Loeb Et Al MS27040 Comp Policy Brief 01-03-08

8/10/2019 Loeb Et Al MS27040 Comp Policy Brief 01-03-08

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The State Role in Teacher CompensationSusanna Loeb, Luke C. Miller, & Katharine O. Strunk

Introduction

Policy makers have long been concerned with K!" teachers# com$ensation.%ot only might increased teacher com$ensation $urchase more skilledteachers, it might also inuence how long teachers stay at their schools andin the teaching $ro'ession. Similarly, changes in the structure o' teachersalary schedules may change the a$$eal o' teaching even i' average salariesremained the same. Much o' the e(tant research on K!" teacher salariesshows, to no great sur$rise, that teachers res$ond to salary changes )see'or e(am$les, *augh and Stone )!+"- and Murnane and Olsen )!++,!++--. /eachers# salaries are 0ust one com$onent o' teachers# overallcom$ensation, however. States and school districts also $rovide otherincentives 1 both monetary and nonmonetary 1 aimed at attracting and

retaining teachers. /hese incentives o'ten target certain ty$es o' teachersin certain ty$es o' $ositions. 2n addition, teachers receive health andwel'are and retirement bene3ts that add to their total com$ensation$ackages.

/his $olicy brie' e(amines the state role in these three com$onents o' totalK!" teacher com$ensation 1 base salary, bene3ts, and other incentives showing how states across the country are going beyond sim$le salarystructures to com$ensate teachers. 4e also e(amine how teachers#com$ensation targets teachers at di5erent $oints in their career cycles.Some com$onents aim at recruiting teachers, others target retention o'

early career teachers, and still others aim at the retention and e5icientrelease o' older and retirementeligible teachers. 4e summari6e the $olicya$$roaches o' all 7 states and the 8istrict o' Columbia, drawing 'rom ane(tensive technical re$ort )Loeb and Miller, "9-. /he in'ormation comes'rom a variety o' sources including state statutes and administrative codesand state websites.! 4e characteri6e the national statelevel $olicy conte(tas it was in "7. 4hile some as$ects o' these $olicies may have changed,the 'ull $icture is likely to look :uite similar today."

1Our $rimary sources o' in'ormation were state statutes and administrative codes. 2nitialdata collection occurred in the summer and 'all o' "7 with an additional wave o' data

collection in the summer and 'all o' ";. 2nitially, we com$ared the acrossstate $olicysummaries com$iled by the


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Salary Schedules

More educational dollars are allocated to teacher salaries than to any othereducational e($ense. /eacher salaries there'ore 3gure $rominently in

education 3nance debates in every state, giving rise to 're:uent calls 'orre'orming both how much teachers are $aid and the determinants o' that$ay. /he current single district salary schedule $ay structure, used in thema0ority o' school districts, is based almost com$letely on education leveland years o' e($erience )see >igure ! 'or an e(am$le salary schedule 'rom%orth Kansas City School 8istrict in Missouri-.

Pro$onents o' this structure argue that the strength o' these in$utbasedsalary schedules is their ob0ectiveness. ?dministrators can accurately andconsistently assess years o' e($erience and educational attainment, leavinglittle room 'or sub0ective and $ossibly biased o$inions o' teachers to

inuence teachers# $ay. ?s such, some re'ormminded $ro$onents o' thecurrent system su$$ort acrosstheboard salary increases. /hey argue thatthe current salary structure is e5ective, but that higher com$ensation willbetter $osition the teaching $ro'ession to recruit and retain high :ualityindividuals.

Figure 1: North Kansas City School District, Missouri 200!" SalarySche#ule

the $a$er we attem$t to clari'y when district res$onse to state $olicies is not homogenousacross a state.

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Note: This example salary schedule has been truncated to 18 steps. There are actually 25steps, with teachers in the fnal column with 25 years o experience earnin !"",###.

Critics o' the current system argue that a key weakness o' these in$utbased structures is that they 'ail to reward individual e5ort, reducingindividual incentive to $er'orm at their best and to remain in the classroomrather than move to a $ro'ession where their e5orts are rewarded by highercom$ensation. 2n addition, in$utbased salary schedules do not distinguishbetween teachers# 3elds o' e($erience so that sub0ects such as math andscience, which have high wages in nonteaching occu$ations, o'ten 'aceshortages while elementary grades and social studies do not. Similarly,teaching 0obs that re:uire more $re$aration or e5ort, such as s$ecialeducation, can 'ace shortages while other teaching 0obs do not. /hese critics

believe that we should $ay teachers based on their sub0ect area e($ertise,the school in which they teach and@or their $er'ormance in the classroom.

One alternative to the current structure is to allow 'or $ay di5erentialsbased on sub0ect area, grade or the school in which teachers work. Other$ro$osals suggest career ladders, which base $ay on teachers# increasingres$onsibilities within the school. ?s teachers move u$ the ladder theyassume greater res$onsibilities in other areas such as heading de$artments,

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organi6ing $ro'essional develo$ment activities and mentoring otherteachers. ?nother, more radically di5erent alternative is to base $ay onteachers# Aout$uts,B or their contribution to student outcomes. Su$$orterso' these $ro$osals believe com$ensation should be better linked to schools#educational goals and that salaries that distinguish e5ective teachers will

encourage individuals who would be e5ective teachers to enter the$ro'ession and encourage current teachers to seek the $ro'essionaldevelo$ment they need to im$rove.

