The accident occurred in the northwestern city of Santiago de Compostela, said Nieves Bernal, a spokeswoman for the Culture Department of the Galicia region.
A girl identified only as Monica told Cadena Ser radio that students at an elementary school saw the three jump from balloon's basket.
``The bell for recess sounded and we saw the first and third graders crying because they saw it all,'' she said. ``One of the bodies hit the roof and fell to the ground.''
The three killed were the balloon's pilot and two employees of the company that owned the balloon.
The balloon bore a logo advertising the annual Way of St. James procession, a yearly Catholic pilgrimage to the cathedral of Santiago, where St. James the apostle is believed to be buried.
Bernal said the government did not hire the balloon to advertise the pilgrimage, which takes place in Galicia.
