Senate approves constitutional change to Permanent School Fund after heated debate over safeguards

The Minnesota Senate adopted a conference committee report on House File 3900, a proposed amendment to the state constitution that would change how earnings from the Permanent School Fund are defined and distributed, and send the amendment to voters in the November 2026 general election.

The bill, described on the floor by Sen. Jen Kunes h as the author, would remove the current “interest and dividends only” restriction and replace it with a distributed-earnings model tied to a market-value calculation. "The proposed amendment must be submitted to the people in the 2026 general election," Sen. Kunesh said, adding the change would treat the fund "as a perpetual financial resource" with an annual distribution policy and reporting requirements to the Legislative Permanent School Fund Commission.

The core policy change would allow distributions defined as less than 4.5% of the average net asset value of the fund over the preceding three fiscal years, eliminate the ten-year loss-smoothing formula now in place, and require the State Board of Investment to continue management of assets under laws that preserve purchasing power.

Much of the evening’s floor time focused on process and safeguards. Sen. Mike Lucero led a motion to reject the conference report and return the bill to conference committee, arguing that the Senate’s original position included a two‑thirds supermajority requirement to change spending and that conferees should have defended that language. "I believe this body needs to stand for that position," Sen. Lucero said as he urged colleagues to send the report back for further consideration.

Supporters of the conference report said conferees had held public hearings and weighed competing views in good faith. "We were in the conference committee, we heard all the different pieces...and after hearing the different arguments, 100% of the other body would not agree to the 'second thirds' suggestion," Sen. Kunesh said, explaining the decision to leave the supermajority safeguard out of the final report.

The motion to reject failed on a roll call, 33 yeas to 34 nays. The Senate then adopted the conference committee report (reported 38 yeas, 29 nays) and later moved the bill to third reading; the measure was reported passed on final passage on the floor.

Floor debate included repeated appeals to fiduciary duty to students, concerns that moving distribution language to statute (rather than locking specific percentages into the constitution) could make the fund more vulnerable to future changes, and questions about whether the constitutional language would alter the historic per‑township or per‑pupil distribution methods. Senators on both sides repeatedly framed the dispute around protecting long‑term beneficiaries — Minnesota students.

What’s next: Because the measure modifies the Minnesota Constitution, it must be submitted to voters on the November 2026 ballot. If voters approve the amendment, the statutory changes would take effect July 1, 2027 and implement the new distributed‑earnings framework.

Support for the article’s reporting is drawn directly from floor remarks recorded during the Senate session, including the author’s explanation of the amendment and roll‑call results on the motion to reject and on adoption of the conference committee report.