School Comments by Dr. Robert Mayer The school funding formula used in South Dakota came to life as a result of a property taxpayer revolt. In the general election of 1994 a ballot initiative known as "Dakota Proposition" was narrowly defeated. The new governor, Bill Janklow, and the legislature reacted to this close vote by restricting property tax increases for schools and local government units. A new funding formula was developed for schools that included a 30 percent property tax reduction.
The new formula did not allow schools to raise property taxes for the general fund. This new formula was based upon two factors: average daily membership (ADM) and a per student allotment figure determined by the state legislature. These two factors are multiplied by each other and the product is called the need. ADM X per student allotment = NEED
The NEED is the amount of money that comes from property taxes and state aid. The amount is equal to 80 percent of the school's general fund revenue. The remaining 20 percent of the general fund revenue comes from 28 sources (refer to last week's article).
In order for the NEED to increase, there must be an increase in the number of students (ADM) and/or an increase in the per student allotment. According to state law, the per student allotment is to increase by 3 percent or the cost of living, whichever is less. The increases have been as low as 1.8 percent and 1.7 percent.
The small increases in funding coupled with declining enrollments have caused schools to have revenue shortfalls necessitating budget cuts, use of reserves, or opting out of the funding formula. From 1998-to and including the present school year Vermillion received a net increase of $263,000.00 in state funding. This translates to an annual average increase of .007. During that same six year period of time the school districts share of health insurance increased $170,000 even with a change of providers, increases in deductibles and fewer benefits. The district also lost 108 students which translates into a loss of revenue of approximately $1,400,000.00.
The revenue shortfall problem has plagued the Vermillion district for the last three years. Next week's article will discuss how the school board has dealt with these shortfalls.