EDUCATION COMMITTEE

The Education Committee was assigned four studies. House Concurrent Resolution No. 3061 directed a study of elementary and secondary education during the ensuing 5, 10, and 20 years, with emphasis on a review of the current school district structure, reorganization options, the potential for creating alternate administrative units, and the equitable distribution of state aid to school districts. Section 17 of House Bill No. 1344 directed a study of the feasibility and desirability of implementing a teacher compensation package that recognizes four levels of teachers from beginning to advanced and which bases the compensation level for each category on the individual teacher's ability to meet or exceed district standards for content knowledge, planning and preparation for instruction, instructional delivery, student assessment, classroom management, and professional responsibility. Section 1 of Senate Bill No. 2428 directed a study of the state and local tax structure for funding elementary and secondary education to determine the feasibility and desirability of enhanced state funding to school districts for delivery of core curriculum instruction, the equity of the existing degree of reliance on property tax revenues for elementary and secondary education funding and whether improved efficiency is attainable in delivery of elementary and secondary education services. House Concurrent Resolution No. 3052 directed a study of safety, efficiency, and cost-effectiveness with respect to school district transportation.

The Education Committee was also directed to receive reports regarding annual school district employee compensation, requests for and waivers of accreditation rules, requests for and waivers of North Dakota Century Code Section 15.1-21-03, which relates to instructional time for high school courses, and student scores on recent statewide tests of reading and mathematics.

Committee members were Senators Dwight Cook (Chairman), Tim Flakoll, Layton Freborg, Jerome Kelsh, David O'Connell, and Terry M. Wanzek and Representatives Larry Bellew, James Boehm, Thomas T. Brusegaard, Lois Delmore, Howard Grumbo, C.B. Haas, Lyle Hanson, Kathy Hawken, Bob Hunskor, Dennis E. Johnson, RaeAnn G. Kelsch, Lisa Meier, David Monson, Phillip Mueller, Darrel D. Nottestad, Dorvan Solberg, and Laurel Thoreson.

The committee submitted this report to the Legislative Council at the biennial meeting of the Council in November 2002. The Council accepted the report for submission to the 58th Legislative Assembly.

PROVISION OF EDUCATION STUDY
Background

Article VIII, Section 1, of the Constitution of North Dakota provides:

A high degree of intelligence, patriotism, integrity and morality on the part of every voter in a government by the people being necessary in order to insure the continuance of that government and the prosperity and happiness of the people, the legislative assembly shall make provision for the establishment and maintenance of a system of public schools which shall be open to all children of the state of North Dakota and free from sectarian control. This legislative requirement shall be irrevocable without the consent of the United States and the people of North Dakota.

Section 1 has not been changed since its enactment in 1889. Article VIII, Section 2, of the Constitution of North Dakota follows with the directive that:

The legislative assembly shall provide for a uniform system of free public schools throughout the state, beginning with the primary and extending through all grades up to and including schools of higher education, except that the legislative assembly may authorize tuition, fees and service charges to assist in the financing of public schools of higher education.

Article VIII, Section 3, requires that "instruction shall be given as far as practicable in those branches of knowledge that tend to impress upon the mind the vital importance of truthfulness, temperance, purity, public spirit, and respect for honest labor of every kind." Finally, Article VIII, Section4, of the Constitution of North Dakota directs the Legislative Assembly to "take such other steps as may be necessary to prevent illiteracy, secure a reasonable degree of uniformity in course of study, and to promote industrial, scientific, and agricultural improvements."

Since at least the 1930s, the state has attempted to meet its constitutional directives by providing some level of financial assistance to local school districts. By the late 1950s, state support for education had evolved into the foundation aid program. During its nearly 50-year history, the program has grown to the point of providing during the 2001-03 biennium $49.8 million for special education, $67.2 million for tuition apportionment, $2.2million for revenue supplement payments, $35million for teacher compensation payments, and $473.9 million for student payments and transportation.

During that same time period, the foundation aid program was the subject of numerous amendments, generally directed toward attaining the goal of an equitable method by which state aid would be distributed. While the committee recognized that an equitable distribution of state aid is the ultimate goal, the committee focused its efforts on the premise that a discussion of equity must include an examination of the entities receiving the funds. The committee determined that consideration should be given to the manner in which school districts are organized and administered in order to determine whether under the current structure equity is even attainable.

School District Demographics

In 1990 there were almost 117,000 students enrolled in kindergarten through grade 12 in this state. In 2002 that number had fallen to 105,214. By 2008 that enrollment is projected to be 87,912, and by 2012 the enrollment is projected to be 77,329. Declining student numbers are being felt throughout the state. Populations continue to shift from rural to urban areas and from west to east. As of the 2000 federal decennial census 36.9percent of the state's people now reside in the eastern most counties--those bordering the Red River. In fact nearly one of every five North Dakotans now resides in Cass County. Seventy-four percent of the state's population resides in 13 counties. Only six of the state's 53 counties showed any growth during the decade of the 1990s, and only Cass, Burleigh, Rolette, Sioux, and Benson Counties showed any increases in children under age 18.

