School Finance 101
This page is intended to break school finance down to its simplest descriptions. This page does not answer all of your questions, but is intended to give you the basics. We encourage you to read this information and if you have questions feel free to email [email protected].
Funding normally comes from the federal government, state government and via local voter-approved initiatives. Our primary source of funding comes from the State of Minnesota. The legislature decides the state's E-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 formulas that considers the number of students, special needs within our district, property wealth and several other factors.
Our School Board, after receiving administrative support, determines how our monies are allocated. 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.
Funding normally comes from the federal government, state government and via local voter-approved initiatives. Our primary source of funding comes from the State of Minnesota. The legislature decides the state's E-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 formulas that considers the number of students, special needs within our district, property wealth and several other factors.
Our School Board, after receiving administrative support, determines how our monies are allocated. 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.
Uniform Financial Accounting and Reporting Standards (UFARS)
UFARS is Minnesota’s standardized school accounting system. It ensures all public schools report financial data consistently, making it easier to compare, audit, and manage school finances across the state. UFARS tracks revenues and expenditures using detailed codes for things like programs, fund types, and account categories. It supports fiscal transparency and compliance with state and federal requirements.
Fund Accounting
UFARS establishes funding categories. The funds applicable to Holdingford School are defined as the General Fund, Food Service Fund, Community Service Fund, Building and Construction Fund, Debt Service, Custodial Fund, and Post-Employment Benefits Revocable Trust Fund.
Funds can be thought of as silos of money. Money designated to the fund can only be used for allowable activities by the fund. For example, revenue from food service meals can only be used for food service activities, and could not go toward educational items, community education, or debt service.
The General Fund is used to account for all revenues and expenditures not accounted for elsewhere. However, some revenue received in the General Fund needs to be reserved for specific purposes (additional silos within the silo). This additional restriction is often referred to as "Categorical" or "Restricted". These restricted funds, if not spent, have to be carried over from year to year and kept separate from those that are unassigned or unrestricted.
Funds can be thought of as silos of money. Money designated to the fund can only be used for allowable activities by the fund. For example, revenue from food service meals can only be used for food service activities, and could not go toward educational items, community education, or debt service.
The General Fund is used to account for all revenues and expenditures not accounted for elsewhere. However, some revenue received in the General Fund needs to be reserved for specific purposes (additional silos within the silo). This additional restriction is often referred to as "Categorical" or "Restricted". These restricted funds, if not spent, have to be carried over from year to year and kept separate from those that are unassigned or unrestricted.
Revenue
Revenue received by a school is either Aid or Levy. Additional funding can be secured through Grants.
Aid is revenue received from either state or federal sources. The largest component of school funding is General Education Aid which can be used for any operating expense. Aids that are not General Education are restricted for uses that are defined by statute.
Levy is revenue received from local property taxes.
School districts receive the vast majority of general education revenue from state aid payments. Revenue from the property tax levy is restricted for a particular use, generally for debt service, the improvement of facilities (Operating Capital and Long-Term Facilities Maintenance) or local programming (like Career and Technical Education [CTE] or school readiness [pre-school].
Many items in the property tax levy have a state aid component, meaning money designated for a particular use is received from both local property tax and state aid. The mix of aid and levy is designed to equalize local tax burdens. Under an equalized system, the higher a district’s property wealth per pupil unit, the lower the amount of education aid the district receives from the state for that program and the higher the amount of revenue provided through the local district’s property tax.
Aid is revenue received from either state or federal sources. The largest component of school funding is General Education Aid which can be used for any operating expense. Aids that are not General Education are restricted for uses that are defined by statute.
Levy is revenue received from local property taxes.
School districts receive the vast majority of general education revenue from state aid payments. Revenue from the property tax levy is restricted for a particular use, generally for debt service, the improvement of facilities (Operating Capital and Long-Term Facilities Maintenance) or local programming (like Career and Technical Education [CTE] or school readiness [pre-school].
Many items in the property tax levy have a state aid component, meaning money designated for a particular use is received from both local property tax and state aid. The mix of aid and levy is designed to equalize local tax burdens. Under an equalized system, the higher a district’s property wealth per pupil unit, the lower the amount of education aid the district receives from the state for that program and the higher the amount of revenue provided through the local district’s property tax.
Expenses
UFARS requires that expenses be reported by the school site they serve (Elementary, Secondary, or District Wide), the program they serve (such as reading, math, athletics, and administration) and the service or commodity received (such as wages, supplies, and services).
Throughout the year, expenditures are classified to the area that they serve. If expenditures are related to purposes defined by restricted revenues, expenditures are first assigned to those restricted purposes with any remaining expense paid for by the unassigned fund.
Throughout the year, expenditures are classified to the area that they serve. If expenditures are related to purposes defined by restricted revenues, expenditures are first assigned to those restricted purposes with any remaining expense paid for by the unassigned fund.
Summary and Resources
School finance is complicated and every evolving. General education revenue is the largest component of school funding and that other revenue received is designated for a particular purpose. Expenditures follow the program that they serve.
Here is a list of outside resources that can be used to better understand the intricacies of school finance:
Minnesota School Finance: A Guide for Legislators
Shedding Light on the Education Formula
Financing Education in Minnesota 2024-25
Here is a list of outside resources that can be used to better understand the intricacies of school finance:
Minnesota School Finance: A Guide for Legislators
Shedding Light on the Education Formula
Financing Education in Minnesota 2024-25