The education formula – complex because of its purpose

March 2023

By Kelly Asche, Senior Researcher

To nearly everyone, the education formula is a mystery. And where there’s mystery, there tends to be misunderstandings, misinterpretations, and incorrect narratives. Making changes to policy that is well understood is hard enough. Imagine trying to change policy that isn’t well understood.

This is the predicament rural schools find themselves in. To discuss funding increases with their local leaders means they have to wade into very complex waters. Throw in the amount of turnover that occurs every year in municipal, county and state government, and it can seem nearly impossible to get everyone on the same page. Work done one year has to start all over if leadership changes.

Due to this complexity, CRPD was asked to provide a simple explanation of how the general education revenue program (colloquially known as the “education formula”) works from a rural perspective and what it means to increase funding. We have released a full report, but I also wanted to provide an overview of what it says.


The first thing to know about the general education revenue program is that it’s complex because of its purpose. The program takes two primary actions:

  1. It provides school districts with a baseline amount of funding. This means that no matter if a district has high or low property values, all districts have access to the same amount of dollars per student.
  2. In addition, the program provides extra funding for school districts that have higher costs than others. For example, districts that serve a large geographic region but have few students will likely encounter higher transportation costs as well as the higher costs associated with teaching fewer students (a lack of economies of scale). These types of schools are eligible for a bit more funding.

Figure 1 illustrates these two points. First, all schools get the same base amount of funding (dark green) from the general education revenue program. In addition, all districts have access to local support via their local property taxes. However, that revenue amount varies depending on the value of the properties within the district. Those districts with lower property values then also receive additional funds called state equalization (light brown bar) to fill the gap between property-rich and property-poor districts. Finally, some districts have higher costs due to student composition (i.e., English learners), rural-ness (i.e., higher transportation costs because they cover a large geographic area), and age of facilities. The state adds additional funding on top of the base and equalization funds to help cover these costs (dark brown bar).

Figure 1: A graphical interpretation of the two primary activities of the general education revenue program.


What this means, then, is that some districts get significantly more revenue per APU than other districts based on their unique circumstances. The goal here is to ensure that all students have similar access to the education they need.

Figure 2 shows how much the general education revenue funding per adjusted pupil unit (APU) in FY22 varies across the state. Some of the highest amounts are Grygla and South Koochiching School districts, which receive nearly $13,000 per APU each. The lowest are in the suburbs of the Twin Cities with Minnetonka, Orono, and Edina receiving around $7,000 per APU. Data: MN Department of Education


This disparity in the distribution of funds can add a lot of tension whenever discussions around increasing education funding occurs at the legislature, especially via the general education revenue program, but essentially, the program is doing what it was designed to do—distribute funding unequally.

Interestingly, this isn’t a metro versus rural argument, though. Figure 3 provides the general education revenue funding per APU for each district in Northwest Minnesota and the seven-county metro. As it shows, the lowest funding per APU is in the suburbs, but also in the lakes region in Northwest Minnesota around Pequot Lakes, Alexandria, Crosby-Ironton, and others. Also interestingly, Minneapolis and St. Paul school districts have some of the highest revenue per APU, similar to the more rural, ag-based districts in northwestern Minnesota like Grygla, Herman-Norcross, and Mahnomen.

Figure 3: Data – MN Department of Education


So how can seemingly very different districts be similar, and how can districts that are so close to each other be so different? It all has to do with the general education revenue program and how it funds different situations that can make it cost more to provide an equal education.

The general education revenue program is comprised of fourteen different components, each with its own formula. To read more about each component, check out our report.

Each of these fourteen components provides funding to address a different issue. Each district receives baseline funding from the general education revenue component; the equalization component balances out high versus low property values; and the additional components help schools with higher costs to provide the same education as a school with lower costs.

Figure 4 provides the composition of the general education revenue program funds distributed to six different school districts:

  • Grygla Public School District: highest revenue per APU from general education formula, $12,978.90
  • Pequot Lakes Public Schools: lowest revenue per APU from general education formula, $7,142.98
  • Moorhead Public School District: located in an entirely urban county, $7,784.95
  • Ada-Borup Public School District: located in an entirely rural county, $8,474.33
  • Minneapolis Public School District: highest revenue per APU in the Twin Cities metro, $8,790
  • Minnetonka Public School District: lowest revenue per APU in the Twin Cities metro, $6,949.

As you can see, the total funding per APU varies significantly across districts. More-rural districts typically get more funds from sparsity and transportation sparsity components. Like Minneapolis and Moorhead, they also get more from the compensatory component (linked to the number of students using the free and reduced-price lunch program). Districts with higher property values such as Pequot Lakes and Minnetonka receive very little extra funding outside of the basic education component since they can raise more revenue locally from property taxes.

Figure 4: Data – MN Department of Education


And this is how the general education revenue program works across the state. It isn’t meant to provide equal funding to each district. Rather, it attempts to provide equal educational access to all kids in the state, regardless of where their district is located or its circumstances.