Southeast Faces $2M Deficit, Layoffs; Students Finding Work, Cheaper Classes Elsewhere

Key to securing passage of House Bill 1182, the sales tax to raise K-12 teacher pay, was Rep. Lee Schoenbeck’s (R-5/Watertown) amendment specifying that three percent of the new revenue go toward raising instructor pay at our vo-techs. With the increase of the state sales tax from 4% to 4.5% effective June 1 projected to raise $107 million, the Schoenbeck Amendment should put about $3.2 million toward the vo-techs. If my rough count from the vo-techs’ online directories is correct, that should give about 320 instructors an average raise of about $10,000, which by my most hopeful interpretation of the K-12 funding formula is a bigger raise than 98% of K-12 teachers will see.

Some instructors at Southeast Technical Institute in Sioux Falls may not see any raise. STI president Jeff Holcomb told his staff Thursday that the school will likely have to lay off staff to fill a $2-million deficit:

In the last three years, enrollment has gone down and students are taking fewer credit hours. In one year from 2014 to 2015, enrollment fell 8 percent; Total credit hours were down 9 percent.

The cuts will help shrink the 10 percent [deficit].  Southeast Tech President Jeff Holcomb told his staff Thursday night.

“It’s just a blunt truth.  I said to them, there’s no easy way to say this,” Holcomb said.

There is not much clarity about how many employees this could affect. Holcomb says we likely will not know until next month.

“We want to exhaust every other adjustment first, before we get to any staff changes,” Holcomb said [Brady Mallory, “Southeast Tech Leaders Talk About ‘Likely’ Job Cuts,” KELO-TV, 2016.04.08].

Wait a minute: Governor Daugaard has emphasizing the importance of vocational education throughout his time in office. Aren’t kids listening?

Nope—they’re too busy going to work:

“Our low unemployment rate really is the highest competitor,” Southeast Tech President Jeff Holcomb said. “So, if you have an individual that has some aptitude, there’s such a demand for their skills that they go right to work.”

Declining enrollment has led to a $2 million gap in the incoming revenue and the operational expenses at STI, Holcomb said. The decline started around 2013, Holcomb said. Between the 2014-2015 school year and the current year, the school saw a drop of 5,000 credits [Megan Raposa, “STI Layoffs Latest Setback for Sioux Falls Higher Ed,” that Sioux Falls paper, 2016.04.08].

That’s a strange dynamic: South Dakota is short on workers. The Governor says we need to beef up our vo-tech schools to produce more workers. But workers are in such short supply that employers aren’t waiting for the vo-techs to crank out all the labor they need; they’re taking high school graduates and getting what work they can out of them and paying enough that, at least short-term, young workers are saying more school isn’t worth the time and tuition.

Even if students decide to put off short-term gains for long-term investment in a technical degree, they can get that degree cheaper elsewhere:

Government aid for tech schools in South Dakota is low compared to all surrounding states. Meanwhile, the amount students pay in tuition and fees each year is higher than all neighboring states — more than double what students pay in Nebraska and Wyoming.

On average, a student can save roughly $1,500 on tuition by crossing the border to Iowa.

“Both Iowa and Minnesota, the states kick in a much larger amount and share to technical education than we do in South Dakota,” said Kent Alberty, a member of the Southeast Tech Council [Patrick Anderson, “Students Pay More with Tech School Fee Hike,” that Sioux Falls paper, 2016.03.18].

Southeast has taken out $20 million in bonding to support new building on campus. Students shoulder two thirds of that debt service, and the state Board of Education hiked student fees another $5 per credit this year to cover that cost.

The Bureau of Labor Statistics says the average wage for postsecondary vocational instructors in South Dakota as of May 2015 was $50,540. At that salary, STI would have to lay off 40 of its instructors, more than 40% of its teaching staff, to close the $2-million budget gap. They have about a hundred other staff to choose from (four security officers, three vice-presidents…) for savings, but Sioux Falls school board president Kent Alberty says the cuts will be across the board.

