Tucked into the 2023 universal school meals legislation was an obscure provision to blunt the impact of the program on compensatory revenue, a type of State funding for low-income students. The one-time provision will boost the district’s budget next year.

Because the State made school meals free for all Minnesota students, fewer families were expected to complete paperwork that would identify them as low-income households. This paperwork is one way to identify how much compensatory revenue schools receive.  

Schools typically use compensatory revenue to hire additional licensed teachers and educational support professionals, reduce class sizes, and meet students' mental health or cultural needs.

The provision, called a “hold harmless provision,” will preserve around $16 million in funding for Minneapolis Public Schools in the 2024-25 school year. However, the provision expires after one year. Without action by the legislature in the upcoming session, MPS will lose funding targeted to low-income students.

This school year, compensatory revenue makes up approximately 12% of school budgets. Without the hold harmless provision, schools would lose about one third of their compensatory revenue funding in the upcoming school year.

The amount of compensatory revenue a school gets varies. For example, compensatory revenue makes up over 20% of the budget for Patrick Henry High School and Franklin STEAM Middle School, but less than 0.2% of the budget at Lake Harriet Lower. This variation is because the proportion of students who qualify for compensatory revenue varies from as few as 6% to as many as 95% of students, depending on the school.

The Minnesota Department of Education is expected to deliver a report to the legislature in January 2024 on compensatory revenue and whether the use of paper forms completed by caregivers can be eliminated in future years. MPS has included advocating for extension of the hold harmless provision into future years as part of its legislative agenda for the upcoming session.

The hold harmless provision was estimated to cost the State a total of $5.4 million for all districts in fiscal year 2025. However, according to the most recent State budget forecast, the provision is now expected to cost $29 million, the $16 million to MPS taking up a big portion of that cost.  

Over the first four years, the cost of the universal meals program is expected to be almost 20% higher than originally budgeted.

Even though hold harmless provision was necessary because of the free meals legislation, education finance scholars have long critiqued the use of free and reduced price lunch qualification as a measurement of poverty. Alternative proposals include linking State administrative data, like tax data, to school data to determine poverty status of students.