HB 1051

26.537.20  101st Legislative Session  1051
                                     2026 South Dakota Legislature
                                             House Bill 1051
                                                   ENROLLED
                                             AN ACT
ENTITLED An Act to revise property tax levies for school districts and to revise the
         state aid to general and special education formulas.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
Section 1. That § 10-12-42 be AMENDED:
            10-12-42. For taxes payable in 2027, and each year thereafter, the maximum
   levy for the general fund of a school district is as follows:
   (1)      The maximum mill levy is four dollars and eighty-six and seven-tenths cents per
            thousand dollars of taxable valuation, subject to the limitations on agricultural
            property as provided in subdivision (2) and owner-occupied property as provided
            in subdivision (3);
   (2)      The maximum mill levy on agricultural property for the school district is one dollar
            and five and one-tenth cents per thousand dollars of taxable valuation.; and
   (3)      The maximum mill levy for an owner-occupied single-family dwelling pursuant to
            § 10-13-40 for the school district is zero dollars and sixty-six and nine-tenths cents
            per thousand dollars of taxable valuation.
            If the district's levies are less than the maximum levies as stated in this section,
   the levies must maintain the same proportion to each other as represented in the
   mathematical relationship at the maximum levies.
            All levies in this section must be imposed on valuations where the median level of
   assessment represents eighty-five percent of market value as determined by the
   Department of Revenue. These valuations must be used for all school funding purposes.
            If the district has imposed an excess levy pursuant to § 10-12-43, the three mill
   levies must maintain the same proportion to each other as the maximum levies of this
   section for taxes payable in 2026. The school district may elect to tax at less than the
   maximum amounts set forth in this section.
Section 2. That § 13-13-10.1 be AMENDED:
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            13-13-10.1. The education funding terms and procedures referenced in this
   chapter are defined as follows:
   (1)      Nonresident students who are in the care and custody of the Department of Social
            Services, the Unified Judicial System, the Department of Corrections, or other state
            agencies and are attending a public school may be included in the fall enrollment
            of the receiving district when enrolled in the receiving district;
   (2)      "Fall enrollment," is calculated as follows:
            (a)    Determine the number of kindergarten through twelfth grade students
                   enrolled in all schools operated by the school district on the last Friday of
                   September of the current school year;
            (b)    Subtract the number of students for whom the district receives tuition
                   except for:
                    (i)    Nonresident students who are in the care and custody of a state
                           agency and are attending a public school district; and
                    (ii)   Students who are being provided an education pursuant to § 13-28-
                           11; and
            (c)    Add the number of students for whom the district pays tuition.
            When computing state aid to education for a school district pursuant to § 13-13-
            73, the secretary of the Department of Education shall use the school district's fall
            enrollment;
   (3)      "Target teacher ratio factor," is:
            (a)    For school districts with a fall enrollment of two hundred or less, the target
                   teacher ratio factor is 12;
            (b)    For districts with a fall enrollment of greater than two hundred, but less
                   than six hundred, the target teacher ratio factor is calculated as follows:
                   (i)     Multiplying the fall enrollment by .00750; and
                   (ii)    Adding 10.50 to the resulting product; and
            (c)    For districts with a fall enrollment of six hundred or greater, the target
                   teacher ratio factor is 15.