17 Responses to Southeast Faces $2M Deficit, Layoffs; Students Finding Work, Cheaper Classes Elsewhere

  1. The simple fact is that in the state of South Dakota education is considered an expense rather than an investment. Teachers are expenses. Students are expenses. It’s all about short-term bottom lines here. Other states take a longer term view.

  2. Steve Hickey

    Mickelson can fix it.

  3. Other states fund education FIRST and then everything else follows with what is left. Other states value education and they know and have learned; that if you educate your residents and strengthen your work-force — it will come back ten-fold. Does South Dakota government want us to remain “ignorant” in many ways?? (not saying we are not an intelligent population — I’m just saying opportunity eludes our youth, in the state).

  4. Nick Nemec

    Mr. Hickey, sometimes I have a hard time detecting what is sarcasm and what is not sarcasm.

  5. Steve Hickey

    Actually it wasn’t sarcasm. I butt heads with Mark on CAFOs but he’s the go to guy on tech schools. It’s an area he will make a mark on if he’s Governor. Not sure what that mark will be- maybe a Mickelson Community College. He laughs at me saying that stuff. Workforce development is what he dreams about at night. I’m serious. If he heard me say that he’d accuse me of being drunk. Still, it’s true.

  6. If labor is in such high demand in South Dakota perhaps now is the time to organize and fight the right-to-work laws.

    Has anybody talked to the employers? Are the tech schools teaching the skills they require or are they turning out graduates who still require on the job training?
    Maybe it doesn’t make any difference to the employers whether somebody went to tech school or not

  8. Mike Kokenge

    It does not take a lot to figure out what ails education beyond high school. COST. Pretty hard to fix something that is beyond the reach of most SD families. I am a graduate of SETI, Electronics Program. Went there in 72-73, full courtesy of the GI Bill. I recall getting about $260 a month for the GI Bill, married. About $300 a month the second year after our family expanded with our first child. I do not recall what tuition was back then, but with just my GI Bill money and a 20 hour a week part time job, we made it just fine. I do remember Voc-Ed not costing very much. Certainly less than my monthly allotment.

    Today? Much different story. SETI now costs on average $6,178 a year for tuition and books. Tuition and books in 2015 dollars for the 1980 school year in public 4 year colleges cost $2320. Compare that to the cost for technical education. It has just become very expensive for Joe Sixpacks kids to get an education beyond high school. They are damned if they do, and damned if they don’t.

  9. Interesting: Erich Schaffhauser reports that enrollment is up at the other three vo-techs. The biggest increase is at Lake Area in Watertown. So even if the costs are rising and higher here than elsewhere, three of the four vo-techs are still drawing customers. What would be unique about the Sioux Falls market that would drag them down—wider variety of jobs? closer to Iowa vo-tech? (Say, what are the nearest vo-techs in Iowa and Minnesota?)

  10. Hickey, tell Mickelson to talk to Ror. Doesn’t he get that if we just invest in education, workforce will sort itself out? It won’t happen right away: we have to undo 30+ years of neglect of K-12, and those kids who benefit from those reforms won’t enter the workforce for a decade, but we’ll get there.

  11. Anne, have you shown Bruce Yakley that link on useless millennials?

    I hear millennials are just trying to pick up the pieces from the Baby Boomers’ mess. ;-)

  12. Mike K, do you have any idea of whether the GI Bill (or whatever we call benefits for veterans who go to school nowadays) has kept up with the cost of higher education and supporting a family? Can a veteran today get the same good deal you did?

  13. Mike Kokenge

    The post 911 GI Bill question is interesting. That is a hard question to deal with, assuming all the different factors to deal with. What I learned is 70% of Vietnam era vets used the GI Bill. 45% of post 911 vets have used the bill. Why the huge difference? Could be the way bottom line costs are drawn out. College today is very expensive compared to Vietnam era costs. I do recall my expenses for education were nothing out of pocket. Can’t draw any real conclusions about today’s vets. Could also be that when I served there was a draft. Probably a little higher percentage of vets from that era had a higher predisposition to a college education. Thought you might find this article interesting Cory.

