School Finance

Michigan Governor Rick Snyder is a new name in education circles, but not to me. Having lived in the state my whole life, I proudly supported him from the days his popular, ?One Tough Nerd,? ads started popping on TV in early 2010. In the August primaries he pulled a shocking upset and went on to win the general election by a landslide. But since taking office, his efforts to erase deficits through drastic budget cuts have left him a villainous figure to many Michiganders. These are many of the same people you hear decrying his new education plan. By introducing these reforms while trimming the state's K-12 education budget by 4%, Snyder is hoping to do more with less. Personally, I couldn't be more in favor of the breath of fresh air he's blowing into the Michigan education system, but there's a lot more at play.

Snyder's plans, while promising, will take time to enact; schools, on the other hand, must act on his budget restrictions immediately. In Michigan, a state where union membership is mandatory for public school teachers, archaic ?last hired ? first fired? policies are still controlling who gets laid off. By not addressing collective bargaining, Snyder's education cutbacks will end up dealing an unintended blow: the jobs of young teachers. I know this because it could have been me. When I joined Fordham last fall, I passed up an offer to teach civics and history at a public high school...

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Unions are not to blame for the severity of public pension shortfalls, but that doesn't mean that taking a hard look at collective bargaining is a bad idea. Matthew Di Carlo at Shanker Blog called yesterday for pols and commentators to stop blaming the nation's public pension issues on collective bargaining. He has a point, but I can't run with his conclusions here:

I find little evidence that the unionization of public employees has any effect ? whether positive or negative ? on the fiscal soundness of state pension plans. This, along with the fact that we already know why pensions are in trouble, and it has little to do with unions, once again represents strong tentative evidence that the push to eliminate collective bargaining is misguided, and the blame on unions is misplaced. States with little or no union presence are, on average, in no better shape.

Pensions are far from the only issue at hand. The Pew report cited by Matthew shows that, in addition to the $660 billion gap in pension systems, there is a $604 billion shortfall to pay for generous health benefits for public-sector retirees. This gap has little to do with the financial crisis, because states didn't have much savings to lose in the markets to begin with.

The absolute level of health care liability per person ? not the gap, but the dollar amount states will have to shell out eventually ? seems to be related to unionization density....

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Montgomery County, Maryland, one of the wealthiest and highest-performing large school districts in the country, is likely to reduce its level of per-pupil spending, in violation of a state maintenance of effort requirement. This means giving up an estimated $29 million in state aid in 2013:

The county's elected leaders have rescinded a request made last month seeking to be excused from a state formula for funding education.

The decision would allow the county to reduce the amount of money it gives to Montgomery County Public Schools in the next fiscal year ? and potentially every year thereafter.

In a letter Thursday to the Maryland State Board of Education, County Council President Valerie Ervin (D-Dist. 5) of Silver Spring and County Executive Isiah Leggett (D) said they do not plan to seek a waiver from Maryland's maintenance-of-effort law.

The county spends roughly $15,000 per pupil, according to the Maryland Report Card, and found itself unable to cover the increased cost from enrollment gains in recent years.

The most interesting part of the story to me is the battle between the County Council, which sees an unsustainable budget, and the school board, which has been demanding that more county resources to be diverted to the already-flush schools. The Council seems to have tied the hands of the district with this move, committing Montgomery County to lower spending for the foreseeable future....

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We don't often talk about the political risk borne by public-sector workers in traditional pension systems, but that risk is now very real for cops and firefighters in Detroit. The city has twice as many retirees as workers on the job, and that coupled with a decline in population is making it tough for them to pay modest pensions ($28,501 a year for the average retired police officer). The city is looking for ways to reduce those already meager benefits.

Conventional wisdom and the laws and constitutions of many states have long held that the pensions being earned by current government workers are untouchable. But as the fiscal crisis has lingered, officials in strapped states from California to Illinois have begun to take a second look, to see whether there might be loopholes allowing them to cut the pension benefits of current employees. Now the move in Detroit ? made possible, lawyers said, because Michigan's constitutional protections are weaker ? could spur other places to try to follow suit.

?These things do tend to be herd-oriented,? said Sylvester J. Schieber, an economist and consultant who studies pensions.

Governments are simply very prone to mismanaging pension funds, over-promising in good times and underfunding in bad. Latin America learned this the hard way prior to pension reforms in the 1980s and 90s. We are blessed with much...

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Ohioans are waiting to see if Senate Bill 5, which would greatly reduce public sector collective bargaining in Ohio, can be repealed at the ballot box in November. Meanwhile, teachers unions and local school districts are working fast to avoid the legislation's consequences, at least anytime soon.

