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.

WELCOME to South Dakotans Talking

k-12 education fundingFinding budget solutions through our shared values

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 SDbpi.org

Robert Burns, President

Deb Fisher-Clemens

Kay Jorgenson

Dave Volk, Vice President

Eileen Briggs Paul Dennert

Gene Lebrun, Sec/Treasurer

Rob Oliver Jim Fry

Rich Garry, Past President

Mary Bibby

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)

US IA MN MT NE ND SD WY$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

40+ years snapshot of average teacher salary changes (constant 2012/13 dollars)

1969-70 1979-80 1989-90 1999-2000 2009-10 2011-12 2012-13

Chart by SD Budget & Policy InstituteData Source: NEA, Estimates of School Statistics, 1969-70 through 2012-13

MT

WY

NE

MT

MN

IA

Regional States

Teacher Salaries

data source

SD teacher salaries are lower than other SD

salaries

88%

76%

SD wages vs wages in neighboring states

All SD private non-farm workers

SD teachers

Iowa Minnesota Montana Nebraska North Dakota

South Dakota

Wyoming0.00

5.00

10.00

15.00

20.00

25.00

30.00

SD wages are 88% regional averageAverage hourly earnings of all employees

on private non-farm payrolls, by state (source bls SAE table 4)

2011 2012 2013

SD teachers make more money when they choose to teach in neighboring states…

both in actual dollars and in purchasing power

SD

ND

MT

NE

IA

MN

WY

$- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000

$44,875

$52,372

$53,077

$54,307

$57,573

$57,711

$60,083

39,580

47,344

49,999

48,931

51,528

56,268

57,920

Average Salary

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

Teacher salaries have higher purchasing power in neighboring states.

Mt 18%

WY 34%

IA 28%

ND 17%

NE 21%

MN 29%

Where to teach?

SD administrators also earn less than their counterparts in neighboring states…

in actual dollars and purchasing power (in all states but MT)

Administrative salaries have higher purchasing power in most neighboring

states.

NE 18%

MT5% ND 8%

WY 16%

MN 20%

IA 16%

Where to administer?

SD

ND

MT

NE

IA

MN

WY

$- $20,000 $40,000 $60,000 $80,000 $100,000 $120,000

$83,390

$90,343

$79,469

$98,457

$97,039

$100,195

$96,338

$73,550

$81,670

$74,860

$88,710

$86,850

$97,690

$92,870

Average Salary

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

South Dakota spends 25% less per

k-12 student than regional average

South Dakota

Iowa Montana Minnesota Nebraska North Dakota

Wyoming $-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

6 year trend in current spending per pupil

In South Dakota and neighboring states

2007 2008 2009 2010 2011 2012

SD per student spending

How SD funds k-12 education

Source of funds to support SD k-12 education

• Federal

• State

• Local Federal9%

state36%

local55%

SD k-12 funding sources 1997Federal16%

state30%

local53%

SD k-12 funding sources 2012

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

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

(in thousands)

$0

$5

$10

$15

$20

$25

local state federal

School Funding Formulapage 19 of Budget Primer

Funding formula

• 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

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

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

ACTUAL PSA INFLATION ADJ PSA

% of SD state and local revenue supporting k-12 education has

decreased since funding formula implemented

1998 2003 2008 2011 20120.0%

10.0%

20.0%

30.0%

40.0%

K-12 % of state general fund down 25%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

0%

10%

20%

30%

40%

50%

60%

70%

K-12 % of property taxes down 17%

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

Data Source: SD Budget Analysis and graphic by SD BPI

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

0.0

1.0

2.0

3.0

4.0

5.0State and local school revenue as percent of S. D. personal income

Year

Re

ve

nu

e %

S.