  14. Mike Kokenge

    Comparing SETI costs to schools in Watertown and Mitchell draws only one glaring difference. Tuition and books are competitive. What is not, is room and board. It is 2 to 3 thousand cheaper a year to get a voc ed in Watertown or Mitchell. Throw those numbers on top of post high school education that has quadrupled in 2015 dollars since 1980 and we have the crisis SETI faces.

    Another factor I think they are facing is they may have, along with all other colleges, spent more than they should have, and passed those expenses on to students. When I went to school at Southeast it had a few classrooms on the north end of the Lincoln High School complex. Simple and very efficient. Another building block they had going for them then was, at least in my class, 75% were there thru the GI Bill.

  15. My prediction is that the staff and faculty at STI will not see any of the money earmarked for Voc-Ed or pay. Furthermore, their pay will actually be cut by reductions in contract days. Everyone will take a big hit…..except those actually responsible for this ongoing financial debacle. When this comes to pass, some questions to ask might well be…..
    Who green lighted this $20,000,000.00 “field of dreams” building with no students to put in it? And all the FTE’s that go along with its operations? BTW, I heard the new administration office is a dandy.
    Could this in anyway be blamed on President Holcomb? Or the cabal of bobble heads amongst his fractured admin team who continue to pump him full of sunshine? Of course not.
    How responsible are those on the SF schoolboard who rescued Mr. Holcomb from the jaws of a righteously angry superintendent Pam Homan when they wrested control of STI for themselves 2 years ago then showed Pam the door? Again, I suspect no hint of culpability will be found in those quarters.
    As for those ever decreasing enrollment numbers, well,….what’s one suppose to do? First the economy is to bad. Now the economy is to good. Nothing about this trend should be mistaken as demonstrating the need for an actual enrollment and recruitment PLAN should it? Give it a few more years and there’s bound to be a couple of days where the economy will be just right. Why get all kinetic and stuff about more students when drifting is so much more….pleasant?
    Anyhow, those are my predictions. The pilots of this stunt show will continue to huff nitrous in the cockpit while the passengers are forced to pass their wallets forward as the rising roar of tall pine on the wing tips drown their hoarse throated screams of “pull up”!!!

  16. As I’ve been told, the situation at Southeast is unique relative to some of the other schools because of curriculum. I don’t know if this is the terms used by the school or not but I would characterize as more focused on technical positions (lab tech, computer tech, business, etc.) vs. vocational (welding, metal bending, machining, etc.)

    The aforementioned technical positions had growth from the 1990’s through probably 2013 and since has either stagnated or declined. Conversely, during the same period, businesses that were needing vocational skills weren’t growing while they are now expanding.

    I know this is an anecdote but it is confirmed by what I’ve heard around down: My wife decided to get rid of our DVR and go to TIVO (don’t know why as it is above my pay grade) but I happened to be at the house when the guy showed up to make the change. He told me he was a STI computer tech grad. When he started in the program, graduates had jobs before graduation. In his class, only half did. So, he is working at this to get in the door at Midco as, in addition to his pay, they are giving him a partial reimbursement for his degree. If he had known what the situation was going to be now, he told me he would have gotten a different degree, probably in welding as he is a farm kid.

    These kids are smart. New enrollees aren’t going to pursue degrees where there is a surplus but will go where there are shortages.

    Also, there is another related phenomenon going on. Sioux Falls recent growth has created a shortage of housing. Despite adding thousands of new apartment units, the demand is for several thousand others (which are being built). Recently, a major employer told me they are having trouble keeping people because they can’t find housing in Sioux Falls. I think this too is discouraging students from going to STI unless they can live at home.

    At the end of the day, the formula for the success and growth of STI the past 25 years is the cause of its current problems. It grew proportionate for the demand in a band of industries which are all now stagnating simultaneously.

    Basically, they are just going to have to deal with the reality of living in a dynamic economy.

  17. Dang, Troy—makes me want to teach at a university that focuses on teaching the classics, the timeless humanities, rather than trying to tailor programs to the transient technical needs of employers.