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WELCOME to South Dakotans Talking

k-12 education funding

Finding budget solutions through our shared values

How South Dakotans collect and spend money for the common good reflects our shared values — our consensus on what public services we believe we need in our state and are willing to pay for together.

Coordinated by: SD Budget & Policy Institute

• Mission - to promote responsible and equitable fiscal policy through research and education • • Nonpartisan, not-for-profit 501(c)3 [not a state government function] Funding from Northwest Area Foundation and donations from people and businesses in South Dakota

Board of Directors

Robert Burns, President Dave Volk, Vice President Gene Lebrun, Sec/Treasurer Rich Garry, Past President Deb Fisher-Clemens Eileen Briggs Rob Oliver Mary Bibby

SDbpi.org

Kay Jorgenson Paul Dennert Jim Fry

South Dakota CONSITUTION:

Article VIII Section 1.

Uniform system of free schools

The stability of a republican form of government depending on the morality and intelligence of the people, it shall be the duty of the Legislature to establish and maintain a general and uniform system of public schools wherein tuition shall be without charge, and equally open to all; and to adopt all suitable means to secure to the people the advantages and opportunities of education.

Research finding

• • • • K-12 education salaries in South Dakota compared to regional marketplace How SD funds k-12 education and historic trends Educational Outcomes (South Dakota KIDS COUNT Beacom School of Business University of South Dakota) SD BPI preliminary research on alternatives

Lets talk teacher salaries

(SD average is 76% of regional average) MT WY MT

Regional States

MN IA NE 40+ years snapshot of average teacher salary changes (constant 2012/13 dollars) $60 000 $50 000 $40 000 $30 000 $20 000 $10 000 $0 US 1969-70 IA MN 1979-80 MT 1989-90 NE 1999-2000 ND 2009-10 SD 2011-12 WY 2012-13 Chart by SD Budget & Policy Institute Data Source: NEA, Estimates of School Statistics, 1969-70 through 2012-13

Teacher Salaries data source

SD wages are 88% regional average Average hourly earnings of all employees on private non-farm payrolls, by state (source bls SAE table 4)

SD teacher salaries are lower than other SD salaries

30,00 25,00 20,00 15,00 10,00 5,00 0,00 Iowa Minnesota Montana Nebraska 2011 2012 2013 North Dakota South Dakota Wyoming SD wages vs wages in neighboring states 88% 76% All SD private non-farm workers SD teachers

SD teachers make more money when they choose to teach in neighboring states… both in actual dollars and in purchasing power

WY MN IA NE MT ND SD $ $10 000 $20 000 Average Salary $30 000 57 920 $60 083 56 268 $57 711 51 528 $57 573 48 931 $54 307 49 999 $53 077 47 344 $52 372 39 580 $44 875 $40 000 Adjusted for price parity $50 000 $60 000

Chart and analysis by SD BPI; Data Source NCES, Census, BLS

$70 000

Teacher salaries have higher purchasing power in neighboring states. Mt  18% WY  34% ND  17%

Where to teach?

MN  29% NE  21% IA  28%

SD administrators also earn less than their counterparts in neighboring states… in actual dollars and purchasing power (in all states but MT)

WY MN IA NE MT ND SD $ $20 000 $40 000 Average Salary $60 000 $92 870 $96 338 $97 690 $100 195 $86 850 $97 039 $88 710 $98 457 $74 860 $79 469 $81 670 $90 343 $73 550 $83 390

Chart and analysis by SD BPI; Data Source NCES, Census, BLS

$80 000 Adjusted for price parity $100 000 $120 000

Administrative salaries have higher purchasing power in most neighboring states. MT  5% WY  16% ND  8%

Where to administer?

MN  20% NE  18% IA  16%

South Dakota spends 25% less per k-12 student than regional average

$18 000 6 year trend in current spending per pupil In South Dakota and neighboring states $16 000 $14 000 $12 000 $10 000 $8 000 $6 000

SD per student spending

$4 000 $2 000 $ South Dakota 2007 Iowa 2008 Montana 2009 Minnesota 2010 Nebraska North Dakota Wyoming 2011 2012

How SD funds k-12 education

• • • Source of funds to support SD k-12 education Federal State Local

SD k-12 funding sources 1997 Federal 9% local 55% state 36% local 53% SD k-12 funding sources 2012 Federal 16% state 31%

Sources of k-12 Funding Revenue

Charts by SD Budget & Policy Institute - inflation adjusted to 2011 dollar Data Source US Census FESEF Table 11, 2002 through 2011

Regional Rankings data source

$25 $20 $15 $10 $5 $0

Total per student funding & funding sources for SD school districts FY11

(in thousands) local state federal

School Funding Formula

page 19 of Budget Primer

Funding formula

Actual PSA (per student allocation) vs inflation-adjusted per PSA

• • • • 1997 per-student allocation (PSA) $3,350 equalize dollars per student annual increase— lesser of 3% or rate of inflation 44% of districts have opted-out tax limit $6 000 $5 000 $4 000 $3 000 $2 000 $1 000 $0 ACTUAL PSA INFLATION ADJ PSA