D.

pe

rso

na

l in

cm

e

State

Local

Analysis and chart provided by SDSU economics Professor Emeritus Ring

K-12 spending as % of SD personal income

down 25% since funding formula

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

0%

1%

2%

3%

4%

5%

6%

SD Ntl

Regional States

K-12 education spending FY12Amount per student by

Source:% of

Personal Income in

state spent on K-12Total Funds

State Funds

Local Funds

Federal Funds

United States $12,331 $5,609 $5,488 $1,235 4.51%

Wyoming $18,446 $9,466 $7,372 $1,608 5.95%Minnesota $13,163 $8,306 $3,932 $925 4.36%North Dakota $13,368 $6,748 $4,980 $1,641 4.03%Montana $11,336 $5,350 $4,480 $1,506 4.40%Iowa $12,175 $5,407 $5,736 $1,033 4.64%

Nebraska $12,267 $3,876 $

7175, $1,216 4.59%South Dakota $10,149 $3,093 $5,392 $1,665 3.51%Table by SD Budget & Policy Project; Data Source US Census Bureau 2012 Public Elementary-Secondary Education Finance Report

2014 KIDS COUNT Data BookEducation Domain

  RankMN 6NE 9IA 13ND 19MT 21WY 24SD 32

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

Educational Outcomes in South Dakota

How do we compare to regional states?

NE IA MN Nation WY MT SD ND

0%

10%

20%

30%

40%

50%

60%

70%

52% 53% 54% 54%58% 60%

62% 64%

South Dakota Compared to the Nation & Bordering StatesPercent of children ages 3 to 4 not attending preschool,

2010-12

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

MN IA NE WY MT Nation ND SD

54%

56%

58%

60%

62%

64%

66%

68%

59%

62%63% 63%

65%66% 66%

68%

Percent of 4th graders who scored belowproficient reading level, 2013

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

MN ND MT SD WY IA NE Nation

0%

10%

20%

30%

40%

50%

60%

70%

53%

59% 60% 62% 62%64% 64% 66%

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

2013

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

NE ND IA MN MT SD Nation WY

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

7%

9%

11%12%

14%

17%

19%20%

South Dakota Compared to the Nation & Bordering StatesPercent of high school students not graduating on time,

2011-12

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

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

Education Domain Ranking

by Year by State 2012 2013 2014 2012-

2014

Iowa 14 15 13

Minnesota 7 7 6

Montana 13 13 21

Nebraska 15 17 9

North Dakota 16 16 19

South Dakota 21 22 32

Wyoming 29 26 24

= Higher ranking (lower is better)

Min

neso

ta

Iowa

Mon

tana

South

Dak

ota

0

5

10

15

20

25

30

35

Education Domain Ranking by Year and State

2012 2013 2014

Data source South Dakota Kids CountGraph 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”

1. Status quo

2. School consolidation

3. Equalizing capital outlay or “other” funds

4. Cap reserves

5. Additional revenue earmarked for education

6. Prioritizing k-12 salary policy

7. Change funding formula CPI measurement

1998 2003 2008 2011 20120.0%

10.0%

20.0%

30.0%

40.0%

K-12 % of state general fund down 25%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

0%

10%

20%

30%

40%

50%

60%

70%

K-12 % of property taxes down 17%

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

2. Consolidation151 school districts in South Dakota

Less than 250 stu-

dents (37 dis-

tricts)25%

250 to 600 stu-

dents (46 dis-

tricts)30%

Sparce (28 dis-

tricts)19%

more than 600 stu-

dents (40 dis-

tricts)26%

Data Source: South Dakota Department of EducationGraphic by SD BPI

Would consolidating small school districts increase economy of scale?

Less than 250 students (37

districts)25%

250 to 600 students (46

districts)30%

Sparce (28 districts)

19%

more than 600 students (40

districts)26%

Is consolidation an answer?

no consolidation Consolidate 37 schools with < 250

students

Consolidate 83 schools with < 600

students

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

$977,652,374.00 $960,965,662.58 $943,788,031.62

How much would consolidation cut education expenses in SD?

-1.7%

-3.5%

Status quo

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 lhttp://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 lhttp://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 modelsEmployee 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

1. Choose a facilitator

2. Choose a recorder

3. Discuss k-12 education funding and/or teacher salariesRecord 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 joys@SDbpi.org)

• 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

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

South Dakotans Talking

Help us describe who participatedHow long have you lived in the community? < 5 years 5-20 years 21-35 years 35+

years

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

How was your experience?What was your best experience of the event? 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

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.

THANK YOU for being part ofSouth Dakotans Talking k-12 education funding

Finding budget solutions through our shared values