Attachment to Maintenance of Effort (MOE) Waiver Request
Summary
This Attachment to Maintenance of Effort (MOE) Waiver Request says that in fiscal year 2023 the State of Minnesota continued to provide state funding for elementary and secondary education and higher education, and that total state support was higher on a total dollar basis and a per-pupil basis than the average of state fiscal years 2017, 2018, and 2019. It says that because the ARP's definition of Maintenance of Effort looks at support as a proportion of total state spending, Minnesota did not technically achieve compliance and requests a waiver under section 2004(a)(2) of the ARP Act. It states that Minnesota failed to meet the proportional requirement for FY 2023 by $994.9 million for E-12 education and $46.6 million for higher education.
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Cite this document
“Attachment to Maintenance of Effort (MOE) Waiver Request.”
Original at www.ed.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/department-of-education-pdf-www-ed-gov-ff286325fc/
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Attachment to Maintenance of Effort (MOE) Waiver Request
Summary:
In fiscal year 2023, the State of Minnesota continued to provide crucial state funding for elementary and
secondary education as well as higher education, areas that are vital to the current and future success of
Minnesotans. Compared to the average level of support provided during state fiscal years (FY) 2017,
2018, and 2019, total state support for elementary and secondary education (“E-12”) and higher
education in FY 2023 was higher on a total dollar basis and on a per-pupil basis. Federal funding
provided in the American Rescue Plan (ARP) Act was intended to expand resources for schools and
students, not replace existing state commitments; and that is exactly what happened in Minnesota. In
fact, the state’s commitment to education in FY 2023 was stronger than ever, despite declining student
enrollment. However, due to the ARP’s unique definition of Maintenance of Effort (MOE), which looks at
support for E-12 education and higher education as a proportion of total state spending, Minnesota did
not technically achieve compliance. As such, Minnesota is requesting a waiver under the authority
provided to the Secretary of Education in section 2004(a)(2) of the ARP Act.
Minnesota failed to meet the ARP’s proportional MOE requirement for FY 2023 by $994.9 million for E-
12 education and $46.6 million for higher education due to several factors described in this waiver
request. Minnesota experienced fiscal burdens preventing, preparing for, and responding to the
coronavirus, particularly in FY 2020 and FY 2021. These commitments left fewer resources available in
spring 2021 when Minnesota set its budget for FY 2022 and FY 2023.
However, after spring 2021 Minnesota began accruing and projecting substantial surpluses. A large
portion of that surplus was “one-time” in nature, meaning it was not expected to be available for
ongoing commitments that are necessary to provide predictable and stable funding for education. Much
of those one-time funds were enacted by the legislature in 2023 for expenditure in FY 2023, which
increased total state spending in that year, thereby decreasing the percent of total state spending on
education (despite the fact that education spending increased overall and on a per-pupil basis in that
year). This is discussed further in response to question number 3 later in this document.
But a considerable amount of the ongoing surplus was in fact dedicated to education. The table below
shows that the year-over-year increases for E-12 education and higher education in FY 2024 far
outweigh the amounts by which Minnesota failed to achieve compliance in FY 2023. The year-over-year
spending increase projected for FY 2024 in E-12 education is nearly twice the size of the E-12 education
FY 2023 shortfall, the higher education FY 2024 increase is more than six times the FY 2023 shortfall.
E-12 Higher Ed
(State support for (State support for higher
elementary and education minus
($ thousands) secondary education) research)
FY 2023 spending $ 10,270,162 $ 1,713,800
Additional spending that would have been needed in FY
2023 to achieve compliance* $ 994,933 $ 46,595
FY 2024 projected year-over-year spending increase $ 1,877,543 $ 281,691
Amount that FY 2024 projected year-over-year spending
exceeds spending needed in FY 2023 to achieve compliance $ 882,610 $ 235,096
Minnesota MOE Waiver Request Attachment - page 1
*This is the amount that would have been needed to be added to E-12 and Higher Ed spending in FY 2023 to achieve
compliance with the MOE requirement, assuming that – per US Ed guidance – the difference between the FY 2023 percent and
the baseline percent may be rounded to the nearest whole number.
Minnesota’s increased commitment to education does not end in FY 2024; rather, these total spending
and per-pupil increases continue into the future. Minnesota currently forecasts state spending through
FY 2027. In FY 2027, E-12 spending is expected to be $13.0 billion, which is a 41% increase over the
MOE baseline period. Higher Ed spending is expected to be $1.9 billion, which is a 24% increase over
the MOE baseline period. These increases are in spite of the fact that enrollment in both E-12 and
higher education is expected to be lower in the near future than in the baseline period.
