How will we know if the k-12
funding changes made in the
past two legislative session are
working?
Presented by Joy Smolnisky
SD Budget & Policy Institute
[email protected]
SD Budget & Policy Institute is a non-partisan SD non-profit with the mission to:
“promote responsible and equitable fiscal policy through research and education”
Funding formula
Actual PSA (per student allocation) vs inflationadjusted PSA
• 1997 per-student
allocation (PSA)
$3,350
• equalize dollars per
student
• annual increase—
lesser of 3% or rate of
inflation
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
ACTUAL PSA
INFLATION ADJ PSA
Problem with formula
• INEQUALITY: Formula doesn’t result in equal funding, it only creates
a floor of funding per student under which no district will drop.
• NO REAL GROWTH: The growth in the funding formula is not
adjusted for the labor market cost of educators in the region. It is
based on the lesser of 3% or CPI-W.
SD Funding formula stalls k-12
investment growth rate
1997 to 2016 (Formula lifespan)
110% - National K-12 Average spending per
student
130% - SD Total General Fund Expenditures
 46% - SD K-12 Per Student Allocation
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
240%
220%
200%
180%
160%
140%
120%
100%
Analysis and Graphic by SD BPI
Data Sources: US Census Bureau; SD Blue Book 2011; SD Budget Summaries 2005 to 2015; SD Department of Education
K-12 spending as % of SD personal income
down 25% since funding formula
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
3.8%
US
SD
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
3.1%
K-12 spending as % of SD personal income
down 25% since funding formula
But won’t 63% of
the 6.0%
new ½ cent
sales
tax
5.0%
Catch
us up?
4.0%
4.0%
3.8%
3.0%
3.1%
2.0%
It only moves SD
up 0.18% to 3.28%
1.0%
US
SD
Regional States Ave (WY/MT/IA/ND/NE/MN)
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
0.0%
Do the new statutes address these former problems?
INEQUALITY: Old formula didn’t result in equal funding, it only
created a floor of funding per student under which no district could
drop.
1. Equalizes “Other Funds” worth about $50
million – or around $400 per student.
2. Reduces “winner” and “loser” districts over
time.
3. Education looses it’s historically higher
growth rate
Do the new statutes address NO REAL GROWTH?
• NEW Distribution
X
X
Formula?
• NEW ½ Cent Sales Tax?
• NEW triannual reevaluation of target
teacher salary to stay
competitive in the
region.
Only opportunity left
for REAL GROWTH
is re-evaluation of
salary targets
LOST higher GROWTH rate funding sources:
Pension fund history
7 year growth
(Average 4.9% vs 1.2%)
$25.0
Pension
Capital Outlay
8.0%
7.0%
$20.0
6.0%
5.0%
$15.0
4.0%
$10.0
3.0%
2.0%
$5.0
1.0%
$-
0.0%
2008
2009
Million $
2010
2011
2012
% increase pension
2013
2014
2015
% increase CPI-W
http://doe.sd.gov/ofm/documents/1415Prof.pdf
LOST higher GROWTH rate funding sources:
Senate Bill 131
Pension
Capital Outlay
Other Funds
Other funds become
“local effort” by FY23
Senate Bill 131
Other Revenues (gross receipts tax on utilities, local revenue in lieu of
taxes, county apportionment of revenue from traffic fines, county
revenue in lieu of taxes, wind farm tax and bank franchise tax.)
1. establishes a “base amount” equal to greatest amount collected
during FY13, FY14 or Fy15).
2. In FY18, the overhead rate shall be adjusted to take into account
the sum of the amounts that districts exceed the other revenue
base amount.
3. In FY19-23 the base amount will be stepped down by 20% each
year so by FY23 all of these other revenues would be recognized as
local effort.
Do we really need ongoing growth since education got
the one-time increase in target salary?
NEW triannual reevaluation of target
teacher salary to stay
competitive in the region.
It costs $14.4M to
raise teacher
salaries $1,000….
Here are the numbers…
$60,000
FY16 Estimated Teacher Salaries in Neighboring States
$50,000
$40,000
$30,000
$20,000
$10,000
$-
MN
FY15
$56,67
FY16
$56,91
1 year %
0.4%
10 year % 19.8%
IA
$53,40
$54,41
1.9%
32.5%
MT
$50,67
$51,21
1.1%
28.6%
NE
$50,52
$51,36
1.7%
27.2%
ND
$50,02
$50,23
0.4%
33.0%
SD
$40,93
$42,02
2.7%
21.1%
Recalculating teacher target salaries…
Salary
-
State &
Local
x
Recalculating teacher target salaries…
State Gross $
SD
$42,025
ND $50,237
MT $51,215
NE
$51,364
IA
$54,416
MN $56,910
WY $57,761
Income
Group
Middle
20
Middle
20
Middle
20
Middle
20
Middle
20
Middle
20
Middle
20
Total
Avg. State Avg. Teacher
Ave. Teacher Pay % above SD
Price
Effective & Local Pay Post State
Post S&L Taxes
Average
Parity
S&L Rate
Taxes
& Local Taxes
and Price Parity
Salary
7.7%
$
3,236
$38,789
88
$44,078.49
7.5%
$
3,768
$46,469
91.5
$50,786.04
15%
6.4%
$
3,278
$47,937
94.2
$50,888.79
15%
10.3%
$
5,290
$46,074
90.6
$50,853.76
15%
9.7%
$
5,278
$49,138
90.3
$54,416.00
23%
9.6%
$
5,463
$51,447
97.6
$52,711.72
20%
5.9%
$
3,408
$54,353
96.2
$56,500.10
28%
You’ve come a long way on
Education Funding
But the Game is not over
HANG ON TO YOUR GOALS:
Maintain EQUALITY in funding
and ENOUGH REAL GROWTH to stay
competitive in the teacher salary market.
GAME PLAN
The legislation says salaries will be
re-evaluated & adjusted every 3 years
but doesn’t identify a funding source.
Strategy 1:
Remind legislators they are using changes in ½ cent sales
tax to supplant other spending rather than setting it aside
for Education salary readjustment.
NOTE 4% salary growth for State and Regent Employees
in Long Term Plan.
GAME PLAN
The legislation says salaries will
be re-evaluated & adjusted every 3 years
Strategy 2: Recommend a very early
summer study in 2018 so you know
candidates position for the 2018 election .
GAME PLAN
The legislation says salaries
will be re-evaluated & adjusted every 3 years
Strategy 3:
Try to reassign new sales tax revenue
growth from Amazon or other internet sellers to
cover cost of salary readjustment
GAME PLAN
The legislation says salaries
will be re-evaluated & adjusted every 3 years
Strategy 4:
Be prepared to provide data sources
to justify necessary salary readjustments.
GOOD LUCK and THANK YOU
12
Source:
https://bfm.sd.gov/ltfp/ltp_2017.pdf#view=fit