            The fall enrollment used for the determination of the target teacher ratio for a
            school district may not include any students residing in a residential treatment
            facility when the education program is operated by the school district;
   (4)      "English learner (EL) adjustment," is calculated by multiplying 0.25 times the
            number of kindergarten-through-twelfth-grade students who, in the prior school
            year, scored below level four on the state-administered language proficiency
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            assessment as required in the state's consolidated state application pursuant to
            § 1111(b)(2)(G) of the Every Student Succeeds Act of 2015;
   (5)      "Index factor," is the annual percentage change in the consumer price index for
            urban wage earners and clerical workers as computed by the Bureau of Labor
            Statistics of the United States Department of Labor for the year before the year
            immediately preceding the year of adjustment or three percent, whichever is less;
   (6)      "Target teacher salary," for the school fiscal year beginning July 1, 2026, is
            $63,700.69. Each school fiscal year thereafter, the target teacher salary is the
            previous fiscal year's target teacher salary increased by the index factor;
   (7)      "Target teacher benefits," is the target teacher salary multiplied by twenty-nine
            percent;
   (8)      "Target teacher compensation," is the sum of the target teacher salary and the
            target teacher benefits;
   (9)      "Overhead rate," is thirty-eight and eighty-hundredths percent. Beginning in school
            fiscal year 2018, the overhead rate must be adjusted to take into account the sum
            of the amounts that districts exceed the other revenue base amount;
   (10)     "Local need," is calculated as follows:
            (a)    Divide the fall enrollment by the target teacher ratio factor;
            (b)    If applicable, divide the English Learner adjustment pursuant to subdivision
                   (4) by the target teacher ratio factor;
            (c)    Add the results of subsections (a) and (b);
            (d)    Multiply the result of subsection (c) by the target teacher compensation;
            (e)    Multiply the product of subsection (d) by the overhead rate;
            (f)    Add the products of subsections (d) and (e) and subdivision (20);
            (g)    When calculating local need at the statewide level, include the amounts set
                   aside for costs related to technology in schools and statewide student
                   assessments;
            (h)    When calculating local need at the statewide level, include the amounts set
                   aside for sparse school district benefits, calculated pursuant to §§ 13-13-
                   78 and 13-13-79; and
            (i)    When calculating local need at the statewide level, include the amounts set
                   aside for career and technical education calculated pursuant to §§ 13-13-
                   81 and 13-13-82;
   (11)     "Alternative per student need," is calculated as follows:
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            (a)    Add the total need for each school district for school fiscal year 2016,
                   including the small school adjustment and the English learner adjustment,
                   to the lesser of the amount of funds apportioned to each school district in
                   the year preceding the most recently completed school fiscal year or school
                   fiscal year 2015 pursuant to §§ 10-33-24, 10-35-21, 10-36-10, 10-43-77,
                   11-7-73, 13-13-4, and 23A-27-25; and
            (b)    Divide the result of (a) by the September 2015 fall enrollment, excluding
                   any adjustments based on prior year student counts;
   (12)     "Alternative local need," may only be used by a school district created or
            reorganized before July 1, 2016, and is the alternative per student need multiplied
            by the fall enrollment, excluding any adjustments based on prior year student
            counts;
   (13)     "Local effort," the amount of ad valorem taxes generated in a school fiscal year by
            applying the levies established pursuant to § 10-12-42. Beginning on July 1, 2017,
            local effort includes the amount of funds apportioned to each school district in the
            year preceding the most recently completed school fiscal year pursuant to §§ 10-
            33-24, 10-35-21 as provided by subdivision (15), 10-36-10, 10-43-77, 11-7-73,
            13-13-4, and 23A-27-25 and that exceeds the other revenue base amount;
   (14)     "Other revenue base amount," is zero;
   (15)     "Wind energy tax revenue," any wind energy tax revenue apportioned to school
            districts pursuant to § 10-35-21 from a wind farm producing power for the first
            time before July 1, 2016, is considered local effort pursuant to subdivision (13) and
            other revenue base amount pursuant to subdivision (14). However, for wind energy
            tax revenue apportioned to a school district from a wind farm producing power for
            the first time after June 30, 2016, one hundred percent must be retained by the
            school district to which the tax revenue is apportioned for the first five years of
            producing power, eighty percent for the sixth year, sixty percent for the seventh
            year, forty percent for the eighth year, twenty percent for the ninth year, and zero
            percent thereafter. If a wind farm begins producing power for the first time
            between October first and December thirty-first in a calendar year, any revenues
            generated for that time period must be retained by the school district and that time
            period may not be counted against the first five-year period;
   (16)     "Per student equivalent," for funding calculations that are determined on a per
            student basis, the per student equivalent is calculated as follows:
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            (a)    Multiply the target teacher compensation times the sum of one plus the
                   overhead rate; and
            (b)    Divide subsection (a) by 15;
   (17)     "Monthly cash balance," the total amount of money for each month in the school
            district's general fund, calculated by adding all deposits made during the month to
            the beginning cash balance and deducting all disbursements or payments made
            during the month;
   (18)     "General fund base percentage," is determined as follows:
            (a)    Forty percent for a school district with a fall enrollment as defined in
                   subdivision (2) of two hundred or less;
            (b)    Thirty percent for a school district with fall enrollment as defined in
                   subdivision (2) of more than two hundred but less than six hundred; and
            (c)    Twenty-five percent for a school district with fall enrollment as defined in
                   subdivision (2) greater than or equal to six hundred.
