Special Education and EL Cross Subsidy

MREA hears a lot about how the Special Education and English Learner (EL) cross subsidies are affecting school district budgets, but what is a cross subsidy?  The cross subsidy is the amount of money from the District’s General Fund used to pay the un-reimbursed cost of providing services. The two biggest cross subsidies that districts were not reimbursed for are Special Education and English Language Learners.  This affects a district’s general fund greatly.  Minnesota public schools serve all students, even the students who have higher needs.  There was an increase in the number of ELL (5.4%) and Special Education (1.5%) students from last year (FY21) to this year (FY22).  This comes at a time when the ELL and Special Education cross subsidies continue to grow. 

MREA created a map that shows Special Education cross subsidy per pupil for all districts for FY21.  You can see that this is not just a rural vs. metro issue. It affects all parts of the state. It also affects all districts negatively with many districts losing millions of dollars from their general fund. The median loss for districts is $833 per pupil.  For some districts, this equates to over a million dollars in lost revenue in FY21.  View the MREA map here. 

MREA also created a map that shows the FY21 EL cross subsidy per ADM across the state.  The EL cross subsidy issue does not affect as many districts across the state as the special education cross subsidy does, but for the districts that do have an EL cross subsidy it can have a very damaging affect to their general fund balance.  There are 157 districts that do not have an EL cross subsidy and the median loss for districts that do have a cross subsidy is $67 per student.  You can see from the map that the biggest percentage of districts above the median is in the Southern part of the state and the twin cities area. View the MREA map here.

Districts receive EL revenue to provide instruction to students with limited English skills. Programs may include bilingual programs or English-as-a-second language (ESL) programs. Bilingual education programs provide curriculum instruction to students in their native language. ESL program students are taught to read, write, listen, and speak in English. The state has provided funding for EL programs since 1980. In the early 2000s, the maximum number of years that a student could qualify for EL funding was reduced from seven to five years. This limitation was increased to six years for fiscal years 2015 and 2016 and restored to seven years for fiscal year 2017 and later. There are two parts to the EL portion of basic skills revenue: the first part or basic formula is a set amount per EL pupil; the second part of the EL formula is a concentration formula. A school district with at least one student eligible for EL services has a statutorily assigned minimum EL pupil count of 20.  

  • Basic EL Revenue = $704 x district’s EL Pupil Units  
  • EL Concentration Pupils= EL pupils x the lesser of:  
    • 1; or  
    • (EL pupils/ADM)/.115 
  • EL Concentration Revenue = $250 x the district’s EL concentration pupils 
  • Total Baseline EL revenue = Basic Revenue + EL Concentration Revenue 

For four years only, fiscal years 2022 through 2025, an additional $2 million per year is distributed proportionately across all districts eligible for EL revenue 

SPED revenue

School districts receive state aid and some federal aid to pay for special education services. Minnesota’s special education formula is a multi-step hybrid formula. The formula combines a cost-reimbursement formula with a modified “census style” of funding, provides a floor of funding based on fiscal year 2016 funding amounts, and authorizes serving school districts and charter schools to bill a portion of their unfunded special education costs attributable to nonresident students back to the student’s resident school district.  To see the multi-step formula, refer to page 58 of the House Research Minnesota School Finance: A Guide for Legislators   

Although both cross subsidies are important, MREA has focused on finding a solution to the special education cross subsidy. It is part of MREA’s platform, and it affects every member district’s bottom line. We will continue to advocate for and fight for Greater Minnesota schools and students.