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SD school boards seek restoration of state aid

PIERRE — The governor’s proposal to the Legislature for state aid to K-12 education is a two-sided coin.

On one hand, South Dakota’s public school districts would see a 3 percent increase in their per-pupil funding from state aid and general-education property taxes.

On the other hand, school districts would still be receiving less than before the budget cuts passed in 2011 at Gov. Dennis Daugaard’s request.

The Associated School Boards of South Dakota hope the Legislature will restore per-pupil funding back to the pre-cut level of $4,804.60 per pupil.

The allocation for the current school year is $4,625.65. The governor’s plan would provide $4,764.42.

Covering the difference between his proposal and the pre-cut allocation would require another $5.4 million beyond his recommended amount, according to the state Bureau of Finance and Management.

The same day as the governor announced his recommendation last month, the Associated School Boards issued a statement calling for additional money to make a full restoration.

The Legislature’s interim study committee on the school finance formula has recommended restoration.

But the 8-7 vote to propose HB 1004 by the committee signals how difficult that could be in the full Legislature.

“There is some support but I don’t think we have enough,” ASBSD executive director Wade Pogany said. “We will lobby hard to get schools restored to the precut levels.”

Prior to the cut, the Legislature appropriated nearly $343 million for state government’s share of the per-pupil allocation. That was 56.6 percent of the total amount of approximately $616 million. The remainder came from local general-education taxes. The cut made in 2011 affected only the state’s share. It was part of cuts throughout state government made necessary by the recession.

The general-education tax levies weren’t reduced, however. That move came at the suggestion of Sen. Larry Rhoden, R-Union Center.

His reason: School districts wouldn’t be hurt as much.

The result was local property owners started paying a greater share of the per-pupil allocation.

That effect can still be seen in the governor’s 3 percent increase proposed for the coming year.

State government’s share would be 53.8 percent under the governor’s plan, still below the 56.6 percent ratio from before the cut.

One of the defenses made by members of the Daugaard administration is school enrollment overall has risen in the past few years.

For the pre-cut year, enrollment totaled 124,016 students. For the coming budget year, enrollment is estimated to be 131,250 students.

Based on the governor’s proposed per-pupil allocation of $4,764.42, the total need from state government and local taxes would be approximately $646.6 million.

That’s about $33 million more than the pre-cut total need. However, state government would be paying about $2.6 million less.

Roughly $2 million of that increase is for a new program to assist schools in providing services to limited-English students. The LEP program is fully state-funded.

That means the net differences between pre-cut and proposed are $31 million more in per-student allocations and about $4.5 million less for state government’s share.

What’s happened since the cut is further reliance by school districts on other sources of local tax revenues such as the capital outlay levy.

There are legislators who want tougher restrictions placed on the use of capital outlay by school districts.

In fact, the same interim committee that recommended restoring the per-pupil allocation to the pre-cut level also filed legislation that would reduce capital-outlay use gradually over a period of four years.

Currently capital outlay can comprise up to 45 percent of a district’s tax revenues. Under HB 1001, the percentage would be reduced to 40 in the 2015 budget year and continue to stair-step down until reaching 10 percent for 2018.

School boards are resisting that change.

Originally capital outlay was intended for acquisition, lease or additions of real estate, plant or equipment.

That’s been expanded through the years to also partially cover buses and mileage payments, text books, instructional software and warranties.

There was a further broadening that took effect in 2009 and currently is scheduled to run through June 30, 2018, allowing capital outlay revenues for property and casualty insurance, energy costs, utilities and motor fuel.

For the 2012-13 school year, school districts collected more than $151.5 million from capital outlay taxes. For comparison, districts brought in $310.8 million from general-education taxes.

Turn back to 2008-09, before the last round of expanded uses. Districts reported receiving $126.3 million from capital outlay that year.

The interim committee also filed legislation that would set a minimum annual increase of 2 percent in the per-pupil allocation. State law says it should be the rate of inflation but not more than 3 percent.

That measure, HB 1003, was endorsed 13-1 by the 15-member committee. History suggests that a 2 percent floor with a 3 percent ceiling might be meaningless, however.

The current law has been ignored at times by the Legislature when smaller or larger increases — or a reduction as in 2011 — were approved by lawmakers.