School Finance

Unfunded liabilities accrued from teacher retirement costs have burdened states and districts to the tune of at least $390 billion (and perhaps as high as one trillion dollars). That amount is projected to swell in the next decade if states do not implement reforms. We’ve said this before, as have many, many others.

Our home state of Ohio deserves some credit, then, for doing the fiscally responsible thing by passing Senate Bills 341 and 342 a year ago. This legislation plugged the pension system’s leaky holes. Unfortunately, it put the financial burden on the back of the state’s new (and future) teachers, creating a situation just as untenable.

According to Ohio Pension Reform in Cleveland: New Teachers Beware, state-level retirement reforms will allow the Cleveland Metropolitan School District (CMSD) to spend less on retirement costs in 2020 (in constant dollars) than it does today.

That part’s good. What’s not so good is that new teachers must now pay for the retirement benefits of senior and retired teachers (without themselves reaping those same benefits).

The retirement changes made in Ohio require new teachers to pay more than their contribution will be worth thirty years hence. In effect, they are being taxed to pay for the debt created by paying for the benefits promised to prior cohorts (an unfair situation that they had no hand in creating). This is grossly unfair, and could disincentive teachers from choosing—let alone staying in—the profession.



Jason Bedrick at Cato is out with Cracking the Books, a new evaluation of the extent to which states are being transparent on education spending. The study scores each state zero through one hundred and assigns a letter grade based on four categories: how each state presents data on per-pupil expenditures, total expenditures, salary data, and the extent to which the data is easily accessible to the public.

At the low end of the transparency spectrum is Alaska, which doesn't even provide per-pupil data and has little in the way of publicly accessible information at all. On the other hand, New Mexico—the top-rated state—provided extremely detailed information, much of which is included on their thorough and well-organized New Mexico Sunshine Portal.

Cato rightly highlights the need for this type of data by noting, “Contrary to the common perception, public school spending has risen dramatically over the past 40 years, even after adjusting for inflation. Over the same time period, student performance on standardized tests has remained essentially flat.” From this data, policymakers can draw a number of conclusions about how states might improve.

The primary issue is how little data is reported by states, period. Cato found large numbers of states not reporting key information, including capital expenditures and employee salaries, while forty-one states did not provide any information about employee benefits. All states should see to it that they provide at least this basic information. The second issue really comes from a perception that the vast majority...


At first glance, the recent teacher-retirement reforms in Ohio seem to bring good fiscal news to school systems in the Buckeye State. Thanks to Senate Bills 341 and 342—and a series of cutbacks on retiree healthcare—the Cleveland Metropolitan School District is projected to spend less on retirement costs in 2020 than it does today. But these reforms come at a big price.

While much of the burden was taken off school districts (and students), it now falls heavily on the shoulders of Cleveland’s newest teachers. (In effect, they are now being taxed to pay for the benefits of other current and past employees.) What will this redistribution of burden mean for those who will teach Cleveland’s children tomorrow? Will the District have more trouble recruiting and keeping a high-quality instructional force for its classrooms?

In Ohio Pension Reform in Cleveland: New Teachers Beware, authors Robert M. Costrell and Larry Maloney project the city’s future retirement obligations and illumine how retirement reform can help solve the pension-funding problem—and some of the accompanying challenges.

When it comes time to pick a career path, young Americans certainly don’t perceive teaching to be the fairest of them all—in any sense of the term. This new report from the Manhattan Institute’s Center for State and Local Leadership emphasizes how pension systems are especially unfair toward young teachers and examines the effects of two cost-neutral pension reforms on teacher compensation for the ten largest U.S. public school districts. The first reform is switching from the traditional defined-benefit (DB) pension system, under which teachers accumulate little retirement wealth until later in their careers, to a “cash-balance” plan, which allows employees to accrue retirement compensation smoothly over their careers. The second reform—the “cost-equivalent” reform—decreases the share of teachers’ salaries devoted to retirement savings so that it matches the private-sector average, moving the difference into take-home salary. The authors concede that traditional DB pension systems do offer teachers the possibility of more retirement money. In most districts, however, that higher amount for a few comes at a cost to a great majority: The loss to teachers who choose to leave the profession after less than three decades exceeds the gains to those who remain. Indeed, the system is constructed on the assumption that many will drop out prior to receiving full benefits. That’s clearly off-putting to smart young folks considering taking up teaching, which means it’s also bad for teacher quality. The report’s recommendations do not address the elephant in the room—namely the huge unfunded pension liabilities...


