Budget and Finance

School District 197 is committed to using resources in ways that support student learning and maintain strong, sustainable programs.

On this page, you’ll find an update on the district’s budget, the financial challenges impacting schools today, how public school funding works in Minnesota, and how resources are used across our district.

2026-27 Budget Update

School District 197 is continuing a multi-year cost-containment effort as we build the 2026–27 budget and plan for long-term financial stability. Like districts across Minnesota, we are facing rising costs—from salaries and benefits to transportation and operations—while state funding has not kept pace with inflation. As a result, the district is planning approximately $2.5 million in budget reductions (2–3%) for the 2026–27 school year, following $700,000 in reductions already implemented this year.

Even with these steps, our focus remains clear: protecting classroom learning and supporting students. Class size parameters are expected to remain unchanged, continuing a long-standing commitment to consistency for students and families. We are also taking a thoughtful approach to reducing costs in other areas—such as limiting discretionary spending, adjusting operations, and identifying efficiencies—while working to remain a competitive employer and maintain strong programs.

We know these are challenging decisions. With over 80% of our budget dedicated to staffing, some position adjustments are necessary. We are committed to making these decisions carefully, guided by what matters most: student learning, responsible stewardship of resources, and long-term financial health. We will continue to share updates as the budget is finalized and are grateful for our community’s ongoing support.

Understanding Today’s Financial Challenges

School District 197—like districts across Minnesota—is facing increasing financial pressure as the cost of educating students continues to rise faster than available funding.

Key factors include:

Inflation and rising operational costs (transportation, utilities, supplies)
Increased student needs and services, including special education
Unfunded or underfunded state mandates
State funding that has not kept pace with inflation and is capped in key areas

We are not alone in this challenge. A recent survey by the Association of Metropolitan School Districts (AMSD) found that Minnesota school districts collectively face a projected budget shortfall of at least $223 million for the 2026–27 school year, highlighting the widespread financial pressures impacting public education across our state.

These pressures lead to what’s known as a structural budget gap—a long-term imbalance where ongoing expenses grow faster than ongoing revenue. In our case, the district is projecting about 1% annual revenue growth compared to 3% annual expenditure growth. Even with budget reductions, this gap continues to widen over time.

The video below, produced by the Minnesota Association of School Administrators (MASA), breaks down why so many school districts in Minnesota are making budget cuts and going to voters for more funding.

How are Schools Funded?

Our primary source of funding comes from the State of Minnesota. The legislature decides the state's K-12 basic funding levels, as well as directing what services schools must provide. In determining how much funding we receive, the legislature uses a complex formula that considers the number of students, special needs within our district, property wealth and several other factors. For our school district, the state currently funds 70.9% of our budget.

Elementary and secondary education in Minnesota is financed through a combination of state-collected taxes (primarily income and sales taxes) and locally collected property taxes. Watch the videos below to see how it works!

Revenue for School Districts is Received in These Major Categories

Revenue from the State of Minnesota comes in four categories.

General Education Aid: The largest share of the education finance appropriation, general education aid, is intended to provide the basic financial support for the education program.
Categorical Aids: Categorical revenue formulas are generally used to meet costs that vary significantly between school districts (i.e., special education) or promote certain types of programs (i.e. integration, adult basic education).
State Paid Property Tax Credits: Property tax credits reduce the amount of property taxes paid. To make up for this reduction, the state pays the difference between what was levied in property taxes and what is actually received in property taxes to school districts and other taxing districts.
Property Tax Levies: Property tax levies are usually determined as part of a formula that includes state aid. The largest share of the levy is from voter-approved levies, the excess operating referendum and debt service levies. General education funds pay for operating expenses, including salaries, benefits and supplies. Funds are also distributed to schools and sites. When there is not enough funding within the budget, the School Board may ask voters to approve an operating referendum levy.

School District 197 Funding

School District 197’s funding comes from a mix of state, federal, and local sources, each playing an important role in supporting our schools.

Where our funding comes from:
- 70.9% – State funding
- 2.4% – Federal funding
- 26.7% – Local funding
Local funding breakdown:
- Approximately two-thirds comes from voter-approved referendum funding
- The remaining portion comes from other levies, based on state formulas and approved by the School Board
Our commitment:
- The School Board serves as a careful steward of taxpayer funds
- We work to keep property tax levies as low as possible while continuing to support strong schools

School District 197 Expenditures

From instructional materials and technology advancements to faculty salaries and facility maintenance, how a school district spends money directly impacts the quality of education and overall student experiences. Here’s a look at our general fund expenses by program type:

44%: Regular Instruction, examples include teachers, paraprofessionals, and substitute teachers; instructional materials; and intervention programs.
22% Special Education Instruction, examples include teachers, paraprofessionals, and contracted services.
11% Pupil Support Services, examples include counselors and nurses, school security, and transportation.
9% Instructional Support Services, examples include curriculum, instruction, and assessment; instructional technology; and staff development.
8% Sites and Buildings, examples include operations and maintenance, utilities, and deferred maintenance.
5% District Support Services and Administration, examples include community relations, principals, and human resources.
1% Fiscal and Other Fixed Costs, examples include property and liability insurance, and unemployment insurance.

Note: We spend one-third less than the metro average on all forms of administration costs—things that students don’t directly see. And the money we save is money we put into the classrooms.

Budget Frequently Asked Questions

How are budget decisions made?

What is a fund balance?

How can the community get involved in the budget process?

Where can I find detailed budget documents?

Does more community growth mean more taxpayer funding for the school?

While more households do add to the tax base, the state-controlled funding formula has not kept pace with inflation. This means that funding for operating expenses lags behind what is needed, and capital expenses are not covered at all.

For decades, the increase in the basic funding formula has often lagged behind the rising costs of utilities, transportation, and classroom supplies. This gap creates inflationary pressure, where the cost of providing the same high-quality education increases faster than the state’s contribution. The result is that even if the district grows, state funding doesn’t cover as much of our expenses as it used to.

How does student enrollment impact the budget?

Are there limits or constraints that dictate how money can be spent?

Yes. There are a variety of constraints that determine how money can be spent including employee contracts, state statutes, mandated services and new legislative requirements, not all of which are funded at the levels needed to cover the associated costs.

The general fund is the most flexible funding source. General fund revenue accounts for approximately 76% of the school district's budget. Other funds, including the food service fund, community service fund, debt service fund and construction fund, can only be spent on a defined set of expenses.

Do my property taxes go to my local school or to the district?

Didn't the legislature just provide historic funding to school districts?

We are grateful for the recent increase in state funding and appreciate the legislature’s investment in public education. The 2023–2024 legislative session saw increases in public education funding, which for one year slightly exceeded the rate of inflation. However, decades of underfunding cannot be instantly reversed, and ongoing inflation continues to widen the financial gap.

In addition, while overall funding has increased, some key areas remain underfunded. The state does not fully cover the costs of required services like special education and English learner programs. As a result, districts must use general education funds to make up the difference—putting additional pressure on their overall budgets.