1. Teacher Compensation Michael Podgursky Department of Economics
University of Missouri – Columbia
NCSL Conference
Phoenix, AZ Dec. 1-2, 2007
Co-investigator, CALDER, NCPI

2. Teacher Quality/Compensation Qauntity-Quality Tradeoff

3. Student Enrollment, Teacher and Non-Teacher Employment
In Public Schools:
3.049m Public School Teachers
Fall, 2003

4. Falling Student-Teacher Ratios U.S. and Missouri, 1987-2004
Missouri school districts traded off the opportunities to raise relative teacher pay and choose instead to hire relatively more teachers per student.
The student-teacher ratio has been falling in the United States and Missouri. Currently there are 15.8 students per teacher nationally and 13.8 in Missouri. This means that some of the increased real spending per student was “spent” in lowering the student teacher ratio.
(Source: Digest of Education Statistics, various years)

5. Teacher Compensation
Salary and Benefits account for roughly 90 percent of K-12 instructional costs
Data Quality Issues (NCES plans)
Single Salary Schedule
Retiree Benefits

6. Teacher Compensation Single Salary Schedule
Compensation Policy Affects the Behavior and Composition of the Workforce
“You can’t repeal the law of supply and demand”
Rigidities by
Teaching field (esp. math, science, special ed)
School Conditions
Quality of Effort

7. San Diego School District: 2006-07 Salary Schedule

8. Difficulty in Filling Vacancies by Teaching Field
Varies considerably by field
Generally somewhat easier in than
NCES Schools and Staffing Surveys, and

9. Source: Schools and Staffing Surveys, 1999-00, 2003-04

10. Staffing Difficulties in Low (<25%) and High (>75%) Poverty Schools:
Elementary Ed
Source: Schools and Staffing Surveys

11. Source: Schools and Staffing Surveys, 1999-00, 2003-04

12. Source: Schools and Staffing Surveys, 1999-00, 2003-04

13. Source: Schools and Staffing Surveys, 1999-00, 2003-04

14. Source: Schools and Staffing Surveys, 1999-00, 2003-04

15. Source: Schools and Staffing Surveys, 1999-00, 2003-04

16. Source: Schools and Staffing Surveys, 1999-00, 2003-04

17. Potential supply Current supply New Hires
In the flow of new secondary mathematics teachers statewide from schools of education was only 122 teachers. (These are program graduates, recommended to DESE for certification, who passed the Praxis II exam.) This flow falls far short of the new hires by Missouri public schools. In the same year, 196 secondary math teachers were in their first year of teaching. Note that the flow of baccalaureate graduates in engineering and mathematics far outstrips the flow of secondary math ed majors. With the right incentives and aggressive recruitment, some of the engineering and math majors might be willing to teach in public schools.

18. The imbalance is even more striking in science
The imbalance is even more striking in science. Missouri teacher training programs only produced 113 secondary science teaching candidates. This fell well short of the new hires and represents a small fraction of the total flow of engineering and science graduates.

19. Consequences of Salary Schedules
School Conditions
School with highest percentage of poor children likely to have least experienced teachers
Quality of Performance
Performance-based pay
School-wide or individual
Role of test scores
Size of bonuses
Encourage Districts to Experiment
Federal Teacher Incentive Fund (TIF) Grants
NCPI Vanderbilt – IES funded experiment
Implement in a way that permits evaluation (pilots)

20. Types of Incentives: Teacher Weights
“Does the district currently use any pay incentives such as cash bonuses,
a salary increase, or different steps on a salary schedule to reward …”

21. Incentives by Teaching Field

22. Total Compensation = Current + Deferred Compensation

23. Teacher Pensions: Some Stylized Facts
Mostly state-wide systems
Roughly 70 percent of teachers are in Social Security. Generally state decision.
Nearly all teachers are in Defined Benefit plans. DC and CB options very limited
Mean retirement age is well below Social Security and Medicare ages
58 years (retired and stopped teaching, SASS TFS)
Very Expensive
Many are under funded

24. Incentives in Teacher Pension Systems
In public sector DB pension systems accrual of pension wealth is highly non-linear and back-loaded
State systems generally have sharp “spikes” in accrual rates
Pull teachers to spike
Push out after
Not inherent in DB pension systems.
“cash balance” (IBM and other firms)
Can smooth spikes

25. FAS = final average salary r(S,A) = replacement factor
Typical DB teacher pension
Annual
Pension = S x FAS x r(S,A)
S = service years
FAS = final average salary
r(S,A) = replacement factor

26. Lots of moving parts…

27. Incentives for Work and Retirement
Compute pension wealth at each year of work life
Compute growth of pension wealth from an addition year of work
Representative teacher
Enters at 25, continuous spell of work
Standard assumptions concerning PV of pension wealth. (see Costrell and Podgursky (2007) )

28. Increment to PV of Pension Wealth from Working an Additional Year:
Missouri

29. Source: Costrell and Podgursky (2007)

30. Source: Costrell and Podgursky (2007)

31. Source: Costrell and Podgursky (2007)

32. Ohio

33. Do these spikes affect teacher behavior?
Yes

34. Increment to PV of Pension Wealth from Working an Additional Year:
Missouri
r = 2.5% S ≤ 30
r = 2.55% S ≥ 31
Changed in July 2001

37. Unintended Consequences of Early Retirements
Retiree Health Insurance (OPEB)

38. Other Post-Employment Benefits (OPEB)
Retiree Health Insurance
Largely Unfunded
Estimates of Liabilities Required Under New Accounting Rules
GASB 43, 45
Initial Estimates of UAL Very Large
LAUSD - $10b

39. 2006 GASB 45 Estimates, LAUSD
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41. Unintended Consequences of Early Retirements
Retiree Health Insurance (OPEB)
Reemployment of Teachers/ Administrators (“double-dipping”)