Committee on Appropriations A/V — 2018

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Roll00:02:54
Introductions 00:02:56
Revenue Subcommittee Announcement/Senators Wiik, Cronin, Partridge, and Nesiba - House/ Hunhoff, Bartels, Ahlers, and Anderson00:06:39
Secretary Donald Kirkegaard, Department of Education, introduced staff and gave overview of Public Education in South Dakota.00:08:05
Public Education in South Dakota - Page 100:08:59
Number of Districts - Chart - Page 200:09:18
District Size - Pie Chart - Page 300:09:37
Number of Teachers (FTE) - Page 400:09:55
Teaching Years of Experience - Pie Chart - Page 500:10:16
Number of Students - K-12 Fall Census Enrollment - Chart - Page 600:11:00
Ethnicity of Students - Page 700:11:25
Students Receiving Free/Reduced Lunch - 37.31% - Page 800:11:50
English Learner Students - Year 2017 -3.94% - Page 900:11:58
Students Receiving Special Education Services - Year 2017 - 21,088 students or 15.37% of student population - Page 1000:12:06
State Initiatives to Improve College, Career, Life, Readiness - Page 1100:12:37
High Quality Standards and Assessment - Page 1200:14:29
Low-Cost Dual Credit - Number of Credits - Chart - Page 1300:14:50
Workforce Education Grants - 20 Grants Awarded in 2016 and 2017 - $2,964,568.99 - Page 1400:15:49
Career Launch - Pilot with four districts: Brookings, Rapid City, Sioux Falls, and Yankton - Page 1500:16:28
Every Student Succeeds Act - Page 1600:17:01
Beyond K-12 Education - Page 1700:17:45
Senator Peters - question - do you have statistics for English as a Second Language and how long does it take for students to complete program and requested additional information00:18:15
Lucas Martin, Fiscal Analyst, Legislative Research Council presented FY19 budget for Department of Education which includes $587,368,676 in general funds, $186,248,530 in federal fund expenditure authority, and $6,747,162 in other fund expenditure authority as recommended by the Governor. - Page 300:21:30
Administration, Secretary of Education - Budget Center - FY19 budget request includes $21,671,521 in general funds, $4,661,025 in other federal fund expenditure authority, and $213,150 in other fund expenditure authority totaling $7,545,696 and includes 35.0 FTE - Page 700:22:00
Prior Year Net Object Transfer - Transferred $199,000 in general funds within General Administration. This is a one-time transfer from operating expenses to personal services. The funds transferred were used for a shortfall in personal services and unbudgeted termination pay for the department. - Page 800:22:50
1. Sub-recipient Monitor - The agency requested an increase in general funds of $72,905 for an additional FTE. This FTE will be used to implement the Uniform Grant Guidance. - The Governor recommended what the agency requested. - Page 900:24:04
Representative Howard - question - have the number of grants increased over the past year and is that why the department needs an additional FTE00:24:50
Representative Lake - question - how many people monitor grants00:26:26
Representative Hunhoff - question - have you reviewed the way you monitor grants and are you efficient00:27:45
Representative Howard - question - what hasn't been getting done in grant monitoring00:28:25
Revenues and Statistics: Administration, Secretary of Education - Pages 9 to 1100:29:10
Representative Howard - question - what is the difference between the state assessment and the NAEP assessment00:29:49
Representative Anderson - question - would you explain the NAEP proficiency results - 35% - and requested additional information00:30:55
Senator White - question - what is the trend of NAEP over the past three years and requested additional information00:32:37
Education Resources - Budget Center - FY19 Budget Request includes $8,942,229 in general funds, $179,116,152 in federal fund expenditure authority, and $981,818 in other fund expenditure authority totaling $189,040,199 and includes 83.5 FTE - Page 4100:33:12
Prior Year Net Object Transfer - Transferred $30,500 in general funds within educational resources. The funds were used for a shortfall in personal services and unbudgeted termination pay for the department. - Page 4200:34:35
Expenditure Object Transfers (PS/OE) - Transferred $64,735 in general funds, $432,117 in other fund expenditure authority, and 3.0 FTE from Education Resources to Postsecondary Vocational Education. This is a base transfer from personal services to personal services, operating expenses to operating expenses, and operating expenses to personal services. Funds will be used for the Board of Technical Education created by Senate Bill 65 of the 2017 Legislative Session. - Page 4300:35:33
Senator Tidemann - question - what is the federal funding trend for Perkins loans00:36:04
Senator Tidemann - question - are the Perkins loan funding located in this budget center and how much is allocated to the regental system and technical schools and requested additional information00:36:30