            When determining the general fund base percentage, the secretary of the
            Department of Education shall use the lesser of the school district's fall enrollment
            as defined in subdivision (2) for the current school year or the school district's fall
            enrollment from the previous two years;
   (19)     "Allowable general fund cash balance," the general fund base percentage multiplied
            by the district's general fund expenditures in the previous school year; and
   (20)     "Alternative instruction participation adjustment," is calculated by multiplying 0.10
            times the number of children who participated in the prior school year in high
            school interscholastic activities sanctioned or sponsored by the South Dakota High
            School Activities Association, as permitted by § 13-36-7, while receiving
            alternative instruction pursuant to § 13-27-3, multiplied by the per student
            equivalent defined in this section.
Section 3. That § 13-37-16 be AMENDED:
            13-37-16. For taxes payable in 2027, and each year thereafter, the school board
   shall levy no more than one dollar and forty-four and nine-tenths cents per thousand
   dollars of taxable valuation, as a special levy in addition to all other levies authorized by
   law for the amount so determined to be necessary, and the levy must be spread against
   all of the taxable property of the district. The proceeds derived from the levy constitute a
   school district special education fund of the district for the payment of costs for the special
   education of all children in need of special education or special education and related
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   services who reside within the district pursuant to the provisions of §§ 13-37-8.4 to 13-
   37-8.10, inclusive.
            The levy in this section is based on valuations where the median level of
   assessment represents eighty-five percent of market value as determined by the
   Department of Revenue. The total amount of taxes that would be generated at the levy
   pursuant to this section is considered local effort. Money in the special education fund may
   be expended for the purchase or lease of any assistive technology that is directly related
   to special education and specified in a student's individualized education plan. This section
   does not apply to real property improvements.
Section 4. That § 13-13-72.1 be AMENDED:
            13-13-72.1. In 2028 and each year thereafter, any adjustments in the levies
   specified in § 10-12-42 made pursuant to §§ 13-13-71 and 13-13-72 shall be based on
   maintaining the relationship between statewide local effort as a percentage of statewide
   local need in the fiscal year succeeding the fiscal year in which the adjustment is made.
   For school fiscal years 2017 to 2022, inclusive, the proportion of local need paid by local
   effort and state aid shall be adjusted annually to reflect adjustments in local effort due to
   the implementation of the other revenue base amount as defined in § 13-13-10.1.
   However, if the levies specified in § 10-12-42 are not adjusted to maintain this
   relationship, the target teacher salary, as defined in § 13-13-10.1 shall be reduced to
   maintain the relationship between statewide local effort as a percentage of statewide local
   need.
Section 5. That § 13-37-35.1 be AMENDED:
            13-37-35.1. Terms used in chapter 13-37 mean:
    (1)     "Level one disability," a mild disability;
    (2)     "Level two disability," cognitive disability or emotional disorder;
    (3)     "Level three disability," hearing impairment, deafness, visual impairment, deaf-
            blindness, orthopedic impairment, or traumatic brain injury;
    (4)     "Level four disability," autism;
    (5)     "Level five disability," multiple disabilities;
    (5A) "Level six disability," prolonged assistance;
    (6)     "Index factor," is the annual percentage change in the consumer price index for
            urban wage earners and clerical workers as computed by the Bureau of Labor
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            Statistics of the United States Department of Labor for the year before the year
            immediately preceding the year of adjustment, or three percent, whichever is less;
    (7)     "Local effort," an amount calculated for taxes payable in 2027 and thereafter using
            a special education levy of one dollar and twenty-four and nine-tenths cents per
            one thousand dollars of valuation;
    (8)     "Allocation for a student with a level one disability," for the school fiscal year
            beginning July 1, 2026, is $7,984.00. For each school year thereafter, the allocation
            for a student with a level one disability must be the previous fiscal year's allocation
            for the child increased by the index factor;
    (9)     "Allocation for a student with a level two disability," for the school fiscal year
            beginning July 1, 2026, is $16,180.00. For each school year thereafter, the
            allocation for a student with a level two disability must be the previous fiscal year's
            allocation for the child increased by the index factor;
    (10) "Allocation for a student with a level three disability," for the school fiscal year
            beginning July 1, 2026, is $21,340.00. For each school year thereafter, the
            allocation for a student with a level three disability must be the previous fiscal
            year's allocation for the child increased by the index factor;
    (11) "Allocation for a student with a level four disability," for the school fiscal year
            beginning July 1, 2026, is $18,281.00. For each school year thereafter, the
            allocation for a student with a level four disability must be the previous fiscal year's
            allocation for the child increased by the index factor;
    (12) "Allocation for a student with a level five disability," for the school fiscal year
            beginning July 1, 2026, is $38,590.00. For each school year thereafter, the
            allocation for a student with a level five disability must be the previous fiscal year's
            allocation for the child increased by the index factor;
    (12A) "Allocation for a student with a level six disability," for the school fiscal year
            beginning July 1, 2026, is $12,378.00. For each school year thereafter, the
