School board announces RIFs

After a special meeting of the Custer School District (CSD) Board of Education April 7 in Custer, a reduction in force was announced. 
In total, the reduction in force will include nine classified positions of general education paraprofessionals, library aides and office assistants, three certified positions and three-and-a half custodial/maintenance positions. For the most part, this is being addressed through attrition. 
As certified and classified employees either retire or resign, the district is absorbing the positions. For positions that were eliminated, staff members are transitioning to other roles within the district. In some cases, hours were cut back as well. 
Superintendent of schools Dr. Tim Frederick said, “At this time, we have only one certified teacher who will not have a position next year,” which is the Custer Jr./Sr. High School physical education teacher. 
As for why the CSD is in this position, Frederick said school districts across the United States are dealing with funding issues and declining enrollment. A lot of it has to do with the impacts of the COVID-19 pandemic. 
“All school districts, government agencies, received additional funding during the COVID period and hired different types of folks in their school systems, did different types of programming and tried to help kids catch up. Now we’re still trying to do the same things, but we don’t have that revenue coming in. On top of that, we’re really seeing, across the United States, declining enrollment in K-12 public education.” 
Enrollment is declining for two main reasons: low birth rates and alternative education options. In the CSD, the high cost of living is another factor. 
“This (alternative education) is a big thing in the Black Hills region right now,” said Frederick. “So we have to do a better job as a school district, and we have to do a better job as K-12 public education, trying to figure out what we can do to help out those alternative education families in the future.”
Some other impacts are high inflation, the vast footprint of the CSD from Custer to Hermosa and property tax reform. 
Frederick said while the property tax reform of Senate Bill 245 will be a positive thing for patrons, it will also impact the CSD significantly. 
“It’s going to be a good thing for our property taxes, but it’s going to impact us by about $1.2 million, receiving less revenue for general fund. That was money outside of the school funding formula,” said Frederick. 
With the passing of Senate Bill 245, the state aid funding formula for education had to be adjusted through House Bill 1051—“An act to revise property tax levies for school districts and to revise the state aid to general and special education formulas.”
According to what Frederick is hearing from Pierre, the CSD will now be outside the funding formula for the first half of the 2026-27 school year and inside the funding formula for the second half. A lot of it depends on changes in property taxes, valuations and levies. 
Board president Jeff Barnes asked how that would work, and Frederick said, “That will come from your folks here in the county on whether they’re collecting on the 4.2 to 4.5 (sales tax). Another thing you have to throw in there is Senate Bill 96. That’s going to create some additional challenges because that’s potentially another (half cent) that you can charge locally.”
Additionally, “The district’s financial health is heavily tied to student numbers and state-level funding formulas,” said Frederick. “Every student that we pick up or we lose going forward, with the change in the funding formula, will impact capital outlay and your general fund.” 
At the start of the 2025-26 school year, enrollment was at 843. Enrollment has since dropped to 829. Because the CSD has an enrollment of 600 or more, the target teacher ratio is one teacher to 15 students. The target teacher salary for the fiscal year beginning July 1 is $63,700.69, and the minimum teacher salary is $46,246. 
Mandatory cost increases are expected or have been confirmed for the upcoming fiscal year as well. Health insurance has a 10.7 percent premium hike, totaling an additional $134,765 in expenditures. Energy costs from Black Hills Energy are proposed to increase by $81,770. Property and liability insurance is expected to increase due to market trends, and teacher pay accountability is increasing by 1.4 percent. 
Currently, the CSD can borrow roughly $700,000 from capital outlay (or up to 45 percent) and $750,000 from impact aid to balance the general fund. However, the district’s capital outlay funds will eventually be needed when rooftops need to be replaced, transportation costs change, remodeling occurs or other such things. Thus, transferring those funds is not sustainable, according to Frederick.
In Fiscal Year 2025, $1,297,049 in reserves was used to balance the general fund as well. 
“That is a huge deficit that we have to make up,” said Frederick. 
With all of this in mind, the CSD has a number of challenges to address. These include declining enrollment, the CSD footprint, revenue shortages due to changes in legislation, service contracts, addressing programming originated during COVID, like extra para support, interventionist programming and technology programming, as well as property and liability insurance and health insurance increases. 
“I really think we need to start looking at legislation and how it impacts us and find a legislator that will carry our story to Pierre. I don’t think people understand the challenges that we have in our district with revenues and expenses, like how expensive it is to live in the CSD,” said Frederick. 
However, Fredrick said, extra para support, interventionist programming and technology programming are things the district can control going forward.
“As we move forward trying to align our revenue with our expenses, these are things that we have to look at,” said Frederick. 
In the 2015-16 school year, the district had 872 students enrolled with 110.71 Full Time Educators (FTEs) employed, of which 57.77 were certified. Currently, the CSD has 140.47 FTEs, of which 62 are certified. Through the attrition methods being implemented, the district is seeking to reduce the current numbers.
Once districts have their funding number based on the number of students, Frederick said an additional 38 percent is added to help cover overhead expenses like administration, office personnel, classified positions, energy bills, transportation and other such things, but it “doesn’t come close to covering it.”
“With the things that we’re doing in the district for this next year, we’re going to get ourselves pretty close to where we need to be at with classifieds. It’s still not going to be close to being covered in that 38.08 percent,” said Frederick. However, “There’s other ways beyond this funding formula to pay for these positions. 
When running the rough numbers through the House Bill 1051 formula, Frederick said for 843 students, the district would receive funding for 56.20 FTEs. The updated numbers are expected to generate $6,321,522 for general fund revenue for fiscal year 2027, whereas the fiscal year 2026 formula would have generated $7,480,352 for general fund revenue. That’s a difference of $1,158,830. 
“Everything above that line, before when it was based off of property tax, we as a school district would receive it. It wouldn’t matter if you had 600 kids or 800 kids. You’re going to receive it,” said Frederick. “It’s part of per- student, but it’s also what your levies generate. It’s not just owner-occupied. It’s others, and it’s ag as well. This is going to create about a $1.158 (million) shortage for our district on top of the $1.2.”
Meanwhile, the impact of declining enrollment is one less certified FTE, $100,000 less in funding and more adjustments. 
“It’s not all bad. Remember, the things that we have are very good. Having interventionists is important. Having behavior techs is important. Having paraprofessionals is very important. Having custodians is important. What we have to do is find a way to streamline what we’re doing to make sure that revenues meet our expenses,” said Frederick.
Frederick added, “There are school districts that have challenging footprints, and we are one of them. That’s the story that we need to be sharing with our legislators when they go to Pierre and make adjustments, because there will need to be adjustments at some point in the future.”