Decoding The School District Budget – Part 1: Where the Money Comes From

School district budgets can be intimidating. SoWashCo’s proposed 2026–27 budget contains hundreds of line items spread across multiple funds, with total revenue of approximately $443.7 million.

Understanding where that money comes from (and what restrictions come with it) is the first step toward understanding the district budget.

In this three-part series, we will examine:

1. Revenue: Where the district’s money comes from
2. Funds: Why money is separated into different accounts
3. Expenses: How the district spends its resources

Let’s begin with the district’s major revenue sources.

State Aid: Approximately $272.3 Million

State aid is SoWashCo’s largest ongoing source of revenue. Across all district funds, SoWashCo expects to receive approximately $272.3 million from the state in 2026–27. But the majority of that ($257.6 million) is deposited to the General Fund.

The two largest components of state aid are:

• General Education Aid: $174.2 million
• Special Education Aid: $70.6 million

Together, these provide approximately $244.8 million. The remaining $27.5 million comes through other formulas and programs, including long-term facilities maintenance, achievement and integration, literacy funding, school library aid, transportation aid, and funding for Community Education and Food Service programs.

Each funding stream has its own formula and purpose. Some funds are available for general operations, while others must be used for specific students, programs, or facilities. Changes in total state aid may reflect legislative decisions, enrollment, student needs, or changes within individual formulas.

Learn more: Explore SoWashCo’s State Aid

Local Revenue: Approximately $160.3 Million

Local revenue provides approximately $160.3 million, or about 36.1% of total district revenue.

This category includes property-tax levies as well as fees, interest earnings, and other locally generated revenue. Some local funding is authorized by state law and calculated through state formulas. Other funding requires voter approval, including operating levies and bonds for major construction projects.

These different sources cannot necessarily be used interchangeably.

Operating-levy revenue helps fund regular educational operations. Bond proceeds are generally restricted to the capital projects voters approved and cannot simply be shifted to salaries, classroom programming, or other routine operating expenses.

SoWashCo voters have repeatedly approved local funding to support district operations and facilities. That local support helps maintain educational services when state funding alone does not cover the full cost of operating the district.

Strong schools can also provide a broader financial benefit to the community.

Learn more: Explore SoWashCo’s Various Local Revenue Sources

Learn more: How School Districts Can Affect Local Home Values

Federal Aid: Approximately $10.9 Million

The federal government provides approximately $10.9 million, or about 2.5% of total district revenue.

Federal aid is a relatively small share of the total budget and is often restricted to specific purposes. It helps support programs such as special education, student nutrition, and services for particular student populations.

Because much of this funding is legally designated, it generally cannot be redirected to solve an unrelated budget problem.

Learn more: What Programs Does Federal Aid Support?

What About the Construction Money?

The district plans to spend approximately $102.8 million from the Building Construction Fund in 2026–27 on construction, renovation, safety, capacity, and technology projects.

Most of the money paying for this work is not new 2026–27 revenue. The district received the major bond proceeds in an earlier year and placed them in the Building Construction Fund. We’ll discuss Funds more in Part 2. As the approved projects are completed, the district draws down that accumulated balance to pay the bills.

The Building Construction Fund is projected to:

• Begin the year with approximately $165.3 million
• Receive approximately $3.7 million in current-year revenue
• Spend approximately $102.8 million
• End the year with approximately $66.1 million

This distinction is important:

• Recurring operating revenue supports the district’s ongoing services.
• Bond proceeds are received when debt is issued and held until the approved projects require payment.
• Spending previously received bond proceeds reduces fund balance but does not represent an operating deficit.
• Money restricted to construction cannot ordinarily be redirected to cover salaries, classroom programming, or a General Fund shortfall.

Unlike the prior year, the 2026–27 budget does not include a large new issuance of construction bonds. The district’s approximately $443.7 million in total revenue is therefore not inflated by a major influx of new bond proceeds. However, its approximately $550.5 million in expenditures includes substantial construction spending financed with bond proceeds received in an earlier year.

For understanding the district’s regular operating position, the General Fund budget (approximately $359.1 million in revenue and $367.1 million in expenditures) is more useful than the all-funds totals by themselves.

Fund-Balance Drawdown Is Not Revenue

The district maintains separate fund balances which are the accumulated difference between revenues and expenditures from prior years.

Across all district funds, the 2026–27 budget projects a net fund-balance reduction of approximately $106.9 million. That number sounds alarming without context, but approximately $99.1 million of the reduction occurs in the Building Construction Fund as the district spends previously received bond proceeds on approved projects.

The remaining funds are projected to decline by approximately $7.7 million combined. Within that total, the General Fund is projected to spend approximately $8.0 million more than it receives, reducing its balance from approximately $56.3 million to $48.2 million. Small projected gains in some other funds partially offset that General Fund deficit in the districtwide total.

Using fund balance can help manage a temporary shortfall, but it is not new revenue. It is similar to using savings to cover the difference between current income and current expenses.

The meaning of a fund-balance reduction depends on why the money was accumulated:

• Spending construction funds on the projects for which bonds were issued is a planned use of those balances.
• Using General Fund balance because ongoing operating expenses exceed ongoing revenue is different. If that imbalance continues, the available balance will eventually be depleted.

The district maintains multiple fund balances rather than one unrestricted savings account. State law, voter authorization, and accounting rules limit how money in certain funds may be used. A healthy balance in a restricted construction, nutrition, or debt-service fund does not necessarily mean that money is available to address a General Fund operating deficit.

We will examine those distinctions in Part 2: Understanding School District Funds.

Source: South Washington County Schools, 2026–27 Preliminary Budget, approved June 25, 2026.