The primary pieces of legislation that increased education funding for FY 2024 and later are Minnesota
Laws 2023, Chapter 55 (K-12 education) and Minnesota Laws 2023, Chapter 41 (Higher Education).
Further information to help in the consideration of Minnesota’s waiver application is provided in the
following pages.
Minnesota MOE Waiver Request Attachment - page 2
Additional Submission Requirements
1. A description of the extent to which the State experienced fiscal burdens in preventing, preparing
for, and responding to the coronavirus and an explanation of how those fiscal burdens affected
the State’s ability to maintain fiscal effort (e.g., the status of and any changes to the State’s rainy
day fund, whether the State experienced a decline in revenues, or an increase in other emergency
expenses resulting from the pandemic, such as expenses related to health care, unemployment
insurance, or support for small businesses).
Minnesota experienced a number of fiscal burdens that impacted our ability to maintain effort under
the proportional MOE calculation. State tax revenues in fiscal year 2020 dropped $584 million (2.5
percent) compared to the prior year. FY 2020 was the most recent closed fiscal year at the time the
biennial budget for FY 2022 and FY 2023 was established. If FY 2020 revenues had instead been in line
with Minnesota’s prior revenue trend, state policymakers would have had significantly more funding
available to them when setting the FY 2022-23 biennial budget in spring 2021.
In addition to revenue losses experienced during fiscal year 2020, the state also committed $755 million
in state funds (not including federal sources) to pandemic response in FY 2020 and FY 2021. State
funded response activities included testing, emergency food shelf response, housing, shelter, personal
protective equipment, long term care staffing, business payments, grants to health care providers, and
staffing for local public health. These expenditures are detailed in response to Question 2 below.
Despite these limitations, Minnesota enacted large increases in funding for E-12 education and higher
education in its FY 2022-23 biennial budget established during the 2021 legislative session.
In the 2022 legislative session, which was considered a “supplemental” budget year in Minnesota,
additional budget investments were primarily pandemic-related. These included:
- $405.8 million payment into the state’s Unemployment Insurance (UI) Trust Fund
- $499.9 million in payments to pandemic frontline workers
- $190 million for miscellaneous pandemic response items such as testing and vaccines
Like many states, Minnesota experienced increased demands on its unemployment insurance program
during the pandemic. In 2022, Minnesota’s UI Trust Fund owed $1.4 billion to the U.S. Treasury
Department. Legislation (https://www.revisor.mn.gov/laws/2022/0/Session+Law/Chapter/50/) enacted
in 2022 used a combination of ARP State Fiscal Recovery Funds and state general funds to repay that
outstanding loan with the federal government and to replenish the state’s UI Trust fund. This action
meant that businesses across the state were held harmless from the effects of the pandemic, and it
ensured that vital UI benefits would be available to Minnesotans in the future. The same legislation also
provided bonus pay to frontline workers who worked during the pandemic to keep Minnesotans safe,
healthy, fed, and cared for. Finally, the legislation included $190 million for testing, vaccines, COVID-19
outbreak management, and health system supports. More detail is available here:
https://mn.gov/deed/newscenter/press-releases/?id=526839.
As noted in the response to Question 3 below, Minnesota increased support for E-12 and higher
education in FY 2023 despite these fiscal burdens. In the absence of these fiscal burdens, Minnesota
would have had an even greater ability support education as a percentage of overall state spending.
Minnesota MOE Waiver Request Attachment - page 3
2. Documentation and data supporting the description of the State’s fiscal burdens (e.g., revenue
data, appropriation tables, unemployment statistics, etc.) including any State action that
impacted State revenue (e.g., tax increases or decreases).
The $405.8 million Unemployment Insurance payment in FY 2022 is shown on page 8 of the November
2022 General Fund Balance Analysis published by Minnesota Management and Budget:
https://mn.gov/mmb-stat/documents/budget/operating-budget/forecast/nov-2022/nov22-fba-
summary.pdf.
The $499.9 million for Frontline Worker payments in FY 2023 is shown on page 12 of the October 2023
General Fund Balance Analysis published by Minnesota Management and Budget, and expenditures
from the $190 million in COVID-19 response appropriation are included throughout the same document:
https://mn.gov/mmb-stat/documents/budget/operating-budget/actual23/close23-fba.pdf.
