On Nov. 3, 2026, Minnesota voters will weigh in on a proposed constitutional amendment that would change how the state’s Permanent School Fund gets distributed to schools.
The ballot question will ask Minnesotans about “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?
A “yes” vote would allow the Permanent School Fund to distribute 4.5 percent of its average market value each year. A “no” vote, or leaving the ballot question blank, would keep the current constitutional formula in place, which has been an annual distribution average of 2.5 percent of the fund’s value. The amendment would be ratified only if a majority of all electors voting in the election vote “yes.”
Here is how the fund works and what the proposed amendment would change.
The Permanent School Fund
When Minnesota became a state in 1858, the federal government granted land to the state “for the use of schools.” Today, Minnesota still owns roughly 2.5 million acres of this school trust land, which generates revenue primarily from mining, timber sales, and real estate transactions. Under the Minnesota Constitution, the revenue is deposited into the Permanent School Fund, a constitutional trust that provides annual support for K-12 public education. As of March 2026, the fund’s market value is $2.4 billion.
The fund’s investment income (from interest and dividends) is distributed twice each year (September and March) to Minnesota’s public school districts and charter schools on a per-pupil basis. But its principal can’t currently be spent, as the Minnesota Constitution requires the state to hold it in perpetuity. If the fund experiences realized investment losses, those losses are recovered over time through a statutory smoothing process that can affect future income available for distribution. This is one reason payments can fluctuate from year to year.
For FY 2026, the interest and dividends produced a record $63.8 million for the state’s 329 public school districts and 169 charter schools and academies, or about 0.5 percent of E-12 education’s budget for FY 2026. Statewide, fund distributions averaged out to about $75 per student. Anoka-Hennepin, the largest district, received $2.8 million. Minneapolis got about $2.2 million.
Schools can use these dollars for educational supplies, designing and modeling school curricula, teacher salaries, extracurricular activities, and establishing and maintaining quality facilities, according to the Minnesota Office of School Trust Lands.
What would a constitutional amendment change?
If the proposed constitutional amendment is passed, both how much the fund pays out and how that amount is calculated would change. The additional dollars are not tied to new accountability requirements or metrics to measure their effectiveness.
Instead of distributing only interest and dividends, which has amounted to around 2.5 percent of the fund’s value, the fund would distribute 4.5 percent of its three-year rolling average market value.
What supporters and opponents say
Supporters say the constitutional change is needed because the current formula limits how much of the fund’s investment growth can be distributed to schools, even in good years. They also stress that the additional school funding wouldn’t come from higher income or property taxes.
A legislative task force recommended setting the rate at 4.5 percent and averaging the fund’s value over three years. Supporters argue that protects the fund’s long-term purchasing power while letting more of its growth be distributed.
The current constitutional language says the fund’s principal is to be “perpetual and inviolate” and requires unrecovered losses to be repaid from later interest and dividends. Under the proposed changes, the principal is no longer described as inviolate, with new language saying the fund is to be managed as a “perpetual financial resource” in a way “designed to provide annual distributions while preserving the purchasing power of the fund over time, and balancing the needs of current and future beneficiaries.”
To put it another way, the current wording gives the legislature authority to set how the money is apportioned, but it can’t set how much is distributed because the Constitution caps distributions at interest and dividends. The amendment removes that cap.
The 4.5 percent rate isn’t written into the Constitution; it is in a companion statute that takes effect if voters approve the ballot question on Nov. 3, leaving a simple majority able to change it later.
Lawmakers disagreed over whether future changes to the distribution would need a two-thirds vote of both chambers.
A conference committee dropped the supermajority provision on a 7-1 vote. Sen. Robert Farnsworth expressed concern over a future single-party trifecta turning the fund into a political bargaining chip. Sen. Mary Kunesh said she feared a two-thirds supermajority would cause the fund to be used as a “pawn” and “politicized.” Rep. Spencer Igo argued that legislative attempts that undercut the constitutional language would be struck down as unconstitutional, making a supermajority requirement unnecessary.
Opponents worry about what happens in a bad stretch for markets and that tying the annual payout to 4.5 percent of the fund’s value could result in it giving out more than it made. The averaging is meant to smooth out short-term market swings but could help less during a long downturn. How risky that is for the fund depends on unknown future returns.
American Experiment economist Martha Njolomole has written:
So far, discussions around the amendment have largely ignored the state’s deteriorating fiscal outlook. This is likely because, as currently structured, the trust is entirely separate from the general fund and operates as “extra” funding for public schools.
Minnesota’s general fund budget, however, has operated on a structural deficit each year since 2024. E-12 education and Health and Human Services (HHS) are the state’s two largest expenditures — taking up over 70 percent of the budget — and the two areas likely to deliver the necessary savings to close the deficit.
The Permanent School Fund could serve as a buffer for general fund spending cuts in E-12 Education in 2027. But this will require that the trust remains solvent long-term — a difficult task to accomplish if the constitutional amendment passes.
For one, raising the annual distribution to 4.5 percent of the fund’s valuation could eat into the principal, draining the trust over time. More immediately, it means no reserve option just as lawmakers head into what will likely be a brutal 2027 budget session.
Worst of all, the allure of “extra” funds might stall necessary spending reforms required to achieve long-term fiscal stability for both schools and the state.
More on the topic
Rep. Spencer Igo (R), the bill’s co-sponsor, joined the American Experiment Podcast to discuss the proposed constitutional amendment:
Here’s education policy fellow Catrin Wigfall on the same topic: