School Finance

It’s literally schools vs. nursing homes, argues the Washington Post’s Robert Samuelson in a wake-up-call editorial on the impending pension crisis. What Samuelson called “a prolonged squeeze” from retirement commitments to public employees, we called “the big squeeze” from retirement costs of teachers.

The Big Squeeze

Samuelson makes two fundamental arguments that are the basis of The Big Squeeze: Retirement Costs and School-District Budgets, written by Fordham’s Dara Zeehandelaar and Amber M. Winkler (and based on three technical analyses conducted by Robert Costrell and Larry Maloney):

First, our swelling pensions are vastly underfunded: Some estimates put that liability at a trillion dollars. It’s a topic that came up a lot at our No Way Out? How to Solve the Teacher-Pension Problem event, cohosted with the National Council on Teacher Quality.

Second, cutting pensions is hard: Samuelson is right there, but it can be done. Look, for instance, at Wisconsin, which now requires employees to pay their fair share and gives districts latitude to curtail healthcare benefits, thanks to Gov. Scott Walker’s Wisconsin Budget Report Bill of 2011.

Had Governor Walker not taken action, tough decisions would have had to be made. Would Milwaukee Public Schools have to fire a quarter of its teachers or negotiate a 25 percent reduction in teacher pay?...

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The Washington Post profiled Josh Powell, a homeschooled young man, who—having never written an essay or learned that South Africa was a country—had to take several years of remedial classes at a community college to get back on track with his peers. Citing worry for his eleven younger siblings, all still being homeschooled by their parents, young Mr. Powell (now a Georgetown undergrad) urges that homeschooling to be subject to accountability. But just what kind of accountability? That’s a tricky question. This is a fascinating case—and a very touchy subject.

There’s a waiting list of about 1,000 students who want to take part in Louisiana’s new Course Choice program, which currently allows 2,000 youngsters to shop around for courses, virtual and otherwise, that are not offered in their home school. State Superintendent John White says that 100 applications pile in every day and that, to accommodate everybody, he’ll have to scrounge for money. The state Supreme Court has already ruled that a constitutionally protected source of public funding is off limits. White estimates that he’ll need another $1.5 million just to meet the current demand.

After reaching a long-awaited teachers’ contract in April, Hawaii’s $75 million Race to the Top grant, awarded in 2010, has finally been cleared of its “high-risk” label. Essentially, this means that the state will no longer have to endure stricter reporting requirements—and, as noted by Education Week, it is a big confidence boost as the...

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That charter schools struggle to find and finance adequate building space is a problem that has received well-deserved attention lately, but few reporters and analysts have documented the challenges charters face in entering the multi-trillion-dollar municipal bond market.

So a hat-tip goes to longtime charter and reform leader Nelson Smith for drawing attention to a worthwhile report from the Local Initiatives Support Corporation (LISC), which found a lack of consensus among underwriters and investors as to what drives credit strength in the charter sector.

As they expand, more charters are turning to municipal bond markets to finance their building projects. When schools issue bonds, an investor essentially loans them money in return for regular interest payments until the bond “matures,” at which point the school repays the principal. School districts and other government entities issue bonds all the time, but many lenders continue to see charters as risky investments.

That perception has consequences for charters, which end up paying higher rates than schools districts, if they can find investors at all. And it’s a perception that seems to be based on a faulty picture of what makes a charter school viable for the life of a bond, which can last up to thirty years.

The overall financial condition of the charter school sector is sound, LISC analysts Elise Balboni and Wendy Berry report. The notion of credit risk often is fueled by high-profile defaults or potential defaults that imply that schools can lose their students or...

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Has the U.S. government’s $3.5 billion School Improvement Grant (SIG) program delivered as promised? The data from Ohio indicates that the answer is no—but with a glaring exception.

SIG is a federal grant program, which has been funded heavily through the 2009 stimulus act. Its goal is to improve the academic performance of persistently low-performing schools. In March 2010, Ohio received a three-year, $132 million grant; the Ohio Department of Education then allocated funds to eligible schools based on a competitive grant process. In spring 2010, over 200 schools applied, and 35 schools received funding.[1]

In return for the funds (up to $2 million per year for a school), the grantee is required to implement one of four intervention models: turnaround—replacing the principal and 50 percent or more of the staff; restart—closing a school and reopening under new management, possibly a charter school; school closure; or, transformation—leaving staff in place but implementing plans to improve instructional effectiveness, extend learning time, et cetera. Most schools in Ohio and across the nation have selected the transformation model, what we have argued is the “easiest” model.

Given the sizeable cash infusion, together with the required interventions to turnaround the school, we might expect to see strong and positive gains in school-level performance.

But one does not observe across-the-board improvements in achievement.

The chart below shows the change in achievement scores for Ohio’s first cohort of SIG schools, from 2009-10 (pre-SIG) to 2011-12 (the second year of SIG...

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There’s no shortage of political gridlock and bad news when it comes to public-sector pension reform. (Consider recent goings-on in Chicago and Philadelphia.) But the reforms that Wisconsin undertook in 2011give cause for hope on this front—at least for the time being.

Milwaukee: Saved by Act 10 For Now

According to a technical report released today by the Thomas B. Fordham Institute (an easier-on-readers summary report by Dara Zeehandelaar and Amber M. Winkler can be found here), authors Robert M. Costrell and Larry Maloney predict that the new authority granted under the Wisconsin Budget Repair Bill—also known as “Act 10,” the measure that focused attention on the Wisconsin statehouse in 2011 and put newly-elected Governor Scott Walker into the spotlight—did much good for the Milwaukee Public Schools’ perilous fiscal condition. It reduced that district’s per-pupil spending on teacher retirement from a projected $3,512 in 2020 to a far more affordable $1,924 per pupil.

