South Dakota Special Education Funding, the GEAR UP Scandal, and School Accountability

When a South Dakota school district tells you they cannot afford the speech pathologist your child's IEP requires, or that there's no budget for the one-on-one aide the IEP team recommended, the first question worth asking is: where does the money actually go?

Special education in South Dakota is funded through a layered system of federal, state, and local dollars—and the history of how those funds have been managed at the cooperative level is not reassuring. Understanding the funding structure helps you push back more effectively when a district uses budget constraints as a reason to deny services your child is legally owed.

How South Dakota Funds Special Education

South Dakota's special education funding comes from three sources:

Federal IDEA funds — The Individuals with Disabilities Education Act provides formula-based grants to states, which flow through the South Dakota Department of Education to local education agencies (LEAs) and educational cooperatives. In South Dakota, IDEA Part B funding supports services for children ages 3 through 21. IDEA Part C funds early intervention for children birth through age 2 (administered through South Dakota Birth to Three Connections).

State categorical aid — South Dakota provides state-level special education funding through its school finance formula under SDCL Chapter 13-13. The formula includes weighted pupil counts for students with disabilities, providing additional state aid per student based on disability category and intensity of services.

Local property tax revenue — Local school districts contribute to special education costs through their general fund. In rural South Dakota, where property values are low and tax bases are thin, this local contribution is often minimal—which creates significant disparities between what wealthy suburban districts can spend on special education and what remote rural districts can afford.

Senate Bill 55, passed in 2025, revised the property tax levy structure for school districts and recalibrated the state aid formula for special education, directly affecting how much local capacity exists for funding IEP services. The long-term impact on rural district funding is still being assessed.

The Critical Legal Point: Funding Cannot Be Used to Deny FAPE

Regardless of how much or how little funding a school district receives, federal law is unambiguous: a district cannot deny a child a Free Appropriate Public Education because of insufficient funding. IDEA is a mandate, not a best-effort program. If your child's IEP requires services the district claims it cannot afford, the district must find another way to deliver them—through the cooperative, through private providers, through out-of-district placement.

The staffing shortage and budget constraint arguments are real challenges for South Dakota districts. They are not legal defenses. A 2019 legislative interim study confirmed that special education positions were the hardest to fill in the state, and that out-of-district placement costs had increased by over $4 million between 2014 and 2018 precisely because districts could not staff required services internally. That study was a policy document acknowledging a systemic problem—it was not a green light to deny services.

When a district tells you they can't afford a service, ask them to document that position in Prior Written Notice under ARSD 24:05:30:04. A budget constraint is not among the legally permissible reasons to refuse FAPE—and having them write it down forces them to either find a different reason or acknowledge the legal problem with their position.

The GEAR UP Scandal and What It Reveals About Cooperative Oversight

The most dramatic illustration of how federal education funds can be mismanaged in South Dakota's cooperative system is the GEAR UP scandal—a story that ended in tragedy and permanently altered how many South Dakota families view the administrative apparatus controlling their children's educational dollars.

The GEAR UP program was a federal college-readiness grant originally intended to serve Native American students in South Dakota, channeled through the Mid-Central Educational Cooperative (MCEC) based in Platte. Over years of operation, grant funds were systematically misappropriated by MCEC's executive director, Scott Westerhuis, and his wife. In September 2015, the situation culminated in the murder of his wife and children followed by his suicide—an event that exposed years of financial fraud, conflict of interest, and regulatory failures in oversight of the cooperative's federal grant administration.

The scandal's relevance to special education parents is not about the specific program. GEAR UP funded college prep, not IEPs. The relevance is structural: it demonstrated that South Dakota's educational cooperative system, which manages hundreds of millions of dollars in federal education funds across dozens of rural districts, operated with insufficient transparency and oversight. The same cooperatives that administer GEAR UP-style grants often also control special education budgets and service delivery.

After the scandal, the SD DOE faced pressure to improve oversight of cooperatives. But the fundamental structure—federal and state dollars flowing to regional cooperatives that then subcontract services across member districts—remains in place. When a cooperative tells you that funds aren't available for a particular service, that claim is worth scrutinizing.

Using the Accountability Framework as an Advocacy Tool

South Dakota must submit an annual State Performance Plan/Annual Performance Report (SPP/APR) to the federal government assessing its implementation of IDEA across 17 indicators. By June 1 each year, the SD DOE releases public reports identifying which school districts are meeting federal requirements and which are not.

These reports are public records. If your child's district has been flagged for compliance problems in the SPP/APR—particularly in areas like evaluation timelines, LRE placement, or disproportionate discipline—that information is relevant to your advocacy. A district under federal scrutiny for compliance failures has additional incentive to resolve individual parent complaints quickly rather than risk an OCR investigation or corrective action plan.

You can request a copy of your district's most recent compliance report from the SD DOE's Special Education Programs office in Pierre. If the district is on a corrective action plan, ask specifically how the plan addresses the services your child has been denied.

Filing a State Complaint When Funding Is Used to Deny Services

If a district or cooperative is explicitly using funding constraints to deny services written into your child's IEP, you can file a state complaint with the SD DOE. The complaint must allege a specific IDEA violation and describe the facts. State complaints are free, must be resolved within 60 calendar days, and can result in corrective actions that require the district to provide the denied services plus compensatory services for the period of denial.

You can also contact your state legislator. South Dakota's special education funding formula is set by the legislature, and legislative staff members on education committees are sometimes responsive to constituent complaints about systemic failures—particularly in the wake of the scrutiny the cooperative system received after the GEAR UP scandal.

The South Dakota IEP & 504 Advocacy Playbook at /us/south-dakota/advocacy/ includes guidance on requesting Prior Written Notice when budget constraints are cited as a reason to deny services, how to navigate the cooperative escalation structure when the local district lacks authority over the relevant budget, and how to file state complaints that are most likely to result in corrective action orders.

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