SCHOOL FINANCE STUDY COMMITTEE MINUTES

The first meeting of the Legislature's interim School Finance Study Committee was called to order by Chair Representative Orville Smidt at 10:30 a.m., Wednesday, June 26, 2002, in the Dean's Office at Aberdeen Roncalli High School in Aberdeen, South Dakota.

The following members were present: Senator H. Paul Dennert; and Representatives Jim Bradford, B. Michael Broderick, Art Fryslie, Jim Peterson, Dale Slaughter, Orville Smidt, Duane Sutton, and John Teupel. The following members were excused: Senator Ed Olson and Representatives Phyllis Heineman, Jeff Monroe, William Napoli, Bill Peterson, and Larry Rhoden.

Staff member present was Mark Zickrick, Principal Fiscal Analyst.

A list of guests present during all or part of the meeting is on file with the master minutes.

(NOTE: For the sake of continuity, the following minutes are not necessarily in chronological order. Also, all referenced documents are on file with the master minutes.)

Chair Smidt welcomed the committee, thanked Roncalli High School for hosting the meeting, and then proceeded with his opening remarks. He commented that there were thirty-nine legislators? responses to the Executive Board?s topics survey expressing interest in this committee?s topic. He said his intention for the committee is to hold meetings at a number of school locations to gain as much information as possible on the topic of school finance in South Dakota. He expressed that even though Roncalli is a non-public school, perhaps something could still be learned that would benefit the state?s education funding system.

He went on to say his plan for the committee is to hold five meetings over the course of the interim; the Executive Board has approved that concept. His intention is for the committee to meet in schools according to South Dakota High School Activities Association classifications: AA, A, and B. At each meeting he wants to incorporate into the agenda presentations from the National Conference of State Legislatures (NCSL) and the Department of Education and Cultural Affairs (DECA) on federal legislation known as the No Child Left Behind Act (NCLB). Because federal legislation could mean that students of non- or poor-performing public schools would be assigned by DECA to non-public schools, discussing school finance in a non-public school is appropriate.

Each meeting will also feature a discussion of funding for secondary career and technical education, which prior to 1995 was categorically funded in the State Aid to Education program.

Chair Smidt explained that on June 10 a steering committee of this committee, consisting of himself, Representative Heineman, and Senators Olson and Dennert, met in Pierre following an Executive Board meeting. The steering committee met with DECA Secretary Ray Christensen and Mark Zickrick to compile a list of schools to nominate for meetings. The steering committee considered several criteria, including school size, standardized test results, cost per student, and overall academic performance and came up with the following nominees: Class AA, Brandon Valley, Pierre, and Yankton; Class A, Custer, Hill City, Lead-Deadwood, and Lyman County; and Class B, Estelline, Mt. Vernon, Stickney, and Willow Lake.

At this point Chair Smidt asked the members of the committee, as well as the members of the audience, to introduce themselves.

Chair Smidt resumed his opening remarks with a discussion of the committee?s Scope of Study, as assigned by the Executive Board: A study of school finances in South Dakota, including an evaluation of current financial resources, alternatives for providing additional resources and the impact of changes in the valuation of agricultural land on the state aid-to-education formula. This study shall include an examination of all revenue received by each school district, the current method for allocating each source of revenue, and possible options for redistributing revenue. School property tax levies and the purposes for which such levies may be used, allocated, and transferred should be reviewed, including the levies for the general, bond redemption, capital outlay, liabilities, and pension funds (Item #1).

He then discussed each item within that assigned Scope of Study and said it would be very important for the committee to keep its focus on school finance issues, but that the meetings will be held in the field to gather facts. Following the school visits, a fifth meeting will be held in Pierre to wrap up the study and consider whether to adopt any legislation.

Chair Smidt explained that his rationale for visiting the different size schools is that the State Aid to Education formula treats schools differently so it is important to hear from them and out in the field so that more local educators may participate as well. He said he wants to leave no stone unturned in addressing the many components of the committee?s scope of study.

Chair Smidt then recognized Ms. Stacy Levsen, Dean and Secondary Principal, Aberdeen Catholic School System, who welcomed the committee to Roncalli High School.

Following Chair Smidt?s opening remarks, Mark Zickrick distributed a copy of NCLB information gleaned from a Web site (Item #2). He reiterated that experts from DECA and NCSL would be on hand during the interim to explain NCLB and provide an update on the state?s latest developments in its implementation.

Mr. Stacy Krusemark and Ms. Susan Woodmansey, DECA, addressed the committee beginning with information on funding amounts for education programs (Item #3). Mr. Krusemark reported that the department?s Consolidated Plan Application for NCLB has been submitted to the federal Department of Education and that a copy of the application is on the DECA Web site. NCLB funds for federal fiscal year 2003 will be available to the state July 1.

Ms. Woodmansey reported on the department?s and local districts? data collection requirements under NCLB. She said the law contains a lot of federal requirements and a lot of responsibility for both the state education agency and the local school districts. However, the state?s electronic means, including the Dakota Digital Network Campus product, should make the job easier, and also make it easier for parents to access information pertinent to their children.

