 20% allocation option to other sites and the 40% temporary flexibility.
• Districts experiencing enrollment changes or program shifts may need to report reallocations to the state and adjust allocations accordingly.

Significance

• The bill aims to modernize and stabilize compensatory education funding while allowing districts more control over how funds are used at the building and site level, and it provides targeted funding through an additional appropriation in 2027.

Relevant terms - compensatory education revenue - compensatory revenue pupil units - building compensatory allowance - formula allowance - area learning center - fiscal agent district - cooperative unit - alternative program (section 124D.69) - building minimum amount - Oct. 1 enrollment (2025 vs 2024) - school building (education site) - allocation (80 percent / 20 percent; up to 40 percent in 2026–2028) - reallocation - statewide minimum totals (e.g., $838,947,000; $857,152,000) - Notwithstanding (legal provision) - general education aid (FY2027 appropriation)