Out$utbased salary structures link teacher com$ensation to a $roductiveresult o' the education $rocess such as $er'ormance evaluations andstudent test scores. /he results used to determine com$ensation amountscan be at the individual, team, grade or school levels. Such structures arenot widely used and $rove highly controversial when $ro$osed orim$lemented. /he main criti:ue o' such structures is the di5iculty inidenti'ying an a$$ro$riate $er'ormance metric. ?re $rinci$al evaluations o'

teachers ob0ective enough to 'airly determine com$ensation 2s ita$$ro$riate to hold teachers accountable 'or the $er'ormance o' theirstudents when so much that a5ects that $er'ormance is beyond the controlo' teachers

$pproaches Ta%en $cross the Nation

?lthough the debate over a$$ro$riate salary structures rages at the stateand 'ederal levels, most states have le't decisions regarding salarystructures to local districts. =owever, states are getting in the game by$roviding at least some guidance regarding salary structure. >or instanceD

"9 states have some kind o' statewide minimum salary scheduleE Si( states re:uire or $rovide 3nancial incentives 'or districts to ado$t

career ladder salary structures and two other states have done so inrecent $astE

/hree states o$erate $er'ormance $ay $rograms.

Statewide Minimum Salary ScheduleD /wentyseven states have ado$tedsome ty$e o' statewide minimum salary schedule )see >igure "-. ?llteachers in these states must be $aid at least the amount s$eci3ed by thestate. Pro$onents o' $olicies that set a oor on the minimum salary allottedto teachers at a higher rate than districts may otherwise $rovide argue thatsuch $olicies will hel$ to recruit more :uali3ed $ersonnel into the teaching$ro'ession. States with minimum salary schedules $rovide 'unds to coversome i' not all the mandated minimums. 8istricts generally are allowed toaugment the minimums with local 'unds. >our states )?labama, Mississi$$i,/ennessee and 4ashington- $lace some restrictions on district salary addons. >or e(am$le, ?labama re:uires that the local addon be the same 'or allteachers while Mississi$$i $rohibits districts 'rom reducing their local add

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on 'rom year to year. ?lthough ten states establish their minimum salaryschedules on an annual or biennial basis )de$ending on their budget cycle-,other states# minimum salary schedules were last u$dated a decade or moreago. Partly as a result o' these dated $olicies not all o' the statewideminimum salary schedules are binding 'or districts within the state.

?lthough this in'ormation is not readily available, we were able todetermine that at least one district in ten o' the "9 states $ays its teacherse(actly the minimums mandated by the state. 2n these states the minimumis binding. 2n nine o' the "9 states, all districts $ay salaries in e(cess o' theminimums. /here are eight states 'or which we are unable to determinewhether or not the statewide minimum salary is binding 'or any districts.)See >igure ".-

Figure 2: State$i#e Minimum Salary Sche#ule, 200%&

Career ladder salary structures:Si( states )?ri6ona, >lorida, 2ndiana,Missouri, %evada and Ftah- have statutes that re:uire or $rovide 3nancialincentives 'or districts to ado$t career ladder salary structures. /ennesseeand /e(as o$erated $rograms in the !+s and !++s.

Per'ormance $ayD >lorida, Kentucky and %orth Carolina o$erate$er'ormance $ay $rograms that $rovide salary bonuses related to student$er'ormance. /he awards distributed by the $rograms in Kentucky and

%orth Carolina are schoolbased, whereas >lorida#s $rogram links anindividual teacher#s award to the $er'ormance o' his or her students.

3Minimum salary schedule states are ?L, ?G, C?, 8


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?s is evidenced by the low :uantity o' states with $olicies encouragingalternative salary schedules, out$utbased salary schedules are still 'ar lesscommon than the more standard e($erience and educationbasedschedules. Pro$onents o' these out$utbased $olicies contend that they willattract more highly :uali3ed $eo$le into teaching by $romising them

rewards 'or a 0ob well done and will encourage such teachers to remain inteaching because they will be rewarded 'or success as measured by as$eci3c out$ut.

Recruitment, Retention and Assignment Incentives

*asic salary schedules are not the only monetary com$ensation tool stateshave to recruit and retain talented teachers. States have also ado$ted avariety o' incentive $olicies to attract talented individuals to the teaching$ro'ession, to retain them, and to encourage them to acce$t assignments in$articular highneed sub0ect areas or schools. /hese incentives come in

'orms as varied as monetary rewards )bonuses- to housing sti$ends andloan 'orgiveness $rograms.

/he incentive systems ado$ted by states can be characteri6ed by theirbreadth, or how many stages o' a teacher#s career they target. 4e de3ne3ve career stages that teachers may $ass through 'rom college toretirementD

!. Period o' teacher $re$aration to initial certi3cationE". Period 'ollowing this initial $re$aration as the teacher begins as the

teacher o' recordE

. Period o' additional education as the teacher com$letes re:uirements'or an additional credential, endorsement or certi3cationE

N. Period 'ollowing the com$letion o' additional training and@or therecei$t o' an advanced credentialE

7. Period o' retirement eligibility.

States can im$lement di5erent ty$es o' incentives at di5erent stages o'teachers# career cycles to achieve their $articular needs. 2ncentivestargeted at distinct stages o' teachers# career cycles will likely a5ect thesu$$ly o' teachers and $ossibly the :uality o' teachers in di5erent ways./hose that target the 3rst two and the 3nal stages o' teachers# careers may

increase states# su$$lies o' teachers, whereas incentives aimed at the thirdand 'ourth stage o' teachers# careers may im$rove the skills and :uality o'states# e(isting teaching 'orces. /able ! outlines the $otential labor markete5ects o' incentives targeted at di5erent stages o' teachers# careers ande(am$les o' the ty$es o' incentive $olicies states may use to recruit andretain teachers.