Good news, yes. (See media coverage here, here, and here.) But Act 10’s pay-as-you-go policy on retiree health benefits means that some sizable costs, necessary to meet obligations to current employees, are simply being postponed. Changes made by the state and district give MPS some time, but further action may still be required.

Still and all, Milwaukee—and Wisconsin—have taken significant (if painful) steps toward resolving...

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Wisconsin governor Scott Walker has been called a lot of things over the past two years; many of these epithets are unprintable in this family-friendly publication. But according to a new Fordham report, he deserves one more: public-education hero.

Governor Scott Walker of Wisconsin
Standards are not self actualizing; unless thoroughly implemented and properly assessed, they have scant traction.
Photo from the Wikimedia Commons

That’s because his Wisconsin Budget Repair Bill of 2011—better known as Act 10, the endlessly contentious measure that shrank (to wages only) the scope of collective bargaining for Badger State teachers—defused the fiscal time bomb that otherwise would have blown up Milwaukee Public Schools (MPS).

Pre-Act 10, MPS was drowning in the rising waters of its retirement obligations (both pensions and retiree health benefits) to current and former teachers. In 2011, it spent $1,860 per pupil for this purpose, more than a tenth of the district’s budget. But the waters were slated to get far deeper.

According to a new technical study by economist Robert M. Costrell and education-finance expert Larry Maloney, MPS was on track to spend as much as $3,512 per pupil by 2020 on retiree health benefits and pension costs, money that would inevitably impact classrooms and students in unfortunate ways. Put differently, without Act 10,...

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StudentsFirst has made a thoughtful contribution to the burgeoning literature on school governance with its new policy brief Change the Leadership, Change the Rules: Improving Schools and Districts through Mayoral and State Governance. In it, the group argues that school boards have been largely ineffective in urban areas and examines two main alternatives: mayoral control and state control—the latter preferably via the “recovery district” model. It’s a short and snappy synopsis.

The Brookings Institute’s Hamilton Project has produced another worthy read: Thirteen Economic Facts about Social Mobility and the Role of Education is organized around three theses: inequality is on the rise against a backdrop of low social mobility; the U.S. is experiencing a growing divide in educational investments and outcomes based on family income; and education and smart interventions can help—such as those outlined in Caroline Hoxby’s Expanding College Opportunities project and Ben Castleman’s Summer Melt study. While the facts themselves are not new, the report offers an accessible and logical assemblage. Dig in!

On Monday, Michigan governor Rick Snyder chose finance expert Jack Martin to succeed Roy Roberts as emergency manager of Detroit Public Schools (DPS). Martin enters the ring with four decades of private- and public-sector experience under his belt, including stints as CFO of the U.S. Department of Education and emergency manager of Highland Park Schools (another troubled school district in the Detroit metro area). What’s more, he is himself a DPS graduate. Martin is surely well credentialed and...

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In 2011, Milwaukee Public Schools (MPS) faced a dramatic and painful increase in employee retirement costs, driven primarily by a sharp rise in the bill for retiree health insurance, a program covered by collective-bargaining agreements between the district and its unions. In March 2011, however, the nation watched as Governor Scott Walker signed into law the Wisconsin Budget Repair Bill, also known as Act 10. By limiting collective bargaining to wages only, this measure gave MPS the authority to modify its retiree health program, and the Badger State’s largest school system has since acted upon that authority.

How did this happen? How much will it save? What would Milwaukee’s costs have been without this repair? How durable is the reform? What difference does it make at the classroom level? And what lessons might other states and districts draw from this experience?

In Milwaukee: Saved by Act 10…For Now, authors Robert M. Costrell and Larry Maloney analyze and project the future retirement obligations in Milwaukee and illumine how retirement reform can help to solve the pension-funding problem.

In which Terry celebrates cheating (sort of)

Terry livens up the airwaves, bantering with Mike about NCTQ’s blockbuster report, the Blaine Amendment, and Philly’s budget woes. Amber waltzes through the dance of the lemons.

Amber's Research Minute

Strategic Involuntary Teacher Transfers and Teacher Performance: Examining Equity and Efficiency,” by Jason A. Grissom, Susanna Loeb, and Nathaniel Nakashima, NBER Working Paper No. 19108 (Cambridge, MA: National Bureau of Economic Research, June 2013).

GadflyNew York City’s graduation rate dipped very slightly in 2012—information that was hailed as a win by Mayor Bloomberg, given that the class of 2012 was the first cohort not given the option to graduate with an easier-to-obtain “local diploma.”

The United Federation of Teachers has announced its support for former city comptroller Bill Thompson’s bid for mayor of New York City—the union’s first endorsement in a mayoral election in more than a decade. But have no fear, ye other candidates—Mayor Bloomberg has derisively dubbed the union endorsement a “kiss of death” (to which the union responded by likening Bloomberg’s approval as “worse than a zombie attack”). And Gotham politics continue.

Earlier this week, New Hampshire Superior Court judge John Lewis bucked U.S. Supreme Court precedent and ruled that the state’s tax-credit-scholarship program directed public money to religious schools, in violation of the state constitution’s Blaine Amendment—a provision banning government aid to “sectarian” schools that has its roots in the anti-Catholic bigotry pervasive in the late 1800s. (Blaine Amendments still exist in thirty-six other states.) Judge Lewis’s ruling marks the first time a tax-credit-scholarship program has been struck down on these grounds. Previously, the U.S. Supreme Court had determined that tax-credit-scholarship money never reaches the state treasury and thus cannot be considered public. An appeal in the...

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