The 2000 census also showed that North Dakota has 160,849 children under age 18. Those children constitute 25 percent of the state's population. In 1960 children under age 18 constituted nearly 40 percent of the state's population. In 1984 the state had 11,833 births. In 2000 that number was 7,676. While only five counties were able to show increases in the number of residents under age 18 during the 1990s, five counties lost more than 30 percent of their under age 18 population during that same period.

This decline in student numbers has affected the number of school districts. In 1918 North Dakota had 4,700 one-room schools. By the late 1940s North Dakota had 2,200 school districts. In 2001 only 222school districts remained. Of those 222 school districts, 105 had fewer than 100 students in high school and 138 had fewer than 150 students in high school.

High schools having more than 550 students in 2001 were able to offer their students an average of 108different courses. That number fell to 55 for schools in the 150 to 549 range. Schools having between 75 and 149 students were able to offer an average of 45courses, and schools having fewer than 75 high school students were able to offer an average of 32 courses. Only 18 high schools offer advanced placement courses. Among the 105 high schools that enroll fewer than 100 students, only one school offers advanced placement courses.

Regional Service Units

Regional service units have been discussed as alternatives to school district reorganization on a number of occasions during the past 40 years. Under the regional service unit concept, school districts would maintain their own autonomy, their own boards, and their own taxing structures but would enter a contractual arrangement for a variety of shared services. These could include the provision of special education services, vocational education services, technical assistance for school improvement, administrative functions such as those performed by a superintendent or a business manager, curriculum development services, distance-learning services, federal title program management services, staff development services, technology support services, and any other services approved by the regional service unit's board of directors.

62-District Proposal

An alternative to the regional service unit considered by the committee involved a mandated reconfiguration of school districts. Under a committee directive that called for between 50 and 75 school districts, the Superintendent of Public Instruction proposed the creation of 62school districts each approximately equal in size. Under the proposal each district would have had at least one high school within its boundary and would have sufficient taxable valuation to ensure its long-term viability.

The proposal would have allowed each of the 62school boards to operate as many facilities as the school boards determined were needed in their respective districts. The proposal would also have decreased the disparity in mill levies which currently exists. Under current school district structure, the difference between the highest and the lowest levying district is 162.8 mills. Under the 62-district proposal, the range would have been narrowed to 149.3 mills.

The proposal was built on the concept that the largest district in each area would serve as an anchor to which the smaller districts would become attached. The intent was to use the fiscal strength of the largest district and enhance it with the resources of the smaller districts for the benefit of all. If only small districts come together, the ability to achieve fiscal equity and educational equity is more elusive. Significant staff reductions were not anticipated because the opportunities to reduce staff under a 62-district proposal were paralleled by the high rate of teacher retirements anticipated in the upcoming five years. Staff salary increases were deemed to be very likely because, in bringing together several districts, it was anticipated that the salary scale would rise to at least the level of the highest-paying district.

The Superintendent of Public Instruction determined that the reduction in duplication coupled with the other efficiencies that are reasonably anticipated with a consolidation of efforts would reduce the cost of education per student and result in a cost-savings of approximately $21.9 million per school year.

76-District Proposal

While the 62-district proposal was based upon a specific configuration of districts, subject to amendment by the 58th Legislative Assembly, and thereafter, subject to change through the normal boundary restructuring processes of annexation, reorganization, and dissolution, a 76-district proposal considered by the committee would have provided a greater degree of local self-determination. It began with the concept of anchor districts, i.e., those districts having their administrative headquarters in cities having a population of 700 or more, as reflected in the 2000 census. All land not in the designated anchor districts would have had to become attached to one or more of the designated districts by July 1, 2006. Any land not attached by that date would be placed in a district by an executive order of the Governor. Again, by creating a greater degree of consistency in the size and wealth of the ultimate districts, a greater degree of educational and fiscal equity was presumed to be achievable.

Minimum Enrollment and Educational Services

At the present time 92 school districts have at least 225 students enrolled in kindergarten through grade 12. These 92 districts educate 88 percent of the students and represent 79 percent of the taxable valuation in the state. At 225 students a school district averages approximately 17 students per grade level. However, as the student numbers continue to decline, that average will continue to be reduced, and the cost of education per student will increase dramatically. Another alternative addressing this situation involves concepts of minimum enrollment and minimum educational services.

One such proposal considered by the committee would have required that each school district in the state offer educational services to students from kindergarten through grade 12 and that it maintain a minimum enrollment of 225 students. If a school district were unable to meet both requirements, the district would be given three years within which to effect a reorganization. Failure to do so would result in a declaration by the Superintendent of Public Instruction, thereby initiating dissolution proceedings. Another alternative would be to require merely that each district offer educational services to students from kindergarten through grade 12, without imposition of a minimum enrollment requirement.

Raising the Bar

As an alternative to mandating consolidation the committee considered options for ensuring that school districts, if they continue to exist, provide a minimum number of educational offerings, require a minimum number of credits for graduation, allow for minimum increases in the school district equalization factor, and prepare to respond to school district and regional demographics by developing 5-, 10-, and 20-year plans. The plans would be required to address potential changes in academic, athletic, and extracurricular programs; potential staff changes; potential building changes, including repairs, remodeling, new construction, and closure; and potential taxation changes.

