The first meeting of the interim Education Committee was called to order by Senator Don Brosz, Chair, at 9:05 a.m., June 13, 2000, in LCR 1&2 of the State Capitol, Pierre, South Dakota.

A quorum was determined with the following members answering the roll call: Senators Don Brosz, Barbara Everist, Jim Hutmacher, David R. Munson, John J. Reedy, and M. Michael Rounds; and Representatives Larry Diedrich, Cooper Garnos, Phyllis Heineman, Kent Juhnke, John McIntyre, Willard Pummel, and Dan Sutton. Representatives Richard "Dick" Brown and Steve Cutler were unable to attend.

Staff members present included Dale Bertsch, Chief Analyst for Fiscal Research and Budget Analysis; Mark Zickrick, Principal Fiscal Analyst; and Rhonda Purkapile, Senior Legislative Secretary.

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

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

Chair Brosz presented the committee with information on the Education Commission of the States (ECS), noting that they are a valuable resource tool available to the Legislature (Document #1).

The committee members expressed an interest in learning more about perceived teacher shortages, teacher salary issues, the recruitment, retention and rewarding of teachers, facility needs, fund balances of school districts, declining enrollments, the state aid formula, other sources of funding for education, the forgiveness of student loans of graduating teachers, the role guidance counselors play in early intervention, the school price index, and capital outlay funds.

Mr. Ray Christensen, Secretary, Department of Education and Cultural Affairs (DECA), presented the committee with a summary of major education legislation passed during the 2000 Legislative Session (Document #2) and with a definition of fund types listed in statute (Document #3).

Mr. Todd Vik, Department of Education and Cultural Affairs, reported that the tax levies for 2000, payable in 2001, are $3.33 per $1,000 of valuation for ag, $5.36 per $1,000 for owner-occupied, and $13.93 per $1,000 for commercial.

Mr. Vik explained that the bond redemption fund (an extra levy to pay off bonds) is different from the capital outlay fund. The bond redemption fund is to service the debt of the capital outlay project. Buildings are not built with moneys from the bond redemption fund.

Mr. Vik reported that beginning July 1, 2000, it will no longer be possible to transfer general funds to the capital outlay fund. Money can be loaned from the general fund to any other fund for up to two years, and if not repaid, it would be considered a transfer. In response to questions, Mr. Vik indicated that technically, a district could transfer general funds to the bond redemption fund, but he did not think this would be a likely scenario.

Secretary Christensen noted that tax levies are not the only sources of income to school districts. They also receive income from mobile home taxes, fines, impact aid, port of entry fees, gross receipts, and the bank franchise tax, to name a few. None of these revenues count in the formula or in the amount available for a school district.

Ms. Susan Woodmansey, Department of Education and Cultural Affairs, presented the committee with a history of general fund levies (Document #4), a five-year history of the school districts? tax base (Document #5), with the total taxes paid by district over a five-year period (Document #6), and with an individual district profile (Document #7).

Senator Rounds noted that it appears the total tax base increased by 16 percent but the total taxes paid decreased by 5 percent. Ms. Woodmansey noted that this was correct, stating that the 16 percent and 5 percent figures were a statewide total?some school districts might have changed more or less than that.

Ms. Woodmansey also presented the committee with a statewide profile total (Document #8) and with a graph charting fund balance trends (Document #9).

Mr. Paul Kinsman and Ms. Colleen Skinner, Department of Revenue, presented the committee with a school valuation worksheet for taxes payable in 2001 (Document #10). Ms. Skinner briefly reviewed the worksheet with the committee members. She noted that there is an appeals process for the school districts before the amount of tax levy is certified back to the county auditor.

Representative Pummel asked about the penalty for opting out of the tax freeze. Ms. Skinner replied that there is no penalty, other than the taxpayers would then be paying more taxes.

Ms. Woodmansey, DECA, presented the committee with an issue brief prepared by the Department of Education and Cultural Affairs entitled State Aid to K-12 General Education Funding Formula (Document #11), and with a chart depicting the general state aid calculation for the school year 2000-2001 (Document #12). Ms. Woodmansey testified that the department is currently in the process of collecting Average Daily Membership (ADM) from the school districts for the past year. Student days present would be prorated for the term if they were not present all term. She noted that ADM measures enrollment, and Average Daily Attendance (ADA) measures attendance. Days of attendance do not influence state aid funding. The ADM is weighted for small schools (fewer than 600 students).

Senator Everist asked if the department ever takes a snapshot look at the school districts that are not levying at the maximum levy. Ms. Woodmansey replied that there are not many that are not levying at the maximum.

Ms. Woodmansey also presented the committee with information on the calculation of the special education funding formula (Document #13). Currently, there is a transition formula in place for special education funding to the new special education funding formula. This will be phased out over a four-year period. In special education, what the school district is levying does impact the dollars the district can receive from the state. Special education aid can be reduced if a school district has excess fund balances.

Representative Diedrich reported that he has been hearing concerns with cash flow problems of the school districts and those districts having to borrow money to support their special education programs. Ms. Woodmansey replied that she has heard that 5 percent of the fund balance is a little too close and does not allow for cash flow; however, she noted that state aid is paid monthly. She noted that cash flow problems would depend on how much of a district?s funding is coming from state aid or property taxes.

Chair Brosz recessed the committee at 11:55 a.m. for lunch and reconvened the committee at 1:30 p.m.

Mr. Deene Dayton, Department of Legislative Audit, presented the committee with information on uses of and restrictions on school funds (Document #14). Mr. Dayton reported that fund balances are divided into three categories: 1) fund balance reserves set aside for specific purposes; 2) fund balance designations (reflects board intent such as cash flow); and 3) unreserved and undesignated funds.

Mr. Dayton reported that every school is affected by the new transfer law, whether or not they receive state aid.

In response to committee questions, Mr. Dayton advised that the capital projects fund is an accounting tool which is only used to account for a large construction project in order to keep it separate from all other money. Mr. Dayton clarified that statute stipulates that the general fund is the operating fund and the capital outlay fund is for brick and mortar expenses. Whether general funds are moved to the capital outlay or capital projects fund, operating funds cannot be spent on brick and mortar. Senator Rounds asked if no transfers to the capital projects fund should also be specified in statute, and Mr. Dayton responded affirmatively.

Mr. Dayton clarified that cities and counties are affected by the tax freeze?schools are not. When cities opt out of the tax freeze, they are opting out of the frozen level. When a school district opts out, they are opting out of their maximum levy.

Mr. Dayton suggested the committee look at amending SDCL 6-13-8 so school districts can receipt money for surplus property back to the fund that purchased the property.

Chair Brosz asked Mr. Dayton if the $300 capital outlay limit should be increased. Mr. Dayton commented that this might be an idea worth examining.

Mr. Dayton noted that the Health and Education Facilities Authority fund is a revolving fund that can be utilized by school districts for improvements.

Chair Brosz asked Mr. Dayton if he has seen any specific problems or violations in the school district audits. Mr. Dayton replied that South Dakota schools are very good at keeping their books. He noted that there will be pressure with the new transfer law to push expenditures back and forth from general funds to capital outlay.

Dr. Rick Melmer, Superintendent, Watertown School District, and Mr. Rick Hohn, Business Manager, Watertown School District, presented the committee with an outline of the Watertown School District budget calendar and the proposed budget for school year 2000-2001 (Document #15). Mr. Hohn reported that the district is at the maximum for tax requests in all of its funds. Salaries and benefits are in excess of 80 percent of the budget. Supplies is only 5 percent of the budget. The district needs to have about 16 percent in its general fund balance at the end of the school year to avoid borrowing to meet cash flow obligations. Mr. Hohn predicted that in 2001 or 2002 they will not need to borrow but after that time they will be looking at borrowing to meet cash flow obligations. He stated that there is a large discrepancy between cash balances and fund balances. He suggested that the committee look at undesignated fund balances rather than just general fund balances.

