Origins

In 1971, the Minnesota Legislature as part of the “Minnesota Miracle” gave school districts the ability to levy, with voter approval, for additional revenue to cover general district operating costs. This authority was rather broad; as most other levy authority for school districts was limited in amount and purpose. Prior to 1971, local school boards had much greater flexibility in deciding how much to levy, with the levy limited primarily by the need for money and the ability and willingness of the property taxpayers in the district to provide resources. The 1971 law was the first effective state-imposed and voter-controlled levy limit on school districts.

The specifics of the law were relatively open-ended. The 1971 referendum levy law stated that “the levy...may be increased in any amount which is approved by the voters of the district in a referendum called for that purpose,” and that “the referendum may be held on the date set for the election of members to the school board, or on an equivalent date in any year in which there is no such election, or between September 1 and September 20.” The 1971 law also provided for the revocation of any additional levy authority that had been previously approved via a subsequent referendum proposed by the school board or required by a voter petition.

Timeline of Legislative Changes

Between 1971 and 1988, no significant changes were made to the operating levy referendum. Beginning in 1989, many changes were made, primarily in an effort to restrain the unlimited nature of the referendum levy and to equalize access to referendum revenue among districts with disparate tax base wealth per pupil unit. The 2001, 2003 and 2005 legislative sessions marked the most significant changes in recent years to the program.

1973-1988
In 1973, an amendment prohibited districts from holding more than one referendum election per year. In 1977, the referendum law was amended to permit ballot language specifying the years of duration of the levy, and requiring that the ballot disclose the amount of referendum levy in mills and the total to be raised in the first year in dollars.

In 1982, the referendum revocation provisions were amended to allow for an election to reduce as well as revoke a referendum levy. Also enacted in 1982, for elections affecting taxes payable in 1983 only districts were allowed to hold two referendum levy elections per year. In 1983, this one-time provision was made permanent.

1989
Districts are limited to one referendum vote per year on the November general election day.

Districts are required to mail notices about the tax impact of the proposed referendum levy to the taxpayers in the district.

Districts are required to specify on the ballot the number of years for which a referendum levy could be in effect.

1991
The first $305 per pupil unit (ten percent of the general education formula allowance) is equalized at a rate of 50 percent of the equalizing factor. This equalization is phased in over three years, effective beginning with 1992-93 school year revenue.

The referendum amount determination is changed from a percent of tax capacity to a dollar per pupil unit, effective for referenda passed fall 1991.

The duration of the referendum is limited to five years, effective for referenda passed fall 1991.

The referendum revenue allowance is limited to the lesser of $1,067.50 per pupil unit (35 percent of the basic general education formula allowance) or the amount the district levied in the previous year. Districts eligible for sparsity revenue are exempt from the limit, effective for referenda passed fall 1991.

Districts are allowed to have referendum elections on dates other than the November election date if the election is held by mail ballot, effective November 1, 1991.

Any new referendum levies must be applied to the market value of property in the school district rather than adjusted net tax capacity, effective for referenda approved after November 1, 1992.

New referendum levies that would begin in payable 1992 are limited to a maximum of $10 million as approved by the Commissioner of Education.

1992
The referendum revenue allowance limit is reduced from $1067.50 per pupil unit to $915 per pupil unit (30 percent of the basic general education formula allowance) unless a district had a higher limit in previous years or is eligible for sparsity revenue, effective for referenda passed fall 1992.

A referendum election may be held only during the calendar year before the new levy first becomes payable, effective fall 1992.

A district in statutory operating debt may apply to and receive approval from the commissioner of education to hold a referendum on a date other than the November Election Day, effective April 30, 1992.

1993
Referendum equalization aid is increased from 50 percent of the equalizing factor to 100 percent for the first $315 per pupil unit, effective for 1994-95 school year revenue.

The referendum levy is no longer to be counted in the allocation of HACA (homestead and agricultural credit aid). HACA that had been allocated to the referendum levy is used to fund the increased level of referendum equalization. This results in about $55 million of HACA being shifted to referendum equalization aid, effective for taxes payable in 1994.