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Ta'le 1: ()ample State *ncenti+es to Recruit an# Retain Teachersthroughout Their Careers

1 2 & %

Career

Stage

2nitialteacher

$re$aration

Postcom$letion o'

initial teacher$re$aration

?dditionaltraining

Postadditional@ advanced

training orcredential

?t or %earGetirement

eligibility

-otential

.a'or

Mar/et

(0ects

2ncreaseteachersu$$ly byenticing$otentialteachers toteach withinthe state

2ncreaseteacher su$$lyby enticing$otentialteachers toteach withinthe state

2m$rove skillsand :uality o'e(isting labor'orce

2m$rove skillsand :uality o'e(isting labor'orce

2ncreaseteacher su$$lyby enticingretirementeligibleteachers tocontinueworking inschools or

decreasesu$$ly o' olderteachers byo5eringincentives 'orearlyretirement

()ample

*ncen

ti+e

s

State3nanced'orgivablegrants andloans

State

3nancedscholarshi$s

?ssum$tiono' 'ederalloans

Salarybonuses

=ousingassistance

/uitionassistance 'orteachers toobtainadditionaleducation@

certi3cation

Salarybonuses 'or%ational*oardCerti3edteachers

Salarybonuses 'ors$eciali6edteachers

Parttimeconsulting@teaching$rograms

Continuedservice withno loss o'retirementbene3ts

States# incentive systems can also be distinguished 'rom one another by thedegree to which they target s$eci3c subgrou$s o' teachers. Many incentivesare awarded only to teachers who teach sub0ect areas with criticalshortages )such as mathematics, science and s$ecial education- or di5iculttosta5 schools )such as low$er'orming schools or schools serving highconcentrations o' students in $overty-. Others are 'urther targeted to

teachers o' critical shortage sub0ects indi5iculttosta5 schools. ?lthougheligibility 'or some incentives are restricted to s$eci3c characteristics o' theteacher )such as teachers o' minority racial or ethnic grou$s-, we 'ocus ourattention on the targeting to characteristics o' the 0ob assignment.

$pproaches Ta%en $cross the Nation

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/here is considerable variation among the 7 states and the 8istrict o'Columbia in the breadth o' their incentive systems. /he ma0ority o' states3nance incentive systems that target more than one stage o' a teacher#scareer. /he most common incentive system can be 'ound in ! states andincludes $olicies aimed at two o' the 3ve stages. Only two states, ?ri6ona

and %ew =am$shire, o5er no state3nanced incentives to attract or retainteachers. >igure outlines the distribution o' the breadth o' state incentivesystems.

Figure &: Num'er o Career Stages Targete# 'y State *ncenti+e-rograms

4States with 6ero are ? and %=E with one, 2%, M%, M/, %


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Figure : Freuency o Targete# Recruitment Retention an#3ssignment *ncenti+es

Gecruitment, retention and assignment incentives that may result in anincrease in the su$$ly o' teachers are somewhat more common than thosethat may im$rove the :uality o' the e(isting labor 'orce both across andwithin states. >orty'our states have at least one $olicy targeting su$$ly)i.e., the 3rst, second and@or 3'th career stages- while + states have anincentive targeting the :uality o' current teachers )i.e., the third and@or'ourth career stages-. ?dditionally, states are more likely to o$erate multi$le$rograms that are likely to increase su$$ly than they are to o$erate$rograms aimed at im$roving the :uality o' current teachers. 2ncentivesmost 're:uently $rovide 3nancial su$$ort to individuals during their initialor additional teacher $re$aration. /he least common ty$e o' incentive is

that aimed at retired or soontoberetired teachers. Most o' these $rograms)o'ten re'erred to as 8GOP 1 8e'erred Getirement O$tion Program- $rovideincentives 'or teachers to $ost$one their retirement. >igure N outlines the're:uency with which states o5er incentives targeted at the di5erent stageso' teachers# careers.

2ncentives o5ered through these state systems can also be grou$ed into 3vecategoriesD

/uition and 'ees 'or teacher trainingE

Loan $ayment assum$tion 'or teachersE

=ousing bene3tsE

Post$oned retirement incentivesE and

Salary su$$lements.

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Figure %: Freuency o State -ro+ision o *ncenti+e Type%

>igure 7 outlines the 're:uency with which states $rovide each kind o'incentive. 2t shows that the most $o$ular incentive ty$e is tuition or 'eeassistance 'or teacher training, with N9 states $roviding an incentive o' thissort. /he ne(t most $o$ular ty$e o' incentive is the $rovision o' salarysu$$lements. /hirtythree states o$erate a salary su$$lement $rogram withthe most common ty$e making awards to %ational *oard Certi3ed /eachers)%*C/s-. /hirtyseven states and the 8istrict o' Columbia have some sort o'incentive 'or teachers to become certi3ed by the %ational *oard 'orPro'essional /eacher Standards )%*P/S-, or to attract teachers who alreadyare so certi3ed.

