A BILL for an Act to amend and reenact section 15.1-27-04.1 of the North Dakota Century Code, relating to the option for a school district to reduce its local contribution deduction in the school state aid formula by the percentage of the local contribution which comes from in lieu of revenue.
HB 1130 would revise North Dakota’s school state aid formula, specifically the baseline funding and local contribution deduction calculations in section 15.1-27-04.1 of the Century Code. The bill gives school districts an option to reduce the amount of local contribution deducted from state aid by the percentage of that contribution that comes from “in lieu of” revenue, which is revenue paid in place of taxes. It also updates how certain tuition revenues are treated in the formula, including phased exclusions for tuition tied to air force base students funded through federal impact aid, and it carries forward existing exclusions for residential treatment, adult farm management, and certain special education/high-cost student tuition.
The bill also makes broader changes to the state aid formula’s timing and mechanics. It sets out separate rules for the period through June 30, 2025, and for the period after that date, including updated per-weighted-student-unit aid amounts, phased reductions to baseline funding above the payment floor, and revised treatment of school districts that become elementary districts. In the post-2025 version, the bill also changes the local revenue deduction to account for sinking and interest and building fund levies, and directs the deducted amount to be allocated to the district’s sinking and interest fund for bonded indebtedness repayment.
In practical terms, HB 1130 would affect how much state aid school districts receive and how much of their locally generated or substitute revenue is counted against that aid. Districts with significant in-lieu-of-tax revenue, certain tuition revenue, or specific levy structures could see changes in their aid calculations. The bill would also require county auditors and school boards to continue reporting detailed revenue and mill levy information to the superintendent of public instruction to support the formula.
The overall sentiment in the recorded votes appears mixed but generally supportive in the House and more divided in the Senate. The bill passed the House on second reading with a strong majority, but the Senate vote was much closer, and the final action shows the bill failed. That pattern suggests the measure had meaningful support but did not secure enough agreement to become law.
The main point of contention appears to be the fiscal effect of allowing districts to shield some in-lieu revenue from the local contribution deduction, which would likely increase state aid obligations. Related concerns likely involved the complexity of the formula changes, the treatment of tuition and federal impact aid for air force base students, and whether the revised deductions and phase-ins fairly balanced state funding with local revenue responsibility.
HB 1130 would amend section 15.1-27-04.1 of the North Dakota Century Code, changing the school state aid formula by adjusting baseline funding calculations, local contribution deductions, and the treatment of several revenue categories. It would specifically allow a district to reduce its local contribution deduction by the share of local contribution derived from in-lieu revenue, and it would revise how tuition, mineral, mobile home, telecommunications, and certain tax-equivalent revenues are counted in state aid calculations. The bill also updates the formula for post-2025 school years, including new per-weighted-student-unit amounts and revised deductions tied to sinking and interest and building fund levies.
The bill appears to have had substantial support in the House but a more divided reception in the Senate. The House second-reading vote was comfortably in favor, while the Senate vote was close, indicating that lawmakers generally agreed the school aid formula needed adjustment but did not reach consensus on the details. The final failure of the bill suggests that support was not enough to overcome opposition or procedural hurdles at the end of the process.
The likely core dispute was whether school districts should be allowed to reduce their local contribution deduction based on in-lieu-of-tax revenue, since that change would shift more of the funding burden to the state. Another likely point of contention was the bill’s detailed formula revisions, which affect how much tuition and other local revenue is excluded from deductions, especially for air force base students funded through federal impact aid. Some lawmakers may also have objected to the complexity of the phased-in changes and the potential budget impact on state aid obligations.