Senator Cronin - question - regarding $64,735 transfer in general funds. Were the 3.0 FTE transferred from Education Resources to Postsecondary Vocational Education and what happened to these FTE00:37:33
Senator Cronin - question - what was the person paid to manage Build Dakota Scholarship Fund and requested additional information00:39:25
Senator Peters - question - would you provide more detailed information what is included in account 1232 00:39:52
A. FMAP - The agency requested an FMAP adjustment from general to federal fund expenditure authority totaling $4,891. This adjustment is related to the birth to three program. The Governor recommended what the agency requested. - Page 4300:41:13
B. Fund Shift (Swap) - The agency requested a fund shift from general funds to other funds totaling $137,220. - Page 4300:41:20
Ms. Darnall explained Perkins Administration Funds were depleted in FY17. This $137,220 comes from the E-rate program and they will need an additional $150,000 to maintain current operations of the Perkins Loan Program00:41:33
Representative Anderson - question - would you explain what is the e-rate program00:44:35
Secretary Kirkegaard indicated there is an E-rate tax on your phone bill, it is a federal program that is used for schools and libraries00:46:00
Senator Tidemann - question - how is the E-rate fund allocated to states 00:47:02
Representative Howard - question - do you anticipate that E-rate fund be consistent and will those funds have to be used for technology rather Perkins Loan Administration00:48:49
Ms. Darnall responded it depends on priority of FCC.00:49:41
Secretary Kirkegaard indicated if the Perkins Program is a priority it will have to reviewed and the department will figure out a way to have ongoing funds to fund Perkins Loan Administration 00:51:52
Representative Hunhoff - question - what is the difference when local schools and the State of South Dakota Department of Education applies for E-rate funds00:52:15
Representative Hunhoff - question - why is cash available for E-rate administration00:53:25
Representative Lake - question - how does the E-rate fund flow through the state level to the local districts00:53:54
Representative Hunhoff - question - what is the criteria to qualify for Birth-to -Three Program and requested additional information00:54:14
1. Dual Credit Increase - The agency requested an increase in general funds of $398,957. This increase is to cover the expected growth with the Dual Credit program, and will cover 26,153 credits. - Page 4400:54:48
Senator White - question - what type of student is taking dual credit and is this program enticing students to attend post-secondary education00:55:11
Senator White - question - are we emphasizing the importance of dual credit for students who aren't confident in attending higher education00:58:11
Ms. Darnall distributed a handout regarding how many students were taking dual credit at each school district.01:00:11
Senator Tidemann - question - asked students in room how many took dual credit courses or Advanced Placement (AP) courses01:00:28
Students in room commented whether they took dual credit or advanced placement courses in high school01:01:00
Representative Bartels - commented that a Watertown student will have an associate's degree in automated machining01:05:45
Representative Anderson - question - will dual credits and AP courses transfer out-of-state01:06:18
Number of Dual Credits by Fiscal Year - FY15 to FY19 Estimated - Handout01:07:21
Ms. Darnall shared dual credit information and a handout was distributed. During the Governor's budget address in December 2017 it was anticipated that an additional 2,882 more dual credits in the current fiscal year and the program will need an additional estimated $278,000. The program is growing and it is anticipated 4,669 additional dual credits will need to be funded for $451,000. If the trend continues funding for FY19 will be 8,037 credits with a total of $777,000. 01:07:29
2. SDSTARS Support - The agency requested a fund shift from federal fund expenditure authority to other fund expenditure authority of $112,780. - Page 4401:09:30
Representative Hunhoff - question - how much is in this E-rate fund and requested additional information01:12:37
Representative Howard - question - is SDSTARS a voluntary software program and do we have to use the E-rate account to fund SDSTARS01:13:26
Ms. Darnall said the SDSTARS software has been integrated into the Department of Education and the longitudinal program generates schools report cards and verifies information the federal government requires. It would be more labor intensive not to use the SDSTARS program for the Department of Education and local school districts.01:13:54
Representative Howard - question - could the Department of Education reduce the number of reports and eliminate an FTE01:16:33