2n addition to the targeting o' incentives to a $articular career stage,eligibility 'or many incentives are 'urther restricted to teachers in s$eci3csub0ect areas and@or schools. States are more likely to restrict eligibility toteachers o' critical shortage sub0ect areas ); states- than to hardtosta5schools )"9 states-. States are least likely to o5er incentives that restricteligibility to teachers o' critical shortage sub0ect areas withinhardtosta5schools, although 9 states do so. >igure ; shows how states restrict$articular incentive ty$es to certain kinds o' teachers.

5States available u$on re:uest.

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Figure : Summary o 4o' 3ssignment Targeting o StateRecruitment, Retention an# 3ssignment *ncenti+es, 200%

Teacher Retirement Policies

/he third $art o' teachers# total com$ensation $ackages is 'ringe bene3ts.

>ringe bene3ts encom$ass nonsalary $erks such as $aid holidays, vacation,health insurance, and teacher retirement $olicies. Such Ae(traB bene3tscom$rise a substantial $ortion o' teacher com$ensation 1 "; $ercentaccording to one estimate )edder, "-. Getirement $olicies cover asigni3cant amount o' this $ercentage.


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State $lans di5er on many key as$ects that may inuence teachers#termination and retirement decisions. 4hile state retirement bene3t$olicies aim to retain talented teachers in the work'orce as long as $ossible,states are also 'acing severe cost $ressures that are causing them todiminish and change some o' their retirement $rograms. >or one, some

states are im$lementing $olicies that $rovide incentives to teachers whochoose to retire beoreretirement age, thus allowing states to re$lacee($ensive more e($erienced teachers who are 'urther down the salaryschedule with newer teachers who demand lower salaries according to thestandard salary scale. /he need to contain system costs has also led statesto shi't 'rom de3ned bene3t to de3ned contribution hybrid $rograms, aswell as to alter the mandatory contribution rates 'or em$loyees andem$loyers, service re:uirement 'or vesting, service and age eligibilityre:uirements 'or 'ull retirement bene3ts, the retirement bene3t calculation'ormula, and retiree health insurance $remiums and coverage.

/he key as$ects o' retirement bene3ts that are addressed by state $oliciesincludeD

/y$e o' $lan )8e3ned *ene3t vs. 8e3ned Contribution vs. =ybrid @Combination-E

Plan membershi$E

Mandatory em$loyee contribution ratesE

Mandatory em$loyer contribution ratesE

esting service re:uirementE

Service years eligibility re:uirementE

?nnual Getirement *ene3t Calculation )including 3nal salary

calculation and service credit $ercentage-E and =ealth insurance coverage.

$pproach Ta%en by &tates across the Nation

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Figure ": Types o -lans Sponsore# 'y State Teacher RetirementSystems, 200%

Plan /y$eD


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than the ;." $ercent O?S82 rate. ?dditionally, they have the highest rateso' all states. /his is likely because teachers who do not earn social securitybene3ts 'rom their em$loyment as teachers must rely more on their statebene3t to su$$ort them during retirement.

esting Service Ge:uirementsD ? key as$ect o' state retirement systems isthe service re:uirement 'or vesting. 4hile teachers are immediately vestedin the de3ned contributions $ortions o' $lans, they must serve a set numbero' years be'ore they become vested in the de3ned bene3t as$ect o'retirement $lans. Once vested, a teacher is eligible to receive his or herretirement bene3t. ? vested teacher is able to leave the classroom but$ost$one drawing a retirement bene3t until years later. Many states re'er tothis as a de'erred retirement bene3t. ?s is shown in >igure , the ma0orityo' states )"- 'ully vest teachers a'ter 3ve years o' creditable service./eachers in another ! states must teach 'or ten years be'ore being 'ullyvested 'or retirement bene3ts.

Figure 5: Ser+ice Reuirements or 6esting in State Teacher Retirement

Systems52n a hand'ul o' states, nonvested teachers are eligible 'or retirementbene3ts once they attain a certain age. >or e(am$le, an active teacher in%ew =am$shire with less than the ! years o' service re:uired to vestretirement bene3ts can retire with bene3ts u$on turning ; years old.

8>or ?K, ?, =2, 2?, 28, 2%, M


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Service Iears igure , each state has establishedse$arate eligibility re:uirements 'or the various bene3ts they o5erincluding service, early retirement and disability retirement. 4e restrict ourattention here to 'ull service retirement bene3ts. ? very common criteria by

which teachers :uali'y 'or 'ull retirement bene3ts is the A years and outBrule whereby the teacher can retire as soon as he or she accumulates as$eci3c number o' years o' service regardless o' his or her age. 2n otherwords, although a teacher may be vested in his retirement bene3ts, he maynot wish to retire at that vesting $oint because he is not yet eligible 'orstates# 'ull $rovision o' service retirement bene3ts. >igure + outlines states#A years and outB eligibility re:uirements 'or 'ull retirement bene3ts.