Mr. Hohn reported that in 1994-1995, Watertown was way below the state?s average cost to educate a student. With enrollments declining in the future, Watertown needs to build up about $1 million to make it through the enrollment declines. Mr. Hohn reported that this next year revenues will not meet expenditures.

Dr. Melmer stated that the state aid formula rewards growing districts. Once a district begins the downward spiral in enrollments, it is difficult for it to rebound.

Representative Diedrich asked Dr. Melmer at what point the district will opt out. Dr. Melmer replied that they will not opt out until they have no other choice. They will do everything they can with reductions in the budget before they opt out and ask for more money.

Dr. Melmer stated that they opposed the limitation of fund transfers?they feel this is a local issue and should remain a local issue. He noted that the background check for personnel will be a minor budget item for the Watertown School District. Increasing the South Dakota retirement contribution from 5 percent to 6 percent will cost school districts money. Dr. Melmer stated that he does not feel the state is doing its share to fund education. The average cost per student is clearly below any of the neighboring states. He suggested that the state reinvest the money saved from declining enrollments into the formula.

In response to committee questions, Dr. Melmer noted that Watertown is struggling to find applicants for high school teaching positions.

Mr. Gene Enck, Associated School Boards of South Dakota, presented the committee with a listing of teaching vacancies in South Dakota compiled by the SD Teacher Placement Center (Document #16). He testified that South Dakota schools are very efficiently operated and requested that the committee reexamine general fund balances with regard to capital outlay funds. He also testified that school facilities are in dire need of attention.

Mr. Bob Stevens, South Dakota Education Association, testified that the issues of teacher salaries and teacher shortages cannot be separated. He noted young people are not being attracted to the teaching profession. School districts have been making cuts in guidance counselors, librarians, fine arts programs, and driver education. Schools are losing a huge percentage of people in their first three years of teaching.

Ms. Christie Johnson, School Administrators Association of South Dakota, testified that more schools levying for retirement might be due to the increase in contributions from 5 percent to 6 percent. She testified that the transfer limit legislation has made the funding formula less equitable. She noted that the loss of quality candidates for both teachers and administrators is truly a reality. She noted that some school districts are paying signing bonuses or paying off student loans to attract and recruit teachers.

Mr. Gordon Kellogg, a parent from Rapid City, testified that the Rapid City School District has been facing some severe budget cuts. He noted that the average teacher salary in Rapid City is $32,000. Rapid City has lost 550 students over the last five years, so declining enrollments has been a problem. He noted the national trend of a large growing at-risk population, to which school districts must respond, oftentimes, with expensive programs. The program is working and seems to be helping to keep these kids in school; however, the budget cuts being made are not in the at-risk student areas; consequently, higher achieving students are suffering from the budget cuts.

Representative Diedrich stated that he would like information on merit pay systems for teachers and how they are working. Chair Brosz stated that this is not part of the committee?s study topic. He noted that he felt this topic would be covered by the Governor?s task force on education.

Representative Sutton noted that there seem to be problems with class size and asked for information on the average class size in South Dakota. Representative Heineman suggested that the committee receive information on the academic achievement level of the students across the state.

Senator Rounds suggested that the committee further examine the issue of facilities and the responsibility for those facilities, and that the committee examine the $300 limit on capital outlay expenditures.

Chair Brosz recessed the committee at 4:40 p.m.

Chair Brosz reconvened the meeting at 8:35 a.m., Wednesday, June 14, 2000, in Room 412 of the State Capitol Building with the same members present.

Dr. Robert T. "Tad" Perry, Executive Director, South Dakota Board of Regents, presented the committee with a list of information that the Regents might be able to provide the committee with regard to the teacher supply issue (Document #17). Dr. Perry noted that the single most current topic on agendas of people in higher education is the whole teacher preparation topic.

At this point, Dr. Perry presented a video entitled the "Merrow Report" on the perceived teacher shortage in the United States.