% of SD state and local revenue supporting k-12 education has decreased since funding formula implemented

45,0% 40,0% 35,0% 30,0% 25,0% 20,0% 15,0% 10,0% 5,0% 0,0%

K-12 % of state general fund down 25%

1998 2003 2008 2011 2012 Data Source: SD Budget Analysis and graphic by SD BPI 70% 60% 50% 40% 30% 20% 10% 0%

K-12 % of property taxes down 17%

Data Source: Dept. of Revenue annual Reports 1996 through 2013 Analysis and graphic by SD BPI

5,0 State and local school revenue as percent of S. D. personal income 4,0 3,0 2,0 1,0 Local State 0,0 1961 1966 1971 1976 1981 1986 Year 1991 1996 2001

Analysis and chart provided by SDSU economics Professor Emeritus Ring

2006 2011

K-12 spending as % of SD personal income

down 25% since funding formula 3% 2% 1% 0% 6% 5% 4% SD Ntl

K-12 education spending FY12

Regional States

United States Wyoming Minnesota North Dakota Montana Iowa Nebraska South Dakota

Amount per student by Source: Total Funds

$12,331 $18,446 $13,163 $13,368 $11,336 $12,175 $12,267 $10,149

State Funds Local Funds Federal Funds

$5,609 $5,488 $1,235 $9,466 $7,372 $8,306 $3,932 $1,608 $925 $6,748 $4,980 $1,641 $5,350 $4,480 $1,506 $5,407 $5,736 $1,033 $3,876 $ 7175, $1,216 $3,093 $5,392 $1,665

% of Personal Income in state spent on K-12

4.51% 5.95% 4.36% 4.03% 4.40% 4.64% 4.59% 3.51% Table by SD Budget & Policy Project; Data Source US Census Bureau 2012 Public Elementary-Secondary Education Finance Report

Educational Outcomes in South Dakota

How do we compare to regional states?

2014 KIDS COUNT Data Book

Education Domain MN NE IA ND MT WY

Rank 6 9 13 19 21 24

South Dakota KIDS COUNT Beacom School of Business University of South Dakota

South Dakota Compared to the Nation & Bordering States Percent of children ages 3 to 4 not attending preschool, 2010-12

NE IA MN Nation WY MT SD ND 0% 10% 20% 30% 40% 50% 60% 70% 52% 53% 54% 54% 58% 60% South Dakota KIDS COUNT Beacom School of Business University of South Dakota

62%

64%

Percent of 4th graders who scored below proficient reading level, 2013

IA NE WY MT Nation ND SD 54% 56% 58% 60% 62% 64% 66% 68% 59% 62% 63% 63% 65% 66% 66%

68%

South Dakota KIDS COUNT Beacom School of Business University of South Dakota

South Dakota Compared to the Nation & Bordering States Percent of 8th graders who scored below proficient math level, 2013

MN ND MT SD WY IA NE Nation 0% 10% 20% 30% 40% 50% 60% 53% 59% 60%

62%

62% 64% 70% South Dakota KIDS COUNT Beacom School of Business University of South Dakota 64% 66%

South Dakota Compared to the Nation & Bordering States Percent of high school students not graduating on time, 2011-12

NE ND IA MN MT SD Nation WY 10% 12% 14% 16% 18% 20% 0% 2% 4% 6% 8% 7% 9% 11% 12% 14%

17%

South Dakota KIDS COUNT Beacom School of Business University of South Dakota 19% 20%

 = Higher ranking (lower is better)

Education Domain Ranking by Year by State

Iowa Minnesota Montana Nebraska

2012

14 7 13 15 North Dakota 16

2013

15 7 13 17 16

2014

South Dakota Wyoming 21 29 22 26 32 24 South Dakota KIDS COUNT Beacom School of Business University of South Dakota 13 6 21 9 19

2012 2014

  

5 10 15 20 25 30 35 0 Education Domain Ranking by Year and State Minnesota Nebraska Iowa North Dakota Montana Wyoming South Dakota 2012 2013 2014

Data source South Dakota Kids Count Graph by SD BPI

Data & Graphic Source: Testimony by SD Dept. of Ed. to SD Joint Appropriations Committee January 2014

Research on alternatives “

how to slice the pie”

Status quo School consolidation Equalizing capital outlay or “other” funds Cap reserves Additional revenue earmarked for education Prioritizing k-12 salary policy Change funding formula CPI measurement

1. Status quo

• • • decrease in % of revenues committed to k-12 education will continue free up current revenue growth for other priorities (examples: economic development, infrastructure, Medicaid expansion) Allows additional opportunity for decreasing current taxes 45,0% 40,0% 35,0% 30,0% 25,0% 20,0% 15,0% 10,0% 5,0% 0,0%

K-12 % of state general fund down 25%

1998 2003 2008 2011 2012 70% 60% 50% 40% 30% 20% 10% 0%

K-12 % of property taxes down 17%

2. Consolidation 151 school districts in South Dakota

more than 600 students (40 districts) 26% Sparce (28 districts) 19% Less than 250 students (37 districts) 25% 250 to 600 students (46 districts) 30%

Data Source: South Dakota Department of Education Graphic by SD BPI

Would consolidating small school districts increase economy of scale?

more than 600 students (40 districts) 26% Less than 250 students (37 districts) 25% Sparce (28 districts) 19% 250 to 600 students (46 districts) 30%

Is consolidation an answer?

