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Minnesota lawmakers have reached a deal on a $26 billion package to fund K-12 schools for the next two years that will raise per-student funding in line with inflation but slash special education transportation spending, library aid and teacher pipeline programs. 

Legislators agreed to a modest $4.2 million increase in per-student money from the current two-year cycle. But the budget negotiators signaled that some $420 million in school funding cuts may be needed in 2028-29 to close a projected massive state budget deficit.

“We kept most of the cuts out of the classroom that were needed to make the budget target” for the next two years, said Rep. Cheryl Youakim, DFL-Hopkins, co-chair of the House Education Finance Committee.

Many of the reductions in the bill are in line with what Gov. Tim Walz 

 required the per-pupil funding formula be indexed to inflation. 

Despite the inflationary boost, the proposed reductions will still be hard for school districts already 

, said Scott Croonquist, executive director of the Association of Metropolitan School Districts, which represents more than 50 districts, mostly in the Twin Cities metro area.

While school leaders understand the state’s forecast financial challenges and are grateful for the inflationary increase, “most of our school districts face daunting budget shortfalls and will be forced to make significant cuts, including staff layoffs” heading into next school year, he said.

The agreement includes a smaller-than-anticipated increase to student support personnel aid and trims reimbursement for special education transportation. It also slashes more than $40 million in school library aid over four years and cuts funding for the state school librarian.

Rep. Ron Kresha, R-Little Falls, warned declining enrollment and special education costs could lead to future problems trying to fund schools. 

“This gets us through a two-year period, but I would call this the canary in the coal mine. Let’s look ahead and let’s try to ward off what could be coming,” 

 who co-chairs the House Education Finance Committee. 

Negotiations on the bill came as part of a legislative working group, which means the budget is ready to move on to a special session. 

Task forces, commissions and school-start flexibility

The funding package also creates a blue ribbon commission on special education, which is meant to find ways to cut costs, create efficiencies and reduce administrative work in order to reduce 

The 18-member commission would include lawmakers, experts in special education, parents and disability law experts. Members would be appointed by September. It could issue recommendations on flexibility in uses of special education funds and streamlined reporting burdens.

A final action plan from the commission is due in October 2026.

State legislators are also turning their attention to what’s known as compensatory revenue — a mechanism that school districts rely on to get state and federal funding for students from economically disadvantaged families.

In the past, districts relied on free and reduced lunch paperwork to count the number of students who qualified for a wide variety of government funding. But now that Minnesota has a universal meals program, districts have been relying on a stop-gap hold harmless measure. 

Now legislators are establishing a task force to evaluate which students are best served with this revenue and which data to use to establish compensatory revenue eligibility. Task force members are to start meeting in September of this year and issue a final report to the legislature by October 2026. 

Other policy changes include a provision to let school districts start classes before Labor Day in the 2026-27 and 2027-28 school years. In both these years Labor Day falls a week into September. 

The agreement on education spending and policy is one of several pieces of budget legislation coming into focus this week. Once the last details are locked in, Walz intends to call a special session. He 

 that he was aiming for Wednesday but that could easily slip until later in the week, or later. 

Peter Cox

Author

Elizabeth Shockman

The deal raises per-pupil funding in line with inflation but slashes special education transportation spending and teacher pipeline programs. It also gives schools flexibility around the state tradition of starting the academic year after Labor Day.

A flag waves on the state capitol building 

Minnesota lawmakers back K-12 ed spending plan amid worries over future cuts

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