/he target number o' years o' service ranges 'rom " years ) states- to 7years )7 states-. /he most common re:uirement, established in !9 states, is years o' service. Similarly, teachers can :uali'y 'or 'ull retirement

bene3ts in ten states once their age and years o' service sum to a minimumamount 1 ty$ically or 7. Seventeen states have no A years and outB$olicy.

2t is im$ortant to note that all states credit only those years o' serviceduring which the teacher and@or the em$loyer made contributions to theretirement system. /eachers are able to $urchase additional years o'service, however, and are also able to remove their own contributions,usually with accumulated interest. /here'ore, it is $ossible 'or a teacher touse $ersonal contributions 'rom one state#s retirement system to buy intoanother state#s retirement system.

Figure 7: 89 ears an# ;ut< (ligi'ility Reuirement or FullRetirement =ene>ts, 200%7

9

/he $olicy a$$lies to some but not all teachers in CO, 8C, L?, M?, %I, O=, OG, 4?, and4. " year states are ?K, L?, and M?E "7 year states, ?L, M


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?nnual Getirement *ene3t CalculationD ?lmost every teacher#s 'ull )aso$$osed to early- retirement bene3t is calculated using a three element'ormula based on )!- years o' service, )"- 3nal salary, and )- a servicecredit $ercentage. ?lthough A3nal salaryB is always calculated as thehighest average salary earned over some $eriod o' time, there is substantialvariation across states in the number o' years included in the calculation o'this average. >igure ! outlines the variations across states in thede3nitions o' 3nal salary.

States also di5er in the service credit $ercentage included in retirementbene3t calculations. ? service credit $ercentage indicates the $ercent o'

3nal salary that a retiree receives as a retirement bene3t 'or each year o'service. /his $ercentage is also titled Abene3t 'actor,B Aage 'actor,BAmulti$lier,B and Abene3t rate.B /he ma0ority o' states# retirement bene3tcalculations use service credit $ercentages between one and two $ercent,although this $ercentage is as high as .9 $ercent 'or some teachers in Ohioand less than one $ercent 'or some teachers in Maryland, Massachusettsand /ennessee.

Figure 10: De>nition o Final Salary ?se# in Retirement =ene>tCalculations, 200%10

10?, C?, KS, KI, M8, M2, OK, F/, and 4? are in multi$le grou$s. One year includes C?Etwo consecutive years, H? and 4?E three years, ?L, ?K, CO, C/, 8


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4e use Maine#s retirement bene3t calculation as an e(am$le o' how statesdetermine teachers# retirement bene3ts based on years o' service, 3nalsalary and service credit $ercentage. 2n Maine, a teacher#s A3nal salaryB isbased on the average o' his or her three highestearning years o' serviceand the service credit $ercentage is ". $ercent. 2' a hy$othetical teacherhas worked years in Maine $ublic schools and the average o' her threehighestearning years o' teaching is ;,, thenD

Final salary xears ser+ice xSer+ice cre#it percentage Q3nnualRetirement =ene>t

@0,000 x &0 years x 2A0B Q @&,000year

/he Maine teacher#s re$lacement rate with years o' service is ;$ercent, bringing the total annual retirement bene3t to ;, $er year./he calculations are not always this straight'orward, as in most states theservice credit $ercentage varies across retirement $lans, years o' service,and@or teacher#s age at retirement.

/able " summari6es estimated 3nal salary re$lacement rates. Ourcalculations are based on each state#s service credit $ercentage schedule

and are a$$licable 'or a teacher 3rst em$loyed in the "7; school year.4e assume that the teacher retires at the age o' 7. 2n other words, weassume that a teacher begins receiving a bene3t 'rom the state retirement$lan at the age o' 7. 4e choose the age o' 7 because many, i' not most,teachers retire be'ore the o5icial retirement age o' ;7. ?s a result, many o'the estimated re$lacement rates do not assume 'ull retirement bene3tsbecause states im$ose early retirement $enalties on retirees who retire

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$rior to age ;7 and@or $rior to com$leting a minimum number o' serviceyears. ?ssuming teachers retired at ;7 would have resulted in 'ullretirement bene3ts calculations in all states. =owever, because manyteachers retire $rior to ;7 years o' age, we believe that assuming 7 as anaverage retirement age $rovides greater and more relevant in'ormation.

Our estimates also assume that all years o' e($erience were either renderedwithin the state#s retirement system )or were credited to the retirementsystem- and that the current retirement bene3t 'ormulas continue to a$$lywhen the teacher retires.

Ta'le 2: 3+erage (stimate# Final Salary Replacement Rates acrossState Retirement -lans or a Teacher First (mploye# in 200%!0,Retiring at 3ge %5, 200%a

Type o Retirement -lan

ears o Cre#ite# ()perience20

earsBE

2%ears

BE

&0ears

BE

&%ears

BE

?ll de3ned bene3t only $lans b ".N N.; 7. ;+.!

?ll Plans where /eachers 8o %ot Contribute toSocial Security

.N 7".N ;;. .

