Stretching the School Dollar

Younger teachers in Illinois, whose pensions were slashed last year by the legislature, should start asking whose benefits they're really paying for. The new Tier 2 pension only costs about 5 percent of salary...yet teachers are paying 9.4% of their salaries into the Teacher Retirement System. This takes the usual shell game of wealth transfers from younger and more mobile teachers to retirees to a whole new level: theft.

My hometown newspaper, the Southern Illinoisan, is running a story that explains who benefits the most richly from the old Tier 1 pension: union functionaries who stopped teaching decades before retirement but still receive a state-funded pension:

Then there is Kenneth Drum. TRS pays Drum more than $160,000 a year, despite Drum only working for 12 years as a teacher.

Drum's large pension comes not from his time in the classroom, but rather because of a 20-year career at IFT. Drum has collected more than $2 million from TRS since retiring in 1994, and is one of 21 former NEA, IEA, IFT or IASB employees who has collected more than $1 million from the TRS since retiring.

Comerford said he couldn't speak for individuals as to why they didn't take an IFT pension when they went to work for the union instead of continuing paying into a public system.

Illinois is a perfect example of how tinkering around the edges of insolvent pension funds just winds up hurting new teachers. The system may in fact be...
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Teacher pension systems around the country are falling into crisis due to poor investment returns, unfunded increases in benefits, and poor governance and management. The PIE Network just made thirteen great policy briefs available on how to advance education reform in the "new normal" of fiscal crisis in America's schools, and among them is a paper I wrote on the teacher retirement crisis.

I commend the full paper to your attention, but here are the key takeaways:

  • Traditional pension systems are bad for many teachers and aren't structured to attract the best young workers.
  • Retiree health care, which is free for many retired teachers, is a major contributor to cost growth in retirement benefits.
  • The time for reform is now. There are lots of good examples of pension reform in the public and private sector that school districts and states can draw on. Fordham has an upcoming publication profiling several such cases.

My colleague Raegen Miller at the Center for American Progress also released a paper on this subject recently that is well worth reading.

Pensions can be a very technical subject, but they're also soaking up growing chunks of school funding. It's an issue that deserves greater attention from the wider education policy community.

? Chris Tessone...

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Last night, in his speech before Congress, the President called for another round of stimulus spending, including $25 billion for school modernization and $35 billion for what the Administration calls "teacher rehiring," i.e., calling teachers back from layoffs pending for budget reasons. I'm skeptical that this will actually wind up helping schools much, however.

On the teacher front, we know from the Center on Education Policy's recent survey and other data that school districts mostly used their EduJobs money to protect fringe benefits and administrative staff while laying off teachers in the arts and other non-core subjects. [Update: CEP disputes my interpretation of the survey: see the comments below.] There is no reason to expect anything but business as usual from another round of subsidies. When the new money goes away, districts will still not have adjusted to the new normal, to their students' detriment. More subsidies just protect the status quo at great expense to taxpayers.

Funds for school modernization are nice as far as that goes. The emphasis on rural schools means the dollars are more likely to go to a high-need area. But having a nice building is not likely to jump start any child's education, and project labor requirements in many locales may blunt the job creation impact of the program as well. I'd rate this warm and fuzzy but ultimately marginal as an education policy, and questionable as a job creation band-aid.

? Chris Tessone...

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I shake my head every time I see stories like this: To Cut Costs, 120+ Districts Shift to 4-Day Weeks.

"It got down to monetary reasons more than anything else," Superintendent Larry Johnke said. The $50,000 savings will preserve a vocational education program that otherwise would have been scrapped.

The tradeoff here is not between a fifth day of school and voc-ed. That program was likely just the easiest to cut without running up against the union, school board, or some other stakeholder.

This feels so obvious I shouldn't have to write it, but the basic job of schools is schooling. What ancillary program, benefit, or perk could possibly be so important that it's worth cutting 20% of the core function of schools to preserve? And if you can't afford five days of school a week in your current configuration, reconfigure. Don't cut 20% of the main service taxpayers pay you to provide.

? Chris Tessone

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Friends don't let friends believe lazy LA Times articles about education budget cuts:

Last year, K-12 budgets were cut $1.8 billion nationwide. According to estimates by the National Assn. of State Budget Officers, cuts to K-12 for the new fiscal year may reach $2.5 billion.

"They've long since been cutting deep into the bone," said Michael Leachman of the nonpartisan Center on Budget Policies and Priorities, based in Washington.

CBPP may have an axe to grind here: they believe government costs what it costs and seem to have little interest in increasing the effectiveness of services. But it's too bad the Times didn't investigate these "historic cuts" a little more deeply.

The nation spends over $600 billion a year on K-12 education. So $4.3 billion in cumulative cuts over two years amounts to less than 1 percent of all spending. If you cut your household budget by 0.7%, would you call that "cutting deep into the bone"? No. Yet analysts and politicians are trying to sell you on the notion that schools can't absorb a 0.7% cut without getting rid of art, libraries, and thousands of teachers.

The truth is, the depth and impact of education budget cuts have varied from place to place. California has indeed seen harmful cuts, in part due to dysfunction in Sacramento and the intransigence of special interests. But the story need not be so dire.?The real question to ask is not why education budgets have seen tiny...

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We're looking at a long weekend for politicians, journalists, and finance professionals as the debt ceiling fight goes into extra innings. The House leadership has delayed a vote on the Boehner plan due to dissension in the Republican rank and file, and odds for a major deal don't look great. What are the implications for education if a deal doesn't happen?

