04 November 2026
The Minnesota Legislature has approved a historic $25.73 billion K–12 education budget for the 2026–27 biennium, marking the largest single allocation of state funds to education in the state's history. The omnibus bill, known as SSHF5, passed with bipartisan support, receiving 97-36 approval in the Minnesota House and a 35-32 vote in the Senate before heading to Governor Tim Walz's desk.
Legislative leaders hailed the package as a critical agreement to fund K–12 schools over the next two fiscal years and raise per-pupil funding in line with inflation, as they had in the 2023 K–12 funding law. "This budget agreement is a great success for Minnesota's students, families, and educators," said Minnesota Senate Majority Leader Kari Dziedzic (DFL) at a press conference following the vote on June 9. "It ensures we can continue to invest in our classrooms and our communities for the next two years, even in the face of new economic challenges."
Largest share of state budget, $4.2B increase
The budget, which received vigorous debate on the House and Senate floors, will represent about 35% of the state's total funds for the 2026–27 biennium, up from 33% the year before. At $25.73 billion, it represents a $4.2 billion increase over the 2024-25 biennium. "This is the largest education budget in state history, and one of the largest commitments to K–12 public education anywhere in the country," said Rep. Cheryl Youakim (DFL-Hopkins), chief author of the 2026-27 legislation. "We're committing funds to ensure inflationary pressures don't damage our schools, and to focus our savings on reducing state-level overhead and settlements."
Funding top priorities, deferring some savings
The largest item was extending the current funding formula, which ties annual increases to the 3% cap on inflation. Increasing student needs will also receive investment: the budget appropriates a one-time $55.6 million increase in compensatory revenue, targeted at funding schools with higher-poverty students.
The bill also includes $4 million for a special education apprenticeship program, and $1 million for schools to develop and strengthen cardiac emergency response plans. But not all spending was increased: the bill also includes about $460,000 in savings by consolidating transportation, library, and charter school aid.
Also preserved were the state's controversial Compulsory Attendance at Independent Foundation Aid (CAFIA) programs, which many critics see as charter school pork. The budget preserved $200,000 in General Fund spending, but deferred any additional increases until the 2028-29 biennium to cut costs.
Projected deficits loom, cuts likely in 2028–29
Including inflated payments for teachers' pensions, the 2026-27 budget is projected to leave Minnesota with a shortfall of $3.6 to $4.6 billion in the 2027-28 biennium. The legislature's 2025 forecast, published in May 2025, projected that the funds could be as high as 6% of the state's total revenue, in an economic downturn tied to changing global oil prices and trade tariffs.
The majority party lowered projections of state revenue growth in recent years. But the majority and minority both cautioned something will have to give, and one principal sacrifice is already agreed: the 2026-27 budget agreement includes one key area of cuts: transportation services for intensive and complex disability cases will be cut by 10% over the next three years, saving over $48 million by fiscal 2029.
"We wish we could have made this a perfect budget, and assured there would be no reductions," said Senate Education Finance chair Mary Kunesh (DFL-New Brighton). "But the public taught us a clear lesson, and we would not ignore it. One thing Minnesotans insisted on was filling the gap by reducing some low-priority state overhead and slicing special education cuts that will not directly impact the education of any student."
She emphasized that cuts will be delayed as far into the future as possible, but are inevitable, "it is as simple as that," and the state will have to make do with reduced transportation services before the 2029-2030 biennium. By 2030, lawmakers project they will spare Minnesota $51 million in special education cost savings.
Budget writers also had to confront continued multibillion dollar shortfalls ahead in the next biennium, driven by additional education spending, decreased revenue, and population trends that are projected to reduce tax receipts, given the rate of childbearing today. The House and Senate budget resolutions alone project the state could be facing a $5 billion budget backlog through 2029 if oil prices rebound, and $10 billion if they do not.
Bipartisan support reflects revenue hikes, tax cuts
Legislators from both parties supported passing the budget on June 9, reflecting unusual political alignment. After months of acrimony between the Majority Caucus and Governor Walz, Republicans reluctantly acknowledged a revenue increase was necessary and negotiating over tax rate changes simply would be a distraction. Private negotiations between the Governor and Majority District leaders, combined with a recent report showing that the state's current revenue projections are even lower than last year, appears to have paved the way to agreement.
"We've fought hard against tax increases, but some are necessary to patch the structural deficit. We'd rather have budget stability and a chance to make some tough but fair decisions, than increasing uncertainty," said Sen. Zach Duckworth, vice chair of the Education Finance committee.
"A tax cut is exactly what we are proposing. A tax cut on teachers' early-dismissal paychecks, which will free up resources for districts to pay for special education services," Youakim added. "We need to protect our students, and ourselves, and 2026 looks like a year where we have to do a little more protecting."
Two-year package avoids cutting classrooms
The 2026-27 budget is notable for avoiding significant cuts to instructional funding, which must be preserved to prevent large layoffs or program cuts for the 2026-27 school year. Instead, most savings are concentrated in non-classroom areas like teacher pipeline and recruitment programs, charter school aid, and special education transportation. The agreement also raises the annual distribution from the state's Chronic Teacher Shortage fund to school districts from 2.5% to 4.5% of the fund's value, effective from July 1, 2027.
But for teachers, increases will not cover all inflationary pressures, and school district leaders are worried: many are drawing on one-time flexibility in their operating budgets through 2026-27, and when those funds are exhausted, they expect significant cuts and layoffs.
"There is still long-term concern. Increased fiscal pressure within two years is inevitable and it's hard for school administrators to close these gaps on a year-to-year basis," chief legislator Rep. Youakim said. The new budget seeks to "free up funds for local school districts to shift resources and reduce unspent balances, but in the end, the new lessons and opportunities will have to come from a new legislature and a new governor."
But will it be enough?
Looking beyond 2026-27, the 2026-27 deal calls for $420 million in general education funding cuts, signaling further cost savings. That huge shift - already $1.6 billion for the biennium - is expected to sneak by undetected to voters, as it is heavily backloaded, not starting until fiscal 2029, the last year of a 48-month budget and policy framework.
Along the way, the deal makes major cuts in prioritized programs, but lays the groundwork for an even greater overhaul of public education services in Minnesota, using the creation of a Blue Ribbon Commission - to be formed on July 1, 2025 - to find up to $250 million dollars in special education cuts, beginning in fiscal 2027.
"Today is a lonely turning point, where we focus on inflation-related increases and avoid harming our young learners. But day after that, more changes will be dealt in the next legislature," asserted Youakim. "But we don't have a lot of time to keep the ball rolling into the future, and we made the right decision for right now."
