The Education Gadfly Weekly

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).

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.

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.

Roland G. Fryer, “Teacher Incentives and Student Achievement: Evidence from New York City Public Schools” (Washington, D.C.: National Bureau of Economic Research, March 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 a cautionary example of how not to reform teacher pensions. The Land of Lincoln recently implemented a two-tiered plan, with teachers hired after January 1, 2011 in the second tier. Tier 2 teachers will make identical contributions (9.4 percent) as their Tier 1 colleagues, but will have a massive cut in pension wealth accrual over their work lives. Moreover, by our calculations, a new teacher entering the Illinois plan at age twenty-five will accrue no net pension wealth until age fifty-one. If the teacher leaves the classroom in her thirties or forties, she will walk away with nothing but her own cumulative contributions.

Tying benefits to contributions would have positive workforce consequences. First, it would provide rational incentives for retirement versus continued work. Each year, an educator would accrue pension wealth in a smooth and transparent way, providing an appropriate addition to the annual salary she is earning. This would generate neutral incentives to work or retire based on individual preferences and effectiveness.

That is not the case with current systems, where pension-wealth accrual is highly back loaded and concentrated at certain arbitrary points in teachers’ careers. Some years (e.g. at twenty-five or thirty years of service) yield increases in pension wealth that are several times the teacher’s salary. This provides a huge incentive to stay on the job until that pension “spike,” regardless of classroom effectiveness. There is no economic rationale for favoring one year of work over another in this way. Nor should an additional year of work reduce pension wealth, as is the case in current pension plans after a certain point in time, often at relatively young ages. This penalizes good teachers who wish to stay but are encouraged to retire early.

Tying benefits to contributions would also eliminate the massive penalties for mobility in current systems. It is well understood in the private sector that in order to recruit and retain talented young employees it is necessary to provide portable retirement benefits. This is accomplished by defined-contribution (DC) or cash-balance (CB) plans that vest immediately or nearly so. Current teacher plans typically have five or even ten year vesting. But even for vested educators, our research finds that the loss in pension wealth for those who split a teaching career between two states is massive. In a system where benefits are tied to the cumulative value of contributions it does not matter whether contributions have all been made in one or many jobs: Penalties for mobility are eliminated.

We favor cash-balance plans that generate notional individual retirement accounts, with contributions from employer and employee, and an investment return guaranteed by the employer. Such plans resemble the DC design, but without transferring investment risk or asset management to the teacher. They are transparent, offer smooth wealth accrual, and are readily annuitized at retirement. Large private employers such as IBM have converted to such plans, as have a few public employers. The TIAA plans that are common in higher education are similar in operation. They have provided retirement security for generations of college professors who often spread careers over multiple institutions.

As states grapple with the current pension crisis, a window of opportunity is open to implement more modern and strategic plans, or to make matters worse. Fundamental reform—based on tying benefits to contributions—is needed to fix these broken systems.

Robert M. Costrell is the endowed chair in education accountability at the University of Arkansas’s College of Education and Health Professions. Michael Podgursky is a professor in the Department of Economics at the University of Missouri, Columbia, as well as a fellow at the George W. Bush Institute at Southern Methodist University. An expanded discussion of these points, with references to the research literature, may be found in the authors’ new study published by the TIAA-CREF Institute.

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.

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.

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.

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).

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.

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.

Roland G. Fryer, “Teacher Incentives and Student Achievement: Evidence from New York City Public Schools” (Washington, D.C.: National Bureau of Economic Research, March 2011).