Judge Upholds S.D. Finance System; Panel Unveils Plan To Retool Formula

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A state judge has upheld the South Dakota school-finance system, ending a two-year challenge by more than a dozen districts.

But state lawmakers are still expected to take up the finance issue next year, and a task force appointed by Gov. Walter D. Miller prior to the ruling unveiled a proposal last week that is designed to make the state's school-aid formula more equitable. The plan will be presented to William J. Janklow, the incoming governor, and the legislature next month.

In his decision, Circuit Judge Steven L. Zinter concluded that the state constitution does not require all districts to tax at the same rate or to spend an equal amount per student, as the plaintiffs had argued.

State officials were pleased with the decision. "At the same time, we understand that what we have is not a perfect system, just a constitutional one," said Dale Hegg, the director of finance and management for the department of education and cultural affairs.

Mark Meierhenry, the lawyer for the plaintiffs, said that he hopes the legislature will address funding inequities but that he will consider an appeal. The Nov. 23 ruling "is certainly not the end of the story," he said.

Mr. Meierhenry criticized the court for taking "a minimalist approach." The only thing the judge stipulated was that districts have to provide an adequate education, he said, and "that's all students are getting."

Adequacy Standard

Like other recent school-finance rulings, Judge Zinter's decision hinged on an interpretation of broad constitutional language defining the state's obligation to public schools.

"The Court concludes that a 'general and uniform' system requires the state to provide a system of public education in which every child may receive a free public education which is adequate to allow students to be responsible and intelligent citizens," Mr. Zinter wrote.

Mr. Hegg said the decision would not ease pressure on the legislature to reduce what residents feel is a heavy property-tax burden. A ballot initiative that would have limited property taxes to 1 percent of assessed value narrowly failed in November's election.

Districts obtain almost three-quarters of their funds from local property taxes, and Mr. Hegg predicted that lawmakers would shift more of the burden to the state.

"The easiest way to reduce property taxes in South Dakota is through the state-aid formula," he said.

Under the current law, a district receives state aid equal to the amount it spent in a prior year, less the amount it could raise under a theoretical tax rate. Districts with less property wealth receive proportionately more aid, but the system encourages districts to spend more money because this draws more state aid.

Under the plan proposed last week, the state would determine the per-pupil cost of providing a "basic education." Districts would be required to tax property at a minimum rate, and the state would pay the difference between the revenue a district generates with that minimum tax rate and its basic costs. Districts could decide to set a higher local tax rate.

Vol. 14, Issue 14

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