How States CanStretch theSchool DollarChris TessoneBernard Lee Schwartz Policy FellowMay 18, 2012
Why Are Schools in Crisis?• Quantity over quality• Out of control mandates• Benefits that no longer serve teachers,  taxpa...
What Role Can States Play?• Promote local accountability…and  individual rewards• Cut red tape, trim state mandates• Take ...
K-12 Budgets = People             19%       21%                              60%  Salaries      Employee benefits         ...
People Are Expensive$14,000$12,000$10,000 $8,000 $6,000 $4,000 $2,000    $0                Per Pupil Cost (2008 $s)       ...
…And We’ve Added a Lot of              Them2520151050              Student/Teacher Ratio                          Source: ...
Teachers Don’t Make Big Bucks          Average Teacher Salary (2008 $s)$60,000$50,000$40,000$30,000$20,000$10,000    $0   ...
Why? Lots of Teachers,Average Quality Is Not Great1443                                       25K                          ...
Rec #1: Treat Teachers Like   Individual Professionals• End “last in, first out” layoff practices• Remove state-level clas...
Public-Sector Retirement Plans  Have a Trillion Dollar Hole$3,500$3,000$2,500$2,000$1,500$1,000 $500   $0         Pension ...
A Select Few Reap Serious                 Benefits                  CalSTRS $100K Club6,0005,0004,0003,0002,0001,000   0  ...
New Teachers Pay the Price  (Case in Point: Illinois)          Source: TIAA-CREF Institute, “Reforming K-12 Educator Pensi...
Traditional RetirementSystems Punish Mobility, Too          Source: TIAA-CREF Institute, “Reforming K-12 Educator Pensions”
Retirement Reform Is Possible:        Here’s Proof
Rec #2: Get Benefits Under           Control• Create sustainable, portable retirement  benefits• Pay down unfunded liabili...
Don’t Let a Crisis Go to Waste• Fiscal crisis has revealed numerous  weaknesses in state K-12 education policy• Revenue ch...
Chris Tessonectessone@edexcellence.net
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Stretching the School Dollar

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A presentation by Chris Tessone at the Council of State Governments 2012 Leadership Conference on May 18, 2012.

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  • The majority of every dollar spent on education pays for salaries and benefits. So it doesn’t make sense to cut budgets for photocopies or field trips in order to save money. To achieve serious efficiency in schools, we need to address how we deploy and compensate people. (Note: The above graph shows the breakdown of operating budgets only, not capital budgets.)
  • Real per-pupil spending has more than doubled over the last forty years. Since people make up most of education spending, have these increases been caused by hiring more people, or paying our workforce more money?
  • The answer is mostly that we’ve added a lot of workers. The above graph shows the dramatic decrease in the student/teacher ratio since the 1970s. Note that this does not include all of the non-teaching personnel (administrators, coaches, curriculum writers, and paraprofessionals) we have added to the payrolls! We need to ask whether we’ve gotten enough bang for our buck by simply throwing additional staff at the problem of low achievement.
  • Costs have *not* increased because salaries have gone up. As you can see, average real salaries are up about 10% since 1970. This increase can’t explain the doubling in per pupil spending during that time. And $55K may sound like a great salary in some places, but it doesn’t go far in others, especially for new teachers. Average starting salaries by state: CA $41,181; TX $32,868; MT $24,865 (NEA analysis).
  • So we have more teachers and other staff on the payroll than we did in past years. How good are they? The data suggest we’re not getting high achieving students to become teachers. New education majors score well below average on the SAT. Class-size reduction policies are partly to blame. California’s CSR policy resulted in 25,000 new teaching positions in its first two years. That means 25K people who were not good enough for the classroom prior to the policy were given responsibility for children’s learning. CSR does not work at huge, statewide scale.
  • The solution to these problems is to return control to local leaders, focus on quality over quantity, and make sure pay (and job security) reflect the value teachers and other staff add to the classroom instead of being based on one-size-fits-all state policy.
  • Retirement benefits for public-sector workers are extremely expensive, and states have not saved enough to pay for them. The graph on the right, showing the $600B in retiree health plans, is one of the scariest graphs in education policy in my opinion. However, the average teacher doesn’t get these rich benefits. They go only to those few workers who spend their entire careers teaching in the same pension system.
  • The few who get full retirement benefits do very well for themselves. Even in the depths of the recession, the number of teachers receiving $100K per year pensions from CalSTRS nearly doubled in two years.
  • Reform should not just punish beginning teachers, however, or teaching will be even less attractive to high-performers. The pension reform done by Illinois in 2010 means that new workers hired after 1/1/11 will earn less than half the pension wealth offered to someone hired in 2010, and it’ll take them years longer to reach the peak retirement amount offered by the system. This is unfair to new workers.
  • Teachers who move from state to state also suffer. This analysis shows the loss in pension wealth experienced by a teacher who leaves Missouri midway through his/her career to teach in a state whose pension system is also modeled after Missouri’s. (This allows an apples-to-apples comparison that avoids differences in pension policy between states.) The 21st century workforce we want to attract to K-12 education is highly mobile. Pension systems like this one serve the needs of the last century and must be reformed.
  • RI Treas Gina Raimondo, shown on the left, pushed through a major reform that will save Rhode Island $4B over time and puts the state’s pension system on a path to solvency. Dan Liljenquist, on the right, helped reform Utah’s pension system BEFORE the state experienced a serious crisis. Both examples show that pension reform, while politically difficult, is possible.
  • Traditional benefits do not serve the needs of most workers, especially most new teachers. Reform is needed immediately in almost every state. There are several paths to reforming teacher retirement benefits, however. We at Fordham prefer 401(k)-style individual accounts, but my colleague Raegen Miller at the Center for American Progress has made a great argument for cash-balance plans that preserve many features of defined-benefit plans while improving portability and fairness. (See http://www.americanprogress.org/issues/2011/09/redefining_teacher_pensions.html.)Retiree health care benefits need a hard look. States have saved very little for them, costs are increasing, and practically no other employers in the country provide such rich benefits.
  • Stretching the School Dollar

