2026 Spring Legislative Update

We are now at the halfway point of the legislative session, and although there is no shortage of activity, meaningful progress has been difficult to come by. Uncertainty about what, if anything, will get done remains the defining refrain at the Capitol.

While February’s state budget forecast showed a much-improved budget outlook, caution remains around the Capitol. The evenly divided House has struggled to find common ground, as every bill requires bipartisan support to advance. This is a dynamic that has slowed progress across virtually every issue area.

Adding to the uncertainty is the looming threat of federal cuts to HHS programs. Federal scrutiny of fraud in Minnesota’s Medicaid and other human services programs has placed the state’s federal funding at risk, casting a long shadow over budget discussions.

Governor’s Budget Recommendations

Shortly after the February forecast, Governor Walz released his 2026 supplemental budget recommendations. Key proposals of note include:

• Blue Ribbon Commission (BRC) budget reduction: The BRC’s required savings target is increased from $250 million to $300 million for FY28-29. If the commission cannot identify savings, special education cross-subsidy aid must be reduced by $300 million. The recommendations also include a directive that savings must come from eliminating costs instead of shifting special education funding to other K-12 funding streams.
• Literacy Aid Formula change: The distribution formula would shift from being based on MCA proficiency data and growth rates to English learner and poverty concentration factors, effective FY27.
• Student Support, Intervention, and Resource Teams (SSIRTs): Districts and charter schools would be required to establish SSIRTs focused on school safety, prevention, intervention, and student support.
• Task Force on Testing and Assessments: A new task force would be established to examine and propose reforms to Minnesota’s current assessment system.

What Next?

As the session progresses, the House and Senate will next establish budget targets for their respective finance areas. This next step will determine what has any chance of advancing this session. While we remain hopeful that the K-12 Education Finance committees will receive a target, both House and Senate chairs have been tempering expectations. It is important to remember that unlike the biennial budget, which is constitutionally required to pass in odd-numbered years, a supplemental budget is optional. Regardless, we will continue to advocate for the needs of school districts.

Other issues getting attention include school safety, compensatory hold-harmless, PSEO reform, and tax credits for scholarship granting organizations.

School safety: School safety continues to generate discussion, but it is complicated by whether funding should extend to non-public schools. Proponents argue that student safety is not exclusive to public school buildings and that all Minnesota students deserve access to prevention and intervention resources. Opponents counter that directing public funding to private and parochial schools raises questions about accountability and oversight. Other student safety bills have been heard during this session, including measures requiring school safety policies and automated reporting systems.

Compensatory Education Hold-Harmless Extension: A proposal to extend the compensatory education hold-harmless provision for one additional year has been discussed in the Senate, although the House seems to have less appetite for moving something forward.

Post-Secondary Enrollment Options (PSEO): PSEO reforms have had informational hearings in the House, though momentum remains limited at this stage. Discussions have centered on program structure, access, and accountability. No specific proposals appear to be gaining traction, but discussions help lay the groundwork for the future.

OBBBA and Scholarship-Granting Organizations: House Republicans are pushing legislation, HF3490, to opt Minnesota into a federal scholarship tax credit created under the “One Big Beautiful Bill Act,” offering up to $1,700 in credits for donations to scholarship-granting organizations. Supporters argue it brings new money into Minnesota schools, but opponents raised concerns that it functions as a national voucher system directing federal dollars to private schools without the transparency and accountability required of public schools. This bill will be a significant sticking point if the committee receives a budget target.

Permanent School Fund Distribution Constitutional Amendment
The Minnesota Legislature is currently considering bipartisan legislation to place a constitutional amendment on the November ballot. SF3593/HF3900 proposes a constitutional amendment to allow an amount greater than the annual interest and dividends to be paid from the fund to the school districts and charter schools. The constitutionally required distribution from the endowment pays out roughly 2.5 percent of the endowment’s net asset value each year to the state’s school districts. By statute, the distribution is made on a uniform per-pupil basis to all school districts.  Should the bill pass this session, the question be placed on the ballot, and ultimately approved by voters, school districts will receive larger annual payments, with the distribution amount statutorily set at 4.5 percent of the three-year average value of the fund.

Thank you for all your advocacy with legislators this year. We ask that you continue to make your voices heard, particularly around the Governor’s proposed cuts to special education funding. If you haven’t reached out directly yet, you can do so here.