WELCOME to South Dakotans Talking k-12 education funding

1. 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.

2. 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

3. 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.

4. 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

5. MT Lets talk teacher salaries(SD average is 76% of regional average) MT MN RegionalStates WY IA NE

6. Teacher Salariesdata source

7. SD teacher salaries are lower than other SD salaries SD wages vs wages in neighboring states 88% 76% All SD private non-farm workers SD teachers

8. Teacher salaries have higher purchasing power in neighboring states. SD teachers make more money when they choose to teach in neighboring states…both in actual dollars and in purchasing power Mt  18% ND 17% MN 29% Where to teach? WY 34% NE 21% IA 28%

9. Administrative salaries have higher purchasing power in most neighboring states. SD administrators also earn less than their counterparts in neighboring states…in actual dollars and purchasing power (in all states but MT) ND  8% MT5% MN 20% Where to administer? WY 16% NE 18% IA 16%

10. South Dakota spends 25% less per k-12 student than regional average SD per student spending

11. How SD funds k-12 education Source of funds to support SD k-12 education Federal State Local

12. Sources of k-12 Funding Revenue Chartsby SD Budget & Policy Institute - inflation adjusted to 2011 dollar Data Source US Census FESEF Table 11, 2002 through 2011

13. Regional Rankingsdata source

14. Total per student funding & funding sources for SD school districts FY11 (in thousands)

15. School Funding Formulapage 19 of Budget Primer

16. 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

17. % of SD state and local revenue supporting k-12 education has decreased since funding formula implemented Data Source: SD Budget Analysis and graphic by SD BPI Data Source: Dept. of Revenue annual Reports 1996 through 2013 Analysis and graphic by SD BPI

18. Analysis and chart provided by SDSU economics Professor Emeritus Ring

19. K-12 spending as % of SD personal incomedown 25% since funding formula

21. Educational Outcomes in South Dakota How do we compare to regional states? 2014 KIDS COUNT Data Book South Dakota KIDS COUNT Beacom School of Business University of South Dakota

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

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

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

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

26. = Higher ranking (lower is better) South Dakota KIDS COUNT Beacom School of Business University of South Dakota Data source South Dakota Kids Count Graph by SD BPI

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

28. 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

29. 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

30. 2. Consolidation151 school districts in South Dakota Data Source: South Dakota Department of Education Graphic by SD BPI

31. Would consolidating small school districts increase economy of scale?

32. Is consolidation an answer? Status quo -1.7% -3.5% 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

33. 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

34. 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

35. Cap school district reserves

36. 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?

37. 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)

38. 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?

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

40. 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

41. South Dakotans Talking Evaluation • Help us describe who participated • How long have you lived in the community? < 5 years 5-20 years 21-35 years 35+ years • Age Range18-35 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? 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 Thank you

42. THANK YOU for being part of 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.