In past legislative sessions, MREA has noticed many rural legislators are hesitant to put money into the Basic Formula Allowance because they think the funding streams tied to the Basic Formula favor Twin Cites metro-area schools. In reality, adding money on the formula helps all schools, and different funding streams affect metro and Greater Minnesota schools differently.
Four Funding Streams Tied to Basic Formula
- Declining Enrollment Revenue
- Compensatory Revenue
- Transportation Sparsity Revenue
- Sparsity Revenue
Part III: Transportation Sparsity Revenue
MREA published Part I of this series, exploring how Declining Enrollment Revenue is impacted by the Basic Formula Allowance. Part II of the series …
Transportation Sparsity Revenue is another funding source linked to the Basic Formula Allowance. Today, MREA explores the historical perspective on this funding source and breaks down how it affects each individual Minnesota district.
The purpose of Transportation Sparsity Revenue is to provide revenue to school districts that have a relatively low ratio of pupils to the square mile area of the school district.
The Minnesota House of Representatives Fiscal Analysis Department has outlined the history of Transportation Sparsity Revenue.
Prior to 1997, transportation funding for schools was a direct appropriation. They included a “smoothing factor” that helped make sure each district received close to the cost of their transportation.
In 1997, the Legislature removed direct appropriation and established a formula amount of 4.66 percent per pupil. They also established a sparsity aid categorical to help districts that incurred a deficit with the change in funding.
Even since that change, some districts still incur a deficit even with the additional aid. Approximately 80 such districts, in all corners of the state including the metro area, still use general classroom dollars to cover their pupil transportation costs.
From 2013-2016, legislation was introduced in various forms to try and address the issue. The Legislature appropriated $4 million in 2017 and created a second categorical of sparsity aid for severely affected districts. That law covered 18.2 percent of the remaining district’s deficits.
In 2019, Transportation Sparsity Revenue was part of the Minnesota Department of Education’s School Finance Working group. In the final recommendations from that working group, they recommended increasing the 18.2 percent to 70 percent. While that still wouldn’t make the districts whole, it would dramatically reduce their need to use general education dollars on transportation. The legislature has not approved this recommendation at the time of this article.
Calculation and Allocation
Definitions and revenue calculations for Sparsity Revenue can be found in Statute 126C.10 Subd. 17 and 18. The formula for Transportation Sparsity Revenue is complex, but in general, the more square miles a district has per pupil, the greater the district’s sparsity revenue. In addition to standard transportation sparsity revenue, districts can receive an additional 18.2 percent of their un-reimbursed transportation costs from the previous year. Transportation sparsity revenue may be used for any general operating purpose. This flexibility makes transportation sparsity a desirable revenue stream.
Minnesota House Research lays out the Transportation Sparsity formula as follows:
- Density Index = square mile area of the district/Adjusted Pupil Units } but not less than .005 or more than .2
- Sparsity Index = the greater of:
- (a) .2; or
- (b) square mile of the district /Adjusted Pupil Units
- Transportation Sparsity Allowance = (Basic Formula Allowance x .141) x (Sparsity Index26/100) x (Density Index13/100) – (Basic Formula Allowance x .0466)
- Transportation Revenue =
- (1) Transportation Sparsity Allowance x Adjusted Pupil Units +
- (2) 18.2% of the districts’ unreimbursed costs of to and from school transportation
Gopherville School District
- Adjusted Pupil Units (APU) = 1,000
- Number of Square Miles = 90
- General Education Formula Allowance = $6,863
- District Sparsity Index = 0.20
- District Density Index = 0.09
Transportation Sparsity Revenue per Pupil Unit = [(Formula Allowance × 0.141) × (District Sparsity Index).26 × (District Density Index).13 – (Formula Allowance × 0.0466)
- = [($6,863 × 0.141) × 0.20.26 × 0.09.13] – ($6,863 × 0.0466)
- = [$968 × 0.658063 × 0.731226] – $320
- = $466 – $320
- = $146
Total Transportation Sparsity Revenue = Revenue per APU × APU
- = $146 × 1,000
- = $146,000
Impact on Minnesota Districts
MREA’s Transportation Sparsity Revenue map shows how the revenue is distributed throughout the state for FY23.
Not surprisingly, the more remote a district, the greater the amount Transportation Sparsity Revenue they receive. Northern Minnesota and Western Minnesota districts receive the greatest revenue per pupil. The median revenue distributed is $222 per pupil. South Koochiching district is expected to receive the most Sparsity Transportation Revenue at $1,096 per pupil. Most of the metro schools receive very little to no Transportation Sparsity Revenue due to their smaller square mile imprint.
The graph above shows the average dollars of anticipated FY23 Transportation Sparsity Revenue by district type in Minnesota. The trend shows that the lower the enrollment, the greater Transportation Sparsity Revenue a district receives per pupil on average.
Transportation Sparsity Revenue is tied to the Basic Formula Allowance, so as the formula allowance increases so does the Transportation Sparsity Revenue per district.
MREA will continue to explore the differences and disparities in rural versus metro funding through increases in the Basic Formula Allowance. In Part IV of the series, we’ll explore Sparsity Revenue and its impact on Minnesota districts.