What Minnesota School Business Officials Need to Know
By Aaron Bushberger, Senior Municipal Advisor
and Shelby McQuay, Senior Municipal Advisor | Managing Director
Every fall, Minnesota school districts certify a property tax levy driven by statutory formulas and allowances and enrollment estimates that determine how much local taxpayers contribute to school operations and debt repayment for the year ahead. And every fall, a handful of avoidable errors ripple forward into future levies, producing swings that districts must then explain to property owners.
The Pay 27 cycle is no different. With August reporting requirements now in the rearview and certification in full swing, it’s worth revisiting how the levy is actually calculated, where errors tend to creep in, and what districts can do now to protect accuracy.
We encourage you to reach out to your Ehlers advisors if you have questions about your levy or would just like another set of eyes on your report. Our advisors routinely assist districts with levy review and strategy, including providing districts with preliminary tax base from your counties and giving you an initial look at the estimated tax impact of your Pay 27 levy.
Two Tax Bases, One Equation
School district levies are spread across two different tax bases, which is the first source of confusion for anyone trying to explain a tax bill. The underlying math, though, is simple: the tax rate is the corresponding levy divided by the corresponding tax base.
That simplicity is deceptive. Both sides of the equation move. The levy changes as enrollment, debt schedules, and statutory formulas shift. The tax base changes as property values rise and fall across residential, agricultural, commercial, and industrial classifications. A district can hold its levy flat and still see rates (and thus taxes) move, or grow its levy and see rates fall, depending entirely on what happened to the base. Understanding which variable drove the change is essential before a district tries to communicate the outcome to its community.
What Actually Shapes the Calculation
Two factors dominate. The first is enrollment data — both students served and resident students. The second is debt service, meaning the district’s annual repayment obligations.
Beyond those primary drivers sit a set of additional factors that shape individual levy components: actual expenditures, building age, the population of the district, voter approval, and unique programs like career and technical education. Each of these feeds particular authorities, which is why two districts of similar size can end up with meaningfully different levies.
The Three-Step ADM Adjustment
Average daily membership deserves special attention because of how the adjustment mechanism works.
The Pay 27 levy is initially calculated using an estimate of next year’s ADM — the 2027-28 school year. That estimate is then adjusted based on first prior year ADM estimates from 2026-27 and adjusted again using final third prior year ADM from 2024-25. In other words, a single enrollment estimate touches the levy three separate times across multiple cycles.
This is precisely why significantly overestimating or underestimating enrollment is costly. An enrollment miscalculation doesn’t simply correct itself quietly. It triggers adjustments, and those adjustments produce property tax swings that land on taxpayers in a later year, disconnected from the decision that caused them.
Resident ADM plays a related but distinct role: it determines the state aid and local levy mix for equalized funding formulas. Get resident ADM wrong and a district misallocates between state and local shares — again with downstream consequences.
Debt Service
Debt service levies are set at 105% of scheduled debt service payments, with the cushion accounting for collection shortfalls. Where districts anticipate future bond issues — say, facilities maintenance bonds to be issued next spring to fund a summer 2027 roofing project — estimates are built into the calculation.
Because existing debt and potential future issuances both feed this calculation, verification of debt levy figures is one of the highest value reviews a district can perform before certification, which is another reason we cross-check this on your behalf.
The Bottom Line
School district levies are complicated — that is the honest starting point for any conversation with a school board or a taxpayer. Accurate estimates matter not only because they shape the current levy, but because they reverberate into future ones through the adjustment mechanism.
Districts that invest time in a year-over-year comparison, verify their debt figures, and pressure-test their enrollment assumptions before deadlines arrive spend far less time explaining surprises later.
Have questions or need assistance with your interpreting your district’s levy or preparing your annual TNT presentation? Use the link below to contact us or sign up for TNT services today!
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