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.