How Schools are Funded: What the state pays for and how local funding works.

The two-year EP&O levy would provide ongoing local funding for day-to-day educational programs and operations that state and federal funding do not fully cover. At the proposed rate of $1.50 per $1,000 of assessed value, it would authorize collections of approximately $11.19 million in 2027 and $12.28 million in 2028. 

The district’s priority is to maintain current staffing, class sizes, course offerings, student activities, health and safety services, and school operations. 

If the levy is approved, this funding would support:

Teaching and learning ($5.3 million)

• Staffing costs for teachers, paraeducators, administrators, and instructional support beyond what the state fully funds
• Expanded access to classroom and library materials, digital learning tools, assessments, and student supports beyond the basic resources available through state funding alone

Operations and Technology ($2 million)

• Custodial, Maintenance, Grounds and Technology staff
• Equipment, Materials/Supplies, Network and Utilities

Health and Safety ($1.8 million)

• Counselors, Health Assistants, and  Nurses, beyond what state allocations fully supports
• School Security and School Resource Officers/SROs beyond what state allocations fully support
• Supplies and Material

Athletics and Activities ($1.5 million)

• Coaches and Officials
• Equipment, Facilities, Supplies and Uniforms
• Transportation and Insurance
• Gamer supervision
• Athletic Trainer
• Athletic Director
• Club Advisors
• Office Professionals

Arts and Course Opportunities ($1 million)

• Staffing needed to maintain arts, music, world language, leadership, and elective courses beyond what state allocations fully support
• Expanded access to instruments, art materials, specialized equipment, repairs, licenses, and supplies beyond the basic resources available through state funding alone

The 2026–27 Yelm Community Schools General Fund budget includes $88.12 million in revenue and $95.18 million in expenditures and transfers out. 

The $7.06 million difference (gap) is being filled with money from the school district’s Ending Fund Balance (similar to a family’s savings account), which includes money from a one-time transfer of funding that had previously been reserved for capital projects. At the end of this year, if the levy does not pass, the Ending Fund Balance is projected to be $877,174, or less than 1% of annual expenditures. 

Moving money between district funds does not create a recurring revenue source. Once the available one-time funds are spent, they are gone and cannot cover the next year’s expenses. There are no additional funds to fill this gap in future school years. 

Sources: Published YCS 2026–27 F-195 budget, August 28, 2026, page 1; district responses supplied for the article; YCS levy FAQs; RCW 28A.315.221 and 28A.315.225. Budget figures are rounded for readability. The current-year $7.06 million drawdown and future-year reduction estimate describe different measures.

As of last year, Washington ranks 40th in the nation in K-12 education investment as a percentage of the state’s total economy. Despite the “McCleary fix,” the state is still not covering the full cost of education. Staff pay and benefits, special education, transportation, teacher training, counselors, school nurses, and other critical educational needs are all underfunded. Student athletics and extracurricular activities are not funded at all. This leaves local communities to fill the gap.

96% of school districts across the state (WA levy status map) do this through a local Education Programs and Operations (EP&O) levy. EP&O levies typically provide 12-18% of a school district’s total budget. Yelm Community Schools has been operating without a local EP&O levy since 2024. If the proposed levy is approved November 3, 2026, it would account for just under 12% of our local school budget. 

In addition to the challenges of chronic underfunding, state and federal school funding must be spent in specific ways. Without a local levy, those state and federal restrictions eliminate much of our local control for local educational programs and services.

• The state does not provide any funding for student athletics and extracurricular activities. This includes all sports and any student activities beyond the school day, including: marching band; choir, theater, and arts programs; student clubs; and many other activities.
• The majority of school teachers and other staff positions are not fully funded by the state.
• The state uses what’s called an Implicit Price Deflator (IPD), formerly called a Cost of Living Adjustment (COLA) to adjust school allocations, but does not provide enough funding to cover the actual staffing and operational costs associated with this rate.
• Special education, transportation, teacher and staff training, counselors, school nurses, student technology, safety and security, and student behavioral support services are not fully funded.

Every state handles revenue (taxes) and allocations (paying for services) differently. Here is a guide to Washington’s Tax Structure. 

A portion of the property taxes that used to go directly to local schools now goes to the state. The state redistributes those dollars back to school districts according to a formula referred to as the “prototypical school model.”

In 2018, the state legislature increased the state-controlled portion of property taxes and lowered the limits for local school levies accordingly. Levies remain essential to pay for local educational needs and priorities that are not fully funded by the state or federal sources. 

