The Key Takeaway
Minnesota does not send school districts one unrestricted payment. State funding is assembled from many formulas. Some revenue follows enrollment and can support general operations, while other revenue is generated for specific students, services, or costs and must be used accordingly.
In 2026–27 the district expects to receive $272.3 million in total State Aid. Of that total, $257.6 million is recorded in the General Fund. This represents 71.7% of all General Fund revenue.
Changes in enrollment, student needs, state formulas, and eligible district costs can all change revenue, even when the Legislature says the per-pupil formula is increasing.
“State aid” is a collection of different funding streams
When a school budget says money comes from the state, it can sound as if the Legislature simply chooses a total amount and sends it to the district. Minnesota school finance is more complicated.
The state establishes formulas for different purposes. The district then generates revenue under those formulas based on factors such as:
- how many students it serves;
- the grade levels of those students;
- the number of students qualifying for particular services;
- local property wealth;
- prior-year eligible expenses; and
- performance or program requirements established in law.
The resulting payments are all recorded as state aid, but they are not interchangeable. Some support the district’s basic operating budget. Others are reserved for a defined purpose or reimburse only part of an eligible cost.
State Aid – General Fund: $257.6 million
South Washington County Schools budgeted $257.6 million in state aid within its General Fund. The district’s budget narrative identifies the following major streams:
| State revenue stream | 2026–27 budget | What primarily drives it |
|---|---|---|
| General Education Aid | $174.2 million | Enrollment and several formulas within the general education system |
| Special Education Aid | $70.6 million | Eligible special education costs and statutory reimbursement formulas |
| Permanent School Fund | $1.4 million | Pupil units and annual trust-fund distribution |
| Literacy Incentive Aid | $1.0 million | Reading proficiency and growth measures |
| Nonpublic Pupil Transportation Aid | $0.9 million | Eligible transportation costs and students transported |
| Student Support Personnel Aid | $0.6 million | Eligible student-support staffing |
| School Library Aid | $0.2 million | Formula-based aid reserved for allowable library uses |
These highlighted programs total about $248.9 million. The district’s General Fund revenue summary reports approximately $8.6 million of additional state aid across other programs and accounting lines that are not individually described in the budget narrative.
The two dominant sources are General Education Aid and Special Education Aid. Together, they account for about 95% of all state aid budgeted in the General Fund.
General Education Aid: $174.2 million
General Education Aid is SoWashCo’s largest source of state funding. Although it appears as a single line in the district budget, it combines multiple formulas based on enrollment, student needs, local property wealth, transportation responsibilities, operating capital, and other adjustments.
The largest component is the Basic Formula, which provides SoWashCo with a projected $154,177,954 for 2026–27. This calculation begins with the statewide allowance of $7,683 per adjusted pupil unit.
Other components provide funding for purposes such as compensatory education, English learner services, gifted and talented programming, operating capital, and transportation-related adjustments. Some of these funds have specific restrictions on how they may be used.
Learn more: What Is Included in General Education Aid?
Special Education Aid: $70.6 million
SoWashCo projects approximately $70.6 million in state Special Education Aid, its second-largest state funding stream. The district reports serving approximately 4,178 students with disabilities.
Special education funding is based primarily on eligible costs, not a single flat amount for every student receiving services. The state formula includes several components:
- Initial aid, calculated from eligible special education expenditures under statutory formulas;
- Excess-cost aid, for districts whose unreimbursed special education costs are high relative to general education revenue;
- Special education transportation aid, which reimburses a share of eligible transportation costs; and
- Cross-subsidy reduction aid, intended to reduce the amount of unrestricted General Fund revenue districts must redirect to pay required special education costs.
The key word is reduce. Special Education Aid does not necessarily cover the district’s entire cost of providing legally required services. The remaining gap is commonly called the special education cross-subsidy. When that gap grows, the district must use other General Fund revenue to cover it.
Minnesota also changed the transportation component for fiscal year 2027. Most qualifying special education transportation costs are now reimbursed at 90%, rather than 100%, although certain categories remain fully reimbursed. The district’s budget narrative appears to describe the prior 100% rule, so the final amount will depend on how the updated law is reflected in the district’s aid estimate.
Permanent School Fund: $1.4 million
Minnesota distributes earnings from its constitutionally established Permanent School Fund based on pupil units. SoWashCo used an estimated distribution of $64.64 per pupil unit for 2026–27.
Literacy Incentive Aid: $957,000
This aid is driven by measures of third-grade reading proficiency and reading growth from third to fourth grade. Unlike basic formula revenue, the amount is connected to defined academic results.
Nonpublic Pupil Transportation Aid: $912,000
School districts have transportation responsibilities for eligible nonpublic-school students living within their boundaries. This state aid uses prior-year transportation costs and current students transported to help fund that obligation.
Student Support Personnel Aid: $626,000
This funding supports eligible positions such as school counselors, psychologists, social workers, nurses, and chemical-dependency counselors. State law limits how the aid may be used.
School Library Aid: $213,000
This revenue is reserved for allowable library costs, including library-media personnel, resources, technology, furniture, equipment, and supplies.
State Aid – Outside the General Fund: $14.7 million
Most of SoWashCo’s state aid is recorded in the General Fund, but approximately $14.7 million is budgeted in other funds for 2026–27. Because these revenues are recorded in separate funds and have specific purposes, they are not available to support the district’s regular General Fund operations or close its unrestricted operating deficit.
Food Service Fund: $8.7 million
State aid to the Food Service Fund helps provide student meals. It is combined with federal reimbursements and locally generated revenue and must remain within the district’s nutrition program.
Community Service Fund: $3.4 million
State aid to the Community Service Fund supports programs outside the regular K–12 school day, including School Readiness, Early Childhood Family Education, Adult Basic Education, and other community education services.
Debt Service Fund: $2.6 million
State aid to the Debt Service Fund helps make principal and interest payments on qualifying district debt, reducing the amount that must be collected through local property taxes.
What should parents look for?
When state revenue changes, the most useful question is not simply, “Did state aid go up or down?” Ask what changed underneath the total:
- Did enrollment change? A formula increase does not guarantee a comparable increase in total revenue when enrollment is falling.
- Is the money unrestricted or reserved? New targeted aid may increase total revenue without providing money that can close the district’s general operating gap.
- Does the revenue cover the full cost it is meant to support? Reimbursement-based aid may still leave a cross-subsidy.
- Is the amount ongoing? A permanent formula change has a different long-term effect than one-time aid.
- Is state aid replacing local taxes, or adding resources? Equalization aid can shift who pays without changing the total funding available to the district.
- Which assumptions are estimates? Enrollment, student eligibility, eligible expenditures, and final state calculations can all cause actual aid to differ from the original budget.
The bottom line
State funding supplies nearly three-quarters of SoWashCo’s General Fund revenue, but that funding arrives through many formulas with different purposes and restrictions.
Understanding those pieces makes budget changes easier to interpret. A rising state-aid total does not automatically mean the district has the same percentage increase available for general operations. The real impact depends on which formula changed, which students or costs generated the revenue, and whether the money is available for the decision being discussed.