New K-12 Funding Formula Requires Schools to Sustain Competitive Teacher Raises

Rep. Lana Greenfield (R-2/Doland) continues to falsely assert that Governor Dennis Daugaard’s teacher pay plan does not direct the money toward teachers:

The money generated by the additional tax has been promoted as going toward education, but there is clear apprehension in the Legislature that that will be the case.

“We need to make sure that when we pass a bill, it’s a good bill. 1182, in its current form, is not a good bill and does not define who is going to get the money,” Lana Greenfield said. She referenced a previous state video lottery bill that was passed in a previous year. “That was a teacher bill and we didn’t get any money,” she said [Kelda J.L. Pharris, “Indian Health Service Payment Change Draws Attention of South Dakota Lawmakers,” Aberdeen American News, 2016.02.28].

That flag was false when Rep. Greenfield waved it at the February 20 Aberdeen crackerbarrel, and it remains false now. The Governor’s teacher pay plan has not one but two provisions that direct new revenue toward teacher pay. The Schoenbeck Amendment to House Bill 1182 specifies how we will divvy up the new half-penny sales tax:

From the proceeds of this Act, each year sixty-three percent shall be dedicated to increasing teacher salaries by school districts, thirty-four percent shall be dedicated to reducing the property tax levies for general education for all classes of property, and three percent shall be dedicated to increasing instructor salaries to competitive levels at postsecondary technical institutes [Section 17, HB 1182, as amended in the House, 2016.02.18].

The Soholt Amendment to Senate Bill 131 specifies how much the schools must raise teacher pay and puts a bite on their funding if they don’t:

For each school district, the district’s increase in average teacher compensation from fiscal year 2016 to 2017 shall be equal to at least eighty-five percent of the district’s increase in state aid to general education funding, as defined in subdivision (2), from fiscal year 2016 to fiscal year 2017.

If a district fails to comply with the requirements of this section, state aid to general education funding to the district in fiscal year 2018 shall be decreased by an amount equal to fifty percent of the amount calculated in subdivision (2). For fiscal years 2019, 2020, and 2021, if a district’s average teacher compensation is less than the district’s average teacher compensation in fiscal year 2017, state aid to general education funding to the district in the following fiscal year shall be reduced by an amount equal to five hundred dollars for each teacher employed in the school district [excerpt from Section 27, SB 131, as amended in Senate State Affairs, 2016.02.19].

I guesstimate that the 85% percent clause in the Soholt Amendment requires schools to raise their average teacher pay 19% to 22% this year. That’s a good goal.

However, the Soholt Amendment has one technical problem that Senate Appropriations ought to fix tomorrow. A school could conscientiously apply its new funding toward higher teacher pay and still possibly miss the 19%–22% raise target this year or see a decrease in average salary in subsequent years. If a school district has a wave of retirements and replaces those veteran teachers with rookies, they’ll go from having a large number of teachers at the top of the salary schedule to a large number of teachers earning the base salary. Even if the school district adds money to every step on the salary schedule, a new staff with lots of people on the lowest step could pull the school’s average salary down from the previous year.

To oversimplify, suppose this year a school offers $35,000 for base salary and $50,000 for the top salary for the most experienced teachers. Suppose the school raises both steps 20%: base goes to $42,000, top goes to $60,000. In extremis, if a district had all veteran teachers, its average pay this year would be $50,000. If those veterans all retire and the district hires all new teachers at base, the average salary would be $42,000, a drop the Soholt Amendment would punish.

Update/Correction 08:05 CST: But wait! An eager reader tells me to scroll up and read Section 23:

The School Finance Accountability Board shall promulgate rules pursuant to chapter 1-26 to establish the appeals process provided for in section 27 of this Act, and to establish the factors that may be considered in considering a waiver requested by a school district, which shall include the impact of retirements [excerpt, Section 23, SB 131].

HB 1182 and SB 131 properly and explicitly direct new revenue toward the intended goal of substantially higher teacher pay. The funding formula as written could punish schools for the vagaries of retirement and the labor pool. But fortunately for schools and for chances of passing the teacher pay plan, appropriators caught this complication and are offering schools a chance to appeal, explain their changes in staff, and spare themselves an unnecessary penalty.

11 Responses to New K-12 Funding Formula Requires Schools to Sustain Competitive Teacher Raises

  1. Bob Mercer

    The legislation package also calls for a review board that can grant waivers in such cases.

  2. Noted and corrected above! Thanks, Bob!

  3. Cory, can you find the breakdown for how the “property tax relief” is going to be distributed (Ag vs Commercial vs Residential)? I’m afraid I’ve not been able to find that nugget.

  4. Mr. B, perhaps Mr. Mercer knows how that works. He seems to be good at reading the law bills.

  5. Liberty Dick

    Soooo Lana was right and there are no guarantees teacher pay will be raised…
    Also looking at SB131 it has a lot of consolidation language. Is part of the master plan to consolidate small town teachers out of a job?

  6. 90 Schilling

    EB5, Gear up? Crickets.

    Shell game on sales tax increase? Lions roar.

    Now why should we suddenly accept this self righteous epiphany without questions?

    JK Clausen is right on the money with this game.

  7. Dick–The master plan SHOULD consist of some consolidation. There are too many schools in this state.

  8. 90 Schilling

    Let’s get a list up of those schools that SHOULD close, Jake.

  9. owen reitzel

    90 is right Jake. Lets see that list and then tell the towns with those schools why they should close.

  10. LibDick, Lana is not right. I just laid out the two portions of the two bills that give the strongest guarantee you’re going to get that the money will be spent on teachers.

    And can you show me the “lot of consolidation language” you’re seeing in SB 131?

  11. Wayne, good question. The Governor’s explanation says the property tax relief will be “applied to all classes of property at the same ratio as the general education levies.”

    The DOE gave the Blue Ribbon panel a primer on the K-12 funding formula. That primer gives the levies for agricultural, residential, and commercial property:

    • Ag: $1.568/$1,00
    • Res: $4.075/$1,000
    • Comm: $8.727/$1,000

    Now I tread carefully, because I’m not sure how this works. But if a $40M property tax break is doled out proportionate to those levies, then ag landowners get about $4.4M, homeowners $11.3M, and commercial $24.3M.

    I wonder—do we also have to factor in the total value of each category to figure out how mcuh goes back to each sector?