District finance officer says special‑education state aid could drop to zero as fund balance grows

Mister Sasse, a district finance presenter, told the Rapid City Area School Board that the special‑education (SPED) fund has accumulated cash because revenue rose faster than the district has been able to spend it, largely because many budgeted positions remain unfilled. "My state aid projection for fiscal year '26 is essentially gonna be $0," he said during a presentation that the board requested ahead of contract negotiations.

Why it matters: Special‑education state aid is calculated from categorical disability counts, per‑student allocations and adjustments for local effort and excess fund balance. If a district—s SPED fund balance exceeds the Department of Education—s limit, the state reduces next year—s aid by the excess. Sasse said the accumulation in Rapid City—s SPED fund — driven by increased local property tax revenue and lower budget utilization — could eliminate the state portion of SPED aid in 2026.

Sasse walked the board through the main drivers. Local property tax effort for SPED has increased substantially; he said local effort rose about 58.73% since pay 20. SPED disability counts have remained steady even as overall enrollment declined, and the district has seen growth in higher‑severity categories such as autism ("autism ... has increased by 100 students, about a 48 percent increase from 2019 to 2024," he said). At the same time the district has struggled to fill SPED positions, lowering budget utilization from roughly 95% in FY21 to about 86% in FY24 and projecting about 87% in the current year. The net effect is cash accumulation in the SPED fund.

Sasse quoted the state rule that constrains the district: "The South Dakota Department of Ed tells us the SPED fund balance requirement is the amount of fund balance you're carrying has to be 25% or less of current fiscal year actual expenses." For a roughly $25 million SPED budget, he said, a 25% limit would be about $6.25 million; any balance above that is removed from next year—s state aid calculation.

Board members asked clarifying questions about revenue sources and spending options. When asked whether federal IDEA funds make up the bulk of SPED revenue, Sasse replied, "The primary source of federal money ... makes up a fairly small portion of overall SPED revenue ... generally in the 10% range." He also described why simply "overspending" now would be risky: ongoing salary increases or adding permanent positions using one‑time fund balances could create problems if projections change.

Board members pressed on staffing and caseloads. Dr. Comer (referred to in the presentation) uses a weighted‑caseload rubric to estimate needed FTEs; Sasse and other staff explained the district uses target caseloads of about 24 at elementary grades and 28 at secondary grades to size case managers. District staff said that if tele‑teacher arrangements were removed, they estimate the district would need roughly 30 SPED teachers to reach full staffing.

Sasse said the SPED formula works as intended: carrying excess balance reduces state aid to force a spend‑down. He showed two projections: one that treats the current cash position as reality (projecting a roughly $2.5 million cash‑based deficit for FY26 under conservative assumptions) and a second that adds back the state aid that would exist absent the excess balance (producing a roughly $3.8 million surplus). He warned that managing between those lenses will determine how the district handles negotiations and spending in the near term.

Board direction and next steps: The presentation was informational; no formal SPED budget action was taken. Board members signaled they want further detail on actual posted FTEs, weighted‑caseload calculations, and the district—s plans for hiring. Several members said the SPED fund position must inform upcoming labor negotiations and budgeting decisions.

Context and limits: Officials repeatedly cautioned that the projections depend on enrollment, staffing and state calculations and that the fund balance rule requires an estimate months before fiscal year end. Sasse emphasized the difficulty of rapidly changing budgets in a school system with long‑term contracts and said any adjustment should be deliberate to avoid fiscal instability.

Ending: Board members requested additional staffing and caseload data and said they will use the SPED presentation as part of the district—s negotiating and budgeting work in the coming months.