School Finance

New York City is closing down its ineffective and poorly designed merit pay system in light of a RAND report published yesterday. Mayor Bloomberg and Joel Klein made a terrible deal to get the pilot program into the city's contract with the teacher unions, giving teachers an option to retire at 55 years of age with 25 years of service instead of age 62. Gotham Schools points out that these pension costs will likely leave a much more lasting mark on NYC than the short-term program they enabled.

There's a basic lesson in financial management here for district leaders: match the time period of your liabilities to the assets or services they pay for. Don't put yourself on the hook for decades of payments in exchange for a five-year pilot.

? Chris Tessone

It's funny that Nicholas Kristof compares the education system to an escalator in his column in this weekend's New York Times. We know a great deal about broken escalators here in DC ? our subway system is full of them ? and the reason they're so often out of order has as much to do with bad management and absurd union rules as it does with resources. (Unsuck DC Metro had an illuminating post about this late last year.) As in public transit, so in public education: how we spend our education dollars is an important and widely ignored problem. Instead, we've mostly preferred in years past to hike tax rates and throw more money at the problem, to little effect.

Kristof tries to shame budget-cutting governors by comparing our education spending here to our commitment to education in Afghanistan. It's hard to imagine a worse comparison, given that Afghanistan spends about four percent of its meager budget on education, down precipitously from the level of spending in 1980. The US spends about 14 percent of every public dollar on education, and the level of spending has increased steadily for decades, even accounting for inflation....

The Rockefeller Institute has some good news to share: state tax revenue collections were up 9.3% in the first quarter of 2011, recovering nearly to the level they were at in early 2008, prior to the financial crisis. The news is not all good, however. Local tax collections are down 0.6%, meaning school districts are still going to feel the pinch when it comes to local funding. What's more, residential real estate markets in most places have not recovered ? even when they do, tax collections will lag by a few years as property values are reassessed. Even at the state level, increases in collections don't mean happy days if legislators assumed even greater increases in revenue in order to balance budgets.

Economic recovery is not likely to bring an end to the "stretching the school dollar" era. As we and others have reported, many states still have catching up to do in funding their pension promises. The rising cost of health care is also weighing on school budgets. This means that rising revenues will not necessarily find their way into new classroom programs or innovative reforms. Instead they'll be funneled to pay for increasingly...

The Republican presidential field is beginning to take shape, and candidates and maybe-candidates are figuring out where they stand and what to say. Sooner or later, they will need to say something about education. May we suggest a few talking points? Or, better yet, a potential speech for a GOP candidate?


[caption id="" align="alignright" width="250" caption="Photo by Josh Berglund 19"][/caption]

Folks, you know that our education system is tattered. Some of it is fine, but too much is mediocre or worse. Once the envy of the world, American schools are losing ground to those in Europe and Asia. Today, many countries are out-teaching, out-learning, and out-hustling our schools?????????and doing it for a fraction of the cost.

Meanwhile, failed education systems in our cities worsen the odds that the next generation will climb out of poverty into decent jobs and a shot at the American dream. And as much as many of us prefer not to notice, way too many of our suburban schools are just getting by. They may not be dropout factories, but they're not preparing anywhere near enough of their pupils to revive our economy, strengthen our...

Times are tight for school budgets, which is one reason Fordham and others have dedicated new attention and energy to doing more with less. Being conscious of cost-effectiveness is about more than pinching pennies, however; it also enables schools to get the very best quality for the dollars they spend on services.

Nathan Levenson, managing director of the District Management Council and a former district superintendent in Massachusetts, highlights this in an interview today with StudentsFirst, talking specifically about special education and early intervention:

I like to simplify this topic, and assert that only three things really matter in early intervention -- reading, reading, and reading. The stats are clear -- reading is the gateway to all other learning. Children who struggle in reading are over-referred to special education and often never catch up. This is especially sad, since we have "cracked the code" on how to teach reading. The National Reading Panel and the What Works Clearing House spell it out. Some districts feel they don't have enough money to implement a best practice reading program, but our studies have shown that typically it costs 1/2 to 1/5 as much as the current mish-mash of elementary support


Only halfway through 2011, a number of states have reformed their laws governing public sector workers' benefits, a few of them in dramatic fashion. The need to close the yawning gap between promises made to workers and the dollars saved for them on states' balances sheets is evident. According to a recent analysis, the average household will have to pay $1,398 in additional taxes every year for the next 30 years to fund retiree benefits, with New Jersey taxpayers on the hook for $2,475 per year per household before that state's recent reforms.?Even more optimistic commentators recognize that the funding ratios reported by states themselves rely on rosy assumptions about investment returns that are not likely to be borne out in reality.?Consequently, states have begun to adjust contribution rates, close loopholes, and otherwise modify pension and retiree healthcare benefits.

It is worth noting that most of these reforms leave public-sector workers, especially those newly-hired, worse off. In many states, this is a necessary evil, with budgets straining and taxes being ratcheted ever higher. Some states have done better than others in making fundamental reforms to address the sustainability of workers' benefits without soaking new workers or taxpayers,...