Education

Facilities & Technology - Debt Service Equalization Revenue

Statewide Outcome(s):

Debt Service Equalization Revenue supports the following statewide outcome(s).

Minnesotans have the education and skills needed to achieve their goals.

Context:

Debt equalization revenue was implemented to help ensure that all school districts, regardless of property wealth, can provide adequate education facilities for their students by helping to offset property owner’s relatively high tax burden in areas with low to moderate tax bases. Without the state aid contribution to assist in paying off the debt associated with bond issuance, school districts with low to moderate tax base per pupil may be unable to provide adequate facilities, or will require a substantially higher property owner tax burden than districts with higher tax bases.

Strategies:

Property tax levies and state aid are calculated to fund school district debt service payments. State aid for eligible debt service obligations is calculated based on the two-tier formula in Minn. Stat. § 123B.53. To assure that funds will be available to make payments in spite of delinquencies and abatements, districts levy 105% of the levy portion required to fund debt service payments.

School districts must receive approval from a majority of those voting in a school bond referendum before issuing

bonds to construct, acquire, or improve school facilities. Since initial implementation, the state aid portion of the revenue has declined, due to property valuation increases and a static equalization factor.

Legislative overhaul of the debt service equalization formula was accomplished in 2001. A new two-tiered equalization formula was created to target districts with low to moderate tax bases and/or districts with a relatively high debt burden. In FY 2011 falling adjusted net tax capacities (ANTCs) prompted an increase in debt service aid. Though debt service aid increased from FY 2010 to FY 2011, in percentage terms, the state’s share of eligible debt service revenue has decreased from 6.1 percent in FY 2003 to a fraction of one percent in FY 2011.

Results:

The Minnesota Department of Education does not collect data regarding unmet facility needs.

Performance Measures Notes:

Previous data is from FY 2005 and current data is from FY 2013.