Local Revenue Is More Than Property Taxes

When people hear “local school revenue,” they often think exclusively about property taxes. Property taxes are the largest source, but they are not the only one. SoWashCo receives local revenue through several pathways:

• Property tax levies
• Program fees and tuition
• Athletic and activity fees
• Admission and other student fees
• Reimbursements for eligible services
• Interest earned on district funds
• Donations, grants, insurance recoveries, and miscellaneous revenue
• Revenue generated by programs outside the General Fund

The word “local” is an accounting classification. It does not always mean the money was paid directly by a district resident. For example, some reimbursements recorded as local revenue may ultimately come through health plans, government programs, or other third-party payers.

Where SoWashCo’s Local Revenue Is Budgeted

Local revenue appears in nearly every district fund:

Fund	2026–27 local revenue
General Fund	$96.0 million
Food Service Fund	$2.2 million
Community Service Fund	$14.3 million
Building Construction Fund	$3.7 million
Debt Service Fund	$43.8 million
Custodial Fund	$20,500
OPEB Trust Fund	$200,000
Total	$160.3 million

This total should not be interpreted as $160.3 million available for regular school operations.

Debt Service revenue must be used to repay debt. Building Construction revenue remains with construction projects. Food Service and Community Service revenue support the activities accounted for in those separate funds.

For operating-budget discussions, the most relevant starting point is the $96.0 million budgeted as General Fund local revenue.

Local Revenue – General Fund: $96.0 Million

Local revenue represents approximately 26.7% of the district’s $359.1 million in total General Fund revenue. The largest component of Local Revenue accounted in the General Fund is the Property Tax Levy:

General Fund Local Revenue described in the budget	2026–27 amount
Property Tax Levy	$88.3 million
Third Party Billing	$2.5 million
E-Rate Funding	$330,000
Athletic and Activity Participation Fees	$698,200
Admission and Other Student Fees	$1.3 million
Interest Earnings	$2.3 million
Other Local Revenue	$1.2 million

Property Tax Levy: $88.3 million

Property taxes are the district’s second-largest General Fund revenue source after State Aid.

The School Board does not have unlimited authority to determine how much property tax revenue the district will collect. Minnesota law establishes the purposes for which school districts may levy taxes and the formulas or limits that apply.

Some levy authority is available under state law and may be approved annually by the School Board. Other authority requires voter approval. The Minnesota Department of Education calculates the district’s maximum levy authority through the annual levy limitation and certification process.

The levy collected from property owners during calendar year 2026 generally provides school district revenue for fiscal year 2026–27.

A Levy Is Not the Same as a Tax Rate

A property tax levy is the total amount of property tax revenue a taxing authority is authorized to collect.

The tax rate is the percentage applied to taxable property values to raise that revenue. An individual property owner’s bill depends on several additional factors, including:

• The property’s assessed value
• Its property classification
• Changes in the value of other property within the district
• The type of levy being collected
• State property tax credits or exclusions
• Levies imposed by other local governments

This means the district’s total levy can increase without every homeowner’s school taxes increasing by the same percentage.

It also means a property can experience a tax increase even when the district’s total levy changes relatively little, particularly if that property’s value grew faster than the surrounding tax base.

Property Wealth Affects the Tax Rate Required

The same amount of school revenue does not produce the same tax rate in every Minnesota school district.

A district with more taxable property value per student can raise a given amount of revenue using a lower tax rate than a district with less taxable property value per student.

Minnesota uses state aid to equalize some school levy programs. Under an equalized formula, the state pays a greater share for districts with lower property wealth, reducing the amount that must be collected locally.

Not every levy is equalized, and different levy programs use different equalization formulas. As a result, the division between state aid and local property taxes varies by district and by program.

The state and local portions may change without changing the total amount of revenue generated by the underlying formula.

Components of the General Fund Property Tax Levy

SoWashCo’s $88.3 million General Fund property tax levy is divided among several purposes:

Property Tax Levy Component	2026–27 Amount	Share of General Fund Levy
Operating Levy and Local Operating Levy	$62.3 million	70.5%
Long-Term Facilities Maintenance	$7.2 million	8.1%
Capital Projects	$5.6 million	6.4%
Lease Levy	$5.1 million	5.8%
Operating Capital	$2.2 million	2.5%
Alternative Teacher Professional Pay System	$1.8 million	2.1%
Other Post-Employment Benefits	$1.1 million	1.3%
Safe Schools	$1.1 million	1.2%
Achievement and Integration	$1.0 million	1.2%
Career and Technical Education	$872,854	1.0%
Total	$88.3 million	100.0%

Although all of this revenue is collected through property taxes, it does not all have the same level of spending flexibility.

