School Funding

A foundation aid program to provide financial assistance to local school districts has been in effect in North Dakota since 1959 when the legislature enacted a uniform 21-mill county levy and provided a supplemental state appropriation to ensure that school districts would receive 60 percent of the cost of education from non-local sources. The legislature recognized that property valuations, demographics and educational needs varied from school district to school district, and incorporated the policy objective that some higher-cost school districts must continue to operate regardless of future school district reorganization plans. The system provided payments that favored districts with lower enrollment and higher costs. Through legislative action and mandates related to lawsuits over equity, the formula has been amended multiple times since its creation. The current per-pupil payment is $10,036.

Funding is also provided in North Dakota by the Common Schools Trust Fund. The fund derives income from land granted to the state through the Enabling Act of 1889, which granted sections 16 and 36 of every township to be used “for the support of the common schools. In North Dakota, this grant totaled more than 2.5 million acres. Article X of the North Dakota Constitution entrusted the management of these lands to the “Board of University and School Lands” (the Land Board). The fund earns cash rents from leases of individuals using the lands for production agriculture, sales of the land, leasing of mineral rights, royalties and bonus payments from the production of minerals, and 10% of oil extraction taxes collected by the state. Due primarily to income from oil taxes, the fund has grown to about $4 billion, and earnings allowed for distribution during the 2019-2021 biennium have grown to $366.8 million.

School districts in the oil-producing counties also receive an allocation of funds through the gross production tax distribution formula. Likewise, districts in coal-producing counties receive income from the state’s coal conversion and coal severance taxes. Revenue from the taxes is considered to be a replacement for property tax revenue that oil- and coal-producing companies would otherwise pay. However, it is not treated as a source of local revenue. An amount equal to 75 percent of what the school districts receive from the mineral taxes is imputed (deducted) from the district’s foundation aid payment. To assist growing districts struggling to come up with money to build new schools, the 2019 Legislature approved a provision that allows districts to keep 100% of their “in lieu of” revenue if it is used for school construction or debt repayment purposes. 

Many school districts are said to be “off the formula,” because they receive a per pupil payment that is more or less than the formula amount. This dates back to revisions made by the 2013 Legislature, which provided transition minimum and maximum payments to minimize the impact of the formula change. The 2019 Legislature approved a seven-year phase-out plan for the transition minimum and maximum payments that began in the current school year. 

Many inequities remain in the funding formula, some small and some large, so legislators are constantly examining ways to improve its fairness. An Education Funding Formula Review Committee met during the 2019-20 interim to examine areas that could be improved. The committee included a number of school administrators who served as “ex officio” members to provide legislators background details and immediate feedback on proposed changes. The committee approved just two bill drafts:

21.0033.02000 - Relating to school district transportation aid payments; and to amend and reenact section 15.1-05 of the North Dakota Century Code, relating to the transportation of open enrollment students
21.0116.01000 - Relating to the ability of a school district to temporarily transfer excess funds accruing as a result of the COVID-19 pandemic between the general fund and the building fund of the school district

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Issue Updates

6/11/21 - Education Study Committees Chosen: Funding and K-12 Policies on the Agenda
Bismarck Democratic Senator Erin Oban will once again chair an interim legislative committee charged with studying K-12 education policy, while Mott Senator Don Schaible will serve as chair of a separate committee that will examine education funding.

4/30/21 - Legislature Boosts School Funding: Per Pupil Payment to Increase “1-and-1”
Lawmakers agreed upon a school funding plan that will include a one percent increase in the per pupil payment each year of the coming biennium. The 1-and-1 increase added about $34 million to the Department of Public Instruction funding bill, which totals just under $3 billion for the biennium.

4/30/21 - Career Builders Funding Approved: Lawmakers Reduce Scholarship Budget
The Career Builders funding continues a skilled workforce scholarship and student loan repayment program aimed at attracting people into high demand and emerging occupations in the state. Even though usage suffered through the COVID-19 pandemic and distance learning challenges, lawmakers agreed to continue funding the initiatives at slightly lower levels.