Representative Hunhoff - question - is 3138 the account for E-rate and requested a more detailed report for contractual services in FY17 and why there was an increase in Capital Outlay and requested more information - Page 197 of Blue Book 01:19:11
3. Increase Utilization - The agency requested an increase in other fund expenditure authority of $150,000. This increase is related to costs of inflation - Page 4401:20:15
Senator Peters - question - why is there an archaeological fund, how is it used, and is it necessary01:21:57
History - Budget Center - FY19 Budget Request is $2,224,512 in general funds, $1,223,680 in federal fund expenditure authority, and $2,241,544 in other funds expenditure authority totaling $5,789,736 and includes 44.0 FTE. - Page 4601:22:42
Prior Year Net Object Transfer - Transferred $250,000 in other fund expenditure authority to federal fund expenditure authority within History and 1.0 FTE from State Library to General Administration. - Page 4701:24:00
Representative Hunhoff - question - why was the State Library FTE transferred to General Administration01:24:49
Library Services - Budget Center - FY19 Budget Request is $1,921,489 in general funds, $1,247,673 in federal fund expenditure authority, and $27,900 in other fund expenditure authority totaling $3,197,602 and includes 22.5 FTE. - Page 5101:27:00
Prior Year Net Object Transfer - 1.0 FTE from State Library to General Administration. This is a base transfer from operating expenses to operating expenses. Federal fund expenditure authority is needed to align with anticipated expenditures. The FTE from Access Services to General Administration will be used to provide increased oversight of select federal grants. The FTE in the State Library is no longer needed due to recent structural and service changes. - Page 5201:27:34
Budget Detail: State Aid to General Education and State Aid to General Education Calculation - Page 1401:29:37
Total State Aid to Education (Excluding Postsecondary) - FY19 budget request is $543,365,660 in general funds, $0 in federal fund expenditure authority, and $3,000,633 in other fund expenditure authority totaling $546,366,293 and includes 0.00 FTE. - Page 1201:30:01
State Aid to General Education Formula - FY19 budget request is $475,498,485 in general funds, $0 in federal fund expenditure authority, and $1,875,633 in other fund expenditure authority totaling $477,374,118 and includes 0.0 FTE - Page 1301:30:31
Prior Year Recap - FY17 Budget - Page 1401:30:54
State Aid to General Education Calculation - Chart - Page 1401:32:00
Senator Cronin - question - how much in reversions were from a reduced student count01:32:12
FY19 Governor Recommended State Aid to General Education Formula - Lucas Martin, Fiscal Analyst, Legislative Research Council, presented State Aid to General Education Formula - Table - Page 1501:32:27
Senator Partridge - question - would you give a high overview of the education funding formula, inflation rate, and how it relates to Senate Bill 13101:34:53
Ms. Darnall said the new formula is based on a target teacher salary, benefits, and target classroom size. Overhead, sparsity, alternative need, and technical assessments are also factored. There is an inflation rate tied into the target teacher salary. Special education is reviewed every three years. A new group will review the funding formula and provide a report to the Joint Committee on Appropriations in September 2018.01:35:37
Senator Partridge - question - is the inflation rate tied to teacher salary and is this written in statute01:38:39
Representative Howard - question - would you explain what the Technology and Assessment and Alternative Needs are when calculating state aid funding formula01:41:20
Representative Hunhoff - question - how do you determine the technology and assessment rate each year01:43:30
Representative Anderson - question - if the schools purchased technology individually it would be much more expensive than going through statewide level. 01:44:16
Representative Lake - question - please clarify the overheard rate01:44:50
Senator Cronin - question - how many districts opted out of the alternative formula and Representative Anderson said Tab 10 has this information01:45:34
Senator Cronin - question - why is Deadwood-Lead and Onida Districts not considered Alternative and are they included in the current funding formula01:46:43
Tami Darnall explained the funding formula visually with chocolate coin candy. - Page 1501:48:25
Representative Howard - question - would you explain what other revenue is and how other revenue is determined in the state funding formula01:51:24
Representative Hunhoff - question - will outside revenue be figured in new funding formula in 5 years01:56:05
Representative Carson - question - in 5 years will the White Lake School District receive funding as local effort or state effort from the wind farms 01:56:44
