Just How Much is Inflation Impacting Teacher Pay in South Dakota
This article provides an overview of recent trends regarding teacher pay in South Dakota. New and existing teachers looking for work in South Dakota may find it a useful reference when contemplating where to live and work. Each school district faces its own complicated set of student needs, budgetary constraints, and cost-of-living differences. As a result, cross-district comparisons do not speak directly to the efficacy of any district’s budgetary decision-making. That said, this analysis draws from recent history, geography, and cross-district comparisons to illustrate some of the trends in teacher pay.
According to the SD Department of Education Data Dashboards, South Dakota has 149 public K-12 school districts, more than 140,000 K-12 students in those public districts, and well over 9,000 teachers and full-time equivalents (FTEs). Public schools make up around 84% of all student enrollment. From the SD Department of Labor & Regulation, across all occupations, all educational levels, and any hours worked, the median annualized wage rate in South Dakota was $43,700 in 2023, and the average was $53,200. For teachers in public districts requiring at least a Bachelor’s degree across all grade levels, the median is around $49,700, and the average is also around $53,200.
Major components of any individual teacher’s salary are years of experience and education. Because of this, salary differences across districts may represent differences in pay scales, teacher experience, or a complex combination of these and other factors. The first map shows baseline/starting salary bins by district from 2022 which should be interpreted as the pay a teacher with no experience and a Bachelor’s degree would be offered. Oglala Lakota 65-1 at Pine Ridge had the highest starting salaries in South Dakota in 2022 at $53,588 while Elk Mountain 16-2 in Edgemont had the lowest at $35,000.
Starting salaries are critical to understanding the choices for new teachers who have to choose whether to work in South Dakota at all before choosing where to work within South Dakota. Taking that a step further, starting salaries are gatekeepers that might present an opportunity to keep new teachers in South Dakota if they are competitive to neighboring states. This map specifically strips away average years of experience as a potential driver of cross-district differences and is particularly useful for brand new teachers.
The next three maps show salary, benefits, and overall compensation bins for each public school district in 2023. South Dakota teachers have substantial non-salary benefits (about a fifth of overall compensation) so analyzing the components separately provides useful insight. For example, Harding County 31-1 in the northwest corner has less than average overall compensation but has much higher than average non-salary benefits when compared to other districts. The average salary in 2023 across the state was $53,200 and typical benefits were valued at $15,300, so the average overall compensation package was around $68,500 (overall compensation $=$ salary $+$ benefits). That average is not weighted by the number or experience of teachers in each district so a weighted average might be somewhat different.
School districts in South Dakota have a surprising amount of variation in terms of teacher pay. Last year, from highest to lowest, starting salaries can be $18,500 different, average salaries can be $20,000 different, and overall compensation packages can be $27,400 different. The highest-paid teachers are usually in high cost-of-living parts of the state, areas with special funding considerations, or districts with unique/historically-underserved student populations. Oglala Lakota 65-1 had the highest overall compensation in 2023 at $80,504 while Big Stone City 25-1 in the northeast corner on the Minnesota border had the lowest at $53, 137.
Cross-State Comparisons
Economic theory offers some explanations for why the same job may pay differently in different markets. Given a well-functioning market for teachers with many school districts, enough job openings, and no lack of teachers looking for work, teachers may be willing to give up some salary for some non-financial benefits of working in a particular state or school district. This idea of trading a financial benefit for a non-financial benefit is commonly called a compensating differential, and these trade offs can push salaries higher or lower depending on circumstances.
For an example, salaries might be higher in areas with fewer amenities because districts might need to offer higher salaries to attract new teachers. On the other hand, many people, including teachers, may want to find work close to family. In this case, teachers may be willing to accept a job with lower pay that keeps them closer to extended family, which also offsets potential travel expenses that would otherwise be incurred if they moved outside the region.
Other factors causing salary differences across markets include tax structures (i.e. income tax versus no income tax) and the relative cost of living. South Dakota is among the most affordable places to live in the country. Only Alabama, Mississippi, and Arkansas are more affordable according to BEA measures reported by the Governor’s Office of Economic Development. Consequently, these same states typically trade the title of lowest teachers’ salaries which is commonly explained by most prices, including wages, being lower. SD GOED also reports a salary of $50,000 in South Dakota would be equivalent to $56,800 in Arizona, $58,100 in Colorado, and $63,900 in California. Though other sources like Forbes.com indicate that $50,000 in South Dakota is as much $70,000 in California.