Dr. Perry reported that the university system in South Dakota is fairly typical of what one would find across the country in higher education. He noted that there are some things South Dakota is doing quite well. South Dakota has made changes in its programming. He noted that a couple of the institutions do have professional development programs, which are working quite well.

Senator Hutmacher commented that he would be interested to see how the non-traditionally prepared teachers compare to the state board-certified teachers.

Representative McIntyre noted that there are a lot of quality programs that produce quality teachers and the Merrow video did not show all aspects of teacher education. He noted that teachers teaching out of their field is not new.

Dr. Don Dahlin, Vice President, Academic Affairs, University of South Dakota (USD), testified that USD does a number of things to ensure the quality of its education graduates. NCATE accreditation is an important quality control measure. About 180 students are admitted to the College of Education after they take an entrance exam and meet certain requirements. Dr. Dahlin stated that it is important that teachers are knowledgeable in the content areas they are teaching. He noted a teacher shortage in the math and science areas. Dr. Dahlin stated that USD started a professional development program about eight years ago with the thrust of this program to provide support to first-year teachers. He stated that this has been a very good program which allows current teachers the opportunity to refresh and update their credentials and furnish support and mentorship for new teachers.

Dr. Don Cozzetto, Vice President, Academic Affairs, Northern State University (NSU), testified that NSU has 17 different certifications in its teacher education program. Northern Statue University utilizes three different placement processes for the education students, one at the sophomore level, field experience in the junior year, and practice teaching in the senior year. The maximum number of student teachers assigned for a faculty member is 18. Dr. Cozzetto stated that professional development schools are a very positive education tool; however, it does cost money.

Dr. Karen Whitehead, Vice President, Academic Affairs, South Dakota School of Mines & Technology (SDSM&T), testified that SDSM&T?s expertise lies in the areas of technology, engineering, and science. Most of their students are from South Dakota. Dr. Whitehead stated that they are finding a trend that students are coming to SDSM&T inadequately prepared to begin the college programs in math and science. Only 40 percent of these students last fall could start with college calculus. Dr. Whitehead said that they are trying to find ways to help teachers who are currently in South Dakota schools improve the quality of education in math and science.

Dr. Dee Hopkins, Dean of Education, South Dakota State University (SDSU), testified that the education program offered at SDSU is for secondary education only. She cautioned the committee not to confuse alternative certification of teachers with a quick fix certification process, because there is a big difference. She noted that alternative certification of teachers can be done in a competent and qualified manner to bring more people into the teaching field as a second career. Dr. Hopkins also suggested that perhaps school districts could examine cooperation between districts to share resources, especially in the math and science areas. Another possibility would be to start front-loading salaries for new teachers, such as signing bonuses, etc., to encourage young teachers to stay in the field. The trend has been that new teachers are gone from the teaching field within five years because they cannot make it financially. Also, new teachers tend to receive the worst assignments. She noted that it is critical to provide support to new teachers in the field.

Senator Rounds commented that front-end loading for teacher salaries could actually be accomplished with one-time funding. He suggested that the committee get some input on this idea from the local school districts because this is where this decision would ultimately have to be made.

Dr. Dean Myers, Dean of Education, Black Hills State University (BHSU), testified that BHSU graduates about 200 students per year from its teacher education program. He noted a high number of faculty turnover this last year. Dr. Myers reported that BHSU is very actively involved in the professional development program, noting that it is certainly an appropriate manner in which to train new teachers. About 25-30 percent of their education students are participating in the professional development program. This program requires a huge time commitment, however, and many of the students at BHSU are non-traditional students who cannot commit this amount of time. It is also difficult to get teachers in public schools to participate in this program because it takes a lot of their time. Dr. Myers stated his belief that the more field experience the students can get is the best way to train them. Dr. Myers testified that the universities have spent a lot of time discussing the alternative certification process and a proposal is moving through the approval process with the Board of Regents and the Board of Education.