The most immediate impact will be that the wall of money flowing on a regular basis from the feds to state and local governments may stop, since bondholders will get priority if the debt ceiling is not raised. States will have to contend with a loss of Medicare and Medicaid support, typically the largest portions of state budgets along with education. It's hard to imagine this not impacting states' education spending. Even short delays may force districts that are living "check to check" with no reserves to borrow cash. Minnesota schools have already been forced to do this by the government shutdown there.

The longer-term impact, even if a deal is reached, would come from a ratings downgrade on America's debt. Districts routinely sell bonds to finance the construction or renovation of school buildings, and these bonds, like US Treasury bills, are rated by credit rating agencies. Moody's has warned that if US sovereign debt is downgraded, these so-called "muni" bonds would also be downgraded. This would cause interest rates to rise on many of these bonds, meaning districts would pay their lenders...

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David Cohen of the University of Michigan complains at the Shanker Institute blog that "niche reforms" like DC's (substantial) overhaul of its teacher evaluation and retention practices under Michelle Rhee are a distraction. Cohen dismisses IMPACT and similar reforms, saying we need to "fix the system" and build "infrastructure" instead.

Meanwhile, Newark Public Schools is under new management and is trying to end the "dance of the lemons," the practice by which bad teachers are shuffled from one poor-performing school to the next. Cami Anderson, the new district superintendent, has found that pulling these teachers out of the classroom is expensive in New Jersey:

[B]ecause of the state's tenure law, which guarantees a paycheck to teachers regardless of whether any principal wants to retain or hire them, Ms. Anderson's new policy will cost the district an extra $10 million to $15 million a year that will go to paying the teachers who are not able to find jobs within the district.

"In other words, by doing the right thing, we created a massive budget issue," she said. Newark schools have a $900 million budget and employ about 4,000 teachers.

Ten other states, including New York, have tenure laws that make it impossible to dismiss tenured teachers even when no principal wishes to hire them.

This puts the lie to David Cohen's argument. There is no amorphous education "system" that does not have teacher evaluation and retention at its core. Reforms like IMPACT in DC...

It turns out Wisconsin's controversial labor law reforms have indeed helped districts cope with their budgets without resorting to layoffs:

With ?collective bargaining rights? limited to wages, [Brown Deer district finance director Emily] Koczela was able to change the teachers' benefits package to fill the budget gap. Requiring teachers to contribute 5.8 percent of their salary toward pensions saved $600,000. Changes to their health care plan???such as a $10 office visit co-pay (up from nothing)???saved $200,000. Upping the workload from five classes, a study hall, and two prep periods to six classes and two prep periods saved another $200,000. The budget was balanced.

?Everything we changed didn't touch the children,? Koczela said. Under a collective bargaining agreement, she continued, ?We could never have negotiated that???never ever.?

With these savings in hand, the Brown Deer school district was able to avoid firing 27 teachers who had been pink slipped. Contrast that with Milwaukee, still under a legacy collective bargaining agreement, where the union refused to compromise on benefits, leading to 354 teacher layoffs. Districts that have flexibility under the new law seem to be using it effectively, saving jobs and programs without having to endure a protracted fight with unions.

It will be interesting to see how district managers and school boards use their new flexibility going forward. These initial results are heartening, suggesting the leadership limbo may be coming to an end in Wisconsin.

? Chris Tessone...

Florida deserves kudos for protecting about $55 million in funding for charter facilities in the face of budget cuts, but they're catching a lot of flak from traditional school advocates, EdWeek reports:

School district officials across Florida are bemoaning the Legislature's decision to cut traditional public schools out of?PECO?the Public Education Capital Outlay program. The state's 350 charter schools will share $55 million, while the approximately 3,000 traditional schools will go without.

"Every cent allocated for school construction went to charter schools," complained Lee Swift, a Charlotte County school board member who heads the Florida School Boards Association.

Swift said lawmakers should focus on "properly funded traditional schools" instead of pressing for more charters that drain resources from the traditional schools.

Charters are growing around the state, however, and many districts are stagnating or losing enrollment. Districts have also been flush with cash for construction in recent years even as charters have received less funding. Last year's Ball State report on charter funding inequity states that districts in Florida "encumber funds or withhold local sources from total funds available before providing charter schools with their 'fair share.'" Charters were already getting a raw deal before this measure was passed.

Florida has done the sensible thing by protecting a growing and historically underfunded sector of its education system.?Traditional public schools will continue to tap local sources for construction and maintenance, revenues that charters don't have access to. Cutting all schools equally, or even...

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Dan Ariely has a provocative but mostly wrong-headed article in today's Washington Post roundtable on the Atlanta testing scandal. He claims that it's inevitable that teachers will respond to high-stakes tests by cheating just as corporate executives act in ethically challenged ways to please their bosses and investors.?But business people all behave differently, some ethically and some not. What drives the difference?

Take Johnson & Johnson during the 1980s Tylenol scare as an example. For decades, J&J has operated based on a credo that permeates the organization. These values have real relevance in the company, and personnel are promoted and developed based on their adherence to the credo. Business school students read cases on Johnson & Johnson's success at developing this corporate culture. When tragedy struck with the Tylenol murders, J&J acted responsibly, even though they weren't responsible for the deaths. Given the culture there at the time, it's hard to imagine them doing otherwise. Yet J&J also measures its profitability and expects employees to contribute to that bottom line.

Ariely glides over this in his "history lesson," suggesting that measuring and evaluating using a specific criterion necessarily causes people to focus only on what's being measured. That's nonsense, and the proof is in the innovative products and services American corporations have developed on the way to creating trillions of dollars of wealth. There are undoubtedly bad actors in the business world, but there are also a lot of leadership teams that successfully balance measuring...

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