The differences between teacher salaries in South Dakota, its neighbors, and other states mentioned here are summarized in Figure 5 which reports on differences in the relative cost of living. Note that the main driving factor behind these composite cross-state differences is housing/rent costs, and the differences are less pronounced in many other sectors. Cost-of-living also varies within states, and the parts of South Dakota that rely more heavily on tourism tend to have highest prices while less densely populated areas tend to have the lowest prices. In the figure, South Dakota’s neighbors are ordered in terms of increasing cost-of-living.
South Dakota’s neighboring states all have higher average teacher salaries and are all relatively more expensive places to live than South Dakota. From highest to lowest, the neighbors rank Minnesota with the highest average salaries, Wyoming, Iowa, Nebraska, North Dakota, then Montana with the lowest. Even adjusting for average cost-of-living across state borders, South Dakota doesn’t keep pace with any of its neighbors for average teacher salaries. That said, South Dakota typically has higher starting salaries than Montana, Nebraska, and Iowa according to the National Education Association’s report on benchmarks and actual starting salaries in 2023. This implies that salary options outside South Dakota become more attractive as teachers gain experience, and keeping experienced teachers would require special focus on fringe benefits or non-financial benefits like job satisfaction and positive work environments. The next figure has average and starting salaries for South Dakota, its neighboring states, and the United States overall, ordered by average teacher salaries. South Dakota’s starting salaries are more competitive to starting salaries in neighboring states than average salaries, which might suggest an attempt to keep (or attract) new teachers in South Dakota.
Recent Policy Changes
In 2015, South Dakota had the lowest average teacher salaries in the nation, but that has not been the case since then. In response to 2015 conditions, then Governor Daugaard created a task force with the goal of collecting feedback (which is condensed in this report in Table A) to “reevaluate the current funding formula, collect and analyze data, engage with stakeholders, and seek public input” which ultimately led to the creation of the Teacher Compensation Review Board (TCRB). The TCRB is a nine-member group of appointees serving terms of two school years.
Three main changes arose from all this: 1) a new half-penny sales tax in 2016 specifically designated to improve teacher pay which was successful at improving average teacher salaries around $5,000 in the first year, 2) limiting general cash balances for each district, and 3) requiring each district’s average (nominal) overall teacher compensation to be at least as high as nominal fiscal year 2017 to continue to be eligible to receive state aid.
Since overall teacher compensation has two parts, salary and benefits, there is some room at the district level to make adjustments to the parts to be compliant with the third requirement of the revised formula. The penalty for failing to follow this provision is a reduction in state aid to non-compliant districts. In 2023, every district was able to keep this standard, but it is difficult to determine whether this was a result of budgetary changes or inflation. To address the potential role of inflation on perfect compliance across all districts, the TCRB recommended that the state Congress revisit the usefulness of the non-inflation adjusted 2017 salary benchmark.
The requirements on general cash reserves were waived for a few years due to an abundance of federal aid in response to Covid. In addition to Covid-related aid, districts reported the most common reasons for having excess funds were unanticipated enrollment changes, increased costs of existing property, costs that were budgeted but not incurred in that fiscal year, and new costs of cyber security.
Comparisons Over Time
The TCRB also sets targets for teacher salary gains which increase every year based on economic conditions in South Dakota and the nation. The targets are a higher benchmark than the revised funding formula requirements so there are no penalties for not hitting the targets. Before Covid, average teacher salaries were approaching the target, getting within $800 at one point. After Covid, during a period of relative high inflation, the target has increased much faster than actual salaries, causing a difference of more than $4,000 now. Importantly, the TCRB salary targets approximately keep pace with inflation which indicates strong awareness of how inflation impacts purchasing power.
When analyzing anything measured in dollars over time, it is essential to adjust for inflation to fully understand how purchasing power is changing over time. Price-adjusted salary/wage data, or “real wages,” can be interpreted as the amount of consumer goods a person would be able to purchase at a specific point in time, usually a reference year that has some important historical context. When real wages increase, we can say that purchasing power has increased, and workers are better off because their wages can buy more stuff. Without inflation adjusting, we analyze “nominal wages” which can fluctuate from changes in purchasing power OR changes in prices.