District referendum revenue is reduced by all or a portion of the $100 per pupil unit increase in the general education formula. The full reduction does not apply to the referendum revenue if the district has supplemental revenue (the reduction is applied first to supplemental revenue) or the district meets a certain group of criteria (low tax capacity per pupil unit, low fund balance, no supplemental revenue and a referendum tax rate greater than 10 percent). Referendum revenue may also be reduced by up to 25 percent of increases in training and experience and compensatory revenue, effective for 1994-95 school year revenue.

The referendum revenue allowance limit is reduced from $915 per pupil unit to $787.50 per pupil unit (25 percent of the basic general education formula allowance) unless the district had a higher limit in payable 1993 or is eligible for sparsity revenue, effective for referenda passed fall 1993.

All referendum levies are set to expire on July 1, 1997 (after payable calendar year 1997 taxes). To continue a referendum, a vote must be held in November 1997. Referendum levies that are renewed would be spread on market value rather than on the adjusted net tax capacity (ANTC) of property and have a five-year limit.

1994
The sunset date for referendum revenue is moved from 1997 to July 1, 2000 for most districts. In the interim period, if a referendum is authorized on market value for ten or fewer years, a referendum is valid for the number of years approved even though it may be in effect beyond 2000.

The maximum duration of newly approved referenda is ten years, an increase from the five years in previous law.

School boards may convert referendum amounts from adjusted net tax capacity to market value in parts over time. A process is established for this conversion, including an incentive (the duration of a referendum before reauthorization may be longer) when districts convert before July 1, 1997.

Districts with referenda expiring before taxes payable in 1998 may propose a new referendum, partially levied on adjusted net tax capacity and partially on market value. The full levy must be converted to market value by 2001.

Market value is redefined for any property having a class rate below one percent. For that property, market value is defined as 100 times the tax capacity.

1995
A referendum election may be held in the first or second calendar year prior to the year in which it is payable.

Market value referendum levies will be equalized based on the market value of the school district rather than net tax capacity.

Capital expenditure facilities and equipment revenue is moved to an operating capital account in the general fund. One effect of this change is to allow referendum revenue to be used for capital purposes.

1996
A referendum election ballot question may propose variable levels of referendum revenue per pupil unit during the years of the referendum. This would allow for increases (or decreases) in the referendum amount after the first year.

The commissioner is granted limited authority to allow districts to hold a referendum election on a date other than the November general election date if that referendum is held in conjunction with a bond election and the proceeds of the referendum would finance the operation of the facility to be funded by the bond issue.

The referendum reduction initially passed in 1993 is made permanent. It no longer will be recalculated each year nor will it apply to new referendum authority.

1997
Clarifies that the referendum cap for newly reorganized districts is the sum of the reorganizing districts’ referendum authority for the prior year, if that sum is greater than the regular cap.

A referendum still assessed on net tax capacity has a fixed equalizing factor of $10,000.

1998
The operating levy referendum election date is modified to allow for elections on a date other than the Election Day in November, in order to tie operating referendums to a bond election that is for a complimentary purpose.

1999
Charter schools’ general education aid includes the state referendum equalization aid for a pupil, based on how much referendum equalization aid the pupil generates in the pupil’s resident district.

The equalized portion of an operating levy referendum is increased from the first $350 per pupil of referendum revenue to the first $415 per pupil of operating referendum revenue.

School districts must transfer referendum equalization aid generated by a resident student to an alternative attendance program if a resident student is being served in that alternative attendance program.

2001
Agriculture land (but not an agriculture homestead including a house, a garage and one acre of land) and seasonal recreational property are excluded from referendum market value and payment of operating referendum levies.

Each school district’s referendum allowance is reduced by $415 per pupil (in conjunction with a $415 increase in the basic formula allowance). A district’s referendum allowance, after the $415 subtraction, cannot be less than $0. The $415 represents the amount that, up until this year, had been equalized by the state.