Additional General Fund investments totaling $755 million are detailed in Table 1 below. Expenditures
were primarily in FY 2020 and FY 2021 and are included in the November 2021 General Fund Balance
Analysis published by Minnesota Management and Budget: https://mn.gov/mmb-
stat/documents/budget/operating-budget/forecast/nov-2021/nov21fcst-fba-detail.pdf
Table 1. State of Minnesota COVID Response
General Fund Commitment
$ in thousands
COVID-19 MN Fund 200,000
Peacetime Emergency Child Care Grants 29,964
Military Veterans COVID-19 Response Assistance 6,200
Emergency Food Shelf Response 9,000
Housing Support 5,530
Emergency Services Grants - Shelter, PPE, Supplies, & Staffing 26,537
Tribal Nations Staffing 11,000
Business Relief Payments 87,750
Unemployment Trust Fund 25,000
Movie Theater and Convention Center Grants 13,900
County Relief Grants 114,728
Health Care Response Fund - Provider Grants 150,000
Public Health Contingency Account - Provider Grants 50,000
Public Health Contingency Account - Staffing and Local Public Health 25,511
Total General Fund Investment 755,120
Documentation of Economic Impact of Pandemic on Minnesota
Minnesota Management and Budget (MMB) issues two Budget and Economic Forecasts each year, in
November and February. In addition, MMB issued a special interim projection in May 2020 when it was
clear that the pandemic would have a significant budget and economic impact. Below are links to
published forecasts since the beginning of the pandemic. In each document, the executive summary,
economic outlook and appendix contain charts and tables showing economic indicators such as GDP,
consumer spending, employment, wage and salary, personal income, and business impact. Each of these
indicators show the impact of the pandemic on Minnesota’s economy.
Minnesota MOE Waiver Request Attachment - page 4
May 2020 Interim Budget Projection: https://mn.gov/mmb-stat/budget/may-interim-budget-projection-
document.pdf
November 2020 Budget and Economic Forecast: https://mn.gov/mmb-
stat/000/az/forecast/2020/budget-and-economic-forecast/november-2020-forecast.pdf
February 2021 Budget and Economic Forecast: https://mn.gov/mmb-stat/000/az/forecast/2021/budget-
and-economic-forecast/february-2021-forecast.pdf
November 2021 Budget and Economic Forecast: https://mn.gov/mmb-
stat/000/az/forecast/2021/budget-and-economic-forecast/november-2021-forecast.pdf
February 2022 Budget and Economic Forecast: https://mn.gov/mmb-stat/000/az/forecast/2022/budget-
and-economic-forecast/february-2022-forecast.pdf
November 2022 Budget and Economic Forecast: https://mn.gov/mmb-
stat/000/az/forecast/2022/budget-and-economic-forecast/november-2022-forecast.pdf
February 2023 Budget and Economic Forecast: https://mn.gov/mmb-stat/000/az/forecast/2023/budget-
and-economic-forecast/february.pdf
November 2023 Budget and Economic Forecast: https://mn.gov/mmb-
stat/000/az/forecast/2023/budget-and-economic-forecast/november.pdf
February 2024 Budget and Economic Forecast: https://mn.gov/mmb-
stat/000/az/forecast/2024/budget-and-economic-forecast/february.pdf
3. In addition, in its waiver request, a State should submit information on the relevant factors listed
below to support its request. The Secretary may ask States for additional information after States
submit the MOE waiver request form.
Has the State increased support for education?
As indicated on the data submission table and Table 2 below, Minnesota has increased its state support
for E-12 education and higher education every year from the baseline period to FY 2023, with annual
average growth of 2.41% for E-12 Education and 2.49% for Higher Education. The state’s primary E-12
education per-pupil formula -- which is set via legislation -- has increased every year since 2011, most
frequently at 2.0% per year. June 2021 legislation enacted a 2.45% increase for FY 2022 and 2.0% for FY
2023, and May 2023 legislation enacted a 4.0% increase for FY 2024 and a 2.0% increase for FY 2025,
which both outpace per-pupil increases during the MOE baseline period.
Table 2. E-12 Education and Higher Education Spending and Enrollment
E-12 Higher Education
Public Total Public
Total Student Expenditures Expenditures Student Expenditures
Year Expenditures Enrollment per Student (minus research) Enrollment Per Student
FY 2017 $8,901,333,000 861,624 $10,331 $1,478,603,000 259,600 $5,696
FY 2018 $9,233,048,000 868,952 $10,625 $1,568,081,000 255,209 $6,144
FY 2019 $9,587,811,000 873,022 $10,982 $1,559,334,000 249,536 $6,249
Minnesota MOE Waiver Request Attachment - page 5
Avg. FYs
2017-2019 $9,240,731,000 867,866 $10,648 $1,535,339,000 254,782 $6,026
FY 2020 $9,835,739,000 874,999 $11,241 $1,610,260,000 247,276 $6,512
FY 2021 $9,919,135,000 855,704 $11,592 $1,631,223,000 238,342 $6,844
FY 2022 $10,000,769,000 856,357 $11,678 $1,675,105,000 226,686 $7,390
FY 2023 $10,270,162,000 855,224 $12,009 $1,713,800,000 223,093 $7,682
Are there exceptional circumstances that caused the State to be unable to maintain support for
education?