Operating Levy and Local Operating Levy: $62.3 million

This is the largest Local Revenue source in the General Fund.

SoWashCo combines its operating levy (Operating Referendum) and local operating levy (Local Optional Levy) into a single line in the preliminary budget. This category includes property tax revenue authorized to support general school operations.

Operating Referendum revenue is approved by voters and generally provides a specified amount of revenue per pupil.

Local Optional Levy is established under state law and represents the property tax-funded portion of Local Optional Revenue. That is why Local Optional Revenue appears in both this Local Revenue article and the State Aid article. The state-aid portion reduces the amount that must be collected from local taxpayers. It does not create a separate additional program.

Operating levy revenue is generally more flexible than many of the smaller levy categories, making it particularly important to the district’s recurring operating budget.

However, the preliminary budget combines multiple operating levies into one number. It does not show how much of the $62.3 million comes from each voter-approved referendum or other operating levy authority.

Read More: Exploring SoWashCo’s Operating Levy and Local Optional Levy

Operating Capital: $2.2 million

Operating Capital Revenue helps districts pay for eligible capital-related costs, including equipment, technology, building improvements, and other allowable expenditures.

Like Local Optional Revenue, Operating Capital can include both state aid and local property tax revenue.

SoWashCo expects to receive:

• $2.5 million in state Operating Capital Aid
• $2.2 million from the local Operating Capital levy

Together, those sources provide approximately $4.7 million in Operating Capital Revenue for 2026–27.

These funds are restricted to eligible operating-capital purposes. They cannot be treated as unrestricted operating revenue simply because they are recorded in the General Fund.

Capital Projects: $5.6 million

Capital Projects levy revenue supports capital expenses authorized for the district’s capital projects program.

Capital expenses can include technology, equipment, building improvements, and other long-term assets. The specific eligible uses depend on the levy authority under which the revenue was approved.

This revenue is reserved within the General Fund. It is separate from bond proceeds recorded in the Building Construction Fund.

That distinction matters: a capital levy and a bond sale may both fund physical or technological assets, but they are different financing mechanisms and are accounted for separately.

Achievement and Integration: $1.0 million

Achievement and Integration Revenue supports approved activities intended to reduce racial and economic enrollment disparities, improve integration, and address achievement gaps.

The program is supported through a combination of state aid and local levy revenue. The local portion must be used for activities included in the district’s approved Achievement and Integration plan.

It is not unrestricted operating revenue.

Long-Term Facilities Maintenance: $7.2 million

Long-Term Facilities Maintenance revenue, commonly called LTFM, supports eligible maintenance, health and safety, accessibility, and facility-preservation projects.

As discussed elsewhere in this series, LTFM revenue may be generated through a combination of state aid and property tax levy. Districts can also issue bonds supported by future LTFM revenue.

The $7.2 million shown here is the General Fund levy component budgeted for 2026–27. It is not the same as proceeds from an LTFM bond sale. LTFM revenue must be used for approved facility purposes. It cannot be redirected to pay for regular classroom operations or close the district’s unrestricted operating deficit.

Lease Levy: $5.1 million

The Lease Levy helps school districts pay eligible lease and facility costs.

Rather than owning every space or facility used for district programming, a district may lease property or participate in eligible arrangements with another public entity. Minnesota law allows districts to levy for certain approved lease expenses.

The revenue is tied to eligible lease obligations and cannot simply be repurposed for unrelated operating expenses.

Alternative Teacher Professional Pay System: $1.8 million

The Alternative Teacher Professional Pay System is commonly known as Q Comp.

Q Comp supports an approved teacher compensation and professional development system. Funding can support activities such as career advancement opportunities, job-embedded professional development, teacher evaluation, and performance-based compensation.

The program is funded through both state aid and a local property tax levy. The levy revenue must support the district’s approved Q Comp program.

Safe Schools: $1.1 million

Safe Schools levy revenue supports eligible school safety activities.

Depending on the applicable requirements, allowable expenses may include school security, violence prevention, emergency response, and certain student support or safety personnel.

These funds are reserved for eligible Safe Schools purposes.

Career and Technical Education: $872,854

Career and Technical Education levy revenue helps reimburse eligible costs associated with approved secondary career and technical education programs.

The formula is connected to qualifying program expenses. Revenue must support eligible career and technical education activities rather than general district operations.