Committee Considerations and Recommendations

The committee considered a bill draft that would have directed the Superintendent of Public Instruction to establish no fewer than 6 nor more than 10 regional service units. Each unit would have had to include a school district having more than 2,500 students. Each school district in the state would be placed in a unit and would have to obtain through the unit all special education services and technical assistance for school improvement. School districts other than high school districts would have to obtain the services of a superintendent and a business manager through the unit. The provision of other services and their related charges would be determined by the board of the unit.

Proponents suggested that school district cooperation, particularly through contractual means, could address many of the concerns that prompt discussion regarding the need to reorganize districts. While opponents agreed the regional service unit concept could be applied to provide additional services to the districts, they articulated the concern that the concept appeared to be adding another layer of bureaucracy with no guarantee that there would be any cost-savings. In fact there was a significant likelihood that there would be additional costs. The committee makes no recommendation regarding the bill draft.

The committee considered four bill drafts that would have reconfigured the existing 222 school districts. The first would have resulted in 62 school districts with the lines drawn in statute and subject to future annexations, reorganizations, and dissolutions. The second bill draft would have resulted in 75 school districts, created around anchor districts. The third bill draft would have required that school districts maintain a minimum enrollment of 225 students and offer all grade levels from kindergarten through grade 12. The fourth bill draft would have removed the minimum student requirement and simply provided that all school districts must offer all grade levels from kindergarten through grade 12. The arguments raised for and against all four bill drafts were similar in nature. Proponents indicated that any of these methods of reorganization would bring commonality to the districts and therefore greater fiscal and educational equity. The disparity in mill levy rates would be reduced, students would have greater access to courses and services, and the cost of education per student would be reduced. Proponents also pointed out that equity concerns have been discussed for a long time and that the incentives offered to school districts for voluntary reorganization during the last 20 years have resulted in nothing that begins to approximate the outcome of these bill drafts.

Opponents argued that their schools are efficient and are providing a good education to their children. They claimed their children have opportunities to play on athletic teams and suggested that those opportunities might not be available in larger school districts. They suggested that any form of reorganization would result in a closing of their schools and consequently, the demise of their communities. Opponents also stressed that through technology each of the school sites could offer a broader array of courses to students than are now offered. They indicated that they are in the best position to determine when a school is no longer fulfilling its obligation to their children, and upon making that determination, they could be counted on to make appropriate decisions regarding the future of the school and the education of their children.

The committee considered a bill draft that would have raised the current equalization factor of 32 mills by 2mills each year. Proponents argued that as long as property value is considered to be a reflection of wealth, the equalization factor system is the best form of equalization available. One group of opponents suggested that increasing the equalization factor by only two mills a year is such a small incremental move that achieving any kind of equalization will take far too long. Another group of opponents suggested districts are not "land rich," they are "student poor," and as a consequence, equalization cannot take place until all districts are given greater resources. The committee makes no recommendation regarding the bill draft.

The committee determined credence should be given to the desire for local control of education. However, the committee also determined that given the constitutional mandate requiring the Legislative Assembly to provide for a uniform system of free public schools, it would be appropriate to impose on the school districts certain minimum requirements regarding their educational offerings.

The committee recommends House Bill No. 1033 to place in statute the requirement that a student successfully complete at least 21 high school credits before being eligible to receive a high school diploma. Proponents pointed out that it is a longstanding but incorrect assumption that the state has in statute a requirement regarding the minimum number of credits needed for high school graduation. Most school districts already require at least 21 units for high school graduation and nothing in the bill would preclude a school district from requiring any number greater than 21.

The committee recommends Senate Bill No. 2031 to broaden the number of courses that a high school must make available to its students. The bill would require there be made available each year one unit of English, which meets or exceeds the state content standards, at each grade level from 9 through 12; one unit of mathematics, which meets or exceeds the state content standards, at each grade level from 9 through 12; one unit of science, which meets or exceeds the state content standards, at each grade level from 9 through 12; one unit of social studies, which meets or exceeds the state content standards, at each grade level from 9 through 12; one-half unit of health, which meets or exceeds the state content standards, at each grade level from 9 through 12; one-half unit of physical education, which meets or exceeds the state content standards, at each grade level from 9 through 12; two units of music, which meet or exceed the state content standards; three units of the same foreign language, which meet or exceed the state content standards; and 24 units of elective courses.

The bill provides that required course offerings must be presented to students and, if any student wishes to take a listed course, the school must provide it. The course may be provided through any delivery method not contrary to state law and may include classroom or individual instruction and distance-learning options, including interactive video, computer instruction, correspondence courses, and postsecondary enrollment options.

Proponents indicated that current law requires each public and nonpublic high school to make available to each student four units of English, three units of mathematics, four units of science, three units of social studies, one unit of health and physical education, one unit of music, and six elective units from a prescribed list. The difficulty with the current language is that it appears to allow a school to offer four years of English during one school year and then no English classes for the next three years. It is not clear whether a school must offer one unit of health and one unit of physical education or one unit that combines the two. There is no requirement governing the course content, the list of elective courses is extremely limited, and as a whole the required offerings do not meet the minimum high school course requirements established by certain universities or the recommended high school course requirements established by others.