    1. 1. How States CanStretch theSchool DollarChris TessoneBernard Lee Schwartz Policy FellowMay 18, 2012
    2. 2. Why Are Schools in Crisis?• Quantity over quality• Out of control mandates• Benefits that no longer serve teachers, taxpayers, and kids
    3. 3. What Role Can States Play?• Promote local accountability…and individual rewards• Cut red tape, trim state mandates• Take bold action on employee benefits
    4. 4. K-12 Budgets = People 19% 21% 60% Salaries Employee benefits All other Source: U.S. Census Bureau, Public Education Finances: 2009, May 2011
    5. 5. People Are Expensive$14,000$12,000$10,000 $8,000 $6,000 $4,000 $2,000 $0 Per Pupil Cost (2008 $s) Source: NCES, Digest of Education Statistics, 2011
    6. 6. …And We’ve Added a Lot of Them2520151050 Student/Teacher Ratio Source: NCES, Digest of Education Statistics, 2011
    7. 7. Teachers Don’t Make Big Bucks Average Teacher Salary (2008 $s)$60,000$50,000$40,000$30,000$20,000$10,000 $0 Average Teacher Salary (2008 $s) Source: NCES, Digest of Education Statistics, 2010
    8. 8. Why? Lots of Teachers,Average Quality Is Not Great1443 25K New teaching positions Average SAT score for new created by CA class-size education majors in 2011 initiative (first 2 years) Many positions were National average for all filled by SAT takers: 1500 inexperienced, uncertified teachers Sources: Chingos, Brookings Institution, “Class Size” College Board, “2011 College-Bound Seniors”
    9. 9. Rec #1: Treat Teachers Like Individual Professionals• End “last in, first out” layoff practices• Remove state-level class-size mandates• Give districts the freedom to set salaries and work rules
    10. 10. Public-Sector Retirement Plans Have a Trillion Dollar Hole$3,500$3,000$2,500$2,000$1,500$1,000 $500 $0 Pension Plans Retiree Health Plans Liabilities Assets (billions of $s) Source: Pew Center on the States, “The Widening Gap”
    11. 11. A Select Few Reap Serious Benefits CalSTRS $100K Club6,0005,0004,0003,0002,0001,000 0 2009 2011 Number of $100K teacher pensions (CA) Source: CalSTRS data, CA Fdn. For Fiscal Responsibility analysis
    12. 12. New Teachers Pay the Price (Case in Point: Illinois) Source: TIAA-CREF Institute, “Reforming K-12 Educator Pensions”
    13. 13. Traditional RetirementSystems Punish Mobility, Too Source: TIAA-CREF Institute, “Reforming K-12 Educator Pensions”
    14. 14. Retirement Reform Is Possible: Here’s Proof
    15. 15. Rec #2: Get Benefits Under Control• Create sustainable, portable retirement benefits• Pay down unfunded liabilities through shared sacrifice• Reform retiree health benefits
    16. 16. Don’t Let a Crisis Go to Waste• Fiscal crisis has revealed numerous weaknesses in state K-12 education policy• Revenue challenges and cost pressure are here to stay• Courageous states have already shown a path to sustainable reform
    17. 17. Chris Tessonectessone@edexcellence.net

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