Representative Anderson - question - wind farms are treated differently that were started after July 1st, 2016 01:58:12
Sparsity School List - Page 1601:58:50
State Aid to Special Education - Budget Center - FY19 $67,717,175 in general funds, $0 in federal fund expenditure authority, and $0 in other fund expenditure authority totaling $67,717,175 and includes 0.0 FTE. Page 1701:59:15
Secretary Kirkegaard said the number of special need students has increased in recent years and will be expensive.02:00:00
Calculating State Aid to Special Education - Table - FY18 Budgeted and FY19 Recommended - Page 2002:00:36
Senator Wiik - question - how does the extraordinary cost fund factor into special education state aid formula and how is it utilized02:02:14
Ms. Darnall indicated there is a concern that extraordinary cost fund will be exhausted and said it is difficult to predict service provider costs 02:05:05
Tami Darnall explained there is a safety mechanism for the extraordinary cost fund and if a school doesn't use funds and their reserves are too large the Department of Education will request the schools to return the money.02:05:35
Senator Partridge - question - have schools had to return extraordinary cost funds since their fund balance grew02:06:14
Secretary Kirkegaard commented if the extraordinary cost fund expenses exceed $4,000,000 by 10% how will the excess costs be addressed.02:07:00
Senator Wiik - question - why is the extraordinary cost fund determined to be $4,000,00002:07:30
Senator Partridge - question - what year was the $4,000,000 fund established and has this fund level been reevaluated02:08:02
History of Special Education PSA and Student Count - Table and Chart - Page 2102:09:26
Representative Howard - question - who determines Disability Levels for Special Education and can the State of South Dakota change them02:09:45
Workforce Education Fund - Budget Center - FY19 Budget request is $0 in general funds, $0 in federal fund in expenditure authority, and $1,125,000 in other fund expenditure authority totaling $1,125,000 and includes 0.00 FTE - Page 2302:10:34
National Board - Certified Teacher and Counselors - Budget Center - FY19 Budget Request $150,000 in general funds, $0 federal fund expenditure authority, and $0 in other fund expenditure authority totaling $150,000 and includes 0.0 FTE - Page 2502:10:54
Senator Cronin - question - are the universities teaching new teachers to become nationally certified and what does it take to become nationally certified02:11:35
Senator Cronin - question - when did the State of South Dakota give a stipend to teachers for becoming nationally board certified and are there any measures to determine they have become better teachers02:13:50
Representative Howard - question - are there other agencies in state government that pay for national certification or education advancement02:14:27
Revenue and Statistics for State Aid: Pages 26 and 2702:15:50
Representative Hunhoff - question - would the Department of Education provide an update for the Native American Curriculum and the Paraprofessional Scholarship Program and requested additional information 02:16:03
Mato Standing High, Department of Education, Director of Indian Education, gave summary of progress at Todd County.02:16:27
Representative Hunhoff - question - are paraprofessionals obligated to teach at reservation schools02:20:48
Representative Hunhoff - question - is the Native American curriculum implemented at both Todd County schools02:22:15
Laurie Gill, Commissioner, introduced staff and actuary and presented South Dakota State Employee Health Plan - Page 102:24:40
Employer Monthly Contribution to Health Plan Per Employee (no dependents) - Comparison to Surrounding States - Chart - Page 202:26:43
FY19 Health Plan Needs - Total Needed $138.2 million, without changes projected revenue is $125.6 million, and the funding need is $12.6 million. Note - Total budget need is $14.4 million which would include $5.7 million in general funds. - Page 302:28:14
FY19 Health Plan Needs - Amount needed is $12.6 million, amount in reserve is $5.1 million, and amount to be covered by plan changes is $7.5 million. Total budget need is $14.4 million and would include $5.7 million in general funds. Total budget needed to cover plan changes is $8.6 million and includes $3.4 in general funds - Page 402:30:00
Commissioner Gill said the amount to be covered by health care design changes is $7.5 million. She is concerned to pass all these costs onto the employee since this could potentially be the second straight year with no salary raise.02:31:22
Senator Nesiba - question - what is the difference between the $12.6 million and $14.4 million total cost to cover health care costs02:32:11
