Funding for K-12 education in Minnesota is a complicated system that is difficult for the general public to understand. 

Currently, the majority of State spending on public schools comes in the form of the formula allowance, a fixed amount per student, regardless of the educational needs of the student, or the local costs faced by a school district. In 2023, the formula allowance totaled around $6.5 billion. This is the largest single source of funding for Minnesota school districts, and also the most flexible. Districts can spend the formula allowance on almost anything related to their operations, including classroom teachers, athletic coaches, advanced coursework, mental health supports for students, or custodial services. 

In addition to the formula aid, the state has fourteen additional forms of aid to school districts, totalling $1.8 billion, that make up general education revenue to school districts. Two of the largest of these 14 categories are both classified as basic skills aid- compensatory revenue and English learner revenue. Together they accounted for 30% of these additional forms of aid. State aid to districts for capital expenditures and for special education services is not included in the general education revenue.

Compensatory revenue is aid given to districts to address the higher costs of educating students who are experiencing poverty. In 2023, compensatory revenue to school districts totaled $482 million. This aid is determined by a complex, site-based formula, that depends on the number and proportion of students qualifying for free and reduced price meals at a school site. 

As the proportion of qualifying students increases, per student funding increases, but plateaus when the proportion reaches 80% of the students in a school. This funding can only be spent on a limited set of services for students, unlike the formula aid. Because of these restrictions on the type of services, as well as other regulations, administering compensatory revenue presents additional challenges for school principals and school districts compared to the formula aid.

English learner revenue to school districts totaled $60 million in 2023, and is designed to cover the cost of services for students who are learning English. Like compensatory revenue, there is a formula to calculate aid that is based on the number of students receiving services and a concentration factor. For English learner revenue, the concentration factor is capped at 11.5% of students in a district. Additionally, a student can only qualify for English learner aid from the state for seven years, even if they require services beyond that time.

The complexities of the state funding system make it challenging for voters, parents and educators to understand. The complexities also obscure the inequities of the current system, making it difficult for the public to advocate for a more equitable education funding system in Minnesota.