Denver Public Schools Employee Compensation: The Role of Pension Benefits

Sari Levy, Van Schoales, and Tony Lewis
Piton and Donnell-Kay Foundations
March 2008

It's been over a year since the New Commission on the Skills of the American Workforce made the inspired recommendation that America's teacher compensation system be turned on its head. Rather than sending the vast majority of goodies to veteran teachers and retirees--in the form of generous, stable, risk-free pensions--more dollars should be targeted to new teachers in the form of higher salaries and incentive pay, the group argued. We agreed wholeheartedly and last summer released a groundbreaking analysis, by Robert Costrell and Michael Podgursky, of Ohio's teacher pensions system  that showed how its "peaks and valleys" created perverse incentives for young and old teachers alike. (They expanded their analysis in this Education Next article.) Now two Colorado foundations have sponsored a similar review of the Denver Public Schools (DPS) pension system--and found similar problems. The Donnell-Kay Foundation's executive director, Tony Lewis, said it well: "It is great if you plan to stay with DPS your entire career and it is lackluster if you don't." Want proof? The study looked at the total compensation DPS teachers earned--both salaries and accrued pension benefits--and found that DPS teachers reap approximately $450,000 in their first decade of teaching, $600,000 in their second decade, and a whopping $1.4 million in their third. To be sure, that's partly a function of the district's salary scale which allocates higher salaries to teachers with the most experience. But mostly it's because of the design of the pension system, which dramatically accelerates benefits for teachers in their last decade of work, on through retirement. Maybe that's why generational warfare between teachers isn't such a distant possibility. For Colorado taxpayers, it means paying about $1,500 per pupil for a teacher with five years of experience (for both salary and pension benefits), $2,000 per pupil for one with fifteen years of experience, and $4,750 for a 25-year veteran. This makes little sense, of course; no research studies show teachers suddenly getting twice as effective from year 15 to 25. If anything, they probably get worse. Nor do we have any reason to believe that many of the Generation Y teachers entering the classroom today are going to stick around to enjoy the larger salaries and big retirement payoff themselves. But changing to a common-sense approach--one that includes portable, 401(k) style benefits--will surely be a battle royal. Exposing the problem is the first step. Other state-based reform groups: now it's your turn. Find this excellent paper here.

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