The limit on how much operating referendum a district may have is changed. The new limit is the greater of (1) 18.2 percent of the basic formula amount, or; (2) the district’s 1994 referendum amount per pupil multiplied by 1.162, plus the amount of 2002 supplement and transition revenue per pupil that was converted to referendum revenue, minus the $415 reduction in the referendum revenue per pupil, or; (3) the sum of all the member districts’ referendum authority in the year prior to the creation of a newly reorganized district.

A new two-tier method for calculating referendum equalization aid is created. The first tier is calculated on any referendum amounts up to $126 per pupil, with the second tier calculated on referendum amounts above $126 per pupil, up to 18.2 percent of the basic formula amount, unless the district qualifies for operating sparsity revenue, in which case the second tier is calculated on any amount above $126 per pupil.

The equalizing factors for calculating a district’s referendum levy are set, with the first tier equalizing factor at $476,000 of market value per pupil and the second tier equalizing factor at $270,000.

Referendum tax base replacement aid is created. Any district with a referendum greater than $415 before the conversion qualifies for aid based on the amount of levy previously paid by agriculture land and seasonal recreational properties.

A school board may, for fiscal year 2003 only, add to the district’s referendum allowance the district’s 2002 supplement and transition revenue amounts (which are repealed elsewhere) without voter approval. The added amounts must be renewed by the voters at a later date.

2002
Referendum equalization aid is limited to 18.2 percent of the basic formula amount for school districts with more than 90 percent of their referendum revenue coming from equalization aid. This provision prevents extremely low property value districts that don’t otherwise have a cap on their referendum amount from passing large referendums that are then paid entirely or almost entirely by the state.

2003
Due to a change in the calculation of pupil counts, referendum amount is adjusted so that districts do not receive less referendum revenue because of the pupil counting changes made by the Legislature. In addition, because of the pupil counting changes, the cap is calculated as 18.6 percent of the basic formula, rather than 18.2 percent.

The limit for referendum amounts is adjusted to include a calculation of inflationary increases in the calculation of the referendum cap. The new cap for most districts is calculated as 18.6 percent of the basic formula, or the previous year's allowance times an inflationary adjustment, whichever is greater. District's limited by their 1994 grandfathered referendum amount now have that limit adjusted by 17.7 percent compared to 1994, and then adjusted each year for inflation. In both cases, inflation is defined as a Consumer Price Index inflation rate for fiscal years 2005 through 2008, but for grandfathered districts, inflation changes from being CPI inflation to one-fourth of the basic formula increase for fiscal year 2009 and later.

The first tier of referendum equalization is increased from the first $126 per pupil of referendum revenue, to the first $405 per pupil for fiscal year 2005 and to the first $500 per pupil for fiscal year 2006 and later.

Tax Base Replacement Aid, which was initially intended to phase out as districts renewed their referendums, is made permanent.

2005
The limit for referendum amounts is increased to 26 percent of the basic formula amount. In addition, for districts capped at their 1994 level plus inflation, the $415 subtraction is reduced to $215, which has the effect of increasing their limit by $200.

The first tier of referendum equalization is increased to include the first $600 per pupil of referendum revenue for fiscal year 2007 and to the first $700 per pupil for fiscal year 2008 and later.

Referendum ballot requirements are changed so that the referendum market value tax rate does not have to be shown on the ballot, and the ballot language is generally simplified.

2006
Referendum ballot questions may state that the amount of revenue approved may increase annually by inflation. The inflation rate referenced is the Consumer Price Index calculation already included in the inflation increase on the referendum cap amount.

Additional Resources

September 2006 - The Minnesota Miracle Abandoned? Changes in Minnesota School Funding, 2001-2007 - The state had now come full-circle with regards to the financing of its public schools. While conceptually wanting to fully fund Minnesota public schools at the state level in 2001, by the 2007 school year, the state had offered greater incentives than ever for schools to fund locally, Rural Minnesota Journal (Power Point).

September 2005 - Minnesota School Finance History - Describes six phases of Minnesota public school funding, Minnesota Department of Education.

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