Other Post-Employment Benefits: $1.1 million

Other Post-Employment Benefits, commonly called OPEB, are benefits promised to eligible former employees after their employment ends. These most commonly involve post-retirement insurance costs.

The district’s General Fund levy includes revenue for eligible OPEB obligations.

This is separate from the district’s OPEB Trust Fund, which holds assets previously set aside for post-employment benefit costs.

Other General Fund Local Revenue

Property taxes account for most General Fund local revenue, but the district expects to receive several other types of locally classified revenue.

Third Party Billing: $2.5 million

The district provides certain health-related services to students receiving special education.

When a service is eligible and the required documentation is complete, the district can seek reimbursement from a third-party payer. These payments help offset costs the district incurs while providing the service.

Although the reimbursements are classified as local revenue in the district budget, “third party” does not necessarily mean the student’s family pays the district directly. The payment may come through a public or private health coverage program.

The revenue depends on:

• Which services are eligible
• Whether the student has qualifying coverage
• Whether required family permissions and documentation are in place
• Whether the district successfully submits and collects the claim

Third Party Billing therefore recovers a portion of costs already incurred. It is not an unrestricted payment for serving a student.

E-Rate Funding: $330,000

The district’s preliminary budget labels this category “E-Rate Funding,” but its explanation describes reimbursement for eligible telecommunications and internet costs at a rate dependent on state funding. It also says the amount is reduced by any federal E-Rate funding received.

The published description therefore appears to refer to a telecommunications reimbursement that interacts with the federal E-Rate program, rather than solely to federal E-Rate revenue.

The funding directly offsets eligible telecommunications and internet expenditures. The budget does not provide enough detail to separate the state, federal, or locally classified portions of the reimbursement.

Athletic and Activity Participation Fees: $698,200

Students pay participation fees for athletics and certain activities. These fees help offset costs such as coaching staff and program operations.

SoWashCo lowers participation fees for families that qualify for free or reduced-price meals.

Participation fees do not necessarily cover the complete cost of offering athletics and activities. The remaining cost may be supported by other General Fund revenue.

Admission and Other Student Fees: $1.3 million

This category includes revenue from sources such as:

• Admission to district activities
• Parking permits
• Class fees
• Replacement charges for lost books or materials
• Transcript fees
• Other allowable student charges

Minnesota law limits the circumstances in which public school districts may charge students. Fees cannot replace the district’s obligation to provide a free public education.

The preliminary budget combines these individual revenue sources into one total.

Interest Earnings: $2.3 million

The district earns interest by investing available cash in permitted financial instruments.

School districts do not receive all revenue and make all payments on the same day. Funds held temporarily can be invested until needed, subject to Minnesota laws governing public funds.

Interest revenue depends on:

• The amount of cash available to invest
• How long the district holds that cash
• Market interest rates
• The timing of revenue collections and expenditures

Higher fund balances and higher interest rates can increase earnings. As cash balances decline or interest rates fall, this revenue can also decrease.

Interest should therefore be treated cautiously in long-term forecasting. It is recurring in the sense that the district regularly invests available cash, but the amount is not guaranteed to remain at its current level.

Other Local Revenue: $1.2 million

This category includes several smaller sources of revenue, such as:

• Donations
• Local grants
• Fees for services
• Insurance recoveries
• Other miscellaneous income

The district’s preliminary budget reports the combined total but does not identify the individual sources or amounts.

Some of this revenue may be recurring. Other items, such as an insurance recovery or one-time donation, may not continue in future years.

That distinction cannot be determined from the published total alone.

Local Revenue – Outside the General Fund: $64.3 million

Food Service Fund: $2.2 million

Food Service local revenue can include payments for meals, à la carte purchases, catering, and other nutrition-related services.

These dollars remain in the Food Service Fund. They support nutrition operations and cannot be redirected to balance the General Fund.

The preliminary budget reports the total but does not provide a detailed breakdown of its individual sources.

Community Service Fund: $14.3 million

Local revenue is the largest funding source for the Community Service Fund.

This fund supports programs operating outside regular K–12 instruction, including community education, early childhood programs, school-age care, adult education, and other fee-supported services.

Local revenue can include:

• Preschool tuition
• School-age care fees
• Community education class fees
• Facility-use revenue
• Program charges
• Other service-related income

Unlike the General Fund, many Community Service programs operate partly through direct fees paid by participating families or community members.

The preliminary budget reports one combined local-revenue total for the fund. It does not show how much comes from each program or fee.

This distinction is especially important when reviewing the financial position of preschool or other Community Service programs. Revenue generated by one activity may not be interchangeable with revenue restricted to another program or reserve.

