South Dakota would have been the first state to pass a law requiring transgender students to use a restroom that corresponds to their biological sex, rather than their gender identity.
But on Wednesday, Governor Dennis Daugaard vetoed the bill passed by the House.
"I think it was the right thing to do," said Al Leber, superintendent of Dakota Valley Schools. "There's a lot of diversity in the United States and I believe that these students do need to maintain their dignity."
Under the bill, schools would have to provide "reasonable accommodations" for transgender students.
The bill's sponsor State Representative Fred Deutsch is not happy about the veto.
"It's disappointing," he said. "I have three daughters and four grandchildren. I don't want them to be showering or changing clothes in the presence of people of the opposite biological sex."
While the bill didn't pass, Leber says they would provide accommodations if transgender students ask for them.
One parent of a Dakota Valley school says the decision on the use of bathrooms and locker rooms by transgender students should be left out of the hands of lawmakers altogether.
"I think that that is something that doesn't need to be legislated by the state," said Ellen Vick, a parent at Dakota Valley Schools. "I think it's really done when that need arises. If the child is uncomfortable, then I think that the schools generally take care of that anyway."
Vick isn't the only one who supports the governor's decision.
The American Civil Liberties Union of South Dakota says they have transgender students who have reached out to them.
"Their happiness and joy at this is just amazing," said Libby Skarin. "One of them reached out to our office and said, 'I feel like they see me as human now, which is such a beautiful, simple statement.'"
If the issue arises again next year, ACLU leaders say they are prepared to fight that battle again.
Despite his disappointment, Deutsch is asking lawmakers not to override the governor's veto.