Proponents also indicated the bill is a first step toward providing students in this state with equitable educational opportunities.

The committee recommends House Bill No. 1034 to require school boards to develop long-term plans. The bill would require that during the first six months of each even-numbered year the board of each school district hold a public hearing to consider the effects of demographics on the district and to consider appropriate responses to such changes. The board would then be required to prepare a report that sets forth the district's 5-, 10-, and 20-year plan. A school district's plan must include potential changes in academic, athletic, and extracurricular programs; potential staff changes; potential building changes, including repairs, remodeling, new construction, and closure; and potential taxation changes. When a school district's report is ready the school district must publish notice of that fact in the newspaper, and it must make the report available upon request.

While opponents argued that 20 years is a long time in terms of doing any practical planning, proponents suggested that the bill will force school boards and school district patrons to have public conversations about factors that will seriously impact their ability to deliver education to their students during the next 5, 10, and 20 years.

TEACHER COMPENSATION STUDY
Background
History of Teacher Compensation

In the 1800s local communities designed schools to provide basic academic skills and moral education for their children. Teacher compensation was rarely more than the provision of room and board by the community. This manner of compensation provided a strong incentive for a teacher to maintain positive relations with community members and to maintain the expected high degree of moral character. The provision of room and board in exchange for teaching services also reflected the barter economy of the time.

During the 1900s, the preparation of teachers became more uniform. Requirements for higher levels of education became more common. Just as society had progressed from a barter economy into one that was industrially focused and cash-based, so too did the compensation of teachers move from the provision of room and board to a position-based salary system. Initially, this system paid elementary teachers less than secondary teachers, arguably because different levels of preparation were required for these positions. It also paid women and minority teachers less than nonminority male teachers.

As the century progressed, so too did opposition to salary discrimination. Greater skills were required for the job of teaching, regardless of the grade level taught or the gender or race of the teacher. Out of this recognition emerged the single salary schedule. Contrary to its name, the single salary schedule did not compensate every teacher in a like fashion or amount. Those with greater years of experience, educational units, and educational degrees received higher compensation than those with fewer. Likewise, those who coached sports, advised clubs, and coordinated various activities received higher compensation than those who did not. The rationale for the salary amounts was objective, measurable, and appropriate given the nature of the school systems at the time.

During the last 10 years changes in education have led to increased skill requirements for teachers. Demands for high standards and accountability coupled with an increasingly diverse student population require teachers to develop and maintain high levels of instructional skills, management skills, and leadership skills. Within this environment there appears to be an emerging concensus that while the traditional single salary schedule may feature fairness, equity, and ease of administration, it does not focus on results, nor does it provide incentives for any long-term career development that is linked to the knowledge and skills needed to teach today's students.

Merit Pay

The committee was told that an alternative to the single salary compensation system is that of merit pay. Under this concept teachers who do a better job receive a higher level of pay. Initially it was thought that a merit pay system would hold schools accountable and would hold teachers accountable. Early efforts at implementing merit pay systems tended to be based on either subjective or very narrow criteria such as students' test scores or administrative evaluations. For the most part the amount of money that was set aside for merit pay was insignificant. In addition the money was generally placed in one pot and a competitive format was established for all eligible teachers.

By the 1980s merit pay had evolved into a system that increased the number of pay categories in the salary system in order to reward teachers for acquiring additional skills. In 1986, 29 states were involved in the development of "career ladders" or similar teacher incentive programs. By 1994, however, only Arizona, Missouri, Tennessee, and Utah still funded such programs.

Merit pay plans, and variations of merit pay plans tended to become caught in a morass that led to their demise. How does one determine who is a good teacher? How does one demonstrate competence in teaching? What precisely is meant by accountability? To whom must a teacher be accountable? For what? What is the applicable criteria?

Performance-Based Pay

In the private sector compensation is frequently used as a management tool to achieve organizational goals. Payment for a specified performance level is a reward that may be given to individuals, to groups, or to entire organizations. When applied to an educational setting, performance-based pay generally refers to a salary structure that ties financial rewards to student achievement. Some performance-based pay models tie the financial rewards to an increase in an individual teacher's skills and abilities, on the assumption that such assets have a direct correlation to students' learning and achievement. Other models combine both skill and performance-based incentives for teachers or for schools.

During the 2001 legislative cycle four states actively pursued performance-based pay plans for teachers. The Nebraska Unicameral failed to pass its plan; the New Mexico Legislature passed a bill that was subsequently vetoed by the Governor; and the Ohio General Assembly considered a pilot project but failed to enact it. Only the Iowa General Assembly successfully passed and funded its performance-based pay plan for teachers.

Iowa's Performance-Based Pay Plan for Teachers

The committee reviewed Iowa's performance-based pay plan for teachers.

Declaring that it wished to create a student achievement and teacher quality program that acknowledges that outstanding teachers are a key component in student success, the Iowa General Assembly enacted a program designed to enhance student achievement and redesign compensation strategies and teachers' professional development so that the state could attract and retain high-performing teachers, reward teachers for improving their skills and knowledge in a manner that translates into better student learning, and reward teachers for improvement in student achievement.