Ms. Woodmansey stated that of particular importance is the NCLB requirement that states determine proficiency levels for all students, and that the data be disaggregated. The states are required to chart average yearly progress (AYP) over the course of 12 years, beginning with the 2002-2003 school year. DECA is developing reports, though, and making them widely available.

Mr. Krusemark commented that ten schools are already participating in the on-line data project, and that more will be on-line by fall. Ms. Woodmansey said DECA will be conducting training for school district personnel on campus this fall.

Senator Dennert asked if school districts failing their performance standards will have to wait until 2008 for corrective actions. Mr. Krusemark replied that is an element of NCLB that is still not final, but that the sanctions process for schools not meeting AYP requirements will likely take effect within three years.

Representative Sutton asked how close DECA?s on-line testing program, known as Dakota Assessment of Content Standards (DACS), is to NCLB requirements. Mr. Krusemark answered that has not yet been determined by the federal Department of Education. He said the federal government still has to issue its rules.

Chair Smidt asked for an update on DACS. Mr. Krusemark responded that the company EdVision got the contract to create DACS, an adaptive on-line test. The federal Department of Education is evaluating it now to determine whether it meets NCLB requirements. DACS is designed to adapt to the student taking the test and give instant feedback of performance for that student, that class, the school, etc. The only glitch in the tests taken during the past school year was due to a rare situation and likely will not recur.

Representative Bradford asked if Shannon County schools will be affected by NCLB or by not complying with it and how. Mr. Krusemark responded that the accountability and sanctions provisions of NCLB are yet to come from the federal Department of Education.

• Mr. Dean Johnson, Volga, representing Sioux Valley School, said that his school district is actually going to lose some money because of NCLB, so just because the overall amount of federal funding is increasing not all schools are going to see an increase.

• Mr. Gene Enck, Pierre, Associated School Boards of South Dakota, asked how much of NCLB will be made public. Ms. Woodmansey responded that much is being posted to DECA?s Web site but not all decisions have been made as to publicizing all items or how.

• Mr. Enck said Title I is the federal program to which Shannon County is not in full compliance, and that stems from federal legislation enacted several years ago. NCLB required that schools are up to compliance with the 1994 act and then they are to work on compliance with the 2001 act.

• Dr. Gary Harms, Aberdeen, Aberdeen Public Schools, said it is important for legislators to know that schools may be placed on School Improvement sanctions if they are failing to meet just one measure in NCLB, and that this could be a problem in South Dakota even though South Dakota schools traditionally perform well overall.

• Ms. Christie Johnson, Pierre, School Administrators of South Dakota, said some early signs indicate as many as 80% of South Dakota schools could have to go on School Improvement.

• Mr. Enck said the media will have to report developments fairly, accurately, and understandably to the public.

Ms. Woodmansey distributed to the committee information on school district general fund levies (Item #4) and districts? general fund revenues that come to districts outside of the funding formula (Item #5).

Chair Smidt commented that pages 1 through 5 of DECA?s Education in South Dakota: A Statistical Profile, also referenced as The Statistical Digest, show statewide totals for enrollments, per pupil expenditures, and revenues. He pointed out that the grand total of revenues for 2000-2001 for schools is more than $934 million.

Representative Bradford asked how the bank franchise tax revenue is allocated to schools, and Representative Broderick replied that it is allocated according to where banks are located.

Mr. Al Kosters, Sioux Falls, DECA Workforce and Career Placement, informed the committee that he has been serving on a financing needs for career and technical education (CTE) task force with other administrators. In 1995, when the current State Aid to Education formula was enacted, the Legislature eliminated the categorical funding for secondary CTE. Since then funding for secondary CTE has diminished in the districts to the point where programs are now in jeopardy. He said supplemental funding is the key to the future of CTE. Mr. Kosters took the committee through a written report on the status of CTE (Item #6) and introduced Mr. Matt Olson of Aberdeen, a graduate of Aberdeen Central, as an example of someone trained through CTE. Mr. Kosters referred to page 3 of his handout where he stressed that South Dakota provides less funding for CTE than all surrounding states and that South Dakota is one of only 10 states that does not provide supplemental funding for CTE.

Mr. Dean Johnson, Volga, Sioux Valley School, explained the multi-district concept for providing CTE and the funding formula used for allocating money from districts for students.

Ms. Levsen was asked if Roncalli students take CTE classes, and she replied that they enroll in the Hub Area Multi-district.

Mr. Fran Schoenfelder, Brookings, East Central Multi-district, said that they have been tracking students for some time and that most students who take CTE through multi-districts go right into employment upon graduation from high school (Items #7 and #8).

Representative Broderick asked if the students pay tuition; they do not.

Representative Bradford asked if the credits earned apply toward graduation and the answer was affirmative, but as elective credits.

