Funding schools in South Dakota – how we do it now

by Bill Powers

The best description I have found of South Dakota’s funding of schools is found at http://doe.sd.gov/ofm/documents/SAbrief15.pdf.

School revenue is primarily received from either the state’s general fund or from local property taxes. The total amount from these sources that each school district will receive is determined by the product of the price/student and the number of students enrolled. Enrollment is determined by the number enrolled on the last Friday in September. The amount paid per
student is adjusted according to the Consumer Price Index or 3%, whichever is the smaller. In the 2011-2012 school year the cost/student was decreased by 8.6% as a budget balancing strategy. The cost/student in 2014-2015 is $4781, which represents a 3.36% increase over the previous year. Were it not for the 2011-2012 adjustment, the cost/student would have been $5408 (assuming a 3% increase per year).

There are a number of augmentations to this cost/student. One is for the size of the school. There are three school size categories: 200 or less, between 200 and 500, and greater than 600. 74% of SD schools have fewer than 600 students. In 2013-2014, those schools smaller than 200 receive an additional $847.54/student. Those schools in the intermediate category
receive an amount proportional to the number of students greater than 200. There is also an adjustment for limited English proficiency students. A cost/student for such students is 25% higher. In addition, there is an adjustment for schools located in sparsely populated districts.

The local need of a school district is determined by the product of the number of students by the cost/student, appropriately adjusted. This funding is provided from the sum of the state’s general fund and local property taxes. The local general education tax rates are capped by law. That maximum rate is set for different categories of land. Ag land is set at $1.782 per
thousand, owner occupied at $4.252/thousand, and $9.106 for non-agricultural land. Districts can “opt out” of these maximums by a 2/3 majority of the school board, unless 5% of the electorate protest. In which case, it will be decided by a public vote. At precent almost 44% of school districts have opted out, meaning that they can raise more funds through increased property
taxes.

Aside from state and local property taxes, there are more than 60 additional sources of local schools revenues, including federal grants, utility taxes (formerly called gross receipts), bank franchise taxes, rental income, investment income, and fines. In 2012-2013 these additional revenues accounted on average for an additional $1377/student. Of course, such revenue is not evenly distributed amongst school districts.

That’s it. Hopefully this is helpful in understanding school funding discussions.

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