?ll Plans where /eachers Contribute to SocialSecurity

"+.+ N. 77.N ;7.N

8i5erence *etween Hrou$s .7 !".! !!.N !N.;a4e e(clude states 'rom the overall averages re$resented in /able " i' teachers in those states are unable to draw

retirement bene3ts at age 7 with that s$eci3ed number o' years o' service. /eachers in ?L, 8C, H?, L?, MS, %J,SC and ? are unable to draw retirement bene3ts at age 7 with " years o' service. 4e were unable to calculatere$lacement rates 'or OG and P? 'or teachers retiring at 7 with " years o' service. /eachers in 8C and 4 areunable to draw retirement bene3ts at age 7 with "7 years o' service. 4e were unable to calculate re$lacementrates 'or OG 'or teachers retiring at 7 with "7 years o' service.b/his e(cludes three hybrid $lans )2%, O= and 4?- 'or which the re$lacement rate could only be estimated 'orthe de3ned bene3t com$onent.

?SSFMP/2O%SD Calculations assume the 'ollowingD )!- teacher 3rst em$loyed 'or the "7; school year, )"-teacher retires at age 7 but could have sto$$ed teaching $rior to age 7, and )- current bene3t calculation'ormulas remain constant over time.%O/


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teachers to stay in the classroom 'or longer $eriods o' time, increasingstates# su$$lies o' e($erienced teachers, or to encourage teachers to leavethe classroom be'ore retirement age, creating s$ace 'or new hires and@orreducing the costs o' $aying the relatively high salaries o' older, moree($erienced teachers.

4hether or not a state#s teachers contribute to the 'ederal Social Securitysystem through O?S82 $ayroll ta(es is related to average re$lacementrates. =igher average re$lacement rates are 'ound in states where teachersdo not $ay O?S82 ta(es than in states where they do because teachers relysolely on their schoolbased retirement 'unds in these states rather than ona combination o' schoolbased and Social Security retirement 'unds. /hedi5erence ranges 'rom roughly nine $ercentage $oints at " years o'service to almost !7 $ercentage $oints at 7 years o' service. /he higherre$lacement rates hel$ e($lain the higher mandatory contribution rates inthese states noted above.

=ealth 2nsurance CoverageD ?s the costs o' healthcare continue to soar,health insurance coverage increases in value to retirees, es$ecially thosenot yet eligible 'or Medicare. States di5er in their a$$roach to $rovidinghealth insurance to their retired teachers. /eachers in at least "! states canelect to continue coverage through their 'ormer em$loyer should theem$loyer make it available. 8etails o' this coverage are generally sub0ect tolocal collective bargaining agreements i' $resent. 4e were unable todetermine the e(tent to which districts in these states $rovide retiree healthbene3ts. Other states allow eligible retirees to $urchase membershi$ ineither a health $lan overseen by the retirement system )!N states- or a

health $lan overseen by another state agency )!+ states-. >igure !! outlinesthe di5erent ways in which retired teachers are $rovided with healthinsurance.

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Figure 11: -ro+i#ers o ealth *nsurance to Retire# Teachers, 200%11

Monthly $remiums 'or health insurance coverage vary dramatically acrossstates and within states across insurance $lans and retiree years o' service.?lmost all states o5er lower monthly $remiums to retirees enrolled inMedicare with most re:uiring retires to be enrolled in both Medicare Parts? and *. 2n res$onse to the recent im$lementation o' Medicare Part 8)$rescri$tion coverage-, states are revam$ing their Medicare su$$lementalinsurance $lans to $rovide even lower $remiums 'or retirees no longerneeding $rescri$tion coverage. ?t least " states subsidi6e a $ortion o' themonthly $remiums.

Evidence of Eectiveness of These Policies

?ll o' the elements o' com$ensation $ackages discussed in this $olicy brie'can be tied to im$ortant labor market outcomes, which can be categori6edinto the recruitment o' teachers, the retention o' high:uality teacherswithin the state, and the e5icient release o' retirementeligible teachers.States may im$lement as$ects o' com$ensation $ackages in order toachieve certain outcomes. Maintaining a high:uality teaching 'orce alsohas $roven ties to im$roving student achievement, a clear goal o' stategovernments, es$ecially in this era o' accountability.

=owever, there are still very 'ew studies 'ocusing on how well many o' the$olicies discussed in this $olicy brie' achieve the states# stated goals o'

11>ormer em$loyer states include C?, C/, 8C, >L, L?, M


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maintaining a high:uality teaching 'orce and increasing studentachievement. /able $rovides a brie' summary o' the current evidence o'e5ectiveness attributed to state com$ensation $olicies. 2t shows that littlework has been done e(amining the e5ectiveness o' com$ensation $olicies inachieving states# goals o' recruiting, retaining and e5iciently releasing a

high :uality teaching 'orce and o' im$roving student achievement.

Ta'le &: Summary o Stu#ies an# (+i#ence on State Compensation-olicies, 200%

Speci>c-olicy

-ossi'le;utcome

sStu#ies (+i#ence o (ecti+eness

SalarySch

e#ule

MinimumSalary

Schedule

Gecruit

2ncreaseStudent?c

hievement

*oal )"7- 1 /, SC Schools res$ond to increase instatemandated minimum salariesby shrinking teaching sta5

Out$ut*asedSalary

Schedules

Gecru

it Getai

n

8ee and Keys )"N-

1 /% Lavy )"N- 2srael

Ladd )!+++- 1 8allas


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TeacherRetirement

-olicies

2ncrease in

retirementbene3ts

Gelease

>urgeson, Straussand ogt )";- 1 P?

