A modest proposal for pension reform

Robert M. Costrell , Michael Podgursky / March 17, 2011

Educator pension systems are becoming increasingly expensive and, in a number of states, plagued by severe problems of underfunding. Given concerns about cost and long-term sustainability, several states have cut benefits, usually for new teachers, and many more are considering doing so. However, in making these changes, policymakers should carefully consider their labor-market effects. Some of the proposed cuts reproduce—and even exacerbate—undesirable features of current systems.

That’s because they violate the paramount principle upon which pension systems should be built: Benefits should be tied to contributions. In other words, benefits paid to any teacher should be tied to the lifetime contributions made by or for that teacher. If $300,000 has been contributed on behalf of a teacher (including accumulated returns) then the cash value of an annuity provided to this teacher should also be $300,000.

This principle is routinely violated in current defined-benefit pension systems. Our analysis, Reforming K-12 Educator Pensions: A Labor Market Perspective, shows that the current systems result in very large implicit transfers from young teachers working short teaching spells to “long termers” who spend entire careers in the same system. In our view, a teacher who works ten years or thirty years should accrue pension wealth roughly equivalent to total pension contributions (with accumulated returns).

	Fundamental reform—based on tying benefits to contributions—is needed to fix these broken systems.

Illinois is

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A modest proposal for pension reform

Students in the center

March 17, 2011

The Beehive State has the opportunity to leapfrog most of the nation when it comes to creating a student-centered education funding system. SB65, a bill that would divide student-funding dollars into course-level units—allowing for the beginnings of “a la carte” education—sits on Governor Gary Herbert’s desk. The innovative bill would also link course-level funding to a student-based accountability structure. Content providers offering individual courses to students would receive 50 percent of the funds upfront and the other half upon successful course completion by the pupil. This system will be especially relevant to Utah’s digital learners, as it knocks down district walls, allowing students to take courses offered online across the state. Utah’s proposed system, if faithfully implemented, will be a giant step toward creating and holding accountable the high-quality, student-centered education system of the twenty-first century.

“Funding can now follow students to online high schools,” by Molly Farmer, Desert News, March 9, 2011.

“Utah Pushes Forward Toward Student-Centric Learning,” by Michael Horn, Forbes: Disrupting Class Blog, March 10, 2011.

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Students in the center

If you can't join 'em, beat 'em

March 17, 2011

With a looming kraken-like budget deficit, Detroit, like many cities, is looking for creative solutions. Last month, DPS emergency financial manager Robert Bobb announced a plan to help right-size the city’s education budget: close 40-plus schools and increase high-school classes to up to 60 pupils a piece. That didn’t go over so well, so he’s back with a new proposal: convert that same number of schools into charters. It’s hard to tell from 1,000 miles away what Bobb might be thinking, but we assume that he’s trying to get around the stubborn resistance of the Detroit Federation of Teachers. Given DFT’s stubborn refusal to negotiate or offer concessions, and Detroit’s yawning deficit (tallying in around $327 million), Bobb’s maneuver might be a smart ploy to circumvent the contract. Still, it has charter advocates rightfully alarmed, as the slapdash conversion of 40 underfunded, under-enrolled, underperforming schools into “charters” is unlikely to result in a big success story. We appreciate Bobb’s sense of urgency and willingness to shoot for the moon. We just hope he doesn’t shoot the charter movement in the foot in the process.

“Detroit Plan Makes Big Charter School Bet,” by Matthew Dolan and Stephanie Banchero, Wall Street Journal, March 14, 2011.

“Michigan Declares ‘Financial Martial Law,’” by Elspeth Reeve, National Journal, March 16, 2011.

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If you can't join 'em, beat 'em

King of choice

March 17, 2011

One of Denver's big suburban school systems, the Douglas County School District (DCSD), added a hammer to its toolbelt of school-choice options yesterday, when the board unanimously voted to pilot a district-wide voucher program in the upcoming school year. The program will offer 500 students $4,575 each to attend one of a score of eligible area private schools (including religious schools)—with an apparent expectation of growing it after this pilot year. The price tag: Free. In fact, by DCSD calculations, the program will save the district money, because each voucher will be for less than it would cost the district to educate these kids in-house. Considering how rapidly Douglas County has been growing, and the cost of expanding and staffing district schools to serve this burgeoning enrollment, we may have here an illuminating example of how “going private” is cheaper, pleasing to those who want to choose their schools, and—maybe—provides a better education. Stand by, as this is certain to be interesting.

“Douglas County school board unanimously OKs voucher plan to help pay for private school tuition,” by Karen Auge, Denver Post, March 16, 2011.

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King of choice

Teachers, Their Unions and the American Education Reform Agenda

Chester E. Finn, Jr. / March 17, 2011

I don't always agree with Marc Tucker but he knows a heckuva lot about how other countries organize their education systems and, as it turns out, that knowledge extends to how their teacher unions have evolved, what roles those unions play, and how their bargaining processes work. His new paper offers an enlightening—and even provocative—comparison of the labor-management relationships in public education in the U.S. and Northern Europe, emphasizing how American teacher unionism and collective bargaining manifest an adversarial relationship, while the approach in Northern Europe is better described as a “social partnership.” Illustrating this distinction, Tucker draws on examples from Germany, Finland, and the United States. He concludes with at least three-fourths of an important point when he describes the need to reform American collective bargaining without utterly alienating teachers at a time when we need their cooperation in sundry other education reforms.