Ms. Mary Keeler, Bureau of Finance and Management, explained why $14.4 million is needed to cover the FY19 Health Plan. There is a partial funding gap for one month due to changes in health care plan from year to year. It is the way the bureau must do their accounting. In addition, Department of Corrections, will need a funding increase due to increase costs of providing health care services. Last, the Bureau of Finance and Management will need funding for bureau billings.02:34:00
Representative Bartels - question - is the $5.7 million in general funds needed assumes there is no plan design changes02:38:16
Representative Bartels - question - does the actuarial set rates for retirees and dependents02:39:12
Representative Bartels - question - how much is the State of South Dakota paying for just single employee coverage02:39:35
Representative Bartels - question - does the actuarial look at each group such as retirees and dependents to determine rates02:40:50
Low Deductible Health Plan and High Deductible Health Plan - FY18 and FY19 Proposed- Handout 02:40:54
Senator Peters - question - please send additional information such as what categories are offered and how many employees are participating in each group. In addition, how much are dependents and spouses costing and how much the state is subsidizing02:42:20
FY19 Proposed Health Plan Design Changes - Add Spousal Surcharge $4,302,723, Increase Dependent Premiums $438,897, Increase Deductible and Out-of-Pocket Maximums $2,802,006 which subtotals $7,543,626. The reserve is $5,098,474. The total is $12,642,100. - Page 502:43:00
Commissioner Gill indicated dependent premiums have not been raised since FY14 and for FY19 BHR is proposing a 23% increase.02:46:45
Commissioner Gill indicated in FY17, 7,113 members or 27% have reached their deductible and 2,412 members or 9% have reached maximum out-of-pocket costs.02:47:40
Senator Peters - question - would you break down deductible increases and out of pocket maximums and is there an actuarial information for the proposed health plan increases02:48:27
Trey Sarsfield, Assistant Vice President and Consulting Actuary, AON Hewitt, responded that $2,802,006 increase in deductibles and out-of-pocket maximums was chosen which would help the bottom line and not be as punitive as other choices. Most costs will be covered by increased deductibles.02:50:12
Senator Peters - question - what would these numbers be if deductibles were raised to $1,200 for low deductible plan and $2,000 for high deductible plan and additional information was requested02:52:20
Senator Cronin - question - did you consider that reserves will be at net zero 02:54:00
Commissioner Gill said the zero percent salary increase influenced plan design changes and has been a difficult process.02:56:00
Senator Nesiba - question - when was the reserve fund created and has it depleted by tens of millions of dollars02:56:51
Impact on Employees - Example of Plan Choices with Design Changes - Page 603:00:22
Impact on Employees - Example of Employee Only Coverage - Page 703:01:32
Senator Nesiba - question - how many state employees are there and how many participate in the employee only plan03:02:00
Commissioner Gill responded there are about 13,000 state employees and 6,430 of these state employees are enrolled in the employee-only health care plan.03:02:07
Representative Howard - question - why don't state employees pay any premium contribution to the state health plan03:02:26
Commissioner Gill indicated 66% of those participating in the employee-only health care plan are making less than $50,000 annually.03:03:50
Senator Cronin - question - what is an acceptable deductible for single and family coverage and could it be raised and commented the current plan is attractive03:04:40
Commissioner Gill said employees that are leaving state government are asked why they are leaving state government and does the health plan influence on their decision.03:07:55
Senator White - comment - the legislature is an employer and should put out a product that will help retain employees and keep turnover low.03:08:00
Senator Nesiba - question - do employees provide feedback and have a say in the current health plan03:09:05
Impact on Employees - Spousal Surcharge - Low Deductible and High Deductible Plans - Page 803:11:05
Appropriation Takeaways - Summary - Page 903:11:48
State Employee Health Plan Full Accrual Financial Statement - Page 1003:13:08
Representative Bartels - question - why is the percentage of claim increasing between 3 to 4 percent and not like national increases of 8 to 10 percent03:14:10
Representative Bartels - question - what is your stop loss analysis and requested additional information03:16:10
Senator Tidemann - comment - we need to look at the employee health care plan carefully and compare it corrections health care plan and salary policy before making decisions 03:18:11
Adjourn Carson/Partridge03:19:20

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