            allocation for a student with a level six disability must be the previous fiscal year's
            allocation for the child increased by the index factor;
    (13) "Child count," the number of students in need of special education or special
            education and related services, according to criteria set forth in rules promulgated
            pursuant to §§ 13-37-1.1 and 13-37-46, and submitted to the Department of
            Education;
    (14) "Fall enrollment," the number of kindergarten-through-twelfth-grade students
            enrolled in all schools operated by the school district on the last Friday of
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            September of the previous school year, less the number of students for whom the
            district receives tuition, except any nonresident student who is in the care and
            custody of a state agency and is attending a public school and any student for
            whom tuition is being paid pursuant to § 13-28-42.1, plus the number of students
            for whom the district pays tuition;
    (15) "Nonpublic school," a sectarian organization or entity accredited by the secretary of
            education for the purpose of instructing children of compulsory school age. This
            definition excludes any school that receives a majority of its revenues from public
            funds;
    (16) "Nonpublic fall enrollment," the number of children under age eighteen, who are
            approved for alternative instruction pursuant to § 13-27-3 on the last Friday of
            September of the previous school year plus:
            (a)      For nonpublic schools located within the boundaries of a public school
                     district with a fall enrollment of six hundred or more on the last Friday of
                     September of the previous school year, the number of kindergarten-
                     through-twelfth-grade students enrolled on the last Friday of September of
                     the previous regular school year in all nonpublic schools located within the
                     boundaries of the public school district;
            (b)      For nonpublic schools located within the boundaries of a public school
                     district with a fall enrollment of less than six hundred on the last Friday of
                     September    of   the   previous   school   year,   the   number   of   resident
                     kindergarten-through-twelfth-grade students enrolled on the last Friday of
                     September of the previous school year in all nonpublic schools located
                     within this state;
    (17) "Special education fall enrollment," fall enrollment plus nonpublic fall enrollment;
    (18) "Local need," an amount to be determined as follows:
            (a)      Multiply the special education fall enrollment by 0.1084 and multiply the
                     result by the allocation for a student with a level one disability;
            (b)      Multiply the number of students having a level two disability as reported on
                     the child count for the previous school fiscal year by the allocation for a
                     student with a level two disability;
            (c)      Multiply the number of students having a level three disability as reported
                     on the child count for the previous school fiscal year by the allocation for a
                     student with a level three disability;
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            (d)   Multiply the number of students having a level four disability as reported on
                  the child count for the previous school fiscal year by the allocation for a
                  student with a level four disability;
            (e)   Multiply the number of students having a level five disability as reported on
                  the child count for the previous school fiscal year by the allocation for a
                  student with a level five disability;
            (f)   Multiply the number of students having a level six disability as reported on
                  the child count for the previous school fiscal year by the allocation for a
                  student with a level six disability;
            (g)   When calculating local need at the statewide level, include the amount set
                  aside for extraordinary expenses defined in § 13-37-40;
            (h)   When calculating local need at the statewide level, include the amount set
                  aside for the South Dakota School for the Blind and Visually Impaired; and
            (i)   Sum the results of subdivisions (18)(a) to (h), inclusive; and
    (19) "Effort factor," the school district's special education tax levy in dollars per thousand
            divided by $1.249. The maximum effort factor is 1.0.
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An Act to revise property tax levies for school districts and to revise the state aid to general
and special education formulas.
                                                      Received at this Executive Office
 I certify that the attached Act originated in        this _____ day of _____________,
 the:
                                                      2026 at ____________M.
 House as Bill No. 1051
                                                      By
                     Chief Clerk of the House  for the Governor
                                                                       The attached Act is hereby
                                                                   approved this ________ day of
                          Speaker of the House  ______________, A.D., 2026
 Attest:
                                                                                         Governor
                     Chief Clerk of the House
                                                      STATE OF SOUTH DAKOTA,
                                                                                                ss.
                                                      Office of the Secretary of State
                       President of the Senate
                                                                     Filed ____________, 2026
 Attest:  at _________ o'clock __M.
                       Secretary of the Senate  Secretary of State
 House Bill No. 1051  By
 File No. ____  Asst. Secretary of State
 Chapter No. ______
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