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Compensatory revenue review: direct‑certification changes, concentration rules and measurement challenges
Summary
House fiscal staff and committee members discussed how compensatory revenue is calculated, the recent inclusion of medical‑assistance direct certification in counts, the site‑based concentration formula and the difficulty of tracking program effects.
On March 11, 2025, the House Education Finance Committee considered compensatory revenue, the state formula that provides additional general education funding to sites that serve higher concentrations of students eligible for free or reduced-price school meals. House fiscal staff said compensatory revenue is the second‑largest component of the general education formula after the basic formula allowance.
Staff reviewed the measure Minnesota has used since 1996: a proxy based on the federal free and reduced‑price meal (FRPM) eligibility count. Staff explained that eligibility has two federal categories: free meals (household income at or below 130% of the federal poverty level) and reduced‑price meals (income between 130% and 185% of the federal poverty level). The committee was shown a chart of historic FRPM counts: the FRPM share rose through the early 2010s, drifted down in mid‑decade and fell…
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