Changes to state law cannot trump existing collective bargaining agreements. So until a teacher union contract expires, teachers and districts won't have to comply with the bill's provisions. Those include (among other things): prohibiting strikes; removing decisions about leave policies, class sizes, and employee assignment from the scope of collective bargaining; prohibiting salaries from increasing solely due to time on the job; removing seniority as the prime determinant of layoffs; allowing districts to pay no more than 85 percent of employees' health care premiums; and prohibiting districts from paying any portion of employees' pension contribution.

We've seen a rash of one- or two-year contracts agreed to recently as a result of SB 5, including in Columbus, the state's largest district. A few locals have negotiated longer agreements, like Bexley, outside Columbus, where teachers and the district agreed to a four-year contract in quick fashion (a single day!). That agreement ends in July 2015, by which time Ohioans may well have ousted the current governor and Republican House majority and replaced them with Democrats who will have overturned the work of the previous administration.

What's missing from many of these agreements are attempts to deal with...

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We at Fordham strongly believe school districts can and should learn to spend their dollars more effectively. That said, I can't agree with Kristi Bowman's idea that Congress should mandate "fiscal accountability measures" in its reauthorization of ESEA:

Congress could require that as a condition of receiving funding under the ESEA, each state must: (1) help school districts create immediate, additional cost savings; (2) publicly monitor districts' fiscal health and create a plan for escalating involvement when a district nears and reaches fiscal crisis; and (3) assist in stabilizing districts' revenues for the long term.

I'm not sure why there should be a role for the federal government in this (the paper on which the EdWeek article is based seems to boil this down to "because it's important" and "because the Feds can"). That is far from the only worry I have, though. Bowman also calls for a federal maintenance of effort mandate for all state school spending throughout the country. Not only would it make fiscal crises worse (if you can't cough up enough state funding, you lose your federal funding!), but innovative state policies to save money would now be illegal.

There are some good ideas here, too, though. Bowman calls for state governments to have plans in place ahead of time to restructure financially troubled school districts; many states have simply not thought this through. She's wrong that funding cliffs and fiscal crises can be eliminated, but the consequences need not be so...

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This morning, the Thomas B. Fordham Institute released our ESEA Briefing Book. The report serves two purposes: First, to provide helpful background for reporters, analysts, and even hill staffers following the reauthorization of the Elementary and Secondary Education Act (aka, No Child Left Behind). Hence, we identify 10 of the key issues that Congress must resolve to get a bill across the finish line, and offer the major options on the table (and their pros and cons) for each one.

The second purpose is to offer our own recommendations, in line with what we've been calling "Reform Realism" for two years now. Reform Realism--a pro-school-reform orientation that is also realistic about what the federal government can (and cannot) do well in K-12 education--entails three main principles:

?Tight-loose? ? Greater national clarity about our goals and expectations for students (i.e., standards linked to real-world demands of college and career), but much greater flexibility around how states, communities, and schools actually get their students there.

Transparency instead of Accountability ? Results-based accountability in education is vital, but it can't successfully be imposed from Washington. Instead, Uncle Sam should ensure that our education system's results?and finances?are transparent to the public, to parents, to local and state officials (and voters), and, of course, to educators.

Incentives over Mandates ?When Uncle Sam seeks to promote specific reforms in education, he should do so through carrots rather than sticks?and...

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Recent pieces by Jay Greene and Kevin Carey serve as effective bookends on the current ESEA debate picking up steam in Congress. They both appear to dislike the ?tight-loose? formulation to federal policymaking that was first championed by Fordham and is now heralded by Secretary Duncan and others?though of course for opposite reasons.

Let's start with Jay. In a witty and amusing blog post yesterday, he proposed a drinking game for readers of Fordham's new ESEA proposal, due out next week. (Clearly Jay has seen it?or at least heard about it?or else simply knows us very well.) From Jay's post:

Tight-Loose ? The Fordham folks will say that they favor being tight on the ends of education, but loose on the means. ?Never mind?that dictating the ends with a national set of standards, curriculum, and assessments will necessarily dictate much of the means. ?My instruction for the drinking game is that every time you see the phrase ?tight-loose? you can take a shot of your choice. ?We are loose about the means but tight on the requirement that you numb yourself to this edu-babble.

Let me give you a little hint: If you play this game, you will get very, very drunk indeed.

But I'm at a loss for why the concept of ?tight-loose? strikes Jay as so preposterous. Try this: Start by looking at the list of potential mandates that Congress could attach to federal Title I funding in the next ESEA:

  1. States
  2. ...
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