Minnesota’s Permanent School Fund Amendment: What Would It Mean for SoWashCo Schools?

The Key Takeaway

Minnesota’s Permanent School Fund currently provides SoWashCo Schools about $1.4 million per year. A proposed constitutional amendment on the November 3, 2026 ballot would change how the fund’s annual distributions are calculated.

If approved, the state would initially distribute 4.5% of the fund’s average value over the preceding three fiscal years, rather than distributing based principally on interest and dividends.

An estimated impact using fiscal year 2025 data shows that the new formula would have provided SoWashCo approximately $627,000 more unrestricted revenue that year without raising taxes. That would be meaningful, but it would cover only a small portion of the district’s projected budget challenges.

The choice involves a longer-term question: How should Minnesota balance providing more money to students today with preserving the fund for future generations?

What Will Voters See?

Minnesota voters will see one proposed constitutional amendment on the November 3, 2026 ballot:

Increasing funding to school districts

Shall the Minnesota Constitution be amended to increase the funding going to all school districts from the permanent school fund, which is a fund that supports school districts without raising individual income or property taxes, effective July 1, 2027?

There is an important difference between voting on a constitutional amendment and voting in most other elections: Leaving the question blank has the same effect as voting no. The amendment must receive support from a majority of everyone voting in the election, not merely a majority of those who answer the question.

What Is the Permanent School Fund?

The fund’s history begins with land.

When Minnesota became a state, the federal government granted land to Minnesota for the benefit of public schools. Revenue produced by those lands (including proceeds from land sales, timber, mining and leases) was placed into a permanent trust.

Minnesota still manages approximately 2.5 million acres of school trust land. Revenue from those lands is deposited into the Permanent School Fund and invested by the State Board of Investment.

The fund grew from approximately $675 million in 2010 to $2.3 billion in fiscal year 2025.

Investment income is distributed to Minnesota public school districts and charter schools based primarily on enrollment. During the 2025–26 school year, the fund distributed a record $63.8 million statewide.

This is not a new fund, and the proposed amendment would not establish a new school program. It would change how the annual distribution from the existing fund is calculated.

How Does the Current Distribution Work?

The Minnesota Constitution currently says:

The principal of the permanent school fund shall be perpetual and inviolate forever.

It then directs the state to distribute the fund’s net interest and dividends to public schools.

In practical terms, the current system distinguishes between different forms of investment return:

Interest and dividends can be distributed.
Most growth from increases in the market value of investments remains in the fund.
Investment losses not offset by gains must eventually be repaid from interest and dividends.

That means the amount available to schools depends partly on how the fund earns its return, not only on its total investment performance.

For example, two investments could produce the same total return. If one produces more dividends while the other increases mainly in market value, the first may generate more distributable income under the current rules.

What Would the Amendment Change?

The amendment would replace the existing constitutional rules with language directing the state to manage the fund as a perpetual financial resource while:

Providing annual distributions;
Preserving the fund’s purchasing power over time; and
Balancing the needs of current and future beneficiaries.

The Constitution would no longer specify that only net interest and dividends are distributed. Instead, the distribution policy would be prescribed by state law.

Legislation already enacted provides the initial formula:

4.5% × the fund’s average net asset value at the end of the preceding three fiscal years

Using a three-year average is intended to reduce the effect of a single unusually strong or weak investment year. It would not, however, eliminate the effects of a prolonged market downturn or a period of unusually high inflation.

The new formula would take effect July 1, 2027, for aid paid during school year 2027-28 (but only if voters approve the amendment).

Current system	If the amendment passes
Distribution is based principally on net interest and dividends	Distribution begins at 4.5% of average fund value
Capital appreciation generally remains invested	The fund’s total market value determines the distribution
Constitutional language says principal must remain “perpetual and inviolate forever”	Constitutional language requires preservation of purchasing power and consideration of current and future beneficiaries
The Constitution limits what can be distributed	The Legislature establishes the specific distribution policy in statute
Investment management costs are handled under existing law	The Constitution expressly permits reasonable fund and trust-land administrative costs to be paid from the fund

How Much Does SoWashCo Receive Today?

SoWashCo’s 2026–27 budget includes:

Permanent School Fund revenue: $1,440,144
Endowment revenue per pupil unit: $64.64
Approximate share of General Fund revenue: 0.4%

The money is unrestricted General Fund revenue. Unlike funding reserved for a particular purpose, it can support regular district operations such as staffing, instructional materials, activities or facility costs.

Although $1.4 million is significant, it is a relatively small piece of SoWashCo’s approximately $359 million General Fund budget.

How Much Could SoWashCo Receive if the Amendment Passes?