Minnesota has a long record of not just maintaining but regularly increasing support for education.
However, there are exceptional circumstances that have caused Minnesota to not achieve compliance
with the proportional MOE in the ARP Act, including declining E-12 enrollment, one-time FY 2023
expenditures in areas other than education, and increased health and human services spending.
Like many other states, Minnesota has experienced declining enrollment in its public K-12 schools. The
number of pupils in K-12 public schools declined 1.5 percent from the baseline period to FY 2023.
Because Minnesota’s K-12 education funding is primarily tied to the number of students enrolled in
public schools, declining enrollment leads to lower spending than would otherwise occur. Enrollment
dropped sharply in FY 2021, due in large part to families delaying enrollment into kindergarten or
pursuing non-public or homeschool options because of the pandemic. Enrollment rebounded slightly in
FY 2022 and then decreased slightly in FY 2023, remaining 12,642 students below the average
enrollment during the baseline period. It is unsurprising that Minnesota’s per-pupil funding has
increased year-over-year, since statutory increases in the primary per-pupil funding and a special
education formula that largely reimburses prior year costs make this all but inevitable. What is notable,
however, is that year-over-year total spending has increased, even when enrollment decreased.
Declining enrollment had a significant impact on total E-12 expenditures in FY 2023, limiting Minnesota’s
ability to achieve MOE compliance.
In addition, as discussed above, the state used balances in FY 2022 to pay back federal government
loans for the unemployment insurance program during the pandemic as well as replenish this fund’s
balance to ensure a safety net for families in the future.
In FY 2023, Minnesota made an atypically large number of one-time expenditures that increased total
state spending, thereby decreasing the percentage of state spending that went towards education.
These included both pandemic-related spending and non-pandemic-related spending. This one-time
spending was possible due to a large budget surplus, much of which was one-time in nature, i.e. the
available funds were not anticipated to be available for ongoing spending. This anomalously high
amount of one-time FY 2023 spending makes a proportional spending comparison between the baseline
period of FY 2017-19 and FY 2023, as required by the ARP Act, misleading in what it suggests about
Minnesota’s E-12 education and higher education spending. Large one-time expenditures made in FY
2023 include:
- $499.9 million for pandemic frontline worker pay
- $378.3 million for early repayment of debt taken out to support stadium construction, allowing
freed up resources in future years to be used for other state priorities (such as education)
- $300.1 million to support the individual health insurance market through operating a
reinsurance program
Minnesota MOE Waiver Request Attachment - page 6
- $115 million to match federal funds coming into the state through the Infrastructure Investment
and Jobs Act (IIJA) and Inflation Reduction Act (IRA)
In addition, health and human services (HHS) spending increased substantially in FY 2023 relative to the
baseline period of FY 2017-19. The primary causes of this increase are 1) increased Medicaid
reimbursement rates to providers; 2) increases in Medicaid waiver programs; and 3) additional supports
for personal care assistance. These investments are vital to the health and well-being of Minnesotans,
issues which the pandemic brought to the front and center.
In the absence of declining E-12 enrollment, significant one-time spending, and increased HHS spending,
Minnesota would not need a waiver of the proportional maintenance of effort requirement for FY 2023.
Minnesota has not only maintained state support for education on a year-over-year basis, but it has also
chosen to direct certain resources from the State Fiscal Recovery Fund (SFRF) to elementary and
secondary education as well as to higher education as a supplement to state funds. SFRF allocations
include $75 million for E-12 summer learning, $29 million for school districts that have experienced
declining enrollment, $35 million for higher education tuition assistance, and smaller amounts for
education-related nonprofits and grants.
Has the state used or will the state use ESSER, GEER, or Higher Education Emergency Relief (HEER)
funding to replace State funding for education?
No. Minnesota has enacted increases to General Fund spending on elementary and secondary education
as well as Higher Education. ESSER, GEER, and HEER funds are supplementing these increases.
Minnesota MOE Waiver Request Attachment - page 7
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