Dr. Tom Hawley, Dean of Education, Dakota State University (DSU), reported that feedback to the universities says the institutions are producing some outstanding teachers, so the universities are doing something right. He noted that many of the graduates from DSU can get technology jobs at a much higher rate of pay than a teaching position. Dr. Hawley said that the state is losing a lot of good students because they cannot afford to repay their school loans. He stated that the universities should also be aggressively helping the graduates find teaching positions. Dr. Hawley noted that the students were very excited about the proposed legislation establishing a loan forgiveness program for teachers and were very disappointed when the legislation was defeated.

Chair Brosz asked what the Education Discipline Council is recommending with regard to alternative certification of teachers. Dr. Myers replied that they are recommending a primary emphasis on secondary education and the people who already have a degree in a content area (such as math, science, biology, etc.), then look at how to get them certified to teach in South Dakota. They would need to complete 25-30 credit hours in teaching courses. Some districts would have to hire this person and over a two-year period of time, they could pick up these teaching credit hours. The school districts would need to provide a mentor for this person. The role of the Department of Education and Cultural Affairs (DECA) and the local school district in this process was also discussed.

Chair Brosz recessed the committee at 12:10 p.m. for lunch and reconvened the committee at 1:30 p.m.

Dr. Janis Somerville, Senior Associate for the National Association for System Heads and Assistant to the Chancellor of the University of Maryland System, presented a report on Achievement in America (Document #18). Dr. Somerville reported that nationally, graduation rates are flat, and that more non-traditional diplomas are being awarded. Most high school graduates do go on to post-secondary institutions, even low-achieving graduates. However, low income students attend four-year colleges at lower rates. The best thing is to keep kids involved and in school?they should not interrupt that school experience. Dr. Somerville noted that many freshmen must take remedial course work.

Dr. Somerville reported that student achievement has remained flat since the 1970s. Too few 17 year olds demonstrate strong reading, math, and science skills. United States students are competitive in early grades but fall behind by the end of high school. Many college graduates demonstrate weak literacy and math skills.

Dr. Somerville stated that some may ask why these gaps exist. She noted that there is now evidence that teacher?s curriculum and expectations all matter. She stated that different students are taught different things. Students who take more vocational courses do not develop strong reading skills. Too many students nationally are being warehoused into vocational technical education programs. Dr. Somerville reported that low income and ethnic students are less likely to be enrolled in the college preparation track. Some students get lower quality instruction. Students in poor school districts lack reading, math, and science resources. Classes in high poverty high schools are more often taught by under-qualified teachers. Dr. Somerville stated that teachers make a phenomenal difference to students.

Dr. Somerville reported that there are different and lower standards for students. She stated that A students in high poverty schools score at about the same level as C or D students in affluent schools. She noted that the El Paso, Texas, school district made a commitment to curriculum and professional development and received positive results in student achievement levels within five years.

Dr. Somerville recommended aligning high school graduate students/assessments with college entry standards/assessments; preparing teachers who can teach to state K-12 standards; and encouraging local K-16 work.

Senator Rounds asked what other countries have been doing to improve their student achievement levels and what the United States has not been doing. Dr. Somerville replied that it appears that the vast majority of United States students have not received the same rigor of demand at the middle school and high school levels as in other countries. For the vast majority of U.S. students, less seems to be expected and she also feels that a number of U.S. students cannot compete. The United States has a culture of expectation that expects much more of some students than others. Also, over the last few years, foreign countries are educating more of their students and more of their students are going on for further education. Dr. Somerville testified that the United States is in a deeply rooted pattern that implicates everyone?states have policies that do not expect a lot of students and expect different things from students depending on their economic and racial backgrounds. The state has to take a leadership role even though this will ultimately be worked out community-by-community.

In response to committee questions, Dr. Somerville recommended that South Dakota examine out-of-field teaching and teacher pay as beginning steps. She noted that South Dakota does not have a college-going rate of students commensurate with its K-12 success rate. She noted that standards that are not measured are standards that are not valued.

