The Foundation Program, revamped by the 1986 South Dakota legislative session, provides a method of determining the state aid support to school districts. In addition, state aid is provided for separate special education funding and for tuition incentive funding. The latter provides up to 3 years of state aid, both for contracting high school students to another district and for situations in which a school district dissolves and attaches to another school district. The combined methodologies for determining the amount due each school district are called the "State Aid Formula." This narrative describes the basic stages in determining the total state aid due each district and explains the statute that provides the step's authorization. It is stated that if this document is updated at the end of each legislative session, it will remain a current interpretation of the state aid process. Equalization is the primary thrust of state aid, and the formula recognizes that it generally costs more per pupil for a small district than for a larger district. There is also a levy adjustment to allow the state demand, as calculated, to coincide with the funds appropriated by the legislature. The report concludes with over four pages of definitions of variables. (MLF)