The Iowa program consists of four major elements:

1. Mentoring and induction programs that provide support for beginning teachers;
2. Career paths with compensation levels designed to strengthen the state's ability to recruit and retain teachers;
3. Professional development designed to directly support best teaching practices; and
4. Team-based variable pay that provides additional compensation when student performance improves.

The specific criteria upon which Iowa teachers are to be evaluated include:

1. The teacher's ability to enhance academic performance and support for and implementation of the school district's student achievement goals;
2. The teacher's competence in content knowledge appropriate to the teaching position;
3. The teacher's competence in planning and preparing for instruction;
4. The teacher's strategies for delivering instruction that meets the multiple learning needs of students;
5. The teacher's methods for monitoring student learning;
6. The teacher's competence in classroom management;
7. The teacher's demonstration of professional growth;
8. The teacher's fulfillment of professional responsibilities established by the school district; and
9. Any other criteria established jointly by the school board and representatives elected by the teachers.

An Iowa school district is eligible to receive additional funds if the board of the school district submits to the state Department of Education a written statement declaring the district's willingness to:

1. Commit and expend local funds to improve student achievement and teacher quality;
2. Implement a beginning teacher mentoring and induction program;
3. Provide the equivalent of two or more additional contract days for teacher career development that aligns with student learning and teacher development needs, including the integration of technology into curriculum development;
4. Adopt a teacher career development program;
5. Adopt a teacher evaluation plan that requires, in addition to annual evaluations, a comprehensive evaluation of all teachers in the district at least every five years and which requires administrators to complete evaluator training;
6. Adopt teacher career paths based upon demonstrated knowledge and skills; and
7. Adopt a team-based variable pay plan that rewards individual school success.

With respect to the beginning teacher mentoring and induction program each participating school district in Iowa must provide for:

1. A two-year sequence of induction program content and activities that support the state's teaching standards and beginning teachers' professional and personal needs;
2. Mentor training that includes skills of classroom demonstration and coaching and district expectations for beginning teacher competence;
3. The placement of mentors and beginning teachers;
4. A process for dissolving mentor and beginning teacher partnerships;
5. District organizational support so that mentors and beginning teachers can receive release time for planning, providing demonstration of classroom practices, observing teaching, and providing feedback;
6. A structure for mentor selection and assignment;
7. A district facilitator; and
8. Program evaluation.

Upon completion of the program, a beginning teacher must be comprehensively evaluated to determine if the individual meets expectations and is ready to move to the career level. If the individual is not deemed ready to move to the career level, the school district may offer the individual a third year of participation in the program at the end of which the individual is again comprehensively evaluated.

Each participating district in Iowa is also expected to offer teacher career development. A district's program must:

1. Provide for support that meets the career development needs of individual teachers and that is aligned with the Iowa teaching standards;
2. Provide for research-based instructional strategies that are aligned with the school district's student achievement needs and the long-range improvement goals;
3. Include instructional improvement components such as student achievement data, analysis, theory, classroom demonstration and practice, technology integration, observation, reflection, and peer coaching; and
4. Include an evaluation component that documents the improvement in instructional practice and the effect on student learning.

With respect to teacher compensation, a district in Iowa must pay a beginning teacher participating in the mentoring program at least $1,500 more than the district paid for a comparable position during the previous year, unless the minimum salary for a first-year beginning teacher exceeds $28,000. There must be at least a $2,000 difference between the minimum salary paid to a career I teacher and the average beginning teacher salary unless the school district has a minimum career I teacher salary that exceeds $30,000. A career I teacher is defined as someone who has successfully completed the beginning teacher mentoring program, who participates in the career development program, and who shows continuous improvement in teaching.

There must be at least a $5,000 difference between the salary paid to a career II teacher and the salary paid to a career I teacher. A career II teacher is defined as someone who meets the requirements of a career I teacher and who has been evaluated by the school district and deemed to have successfully demonstrated the competencies required by the school district in order to be a career II teacher.

There must be at least a $13,500 difference between the salary paid to an advanced teacher and the salary paid to a career I teacher. An advanced teacher is defined as someone who has been evaluated by a review panel and deemed to have successfully demonstrated the competencies required in order to be an advanced teacher. The individual must also possess the skills and qualifications necessary to assume leadership roles.

A teacher in Iowa may be promoted only one level at a time and must remain at that level for at least one year before requesting promotion to the next level. Reviews must take place annually and must be conducted by a certified evaluator. Whereas annual reviews include classroom observation of the teacher and supporting documentation from other supervisors, parents, and students, comprehensive evaluations require classroom observation of the teacher, a review of the teacher's progress, and implementation of the teacher's individual career development plan. An appeal process is included for any teacher who is denied advancement.