2ncreases in retirement bene3tsincrease retirement rates amongretirementeligible

&alary &chedules:

One o' the 'ew education $olicy areas that bene3ts 'rom a si6eable body o'research is the e5ect o' salaries on teacher recruitment and retention and

student achievement. /his literature can be s$lit into three grou$s. /he bulko' the research assesses the e5ects o' salary levels or the salaries relativeto those o' other $ro'essions )i.e., o$$ortunity costs-. Studies o' the e5ectso' out$utbased $ay schemes such as career ladders and merit $ay 'orm thesecond grou$. >inally, we know o' only one study that e(amines the e5ect o'minimum salary schedules like those discussed above.

Mandated Minimum SalariesD 2n the one study o' this $o$ular $olicy, *oal)"7-, e(amines the e5ects o' mandated minimum salaries on the demand'or teachers using the minimum salaries in two nonunion states, SouthCarolina and /e(as. =e 3nds that schools res$ond to an increase in state

mandated minimum teacher salaries by shrinking their teaching sta5 )ashortrun demand elasticity o' a$$ro(imately ."-. *oal )"7- tells us thatminimum salary schedules may not actually recruit more teachers to thework'orce because districts and schools may not be able to hire as manyteachers at higher salaries as they would at lower nonmandated salaries.=owever, we do not learn how these minimum salary $olicies a5ect teacher:uality. /here is also no research that we know o' assessing the im$act o'statelevel salary schedules on student achievement.

Out$ut*ased Salary StructuresD Studies o' out$utbased $ay structureso'ten 'ocus on their e5ects on student achievement and 3nd some $ositive

e5ects, but not without costs. 8ee and Keys )"N- 'ound that /ennessee#scareer ladder $rogram was success'ul at identi'ying e5ective teachers. Lavy)"N- 'ound $ositive student achievement e5ects 'or an 2sraeli cash bonus$rogram and Ladd )!+++- 'ound $ositive e5ects 'or a schoolbased award$rogram in 8allas.


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4hile the results o' these studies seem to su$$ort the argument that merit$ay can im$rove student achievement, there also a$$ear to be substantialcosts to many o' these systems which may or may not outweigh the bene3ts.>irst, it is di5icult to structure a system that $rovides incentives to more

than a 'ew teachers. /he studies above 3nd that teachers who with a bit o'e5ort could get a reward do o'ten $ut in that e5ort and im$rove student testscores, but that most teachers are so unlikely to get it )or alternatively solikely to get it- that they do not change their behavior. Pro$onents o' meritsystems argue that even i' the systems do not im$rove e5ort they willbene3t schools because they will attract into teaching those individuals whobelieve they will bene3t 'rom such a system. Fn'ortunately, there is littleevidence to su$$ort or re'ute this argument.

2n addition, teachers tend not to su$$ort merit$ay systems and encouragetheir re$resentative union not to as well. /hese $rograms can increase the

stress 'elt by teachers and can lead to unintended behaviors such ascheating, 'ocusing on testtaking skills instead o' content, and narrowing o'the curriculum. Overall, it a$$ears di5icult to design e5ective $rograms,though *allou and Podgursky )"!- $oint out that they may be easier toim$lement in smaller organi6ations. >or a 'urther discussion o' theadvantages and disadvantages o' meritbased $ay see Lavy )'orthcoming-.

'ecruitment, 'etention and $ssinment (ncenti)es

8es$ite the $o$ularity o' recruitment, retention and assignment incentives,there is s$arse research on the e5ects o' these incentive $olicies on the

recruitment, retention and assignment o' teachers in general, and in criticalshortage areas and di5iculttosta5 schools in $articular. 4e 'ound noevaluations o' the e5ectiveness o' tuition su$$ort, loan assum$tion orhousing incentive $rograms. =owever, several states have conducted annualreviews o' some o' these $rograms which $rovide use'ul insight into howthey o$erate. /hree $rograms in $articular $rovide e(am$lesD the SouthCarolina /eacher Loan Program )/LP-, Massachusetts Signing *onusProgram 'or %ew /eaches, and the %orth Carolina Math@Science@S$ecial


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also ended a'ter three years, 'ound some $ositive e5ects on teacherretention, reducing turnover by a$$ro(imately !" $ercent. South Carolina#s$rogram $rovides 'orgivable loans to individuals to enroll in a teachercredentialing $rograms and commit to teach in areas o' critical need )eithersub0ect or geogra$hic-. 2t continues to o$erate yet with no strong evaluation

o' success or 'ailure.

/he re$orts and evaluations o' these incentive $rograms em$hasi6e threekey lessons. One, im$lementation errors doom most $rograms. /wo,targeting the incentives to s$eci3c teachers and schools, while a$$ealing'rom a $olicy and 3nancial stand$oint, is challenging to carry out. ?ndthree, the ability to draw $olicyrelevant conclusions regarding the$rograms# e5ects on teacher recruitment, retention, and assignment issubstantially ham$ered by lack o' data.

/he evidence o' the im$act o' %*C/s on student achievement in %orth

Carolina o5ered by Holdhaber and ?nthony )"7- $rovides insight into the$ossible e5ects o' several key as$ects o' the %*P/S incentive $rogramsim$lemented in other States. %*P/S certi3cation was 'ound to besomewhat success'ul in identi'ying e5ective teachers. /he achievementgrowth o' students o' success'ul a$$licants e(ceeded that o' unsuccess'ula$$licants by 7 $ercent o' a standard deviation in reading and + $ercent o'a standard deviation in mathematics. %*P/S status is by no means a $er'ectmeasure o' e5ective teachers 1 many non%*P/S teachers showachievement gains with their students that are larger than many %*P/Steachers. =owever, there are di5erences on average, with the students o'%*P/S teachers showing greater testscore gains.

