The House Education Committee on Monday advanced a bill that would change how South Dakota calculates annual increases to K‑12 education funding, sending it to House Appropriations without a recommendation after a tied vote.
House Bill 1205 would change the state’s education funding formula so annual increases match inflation or 3 percent, whichever is greater. Current law caps increases at inflation or 3 percent, whichever is less.
The committee voted 8-6-1 to send the bill to House Appropriations with no recommendation after an initial motion for a “do pass” recommendation failed on a 7-7-1 vote.
What the bill does
The legislation targets the “index factor,” which determines how much the state’s target teacher salary and special education funding categories increase each year. Under current law, the index factor uses the consumer price index for urban wage earners or 3 percent, whichever is less.
Uhre-Balk told the committee the change addresses a fundamental problem with the current formula. She said when funding grows more slowly than inflation, it amounts to a cut to classrooms, even if the dollar amount increases.
The Bureau of Finance and Management testified that the change would have cost approximately $30.9 million in general funds and $9.5 million in property taxes this year if it had been in effect.
Supporters cite teacher pay, property tax relief
Education groups supported the measure, arguing it would help the state keep pace with inflation and meet teacher salary targets.
Rob Monson, representing School Administrators of South Dakota, said changing the word from “less” to “greater” sends an important message to teachers about their value.
Sandra Waltman of the South Dakota Education Association said the change would signal the state’s intention to invest in educators and schools.
Sam Nelson, representing the Sioux Falls School District, linked the proposal to property tax concerns, noting the Legislature sets the general fund levy that makes up the largest portion of property tax bills. He said education doesn’t receive targeted increases the way other major budget categories do.
State budget office opposes change
Grant Judson of the Bureau of Finance and Management opposed the bill, arguing that changing the statute wouldn’t solve underlying budget realities.
Judson noted that since fiscal year 2020, state aid to education has increased by 27.9 percent, compared to the 21.7 percent required by the current statute. He said this shows the state already provides more than required when resources are available.
He said the governor’s budget this year estimates $51.6 million in new ongoing funds, with $47.2 million dedicated to mandatory increases such as Medicaid utilization and inflation adjustments.
Committee split on policy and budget concerns
Committee members raised concerns about sustainability, declining enrollment, and balancing education spending with other budget priorities.
Rep. Kathy Rice, R-Black Hawk, questioned how the 3 percent floor would work with declining enrollment and expressed concern that education spending would become imbalanced with other major budget categories.
Rep. Jim Halverson, R-Winner, expressed confusion about how the state can set funding levels in statute but not follow them.
Rep. Mike Stevens, R-Yankton, defended the proposal, noting that schools are already consolidating and tightening budgets, with 87-88 percent of costs going to salaries. He said claims that schools need to cut spending ignore the reality that cuts mean eliminating teachers and programs.
After the initial “do pass” motion failed 7-7-1, Rep. Arlant moved to send the bill to House Appropriations without a recommendation. That motion passed 8-6-1, with Rep. Logan Manhart, R-Aberdeen, joining the previous majority.
The bill now goes to the House Appropriations Committee, where lawmakers will weigh the proposal against the governor’s budget, which calls for a zero percent increase for education.