Marc Tucker, “Teachers, Their Unions and the American Education Reform Agenda,” (Washington, D.C.: National Center on Education and the Economy, March 2011).

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Teachers, Their Unions and the American Education Reform Agenda

Teacher Tenure Reform: Applying Lessons from the Civil Service and Higher Education

Daniela Fairchild / March 17, 2011

This paper from Public Impact—one in a series entitled “Building an Opportunity Culture for America’s Teachers”—analyzes four design elements of teacher-tenure systems (time to tenure, criteria for tenure, the process for conferring tenure, and tenure protections) through the lenses of the K-12, civil-service, and higher-education sectors. While all three, for example, have strong protections in place, the higher-education system allows for a dynamic array of rewards that the K-12 sector currently does not, such as increased pay, responsibility, and status. Similarly, the civil-service sector promotes high performers, allowing those who excel to climb ranks quickly, whereas the K-12 sector offers no such incentives. Most interestingly, the paper articulates a new design framework, dubbed “elite tenure.” In this model, teachers would be eligible for tenure after six years as an educator (because the new teacher learning curve flattens at year five). Districts would only award tenure to the top 10 to 25 percent of educators and, much like national board certification, the applicant would have to prove worthiness. Finally, regarding dismissal: While the burden of proof would be on the employer, this new “elite tenure” system would provide broad grounds for dismissal, keeping some onus on the employee. Ideas from this paper aren’t a cure-all, but at a time when we need tangible remedies to fix our ailing system, they are a great chicken noodle soup.

Public Impact, “Teacher Tenure Reform: Applying Lessons from the Civil Service and Higher Education” » Continued Teacher Tenure Reform: Applying Lessons from the Civil Service and Higher Education Teacher Incentives and Student Achievement: Evidence from New York City Public Schools Chris Tessone / March 17, 2011 Merit pay for teachers remains a volatile issue, and this NBER working paper does little to quench that fire. It evaluates the efficacy of New York City’s high-profile performance-pay program, conducted in 200 high-needs schools over three years. Overall, it finds no effect of teacher performance pay on student achievement. Yet these results are misleading. Unpack them and find some eyebrow raising concerns: First, performance bonuses were awarded to schools to divvy up amongst their staff, not to specific teachers. Over 80 percent of the schools distributed the bonuses equally, muting the ability of such rewards to incentivize quality instruction or distinguish good from mediocre (or worse). Second, the vast majority of schools in the study were awarded bonuses: More than three-quarters qualified for the maximum payment in the second year. Third, the performance measure used was enormously—and unnecessarily—complex, providing teachers with minimal agency over their final scores. Far from representing a bold experiment with pay for performance, this scheme closely resembles the status quo: The majority of teachers are considered highly effective by the system no matter how their students perform. Mayor Michael Bloomberg traded major concessions on early retirement to convince the UFT to try pay for performance. Unfortunately, and despite the publicity afforded Fryer’s paper, this expensive effort has little to say about how a well-designed compensation system might incentivize teachers to be more effective—or how it might attract stronger teachers to the profession. » Continued Teacher Incentives and Student Achievement: Evidence from New York City Public Schools Announcements March 25: AEI Common Core Event March 21, 2013 While most discussion about the Common Core State Standards Initiative has focused on its technical merits, its ability to facilitate innovation, or the challenges facing its practical implementation, there has been little talk of how the standards fit in the larger reform ecosystem. At this AEI conference, a set of distinguished panelists will present the results of their research and thoughts on this topic and provide actionable responses to the questions that will mark the next phase of Common Core implementation efforts. The event will take place at the American Enterprise Institute in D.C. on March 25, 2013, from 9:00AM to 5:00PM. It will also be live-streamed online. For more information and to register, click here. Read more announcements Archives Month January February March April May June July August September October November December 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 Sign Up for updates from the Thomas B. Fordham Institute    Please leave this field empty Gadfly Podcast The World is Phat play pause stop mute unmute National         About Us Our Mission Board of Trustees Staff Fellows EEPS Funding and Financing Partners Careers Contact Us Subscribe to the Education Gadfly Online Policy Priorities Standards-Based Reforms Quality Choices A Reform-Driven System Commentary Education Gadfly Weekly Education Gadfly Daily Flypaper Ohio Gadfly Daily Common Core Watch Choice Words Videos Podcasts Publications Standards, Testing & Accountability Talented Tenth Charters & Choice NCLB School Finance Governance Ohio Policy Curriculum & Instruction Digital Learning Teachers Additional Topics Events Upcoming Events Past Events Ohio Policy Ohio Education Gadfly Ohio Publications   Ohio Charters Fordham-Sponsored Schools Applying for Sponsorship Resources for Schools © The Thomas B. Fordham Institute Privacy Policy Usage Agreements 1016 16th St NW, 8th Floor Washington, DC 20036 (202) 223-5452 thegadfly@edexcellence.net nonprofit software