In order for a career II teacher to receive an advanced designation, the teacher must submit a portfolio of work aligned with the Iowa teaching standards to a review panel established by the Iowa Department of Education. Based on a review of the portfolio the panel must determine whether the teacher demonstrates superior teaching skills and must make a recommendation to the board of educational examiners regarding whether or not the teacher is to receive an advanced designation. Review panels are established by the Department of Education and include at least one nationally board-certified teacher and one school district administrator. The members serve a staggered three-year term and may be reappointed to a second term.

A career II teacher who does not receive a recommendation of advancement from a review panel may appeal that denial to an administrative law judge. Expenses associated with the appeal are borne by the teacher, and the state may not be held liable for a teacher's attorney fees, costs, or damages resulting from the appeal.

The Iowa Department of Education must establish an evaluator training program for the purpose of improving the skills of school district evaluators in making employment decisions, making recommendations for licensure, and moving teachers through a career path. Administrators who conduct evaluations of teachers are required to complete the training program. Upon completion of the program the administrator becomes "certified" to conduct evaluations.

Each participating school in Iowa is to administer valid and reliable standardized assessments at the beginning and end of a school year to demonstrate growth in student achievement. If a particular attendance site has demonstrated improvement in student achievement, all the teachers employed at the site share in a cash award. Each participating school district is to create its own design for a team-based pay plan. The plan must be linked to the district's comprehensive school improvement plan and must include student performance goals, student performance levels, multiple indicators to determine progress toward the goals, and a system for providing the financial rewards. The team-based pay plan must be approved by the board of the school district and the Department of Education.

Committee Consideration - Conclusion

The committee reviewed a bill draft that would have appropriated $340,000 to the Superintendent of Public Instruction for the purpose of funding a pilot project to implement a knowledge-skills-based pay system similar to that in Iowa. Of that amount $150,000 would have been available for two participating entities, each of which had to be a school district enrolling more than 2,500 students, or a consortia of school districts having a combined enrollment in excess of 2,500 students. The pilot project would also have provided each participant with an additional $20,000 to cover the direct and indirect costs of participation.

Proponents of the concept suggested that new federal accountability standards set forth in the No Child Left Behind Act establish higher qualification levels for teachers and will consequently require alternative ways to enhance teacher compensation. They indicated a pilot project would allow at least two districts or consortia to address improved methods of teacher compensation in a proactive manner.

Opponents pointed out that it would not be a prudent recommendation to expend $340,000 at a time when there is concern regarding the state's ability to maintain the commitment to teacher compensation made by the 2001 Legislative Assembly. Opponents also pointed out that nothing in the current law precludes a school district or a consortia of districts from implementing a knowledge-skills-based pay plan on their own.

The committee makes no recommendation concerning its teacher compensation study.

STATE AND LOCAL TAX STRUCTURE STUDY
Background

During the 1999-2000 school year the state had 230school districts, 8,623 full-time administrative and instructional personnel, 108,094 students and 113,540 in average daily membership, and an average cost per student of $5,136. Local sources assumed 42.79percent of the cost incurred in educating kindergarten through grade 12 students, the state assumed 43.46 percent, and other sources accounted for the remaining 13.75 percent. Ten years earlier, during the 1989-90 school year, the state had 276 districts, 8,723full-time administrative and instructional personnel, 116,951 students and 118,086 in average daily membership, and an average cost per student of $3,427.14. Local sources assumed 39.34 percent of the costs incurred in educating kindergarten through grade 12 students, the state assumed 47.33 percent, and other sources accounted for the remaining 13.33 percent. Like most other states, North Dakota finances its state and local government services primarily through sales taxes and income taxes levied at the state level and through property taxes and sales taxes levied at the local level. State government relies most heavily on the state sales taxes, which constitute approximately 44 percent of general fund revenue.

Sales Tax

The state's sales tax rate is 5 percent, which places North Dakota higher than 16 other states, lower than 17 other states, and at the same level as 12 other states. The collections per capita place North Dakota 12th highest among the states.

Individual and Corporate Income Taxes

Individual income taxes account for 25 percent of the state's revenue while corporate income taxes account for an additional 6 to 8 percent. During fiscal year 1999 the state's income tax rates generated $287 per capita, thereby placing North Dakota 41st of the 43 states that have individual income taxes.

Other State Taxes

Coal severance and oil extraction taxes accounted for approximately 14 percent of the state's general fund revenue in 1987-89. During 1999-2001 they accounted for 5 percent of general fund revenue. Estate taxes, which are collected by the state but returned to the counties and cities in which the property is located, generate between $3 million and $7 million annually. Taxes on the gross proceeds from games of chance generate approximately 1 to 2 percent of the state's general fund revenues.

Local Government Tax Instruments

Thirty-eight percent of all local government revenues come from the state, 31 percent come from property taxes, 23 percent come from miscellaneous sources, 5percent come from federal sources, and 3 percent come from local sales and use taxes. Of the $537million collected in property taxes during 1999, 55percent went to school districts, 24 percent went to counties, 13 percent went to cities, 4 percent went to park districts, 2 percent went to townships, and the remaining 2 percent was distributed to other special districts.

During 1999, 85 North Dakota cities imposed and collected local sales and use taxes. The total amount generated was in excess of $53 million. Local governments also collect a portion of their revenues through user fees such as those applied to building permits, public utilities, and facility fees.