No one can yet calculate SoWashCo’s actual fiscal year 2028 payment. That will depend on:

The fund’s value at the end of the relevant three fiscal years;
SoWashCo’s enrollment;
Statewide enrollment; and
Any later changes to the statutory distribution policy.

However, the Minnesota School Boards Association published a district-by-district illustration applying the proposed formula to fiscal year 2025:

Illustrative FY2025 calculation	SoWashCo amount
Actual distribution under the existing formula	$1,295,833
Estimated additional distribution under the proposed formula	$627,284
Estimated total under the proposed formula	$1,923,117
Estimated increase	48.4%

This is a comparison of the two formulas using an earlier year (not a forecast or guarantee of what SoWashCo would receive in fiscal year 2028).

Based on that illustration, the amendment might initially provide SoWashCo approximately $600,000 to $700,000 more per year, but future payments could be higher or lower.

How Much Would That Matter Locally?

An additional $600,000-$700,000 would be meaningful, but it would not fully resolve SoWashCo’s projected financial challenges.

For context, that amount would equal approximately:

4.8% of the district’s current $13 million budget-adjustment target; or
2.3% of its previously projected $26.7 million deficit for school year 2027-28.

The additional revenue could help retain some positions, programs or services. It could also reduce (but not eliminate) the amount the district would need to address through spending reductions, new revenue or other parts of its five-year plan.

What Arguments Do Supporters Make?

Supporters of the amendment generally emphasize the following considerations:

More investment growth could reach today’s students

The current formula limits distributions largely to interest and dividends. Supporters argue that this does not reflect the full return generated by a modern investment portfolio, much of which may appear as appreciation in market value.

The formula resembles common endowment practices

The Permanent School Fund Task Force reported that many endowments distribute approximately 4% to 5% of their average value annually. It recommended 4.5% as a balance between current distributions and long-term preservation and the formula can be updated by future statute if desired.

Averaging could make distributions more predictable

Using the fund’s average value over three years reduces the extent to which one year’s market movement immediately affects school funding.

Schools would receive more money without a new tax

The higher distributions would come from an existing trust. The amendment does not itself increase individual property or income taxes or require an appropriation from the state’s General Fund.

That does not mean the additional distribution is financially costless: money distributed to schools is money that remains unavailable for future investment growth. But the amendment does not impose a new tax.

All Minnesota public schools would benefit

Distributions are based primarily on enrollment rather than local property wealth. Students in districts with very different tax bases would receive the same approximate per-pupil benefit.

What Concerns Do Critics Raise?

Critics and skeptical voters generally focus on governance and long-term risk.

Higher distributions leave less money invested

A larger annual payment provides more funding today but reduces the amount retained to generate future investment returns.

The amendment changes an explicit constitutional protection

The existing requirement that principal remain “perpetual and inviolate forever” would be removed. It would be replaced by a requirement to preserve purchasing power and balance the needs of current and future beneficiaries.

Both versions are intended to preserve the fund over time, but they do so through different legal standards.

The 4.5% formula would be in statute but not in the Constitution

Voters are not being asked to place 4.5% permanently into the Constitution. They are being asked to authorize the Legislature to establish a distribution policy consistent with the new constitutional principles.

The Legislature has already enacted the 4.5% formula, contingent on passage. A future Legislature could amend the statutory percentage or calculation without holding another constitutional vote, although any revised policy would still have to satisfy the Constitution’s requirement to preserve purchasing power and balance current and future beneficiaries.

The Constitution would expressly authorize a broader range of administrative costs

Investment-related expenses are already paid from the assets managed by the State Board of Investment. The proposed amendment would expressly allow reasonable and necessary costs associated with managing either the financial fund or the underlying school trust lands to be paid from the fund as prescribed by law. The amendment does not identify which additional costs would be charged or their amount. Any costs charged to the fund would reduce the assets available for distributions or future investment growth.

Questions for Voters to Consider

How should Minnesota balance additional funding for students today against the potential value of leaving more money invested for future students?
Is 4.5% a sustainable distribution after accounting for inflation, investment expenses and trust-land management costs?
Should the specific distribution formula be adjustable by the Legislature, or should it have stronger constitutional limits?
Does the requirement to preserve purchasing power adequately replace the existing protection of principal?
Is an illustrative increase of approximately $627,000 for SoWashCo worth the accompanying change in how the trust is protected and governed?

The Decision

A yes vote would authorize the new constitutional framework. The already-enacted 4.5% formula would then take effect for fiscal year 2028, increasing the amount expected to be distributed to Minnesota schools.

A no vote (or leaving the question blank) would retain the current constitutional language and the existing interest-and-dividend-based system.

Either choice preserves the Permanent School Fund for the exclusive benefit of public education. The disagreement is about how its benefits should be divided between students attending school now and students who will depend on the fund in the future.