Schools to feel budget pain despite 3 percent increase

By Kayla Gahagan, Journal staff | Wednesday, December 03, 2008

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It will be a tight year for education funding in South Dakota.

In his annual budget address Tuesday, Gov. Mike Rounds proposed the minimum 3 percent per-student funding increase for the 2009-10 school year. And he said several other education programs will have to be cut to keep expenses down.

The increase for K-12 education will total $12.5 million, or $139.94 per student.

South Dakota law requires that state aid to school districts must increase each year by the rate of inflation or 3 percent, whichever is less.

Fifty percent of state spending goes to education, which includes school districts, universities, technical schools and the state Education Department.

The Associated School Boards of South Dakota criticized the 3 percent recommendation, saying it is understandable given the economy, but it puts school districts in a bind with inflation higher than 4 percent.

The association's executive director, Wayne Lueders, also said the $12.5 million increase will be offset by $8 million in cuts.

To control the rise in state spending on education, Rounds proposed canceling a planned $2.5 million increase for the state's Classroom Connections laptop program, which would have provided 5,000 more students with laptops.

Rounds also proposed doing away with sparsity payments that have gone to school districts that cover large areas but have few students, and he wants to eliminate extra aid that has gone to schools with significantly declining or increasing enrollments.

"I wish we could provide it; we do not have resources," Rounds said.

Sioux Falls School District business manager Todd Vik said the district would take a big hit with a freeze on the increasing-enrollment funds.

"It's very significant," he said. "We'll have to look at all our options."

The Sioux Falls district stands to lose 0.8 percent of its state aid funding, said Superintendent Pam Holman, which means it would receive an increase of only 2.2 percent next year from the state.

Vik said he has to look more closely at the numbers, but schools across the state could take a $12 million total hit to their budgets.

The Kadoka Area School District would be one of 25 districts not receiving sparsity payments in 2010. Kadoka business manager Eileen Stolley said the district would have received about $71,000. The district's general fund budget is currently $3.7 million, so the loss will have an impact, she said.

"There's always more needs than there is money to go around," she said.

She doesn't expect that the district will have to make cuts to compensate for the loss.

"At this point, we're holding pretty stable," she said. "Hopefully, we'll be able to maintain programs. There are so many unknown factors. It's hard to say."

She said the district has survived tough economic times with conservative spending.

"Our district has been fortunate so far," she said. "We run a tight ship."

The 3 percent increase is good news, she said. It's also good news for the Rapid City school district, where school officials recently announced a plan to cut 5 percent - about $4 million - from the 2009-10 budget.

Budget manager Dave Janak said that proposal was based on an assumption that the funding formula would be reduced and the governor would give a 2.5 percent increase. The governor's 3 percent proposal doesn't change the plan for cuts, he said.

"We need to get revenues back in line with expenditures; we need to do that regardless," he said.

He has recommended an across-the-board cut that would affect all schools in the district.

In Rounds' address, the governor criticized school districts for keeping too much money in reserves, something he has voiced before.

Rapid City has been spending down its reserve fund each year, and that spending, coupled with a decrease in revenues, has the district scraping bottom and headed into its second year of multimillion-dollar cuts.

Janak said Rounds isn't talking about Rapid City because the district's reserve fund balance is well below the state's recommendation. Janak said moving forward with cuts will help get the district back to a healthy fund balance.

"We need to do what's right for Rapid City, and that's what we're doing," he said.

Lueders, with the school boards association, said districts have made "tremendous progress" in avoiding excessive fund balances. He said only four districts were penalized for the big savings accounts last year, compared to 86 districts in 2002.

Also next year, the state's property owners will foot a bigger part of the education budget than they do now, and individuals could see a tax increase.

Normally, the levies are lowered by the Legislature each year to provide property tax  relief, and so the local share of education spending doesn't  increase.

Rounds wants to freeze local tax rates for school property taxes, which would mean more of the cost in increased spending per pupil would be supported by local property taxes.

For the future, Superintendent Holman said the Sioux Falls district strongly supports a bill by Sen. Dave Knudson, R-Sioux Falls, that would change the annual education funding formula increase to 4 percent or the rate of inflation, whichever is greater.        Under the bill, state aid for education couldn't be increased to more than the percentage increase in the state's general fund revenue.

Under that plan, when times are tight, districts would have to live within their means, Vik said, but they would benefit more during times of prosperity.

"What better year than this year" to pass the bill? Holman asked.

Contact Kayla Gahagan at 394-8410 or kayla.gahagan@rapidcityjournal.com

Title: Gov. Rounds' budget address Date: December 2nd, 2008 Gov. Mike Rounds presented his proposed budget for 2010. Read who it will affect and how it will affect them. VIEW PRESENTATION »