A bond provides local funding for capital projects such as purchasing property for schools, constructing new schools, or modernizing existing schools. Bonds are sold to investors who are repaid with interest over time from property tax collections, generally between 10-25 years. Bonds require a super majority to pass (60% yes vote). 

Yelm approved a school bond measure in February 2019 to pay for safety and security improvements at all schools. This bond also replaced Yelm Middle School and Southworth Elementary School and removed portable classrooms from these schools. Money from school bonds cannot be used to pay for the day-to-day costs of operating schools. 

A levy provides local funding for local schools to cover the costs of programs and services that the state does not fund or only partially funds as part of “basic education” allocations. Levies require a simple majority to pass (50% yes vote). 

There are three types of school levies:

• Educational Programs and Operations (EP&O) levies fund school services and positions like teachers to reduce class sizes and provide additional classes and student programs, support staff, supplies and materials. EP&O levies also pay for other programs and services that the state only partially funds or doesn’t fund at all, like student athletics and activities. State money for schools does not fully cover the actual costs of operating a school district, so EP&O levies bridge the funding gap. These levies can be approved for up to four years. The Yelm Community Schools proposal on the November 3, 2026 ballot is for two years. 
• Capital levies (which includes tech levies) fund things like modern technology, enhanced building security, and renovation projects. Capital levies can be approved for up to six years. Yelm has not proposed a Capital levy. 
• A Transportation levy can be used to fund things like new buses or major repairs to older buses to prolong their useful life. Transportation levies can be approved for up to two years. Yelm has not proposed a Transportation levy.

Prior to passage of the 2019 school bond, the school board had begun to set aside money from the general fund into a capital fund in order to save up for a selection of necessary capital projects. When the school bond measure was passed, those projects were completed using money collected through the bonds. 

According to OSPI and the ESD, Yelm was allowed to bring the monies that had previously been set aside but unspent back to the general fund. That provided $9 million to help YCS bridge the funding gap in 2025-2026 and create a balanced budget this year. Without that action, our schools would already be under State Financial Oversight. See this section of our FAQs about the school district fiscal situation, state oversight and the potential for financial insolvency. 

It is important to note that this transfer of money was a one-time action. All of the money that was permitted to be transferred back to the general fund was transferred last year. There is no additional reserve.

For additional background information about this transfer, see this February 20, 2026 Superintendent's Message. 

A lot of people think that. Actually, the lottery goes to the state general fund, not to local schools. Some money is earmarked for schools, but the state long ago supplanted that money by reducing other allocations.

School districts in Washington State do not see any direct financial support from cannabis sales. Unlike Colorado, which spends most of its cannabis money on schools, in Washington State, the majority of cannabis tax dollars go to the state’s Basic Health Plan Trust Account. (Source: WA State Office of Financial Management)

Since the 2023-24 school year, Yelm’s student enrollment has reduced by about 475 students. These reductions have not been concentrated in one school area, but have happened across the district. So in Yelm, we are not in a position to consider closing schools. There are a few areas of the high school that could potentially be shuttered to reduce operational costs. We are evaluating this possibility.

State funding goes down when enrollment drops, but the costs to operate schools do not decrease at the same rate. Similar to a home with multiple children, if one of your children graduates and moves out, your mortgage, electric bill, gas costs, and home insurance don’t suddenly drop by a third. Schools work much the same way. Fewer students means less state funding, but the basic costs of keeping schools open remain. 

Additionally, the cost of just about everything is going up right now, and state funding has not kept up with this inflation. Just like your household expenses, local schools have seen significant increases in utilities, fuel, food, insurance, and staffing costs. This is true for every school district across the state, and means that even though we are serving fewer students and have fewer staff, our overall costs continue to increase. 

Even with fewer students, the district must still cover fixed costs and cover educational costs that are not funded by the state:

• Fixed Operational Costs: It costs the same to heat buildings, repair roofs, maintain fields, and run bus routes whether each classroom has 18 students or 31.
• The Funding Gap: State funding is “per pupil.” When enrollment dips, we receive less state money, but our students and community still desire a range of classes and programs the state does not fully fund.
• Staffing Efficiency: We adjust staffing as needed, through normal attrition when possible, but we must maintain baseline staffing of teachers, specialists and support staff to keep our schools clean, safe, and well staffed to serve students.