Given that, even if nominal wages are increasing, there is a chance that a wage earner could be worse off if other prices are increasing faster than their wages. Put differently, consumers can’t buy as much stuff as the previous year if inflation outpaces nominal wage growth. Many industries provide cost-of-living adjustments to wages, and the most common benchmark is the Consumer Price Index (CPI).
Inflation is commonly measured from year to year, but we can also look at total inflation over a period of time, say 2017 to 2023. For example, the average teacher pay in South Dakota increased 13.8% from FY 2017 through FY 2023 (average year-over-year increases of around 2%). In fact, each of the 149 public districts in South Dakota increased salaries over this stretch of time. The district with the least wage growth totaled 2.5%, and the district with the most wage growth totaled 35.7%. The next map (Figure 7 on the following page) shows that overall compensation rose for each district as well, from 1.2% in the district with the least growth up to 41% in the district with the most growth.
While the TCRB penalizes districts that do not increase nominal overall compensation compared to the 2017 fiscal year, total core CPI inflation (excluding volatile energy and food purchases) for the Midwest region was 21.4% from July of 2017 to June of 2023 (St. Louis FRED – series CUUR0200SA0L1E). The last map shows inflation-adjusted growth in overall compensation between 2017 and 2023. Districts in blue are the only ones whose overall compensation for teachers has keep pace with or exceeded inflation. Districts in red fell furthest behind inflation. For any district in the previous map with nominal wage growth rates, subtract the inflation rate of 21.4% from the nominal wage growth rate to get the inflation-adjusted amount of wage growth in the final map.
Since inflation was higher than nominal wage growth, real wages (i.e. purchasing power) fell by 7.6% for the typical teacher in South Dakota between 2017 and 2023. For context, the typical household in South Dakota over the same time felt real income/wage declines of about 5%. Based on U.S. Census averages and national core CPI (which is about 7% higher than the Midwest CPI), teachers across the nation felt real wages fall by an average of 4% in the 2020 fiscal year alone, as much as 9% just in 2022, and real wages have fallen even further in more recent years. South Dakota teachers have been somewhat insulated from real wage declines compared to teachers across the nation, which is common for many industries in relatively low cost-of-living states.
Table 1 reveals some nuance to the 2017 to 2023 period related to Covid and highlights several district-level differences. The Average Real Pay Increase column on the far right equals Average Nominal Pay Increase minus Midwest Core CPI Inflation. The Range for Nominal Pay Increase column summarizes the range of nominal salary increases across districts. For example, the lowest inflation-adjusted wage growth pre-Covid was -5.9% (e.g. -2.4% – 3.5% = -5.9%). In contrast, the highest inflation-adjusted salary growth pre-Covid was 8.4% (e.g. 11.9% – 3.5% = 8.4%). To get a clearer picture of the pre- and post-Covid periods, 2020 is excluded so the any change specifically in that year is in the total rows only.
The pre-Covid years had much slower nominal growth in salaries, benefits, and overall compensation which is most likely attributed to relatively-high inflation in the post-Covid years. Another thing to note is that benefits are more flexible than salaries with larger extremes in either direction. This might indicate pecuniary non-salary benefits are a focus in negotiations to achieve a higher overall compensation package, especially when salaries are less flexible.
Conclusion
Teachers in South Dakota receive lower salaries than most states, but cost-of-living differences make direct comparisons difficult. Teachers get paid less than other occupations in South Dakota that require similar educational backgrounds, but it is difficult to compare those directly due to differences in hours worked. Teacher salaries have risen recently, but inflation has made these changes easier to accomplish and more difficult to interpret. Many claims can be made about teachers’ salaries in South Dakota, but few of them should be taken at face value or without context. Covid and inflation are presenting challenges for effectively managing teachers’ salaries across the state and finding the most credible interpretation of the data.
Districts across South Dakota face varied challenges and budgetary constraints. That said, there are some takeaways from cross-district and cross-state analysis that might be useful for new teachers to consider as well as which districts are facing difficulties keeping pace with inflation and state averages. Recent changes, including the creation of the Teacher Compensation Review Board seem to be constructive steps toward increasing teachers’ salaries to keep pace with inflation.