4/2/21 - Schaible Wants “1 and 1” Restored: Dollars to Provide Pay Raise for Teachers
The chairman of the Senate Education Committee said he would like to see the 2021 Legislature approve a modest increase in state aid to schools to help districts provide salary increases to teachers.

3/26/21 - School Carry Over Bill Passes House: Amendment Provides Two-Year Moratorium
The House overwhelming approved a bill changing the amount of ending fund balances school districts are allowed to carry forward. An amendment was added creating a two-year moratorium on implementing the ending fund balance law in order to give school districts the time they need to use federal assistance from ESSER.

3/12/21 - Bill Addresses School Carry Over: Flexibility Would Allow Larger Balances
The House Education Committee is considering a bill that would change the amount of ending fund balances school districts are allowed to carry forward. The issue comes forward due to COVID impact money that pushed ending fund balances higher.

3/12/21 - Senate Advances Resolution to Study Income Surtax for School Construction
The ND Senate passed a resolution to study the feasibility of using an income tax surtax to fund school construction feeling using such a surtax would be a more equitable way to fund school construction projects.

2/26/21 - No Increases in K-12 Funding Bill: State Relying on Federal Dollars to Help
The ND House approved a lean K-12 funding bill this week that does not increase the current per pupil payment in the state's Foundation Aid funding formula since the state expects districts will be receiving federal assistance through ESSER.

2/5/21 - Budget Amendment on Lost Oil Revenue: Senate Votes to Protect Schools
The U.S. Senate approved an amendment offered by Wyoming Senator John Barrasso aimed at protecting schools negatively impacted by the Biden Administration’s moratorium on oil and gas leasing.

2/5/21 - Bill to Reduce Vote Threshold Fails: School Bond Requirement Remains at 60%
The failed legislation would have reduced the “supermajority” requirement of 60% of voters necessary to approve a school bond. The threshold would have remained the same for districts with populations under 4,000, but would drop to 57% for those between 4,000 and 20,000, and to 55% for those with more than 20,000 people.

1/29/21 - School Bond Threshold Questioned: Supermajority Requirement Out-of-Step
The “supermajority” requirement to pass a school bond referendum is being challenged by western North Dakota lawmakers. Current law requires that 60% of voters must approve a school bond, but HB 1350 would reduce that percentage depending on the population of the school district.

1/22/21 - School Bond Passage Made Easier: Bill Would Drop Vote Requirement to 55%
Construction projects funded by school bonds now require a 60 percent majority for approval, but a Williston legislator hopes to reduce that number to 55% in large districts with a population greater than 20,000, and drop it to 57% in smaller districts.

12/11/20 - Williston/Williams County Schools Merge
Voters in the the Williston No. 1 and Williams County No. 8 school districts voted this week to approve a reorganization plan that will merge the two districts, setting the stage for the election of a new school board next week.

12/4/20 - K-12 Per-Pupil Funding to Hold Steady
With an expected decline in oil tax revenue in the coming biennium, Gov. Doug Burgum's budget proposal would use $83 million from the Foundation Aid Stabilization Fund to keep the K-12 per-pupil payment at the current level of $10,036 through the 2021-23 biennium.

11/27/20 - Williston School Re-Organization Vote Set for Dec. 8
Patrons of two Williams County school districts will go to the polls December 8 to vote on a reorganization plan that will merge the two school districts into a new Williston Basin District #007.

Resources and References

Media Coverage

McKenzie County provides school districts with $5 million
5/25/21 -
North Dakotans asked to comment on how DPI should use federal aid
5/24/21 -
School voters in Divide County pass measure to cut board seats
5/18/21 -
Teachers, new school district still negotiating for next school year
5/12/21 -
Minot and MSU Foundation agreement advances CTE plans
5/5/21 -
ND Dept of Public Instruction to monitor 'ESSER' funding for local schools
5/4/21 -
Higher education budget on its way to Gov. Burgum
4/21/21 -
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