Representative Slaughter asked about transportation of students to CTE classes at the multi-districts' and Mr. Johnson replied that the local school districts cover it.

Representative Teupel asked if categorical funding for CTE should be restored. Mr. Johnson replied that, as he understands it, the State Aid to Education formula is probably a good formula but that it just needs more money. He said that if the formula were funded adequately, secondary CTE would not require restoration of categorical funding. Otherwise, categorical funding should be returned.

Chair Smidt stated there would be no discussion of whether the State Aid formula is adequately funded, that discussions would be held to the committee?s Scope of Study (Item #1).

Representative Teupel distributed information on Average Daily Membership (ADM), expenditures, and State Aid for six school districts, and the comparison between levels for fiscal years 1997 and 2001 (Item #9). He called the committee?s attention to the $4,955 Total General Fund Revenue per ADM figure and compared that to the $5,115 as reported for the nine surrounding states in the CTE handout (Item #6, page 3). He asked if the numbers were directly comparable. Mr. Johnson and Mr. Enck replied that they would get further information on the $5,115 figure.

Mr. Johnson concluded his presentation with a proposal for amending the State Aid to Education formula (Item #10). He explained his proposal would bring back the calculation of classroom units and would base funding 50/50 on ADM and number of classroom units per school district.

Representative Bradford commented that declining enrollments have been key to the turmoil in education funding.

Asked if CTE is mandated, Mr. Larry Nelson, DECA, replied that the districts have the right to decide if they want to offer or participate in approved programs.

The committee recessed for lunch at 12:42 p.m.

The committee reconvened at 1:28 p.m.

Chair Smidt commented on a recent article in the Sioux Falls Argus Leader wherein Mr. Tom Lorang was quoted on how private schools make public schools better.

Ms. Stacy Levsen, Aberdeen, Superintendent of Aberdeen Catholic Schools and Principal of Roncalli High School, addressed the committee and distributed information on Aberdeen Catholic Schools (Item #11). She began her remarks with a statement on how research has shown that Catholic schools do the best job of educating poor students, and how they do it efficiently. She said Catholic schools also promote tolerance.

Levsen stated there are 6,546 students in Catholic schools in South Dakota. She gave a history of Catholic education in Aberdeen.

Senator Dennert asked if Aberdeen Catholic Schools have to report data to DECA. Ms. Levsen said they do, but she did not know why they are not included in DECA's the statistical digest. Material in her handouts was patterned after DECA?s statistical digest and gave ADM enrollment figures, average teacher salary, number of certified staff, student to staff ratio, and other information.

Ms. Levsen introduced Mr. Pat Gallagher, Director of Development for Aberdeen Catholic Schools, who addressed matters concerning the $2.3 million budget and $3,396 per student for 680 students. He said this expenditure level per student has not changed significantly over the last five years. He stated that the school?s income is approximately 37% tuition, 37% support from the parishes in Aberdeen, 7% foundation, and 5% fundraising. He clarified that the $3,396 per student is for educational costs and capital construction is not included. Those projects are handled completely separately through fundraising.

Representative Sutton asked if Aberdeen Catholic schools have special education. Mr. Gallagher replied in the negative, saying 95% of those students in "significant need of special education" are handled by the public school district, and the other 5% of those students? needs are met by parents.

Representative Teupel asked how many administrators there are at Aberdeen Catholic Schools, and Ms. Levsen replied there are: an elementary principal, a business manager, the development director, a half-time athletic director, a half-time high school principal; and that she is half-time superintendent and half-time high school principal.

Senator Dennert said there was a short list of questions he would be asking at each school, and he asked Ms. Levsen the questions for Aberdeen Catholic Schools. The answers are as follows: starting Salary is $19,500. Salary is by contract, not on a scale. Aberdeen Public Schools Superintendent Dr. Brad Meeks replied to Senator Dennert?s question that the special education budget for Aberdeen is about $2.7 million for about 500 students.

Representative Bradford asked Ms. Levsen if most of her teachers are Catholic. She responded affirmatively, but that not all are. She mentioned that they believe in the mission of a Catholic school, however.

Representative Bradford asked if Aberdeen Catholic Schools does grant writing, and Mr. Gallagher replied affirmatively.

Discussing Roncalli?s education technology, Ms. Levsen said they did not have their school buildings wired as part of DECA?s Wiring-the-Schools project, but they are wired for Internet. She said there is a V-Tel lab, but they did not proceed with access to the Dakota Digital Network. She said the rate was prohibitive so there is connection just to the Diocesan office.

Ms. Levsen invited the committee to tour the building.

The committee will hold its second meeting July 31 at Brandon Valley, the third meeting August 28 at Custer (with invitations to be sent to superintendents of Hill City and Lead-Deadwood), and the fourth meeting September 25 at Estelline. The fifth meeting will be October 7 in Pierre.

There being no further business, Representative Broderick moved, seconded by Representative Sutton, that the committee adjourn. Motion prevailed on a voice vote. The committee adjourned at 3:06 p.m.