Building Construction Fund: $3.7 million

The Building Construction Fund accounts for construction, additions, and major renovation projects.

Bond proceeds are generally recorded as other revenue when debt is issued. The fund’s local revenue may include investment earnings and other project-related receipts.

Regardless of classification, revenue within this fund remains committed to construction and other authorized project purposes. It cannot be redirected to regular district operations.

The preliminary budget does not itemize the sources included in the $3.7 million local-revenue total.

Debt Service Fund: $43.8 million

The Debt Service Fund receives local property tax revenue to make scheduled principal and interest payments on district debt.

Minnesota law generally sets the debt service levy at 105.0% of scheduled debt payments. The additional margin helps ensure that payments can be made even if some property taxes are paid late or become delinquent.

This does not allow the district to accumulate unlimited excess revenue. The Minnesota Department of Education monitors Debt Service fund balances. If the balance exceeds the amount needed for upcoming obligations, the district’s future levy may be reduced.

Debt Service revenue is legally separate from operating revenue. It cannot be used to hire staff, reduce class sizes, or close the General Fund deficit.

This is why a district can be collecting substantial property tax revenue while simultaneously needing to reduce its operating budget.

Custodial Fund: $20,500

The Custodial Fund holds resources the district administers on behalf of third parties, such as donor-directed scholarship funds.

The district acts as custodian rather than treating the money as its own operating revenue.

OPEB Trust Fund: $200,000

The district established an irrevocable trust to hold assets set aside for Other Post-Employment Benefits as we describe in our Expenses article.

The trust’s local revenue may include investment earnings. Those assets are restricted to eligible post-employment benefit obligations and are not available for general district operations.

Why Local Revenue Changes

Local revenue can change for many different reasons.

Property tax revenue may change because of:

• Voter approval or expiration of a referendum
• Changes in state levy formulas
• Enrollment changes
• Changes in taxable property value
• New construction within the district
• Changes in state equalization aid
• Debt issuance or repayment schedules
• Prior-year levy adjustments

Other local revenue may change because of:

• Participation in athletics, activities, preschool, or school-age care
• Changes in program fees or tuition
• Interest rates and available cash balances
• The volume of eligible third-party claims
• Insurance recoveries
• Donations or local grants
• One-time transactions

A change in local revenue does not automatically indicate that the School Board raised or lowered property taxes. The change may occur in a fee-supported program, a reimbursement account, construction fund, or debt schedule.

Even within property taxes, the cause matters. A levy can increase because voters approved new authority, because the state formula changed, or because an existing formula generated a different amount.

What Local Revenue Can and Cannot Do

Some local revenue provides meaningful operating flexibility.

Operating levy revenue, interest earnings, and certain miscellaneous receipts can help support the district’s regular General Fund budget. These sources can pay for costs that state or federal grants do not fully cover.

However, much of the district’s local revenue remains restricted:

• Debt Service levies must repay debt.
• LTFM revenue must support eligible facility projects.
• Operating Capital revenue must support eligible capital costs.
• Capital Projects revenue must remain with authorized capital purposes.
• Safe Schools revenue must support eligible safety activities.
• Q Comp revenue must support the approved compensation program.
• Food Service revenue must remain in the Food Service Fund.
• Community Service revenue belongs to the applicable community programs and reserves.
• Construction revenue must remain with authorized projects.
• OPEB Trust assets must support post-employment benefit obligations.

The source of a dollar does not determine whether it is flexible. A locally raised dollar can be just as restricted as state or federal aid.

Bottom Line

Local revenue is not one pool of money.

SoWashCo budgeted $160.3 million in local revenue across all funds for 2026–27, but only $96.0 million is recorded in the General Fund. Of that General Fund amount, $88.3 million comes from property taxes divided among multiple operating and restricted purposes.

The remainder comes from reimbursements, fees, interest, donations, grants, and other district activity.

Understanding the individual components matters more than the total. Property taxes collected for debt cannot solve an operating deficit. Fees paid for Community Service programs cannot automatically support K–12 classrooms. Facility levies cannot be redirected to staff salaries.

The useful question is therefore not simply, “How much local revenue does the district receive?”. It is:

Where is the revenue recorded, what generated it, and what is the district legally allowed to use it for?

Sources

• SoWashCo Schools 2026–27 Preliminary Budget
• Minnesota Department of Education: Payable 2026 Levy Forms and Instructions
• Minnesota House Fiscal Analysis: Financing Education in Minnesota