South Washington County Schools is preparing for a significant financial adjustment as district leaders work to address deficit spending, declining enrollment and a state funding system they say has not kept pace with inflation.
The financial picture was presented to the School Board at its workshop Thursday, Sept. 10 as part of a series of updates covering the district’s preliminary property tax levy, its budget adjustment process and its 2023-2028 strategic plan. The district will hold a listening tour now through December 2026 as part of the process. More can be found the district website at sowashco.org/next-5yrs.
As to the funding process, school districts must establish their preliminary levy by Sept. 30 for property taxes payable the following calendar year. Taxes collected in 2027 will become district revenue for the 2027-28 school year. Local levies account for about 25 percent of the district’s General Fund revenue. 
Unlike cities and counties, which operate on calendar-year budgets, school districts begin their fiscal year July 1. That means property taxes payable in 2027 will support the district’s 2027-28 fiscal year. 
District officials emphasized that Minnesota school funding is heavily regulated. The state establishes formulas that determine much of a district’s revenue, sets local school tax policy and establishes maximum authorized property tax levies. Districts can levy less than the state-authorized amount, but generally cannot levy more unless voters approve additional operating or capital funding. 
A major concern at present is the gap between inflation and Minnesota’s basic general education formula. For 2026-27, the formula increased 2.69 percent, or $202 per pupil, to $7,683. The 2027-28 increase has not yet been determined but will be tied to inflation, with a minimum increase of  two percent and maximum of three percent.
District figures showed the current formula would have to increase another $1,516 per student, or 19.7 percent, to $9,199 to match inflation since 2002-03. The district estimated the cumulative budget impact of that funding gap at more than $31 million. 
Special education funding presents another financial challenge. According to figures cited from the Minnesota Department of Education, statewide special education costs were underfunded by $503 million in fiscal year 2024. Despite recent funding improvements, the gap is projected to remain approximately $448 million in fiscal year 2027. Districts have traditionally addressed those gaps by reducing regular program spending, increasing referendum revenue or using a combination of both. 
Aan increase in a district's property tax levy meanwhile does not necessarily translate into an equivalent increase in spending. Levy amounts are driven by numerous state formulas and voter-approved referendums, and some increases in property taxes are offset by decreases in state aid. District expenditures remain constrained by state revenue formulas, voter-approved levies and available fund balance. 
The School Board is scheduled to approve the preliminary 2026 Pay 2027 levy at its Sept. 24 meeting, followed by approval of the final levy in December. 
Those broader financial pressures are feeding directly into the district’s budget adjustment process.
Assistant Superintendent Kelly Jansen and District Director of Business Services Kris Blackburn outlined a process intended to produce short-term reductions for the 2027-28 school year while moving more complicated structural questions into a longer-range planning effort.
The district’s immediate goal is to develop a plan addressing deficit spending, with changes taking effect in fall 2027. Ideas requiring more time to study or implement will move into a separate process for “Planning for the Next Five Years.”
The scale of the adjustment is substantial. The district’s strategic planning documents state that it will seek to reduce expenditures by $13 million. School Board policy requires the district to maintain a 16.6 percent fund balance, equivalent to approximately two months of expenditures. Beginning in December, the district expects to shift greater attention toward longer-term financial and operational questions. 
The initial budget work took place from April through August, when program facilitators developed possible reductions. From August through November, the district is moving through a series of feedback opportunities involving staff, a steering committee and the community. The School Board is scheduled to receive its first reading of budget adjustment recommendations in November, with the plan finalized in December. Items needing additional study will be moved into the five-year planning process. 
The longer-range review will cover the years 2028 through 2033 and could result in more fundamental changes to district operations.
Among the issues identified are enrollment imbalances and school boundaries, with the district seeking to use buildings more efficiently for staffing and program delivery. Officials will also study facility longevity, possible future bond projects and whether existing spaces should be repurposed or consolidated.
Program optimization will examine how and where programs are delivered. The five-year process will also examine whether additional revenue could be needed through an operating levy or capital projects levy. 
It was acknowledged that the process could result in difficult decisions, with discussions about the next five years potentially including the loss of staff, programs and services. Declining enrollment is contributing to the pressure, with the district reporting that incoming classes have approximately 1,200 students compared with graduating classes of about 1,500 students. 
The financial work was placed within the larger context of the district’s 2023-2028 strategic plan, which Superintendent Julie Nielsen reviewed with the board.
The strategic roadmap is intended to serve as the district’s long-term operational plan, bringing the School Board, administrators, teachers, families and community together around a common direction for student success. It is also intended to guide budget, hiring and technology decisions while providing accountability through measurable goals and annual progress reports. 
The roadmap is organized around five strategic directions: student experience; mastery of learning and expectations; student pathways and systemic supports; operations, staffing and finance; and engagement and partnerships.
Under student experience, the district intends to develop systems that encourage positive student interactions, strengthen student voice and ensure students feel welcomed in their schools. The mastery of learning component focuses on clear expectations, personalized learning and encouraging students to take ownership of their education. Student pathways call for meaningful learning opportunities paired with academic and social-emotional supports based on individual needs. 
Operations, staffing and finance calls for investing in employees while managing district resources efficiently and responsibly. Engagement and partnerships focuses on working with families and the community and sharing resources to strengthen those relationships. 
For 2026-27, several of those strategic directions come together under a focus on high-quality teaching and learning. Priority work includes implementation of a Multi-Tiered System of Support, or MTSS; greater use of data to make decisions about instruction and academic and social behavior supports through EduClimber; and continued development of career and college pathways. 
Plans to measure its academic progress against goals that include having all children ready for school, closing racial and economic achievement gaps, preparing students for career and college, ensuring students graduate from high school and preparing students to become lifelong learners. 
Financial stability is itself one of the strategic measures. The district considers successful completion of the budget adjustment process necessary to slow deficit spending and remain within its fund balance policy. Officials also plan to establish timelines for longer-term issues that cannot be resolved during the immediate budget process, potentially including curriculum delivery, enrollment and building capacity, and facility needs. Completion of projects funded through the district’s 2023 bond program on time and on budget is another stated objective. 
Communication is another major priority for the coming year. The district plans to implement its Language Access Plan and a new communications and engagement platform, ParentSquare, while also working on digital accessibility compliance. 
The district ultimately wants families to better understand school policies, procedures, technology platforms and student devices while having access to tools that allow them to participate in their children's education. Another goal is for families to receive school information in their preferred language and feel they have opportunities to work directly with staff in support of their students. 
The strategic plan and financial discussions ultimately converge around the same issue: determining how South Washington County Schools can continue meeting educational priorities while adjusting its operations to match available resources.
As for now, the immediate task is to address the budget deficit for 2027-28. Decisions that require broader changes to facilities, programs, boundaries or funding will then become part of the district's next five-year planning process, extending the discussion beyond short-term reductions to what the school system should look like through 2033.
Closing out the Sept. 10 workshop and due to be revised at the business meeting later this month is policy review. Policies reviewed for Sept. 2026 include 520 Student surveys, 525 violence prevention, 526 hazing prohibition, 710 extracurricular transport distance, 711 video recording on school buses, 713 student activity accounting, 713.1 gate receipts and admissions, and 720 vending machines. 
There are no suggested changes to policies 525, 526, or 713. Deletion and creation of procedure is recommended for policies 713.1 and 720, while minor updates are in view for policy 520. Policy 710 on extracurricular transportation looks to update transport distance while policy 711 on school bus video recording would add employees to the policy.
A full review of proposed policy edits can be found on the district website at www.sowashco.org under the school board tab, with Sept. 10 workshop leading to more information.