Property Taxes as a Funding Source for Kindergarten Through Grade 12 Education

The committee received information on a recent study of the state's tax structure. During the 1999 legislative session, the Tax Commissioner was provided funding to support a citizen's study of the tax structure in North Dakota. The study group was charged with analyzing the state's tax structure, taking a critical look at how the tax structure serves the state, and making recommendations to promote a fair and simple tax system that is responsive to a 21st century economy. The study group found that overall the state and local tax system in North Dakota is rather easily understood and generates fairly stable revenues. The burden is spread across a variety of traditional instruments with relatively high taxpayer compliance. With respect to property taxes specifically, the group concluded that the property tax burden to support kindergarten through grade 12 education is disproportionately borne by agriculture in rural counties. Statewide, agricultural property contributes 32 percent of the property taxes paid to school districts. By county the percentage of agriculture-related property taxes paid to school districts varies from 4.4percent to 97.3 percent. Fifty-five percent of the property tax paid by a "typical" agricultural or commercial property taxpayer in a rural county goes to the local school district.

The group found that by reducing taxes on agricultural and commercial properties, through imposition of a local sales tax, or through imposition of increased state sales and income taxes, school districts would be less reliant on local real estate taxes and the total property tax burden could be reduced. The group also concluded that as the financial burden would shift from the local level to the state level, so too would the degree of decisionmaking otherwise exercised by local entities.

Committee Considerations - Conclusion

The committee reviewed demographic information pertaining to urban and rural areas of the state between 1900 and 2000. Testimony indicated that only 6 of the 53 counties showed an increase in population during the past 10 years. During that period 27 counties lost more than 40 percent of their 20- to 34-year-old population.

With respect to elementary and secondary education, the committee received information that indicated slightly more than 10 years, the state is expected to have only 91,000 students in public, private, and home-education situations. These figures assume there will be no outmigration between now and then and that the birthrates will remain at the current level of 7,635 per year. In addition to student numbers, declines can be measured in student-teacher ratios. Since 1997 the state has seen a decline in the student-teacher ratio from 13.11 to 11.54.

The committee recognized that both the decline in population and the geographic shift in population affect tax burdens. The committee determined that rather than directing its efforts toward restructuring the state's tax base, it should consider alternative ways of structuring the state's education delivery system so that funding available at both the state and the local level could be used in the most efficacious manner possible.

The committee makes no recommendation concerning its study of state and local tax structure for funding elementary and secondary education.

SCHOOL DISTRICT TRANSPORTATION STUDY
Background

While the inception of public education in this country can be traced back to the mid-1600s, it was not until the 1800s that the transportation of public school students in special vehicles became a feature. First efforts at the organized transportation of students involved nothing more than horse-drawn wagons generally borrowed from area farmers. The wagons were later replaced with gasoline-powered school trucks, and as the country's road system improved, the early trucks were in turn replaced in both the urban and rural areas by schoolbuses.

With the increase in schoolbus numbers came an increase in problems. Accidents involving schoolbuses caused school officials to think about developing safety guidelines and recommending safety standards. In 1939 representatives from 48 states gathered to develop standards and recommendations for the schoolbus industry. Since 1939 there have been 12 additional national conferences on school transportation. At each conference, representatives from the states gather to revise existing standards and to establish new safety standards for schoolbuses, as well as operating procedures for the safe transportation of students, including those with disabilities.

Today there are approximately three dozen Federal Motor Vehicle Safety Standards that apply to schoolbuses. These standards address a wide range of vehicle components and systems, including outside mirrors, warning lights, emergency exits, and fuel system integrity. Four of the standards are unique to schoolbuses. These standards govern the performance and use requirements for schoolbus pedestrian safety devices such as stop signal arms, the minimum structural strength of schoolbuses in order to maintain vehicular integrity in the case of a rollover, the minimum requirements for the strength of the joints between the panels of the schoolbus body, and requirements for the seating systems in all sizes of schoolbuses, including the securing of wheelchairs during transit and the restraint of wheelchair occupants.

For the 1999-2000 school year 46,114 students were transported 23,349,766 miles at a total cost of $29,515,603 in North Dakota. The average cost of transportation per student transported was $640.06, and the average cost per mile was $1.26.

State Aid for School District Transportation

North Dakota Century Code Section 15.1-27-26 provides for the following transportation payments:

1. Twenty-five cents per mile for each schoolbus and school vehicle having a capacity of nine or fewer students and transporting students who reside outside the incorporated limits of the city in which their school is located;
2. Sixty-seven cents per mile for each schoolbus and school vehicle having a capacity of 10 or more students and transporting students who reside outside the incorporated limits of the city in which their school is located;
3. Twenty-five cents per mile for each schoolbus and school vehicle having a capacity of nine or fewer students and transporting students who reside within the incorporated limits of the city in which their school is located;
4. Thirty-five cents per mile for each schoolbus and school vehicle having a capacity of 10 or more students and transporting students who reside within the incorporated limits of the city in which their school is located; and
5. Twenty-five cents for each one-way trip by a student who rides a schoolbus or a commercial bus to or from school and who resides within the incorporated limits of the city in which the student's school is located.