Chair Brosz asked Dr. Somerville what is being done in other states to address teacher shortages. Dr. Somerville reported that the effort in developing K-12 standards has brought a greater attention to the issue of teacher quality. Dr. Somerville noted that it is becoming quite clear in state after state that to have qualified teachers in the classroom, teachers have to be paid well or offered incentives. Another pressure happening in a few states is looking at different ways for people to enter teaching as a second career. Dr. Somerville also noted that very little has been done to focus on recruiting those higher education students who are undecided on a career field into teaching. She noted that other states have finally begun putting in career ladders for teachers and professional development opportunities. She noted that effective teachers have high verbal and literacy skills and their content knowledge is high.

Mr. Gene Enck, Associated School Boards of South Dakota (ASBSD), presented the committee with information from the Teacher Placement Center (Documents #19 and #20). He noted that the ASBSD has operated a teacher placement center for about 19 years. Next year, they plan to have a web page with all the job openings across the state for teachers listed. Mr. Enck testified that South Dakota has good teachers but will be seeing more of those teachers retire and will have difficulty filling those openings. He also testified that more teacher in-service will be required in the future to keep the teachers current in their fields.

In response to questions, Mr. Enck stated that there are some school districts that are looking into offering signing bonuses to attract teachers to their district and some school districts are examining differential salary schedules. He also thought a loan forgiveness program is a good idea. Mr. Enck noted that more mentoring programs are needed for first-year teachers, but this requires funding. He also noted serious facility problems in some school districts.

Mr. Bob Stevens, South Dakota Education Association (SDEA), testified that mentorship of new teachers is an excellent idea but noted that there will be a cost to this program. He stated that his organization has sent out a survey on teacher retention. The results of those surveys are just coming back to the office. Mr. Stevens testified that his organization would be willing to work with higher education staff to put together a plan on alternative certification for teachers. He also stated that as long as teachers were involved in the process, he did not feel they would object to the measurement of achievement gains in students. Mr. Stevens testified that his organization has also been working on alternative compensation for teachers and has put together information to educate their membership on this issue.

Ms. Christie Johnson, School Administrators Association of South Dakota (SAASD), testified that there is a drain of teachers and administrators in South Dakota. She stated that South Dakota must talk about paying its teachers more because these new graduates know what they are worth in the job market. Ms. Johnson testified that South Dakota needs to start talking about the level of achievement of its students and if achievement is improving.

Mr. Mike Buckingham, Rapid City School Board member, testified that parent input to the board as part of the budget process does have an effect?the board listens to parents and does make adjustments to the budget when possible to respond to those parental concerns. Mr. Buckingham stated that as a board member, he must consider the good of all 13,000 Rapid City school district students and not just his children or a few other children. He wants to ensure that all students who enter kindergarten graduate with a diploma and the skills to go on to college or compete in today?s job market. Mr. Buckingham noted that teachers are the people who make the difference. He reported their starting salary is $23,000, which he does not feel is sufficient. Mid-level teacher salaries average $34,000 and high level salaries average $47,000 in the Rapid City School District. Mr. Buckingham noted that about 10 percent of the students in the school district are in alternative education programs.

Chair Brosz suggested possible topics for the next meeting: 1) information on facility needs of school districts; 2) updates on technology from the Governor?s Office; 3) information on the Iowa base salary; 4) information on teacher shortages; 5) possible incentives for combination of services between districts; 6) a possible increase of the $300 minimum expenditure from the capital outlay fund; 7) the Consumer Price Index (CPI) compared to the School Price Index (SPI); and 8) how ADM and ADA are being tracked by the Department of Education and Cultural Affairs.

Senator Rounds requested information on the possibility or limitations of school districts to front-end load salaries to attract teachers.

Representative Pummel felt the committee should look at teacher performance. Chair Brosz stated his opinion that the Governor?s education task force will probably examine this issue.

Representative Diedrich requested specific information on teacher shortages in subject areas and rural compared to urban.

Chair Brosz set the next meeting for July 11 and 12, in Pierre, with the final meeting being scheduled for August 16 or 17.

Chair Brosz adjourned the meeting at 5:20 p.m.