South Dakota EducationSD Funding Formula Explained
Table of Contents
How State Aid is Determined
South Dakota distributes state funding to public schools using a per-student funding formula. The foundation program calculates a target budget for each school district by multiplying its average daily membership (enrollment) by a state-defined per-student allocation. The state then subtracts the district's local tax contribution from this target budget, and the state general fund covers the remaining balance.
The Role of Local Property Taxes
Local property taxes are a primary funding source for public schools. The state legislature sets maximum property tax levies that school boards can collect for their general fund. These levies are divided into three categories: agricultural land, owner-occupied residential property, and commercial property. The state formula ensures equity by adjusting state aid based on a district's capacity to raise local property tax revenue.
The Target Teacher Salary Metric
In 2016, South Dakota overhauled its funding formula (via HB 1182) to address teacher shortages. The new formula established a "target teacher salary" ($48,500 initially, adjusted annually for inflation) and a target student-to-teacher ratio. The state uses these targets to calculate the per-student allocation, ensuring that school districts receive enough funding to pay competitive salaries, though districts retain local control over actual pay scales.
General Fund vs. Capital Outlay
School district budgets are divided into distinct funds that cannot be easily mixed. The **General Fund** covers day-to-day operational costs, including teacher salaries, utilities, and instructional supplies. The **Capital Outlay Fund** is funded through local property taxes and can only be used for long-term investments, such as building construction, school bus purchases, and technology acquisitions.
School District Budget Opt-Outs
If a school district's formula funding is insufficient to cover operational expenses, the school board can vote to "opt out" of state tax limits and raise additional local property tax revenue. Budget opt-outs require a public resolution and are subject to a voter referendum if local citizens petition against the decision. Opt-outs are commonly used by rural districts facing declining enrollments or rising operational costs.