How much would consolidation cut education expenses in SD?

$1 200 $978 $960,97 $943,79 $1 000 $800 $600 $400 $200 $0

Status quo -1.7% -3.5%

no consolidation Consolidate 37 schools with < 250 students Consolidate 83 schools with < 600 students

Data Source SD DOE 2012-13 expenditure data & rankings; SD DOE Scarcity Funding. Analysis and chart by SD BPI Assumptions only non-sparce districts consolidated, economy of scale equal to average per student expenditures in SD districts with >600 students

3. Equalizing “other” revenue

“Other” revenue are not currently equalized and range from $130 to $3,202 per-student, depending on the district. Slide 79 k-12 Education Funding Presentation to Legislative Planning Committee June 16, 2014 by Michael Houdyshell, Director Property and Special Taxes Division SD Dept of Revenue l http://legis.sd.gov/docs/interim/2014/documents/LPC06-16-14Combined.pdf

Slide 83 k-12 Education Funding Presentation to Legislative Planning Committee June 16, 2014 by Michael Houdyshell, Director Property and Special Taxes Division SD Dept of Revenue l http://legis.sd.gov/docs/interim/2014/documents/LPC06-16-14Combined.pdf

Cap school district reserves

4. Additional revenue options

• • Increasing state sales tax from 4 to 5 cents would raise $206 million per year Additional revenue options used by other states: • personal income taxes, • • • • • corporate income taxes, Sunset clauses on existing tax expenditure statutes higher bank franchise taxes, higher “sin” taxes on tobacco or alcohol, sunset existing tax expenditures statues Other examples you can think of?

5. Prioritize k-12 salary policy

State salary policy models

• • Employee compensation plan PACE “movement to job worth” in place since FY92 Market-based-pay in place since FY13 (Note: annual FY15 cost $13 million—beyond 3.0% across the board raises) • • Investment council compensation plan (10 year plan) increases: Base compensation & benefits @ 7% per year from $184,000 to $362,000 annual ave.

Incentive compensation & benefits @ 7.2% per year from $301,000 per FTE to $602,000 per FTE (Note: total personal services under Investment Council 10 year plan increases from $8.5 million to $18.1 million for 30 FTE)

Public Questions: Increasing or changing the CPI limit used in the formula

• • • Did the funding formula start out high enough per student? What happens when you limit growth to the lower of inflation or 3%? Are there more accurate inflation measuring tools available?

Small group discussion

Choose a facilitator Choose a recorder Discuss k-12 education funding and/or teacher salaries Record ideas as you go:   areas of general consensus you discover Recommendations or action ideas 4.

Prioritize the top 1 or 2 issues you want to share with a larger group

Large Group Discussion

• • • • If you are meeting in a large group – share the range of ideas and options generated with each other.

Discuss and then vote for your top priorities Please let the Institute know the outcomes of your dialogue so we can compile it with conversations from around the state (send to [email protected]

) If you choose to form ongoing community discussion groups please let us know and we will provide you with contact information for other ongoing grass roots conversations that form around the state

South Dakotans Talking

Evaluation

• • Please fill out the evaluation – it helps SD BPI provide meaningful reports on this process If you know of other communities that would like to hold this discussion or if you would like to have it repeated in your community – contact SD BPI

Help us describe who participated

How long have you lived in the community? < 5 years 5-20 years 21-35 years 35+ years

How was your experience?

What was your best experience of the event? Age Range 18-35 36-50 51-65 65+ Employment status Self employed employed full-time employed part-time student work at home unemployed retired no answer Where do you live? On a farm, ranch or acreage In a small SD town (< 1,000) In a medium sized SD town (1,000 to 5,000) In a larger SD town (> 10,000)

How would you describe your general world view?

Conservative moderate progressive Did this event None--somewhat-alot •Increase your understanding of this topic? 1 2 3 4 5 •Change your perspective on this topic? 1 2 3 4 5 •Increase your ability to engage on this topic? 1 2 3 4 5 • As we facilitate more annual “South Dakotans Talking” events, what should we do differently?

•Are there other topics you would like to discuss?

Thank you

THANK YOU for being part of

South Dakotans Talking

k-12 education funding

Finding budget solutions through our shared values