Stretching the School Dollar: A Brief for Policymakers

Stretching the School Dollar: A Brief for Policymakers

Terry Ryan on Collective Bargaining in Ohio

Terry Ryan on Collective Bargaining in Ohio

Terry Ryan talks about his testimony on Senate Bill 5 and what it means for Ohio.

Back-to-school season is officially upon us and for many families that means new school supplies and backpacks and recalling where they stashed the warmer clothes. But if you're a public opinion pollster, back-to-school means it's time to dust off your old education surveys and see if anything’s changed from last year.

With three polls released this week (AP-NORC, PDK/Gallup, and Education Next),  trying to draw broad conclusions can be tricky given what, at times, seem to be fairly contradictory answers from the public. Some commentators have focused on what the data seem to show regarding hot-button policy issues such as testing or vouchers.  But that’s only the tip of the survey iceberg. Consider also:

Common Core: This one is pretty easy to sort out across the rival polls: If you ask an American about the Common Core, chances are they will tell you they haven't heard of it. If they claim otherwise, there’s a good chance they are either lying or severely misinformed. 

That’s not a knock on the standards themselves or their backers. John Q. Public will learn more as CCSS morphs from a wonky D.C. political issue to an active reshaper of their local schools and state report cards.

Education Next flags the near-doubling of opposition to the standards, but the jump from 7 to 13 percent is far from a tectonic shift considering that support also climbed slightly from 63 to 65 percent.  The polls consistently showed that those who know about the CCSS generally like them....

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“No country, however rich, can afford the waste of its human resources.” This is carved into a massive stone wall on the FDR memorial in Washington, but it could have been the preface to this slender, timely, punchy book by Eric Hanushek, Paul Peterson, and Ludger Woessmann. These authors make a...

British author and director of research at the Centre for Market Reform of Education, Gabriel Sahlgren brings us back to Economics 101 with the contention that there is one root cause of all problems afflicting education today: a lack of proper incentives for quality. He argues that the...

The cheesehead edition

Is it all just politics in the Badger State? Have you ever heard of the Common Core? Mike and Brickman talk dairy, while Amber hashes out the latest Education Next survey results.

Amber's Research Minute

The 2013 Education Next Survey by Michael Henderson and Paul E. Peterson, (Harvard Program on Education Policy and Governance (PEPG))

A Chicago public school and public library will begin to share space on Thursday, breaking ground for a new “library-within-a-school” model that may be “copied and mimicked all across the city,” according to an enthusiastic Mayor Rahm Emanuel. The Windy City’s schools and libraries have both seen financial troubles in the last couple of years. Library Commissioner Brian Bannon has clarified that proliferation of this model would be about “reducing storefront and leased space” and possibly result in moving libraries, not closing libraries. Gadfly likes efficiency and books—so hat tip!

The school-funding crisis in Philadelphia has reached the boiling point: After Superintendent William Hite issued an ultimatum stating that schools may not open in time if the district does not receive at least $50 million more in funding by Friday, August 16th, Mayor Michael Nutter announced that it would borrow the cash, apparently obviating that eventuality. Now that the district will be able to re-hire some laid-off staff members, the School Reform Commission—Philadelphia’s appointed school board—will vote on whether to suspend portions of state law to grant Hite the flexibility to re-hire for reasons other than seniority. The unions, naturally, are furious, but this appears to be the best possible outcome for students.

This week, Atlanta Public Schools Superintendent Erroll Davis asked the district’s Board of Education to stop approving new charter schools. The reason: Georgia’s Supreme Court has yet to decide whether Davis can withhold...


Following the Tony Bennett flap, the A-to-F school-grading systems that Bennett championed are themselves under the gun. Some have argued in favor of increasing the number of measures upon which schools are graded, reflecting the variety of grades that parents see their children bring home from school every year. But at what point will more information become too much information? For a great discussion, check out this week’s Education Gadfly Show.

After announcing its plans to withdraw from both Common Core–assessment consortia, Pennsylvania has clarified that it will in fact remain a member of both PARCC and Smarter Balanced—it just won’t be using either test. “Huh,” you say? The nominal difference means that the Keystone State will retain the right to “participate” in each group’s discussions.

In a Washington Post op-ed, Robert Samuelson argued that the fiscal crisis facing state and local governments can be boiled down to the clash of two interests: schools versus nursing homes. Samuelson characterized the impending pension crisis as a “prolonged squeeze” from retirement commitments to public employees, while we call it the “big squeeze” in our series of reports on retirement costs of teachers....