/he study also 'ound that com$leting the %ational *oard assessment$rocess had no im$act on teacher e5ectiveness as measured by student testscore gains in math and reading. /eachers going through the $rocess addedno more to their students# test score gains a'ter they com$leted the$rogram than be'ore they entered. /his result cautions against the use o'%*C as a means o' $ro'essional develo$ment. =owever, given that the$rocess may contribute to teachers# e5ectiveness in ways not $icked u$ bystudents# $er'ormance on math and reading e(ams, the evidence is notstrong enough to com$letely condemn %ational *oard certi3cation as ameans o' $ro'essional develo$ment. >inally, the study 'ound that that

%*C/s have a larger im$act on students who are receiving 'ree or reduced$rice lunch than on students who are not suggests the use'ulness o'targeting the incentives to highneed schools, such as in Cali'ornia#s $olicy.

Considerable ta(dollars are e($ended on teacher recruitment, retention,and assignment incentives. /he evidence suggests that teachers do res$ondto incentives. =owever, we know very little about the e5ects o' di5erentincentives, de3ned either by ty$e or by amount. State e5orts in this area

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would bene3t greatly 'rom additional research, including costbene3tanalysis, on the 'ull array o' incentives.

Teacher 'etirement *olicies

2t is a generally held belie' that retirement systems inuence thetermination and retirement decisions o' teachers. 8es$ite this belie', we areaware o' only one study that e($licitly attem$ts to link retirement bene3tsto teacher career decisions. >urgeson, Strauss, and ogt )";- e($loit achange in Pennsylvania#s retirement bene3t 'ormula to assess the e5ects o'an increase in retirement bene3ts on the retirement decisions o' eligibleteachers. ?s re$orted above, Pennsylvania has a A7 years and outBeligibility re:uirement 'or 'ull retirement bene3ts. 2n !++9+ and !++++,this eligibility re:uirement was tem$orarily reduced to years 'or thoseyears only. /hey 3nd a !, )or .N $ercent- increase in the real $resentvalue o' retirement bene3ts increases the $robability o' a 'emale teacher

retiring by between ." and . $ercent. /hese results im$ly an elasticityo' retirement o' between ". and .7. 2' a State wants to encourage longserving teachers to retire, increases in retirement bene3ts will increaseretirement rates among the target $o$ulation.

Conclusion

2t is clear that there is a huge variety in teacher com$ensation $oliciesacross the country. %o two states have im$lemented the same set o'$olicies. ?s is the case with many education $olicies, we lack su5icient dataand evidence with which to evaluate these $otentially im$ortant tools 'or

teacher recruitment and retention and 'or the im$rovement o' studentachievement.


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Lastly, research shows us that the im$lementation o' e5ective com$ensation$olicies can be di5icult and the negative conse:uences o' $oorim$lementation can override any $ositive bene3ts o' com$ensation $olicies.>or e(am$le, it a$$ears to be di5icult to create a merit $ay system thatcreates $ositive incentives 'or a large number o' teachers 1 many teachers

will either receive or not receive a bonus regardless o' a change in theirbehavior 2ncentive $rograms are e:ually di5icult to im$lement. Success'ulim$lementation re:uires a clear $ur$ose o' the $rogram and a $lan 'ordisseminating $rogram in'ormation to the a$$ro$riate $eo$le. >or instance,Massachusetts# $rogram was undone in $art due to con'usion over the$rogram#s goals, and in'ormation dissemination $roved a signi3cant hurdlein the %orth Carolina $rogram where survey data revealed that $rinci$alsand teachers had very little knowledge about the $rogram.

Moreover, it is di5icult to understand the intricacies o' how state $oliciesare ada$ted at the district level, es$ecially given the $ressures e(erted on

districts by local collective bargaining agreements and by re:uirementsinstituted by the 'ederalNo +hild et -ehind)N+-- $olicy. 8istricts#res$onses to uni'orm state $olicies will likely vary according to di5erencesin their collective bargaining agreements and relationshi$s with their localteachers# unions. 2n addition, districts# s$eci3c teacher needs will shi'taccording to the re:uirements o'N+-, which will necessarily a5ect howthey inter$ret and im$lement state com$ensation $rovisions.

2n order to learn 'rom the e($eriences o' the 7! di5erent sets o' $oliciesacross the country, we must care'ully construct and evaluate the $rograms.

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Reerences

*allou, 8. & Podgursky, M. )"!-. Personnel Policy in Charter Schools.4ashington, 8CD /homas *. >ordham >oundation.

*augh, 4.=. & Stone, J.?. )!+"-. Mobility and 4age


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Lavy, )'orthcoming-. AFsing Per'ormance*ased Pay to 2m$rove theRuality o' /eachers,B The 4uture o +hildren. Princeton*rookings

Lavy, . )"N-. APer'ormance Pay and /eachers#

Documents

Loeb Et Al MS27040 Comp Policy Brief 01-03-08