The school district transportation payment system is based on historical costs. School districts receive transportation formula dollars based upon the miles traveled by a particular sized schoolbus. Regardless of whether a large bus transports 2 students or 40 students, the rate of payment is the same. The method presently used by North Dakota to promote efficiency involves the capping of transportation payments at 90 percent of the actual cost incurred by the district.

Data Envelopment Analysis

The committee learned that an alternate method for measuring and encouraging efficiency, as well as providing a basis for funding, involves an analysis of comparable operating units. All school districts in the state would be divided into categories or peer groups. Once the categories or groups are established, the next step is to standardize the factors. In the case of school district transportation the factors might include costs for administrators, drivers, mechanics, repairs, fuel, etc. Through use of a mathematical formula, variables are analyzed to determine the relative efficiency of each district. Each district is compared to the other districts in its category or group. If funding is made a part of the formula, the funding is then based on the operational cost of the most efficient district in the category. This type of analysis is known as data envelopment analysis. In addition to providing a basis for funding, it is also able to assist school districts in reconfiguring their transportation routes so that the greatest possible degree of efficiency might be attained.

The data envelopment analysis project has been in a stage of partial completion for a number of years. An initial appropriation of $50,000 was made for the project during the 1997 legislative session but not supplemented in 1999 nor 2001.

Committee Considerations - Recommendation

The committee recommends Senate Bill No. 2032 to appropriate $50,000 to the Superintendent of Public Instruction for the completion of the data envelopment analysis project. The committee determined that the completion of the project was a necessary precursor to an examination of changes in the school district transportation funding formula. Under the present method of funding school district transportation, there exist tremendous payment differentials between districts having seemingly similar characteristics. By using a data envelopment analysis system, a new transportation payment system could be developed and implemented. This system would determine payments based on the most efficient school district in each peer group or category.

MISCELLANEOUS REPORTS
School District Employee Compensation Reports

In considering issues related to teacher compensation the 57th Legislative Assembly found that data relating to the compensation of school district employees could vary significantly based on the positions that were and were not included, the consistency of definitions, and the consistency of reporting periods. The Legislative Assembly enacted a law that specifically defined administrative and teaching positions and required that compensation data be collected with respect to those positions in a format that differentiated between full-time and part-time personnel, normal and extended schooldays, and regular and extended school calendars. The compensation was to include base salary, compensation reportable as gross income under the Internal Revenue Code, any other compensation paid or provided to or on behalf of the individuals, health insurance benefits paid to or on behalf of the individuals, retirement contributions and assessments paid on behalf of the individuals, and any other benefits paid or provided to or on behalf of the individuals.

The Superintendent of Public Instruction, with advice from a number of school district business managers, created a method for collecting and disseminating such data. Although the committee was informed that the compilation of the data created several days worth of work for business managers in the larger districts, it also was informed that the information had proven invaluable to the Education Factfinding Commission in addressing impasses in teacher contract negotiations. This data is collected and transmitted electronically. Because of the detail required, the data allows school personnel, school boards, negotiators, and legislators, among others, to review current and eventually historical information with the ability to accurately compare precisely defined categories of compensation and precisely defined positions.

Requests for Waivers of Accreditation Rules

The Superintendent of Public Instruction received one request for a waiver of an accreditation rule. Because a principal needed to serve as a science teacher, a waiver was sought allowing her to reduce the time she was otherwise required to serve as a principal by one hour each day. The request was granted by the Superintendent of Public Instruction.

Requests for Waivers Relating to Minimal Instructional Time for High School Units

North Dakota Century Code Section 15.1-06-08.1 precludes the Superintendent of Public Instruction from waiving any statute in whole or in part, with the exception of Section 15.1-21-03, which relates to the minimum time that high school units must be offered. Section 15.1-06-08.1 also requires the Superintendent to file a report with an interim committee indicating whether such a waiver was requested and what action was taken by the Superintendent in response to the request. No requests for waivers of Section 15.1-21-03 were filed.

Student Scores on Mathematics and Reading Tests

North Dakota Century Code Section 15.1-21-08 directs the Superintendent of Public Instruction to administer annual tests to public school students in the areas of reading and mathematics. The tests were aligned to the state content standards and were given to students in grades 4, 8, and 12.

The results became available on October 9, 2002. The results of the mathematics test indicated that among 4th grade students 18 percent were at the advanced level, 38 percent were proficient, 29 percent were partially proficient, and 14 percent were novice. Among 8th grade students 10 percent were advanced, 31percent were proficient, 46 percent were partially proficient, and 12 percent were novice. Among 12thgrade students 13 percent were advanced, 20percent were proficient, 41 percent were partially proficient, and 25 percent were novice.

The results of the reading test indicated that among 4th grade students 21 percent were advanced, 53 percent were proficient, 18 percent were partially proficient, and 8 percent were novice. Among 8th grade students 16 percent were advanced, 50 percent were proficient, 20 percent were partially proficient, and 13 percent were novice. Among 12th grade students 19 percent were advanced, 32 percent were proficient, 27 percent were partially proficient, and 22 percent were novice.

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