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Opinion and News Analysis
Opinion: Teacher pensions in the charter sector
By Amanda
Olberg and Michael
Podgursky
In the wake of the economic downturn, American public
schools face serious, long-term fiscal challenges. Of them, rising pension
costs are a particular concern. Yet school districts have no mechanisms for
reining in these costs; almost all districts are tethered by statute to state
pension systems (or, sometimes, their own local pension systems). It turns out,
though, that some states allow their public charter schools to opt out of those
systems. How they handle this opportunity bears scrutiny—and may suggest some
lessons for the larger public education system.
 Nationally, teacher
compensation comprises 55 percent of current expenditures in K-12
education. (That figure rises to 81 percent when all school staff are
included.) A large and growing share of these costs goes to help fund
retirement benefits. Between 2004 and 2010, for example, district pension costs
(not counting retiree health insurance) increased from 12
percent to over 15 percent of salaries. A recent
report from the Pew Center on the States estimated that unfunded public
employee pension liabilities in the U.S. grew to $1.26 trillion during the 2009
fiscal year; other studies estimate that the true liability is even higher.
Even as states attempt to pay down this liability, pension costs for all public
employees, including teachers, will
likely keep rising.
In search of alternatives, we looked at public charter
schools in some states where there is no requirement to participate in the
state teacher-pension plans. That’s the situation today in sixteen states. When
given the option, how many of these schools choose to participate in their
regular state (or local) teacher pension plans, and how many do not? When they
do not participate in state plans, what—if anything—do they offer instead?
To answer these questions, we examined data regarding the
pension arrangements of “opt-out” charter schools in six states: Arizona,
California, Florida, Louisiana, Michigan, and New York. We chose these six
because they contain large numbers of charter schools and comprise over 75
percent of all of the charter schools that have the pension opt-out right.
We found that the rates at which charter schools participate
in their state plans are low in jurisdictions where teachers in the state plan
also participate in Social Security (New York, Florida, Michigan, Arizona). However, in
states where teachers in the state retirement plan are not also included in
Social Security (California, Louisiana), charter participation rates are high.
In the latter states, opting out of
the state system means opting in to
Social Security, which evidently creates an incentive for charters to favor
their state retirement systems.*
We surveyed a random sample of opt-out charters and
found that their most common alternative retirement plans are 401(k) and 403(b)
plans. The figure below shows the overall results. (Detailed state-level
profiles and a more extensive analysis of the results are included in our full
report, released yesterday).
Alternative Retirement Plans Offered by Charters
A significant number of charter schools that opt
out of their state retirement plans offer no
alternative retirement plans for their teachers. This varies widely by state,
however. For instance, while only one non-participating school in Michigan
offers no alternative, 18 percent of non-participators in Florida and 24
percent in Arizona have no alternative retirement plan. In Michigan, 401(k)
retirement plans are overwhelmingly the preferred alternative; a majority of
charter schools in Florida and Arizona also choose those plans. Most charter
schools in Louisiana and New York instead opt for 403(b) retirement plans. In
California, the majority of charters are split evenly between 401(k) and 403(b)
retirement plans. Types and amounts of employer and employee contributions also
varied widely, as shown in the figure below. (Again, a detailed examination of
these findings is available in the full
report).
Types of Employer Contributions for Charters Not
Participating in State Plans
As is often the case in this kind of analysis, the data
raise at least as many questions as they answer. For example, do charter-school
participation rates vary depending on characteristics such as authorizer type
or grade span? What might we find in the other ten states that also allow
charters to opt out of state retirement systems? What is the effect of
charter-pension policies on teacher recruitment, retention, and quality? What
important lessons can be gleaned from charter-school experimentation with
alternative retirement systems? And finally, how can these lessons inform
ongoing reform efforts in traditional public schools?
Charter schools were created in part to serve as
laboratories for innovative practices and alternative approaches within the
broad framework of public education. In certain areas, such as personnel
policy, they’ve diverged considerably from traditional public school practices.
Most, for example, forego formal collective bargaining and conventional teacher
tenure. Many use various
forms of differentiated and performance-related pay. The present study, the
first of its kind, makes clear that some charter schools are also innovating in the teacher-pension
arena.
There is no single pattern in the retirement alternatives
offered by charter schools, but it is clear that traditional defined-benefit
plans are not the only possible way to organize teacher pensions. Mobile
teachers are apt to spend parts of their careers in different places and even
different lines of work. Perhaps these teachers prefer portable 401(k)-style
retirement plans, whereas those interested in job security and planning a long
career at the same school might be less satisfied with such plans. Perhaps it
is possible to restructure retirement options in a way that enhances the growth
of human capital in all our schools. At the very least, we know that fiscal
realities dictate fresh thinking about teacher pensions—and charter schools may
point the way forward.
*Note: Not all public employees participate in Social
Security; individual states decide.
Opinion: Setting the record straight: Fordham and charter-school sponsorship
By Terry Ryan
Ohio has echoed with controversy in recent weeks regarding
House-passed changes to the state’s charter law that would decimate an already
weak charter-school accountability system (see here,
here,
and here).
We at Fordham have been outspoken and relentless in commenting on what’s wrong
with the House amendments and have forcefully argued for stronger charter
accountability and transparency.
That’s not a new argument or a new role for us. For more
than a decade, we’ve pressed Buckeye policymakers on charter-school quality.
That included co-authorship (with the National Association of Charter School
Authorizers and the National Alliance for Public Charter Schools [NACSA]) of Turning the Corner to Quality: Policy
Guidelines for Strengthening Ohio’s Charter Schools. This 2006 report
urged a “housecleaning” that would close down Ohio’s poorest performing
schools. Partly in response, the General Assembly passed a law two months later
that forced failing schools to improve or face automatic closure.
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We have no need or desire to sponsor schools in the future if a better option is available for schools and the children they serve.
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Because we’ve been so vehement in criticizing the recent
House language (currently in conference with the Senate, which stripped that
language out of its version of Ohio’s biennial budget), some who disagree with
us have questioned our motives. They’ve even charged Fordham with a “power
grab” because we’ve pushed the legislature to allow for a new statewide
authorizing entity that would merge the school portfolios of several existing
sponsors, us included. Still others claim we are financially greedy and seek to
expand our sponsorship efforts in order to boost our revenues. Such allegations
are hokum and need to be refuted.
Our charter-school
sponsorship philosophy
The Thomas B. Fordham Foundation has been sponsoring charter
schools in Ohio
since 2005.* Today there are six schools in our portfolio. (The all-time peak
number was ten.) Two of these are in Columbus
(KIPP: Journey Academy
and Columbus Collegiate
Academy), two are in Dayton
(Dayton Liberty and Dayton View), one is in Cincinnati
(Phoenix Community
Learning Center),
and one is in Springfield
(Springfield Academy of Excellence). Collectively, these schools serve about
1,850 students, more than 85 percent of whom are economically disadvantaged.
Next month, two more charters enter this fold: Sciotoville Elementary Academy
and Sciotoville Community School, both located outside Portsmouth, in southern
Ohio.
Fordham’s sponsorship efforts are aligned with NACSA’s Principles and Standards for
Quality Charter School Authorizing. We believe that quality
sponsors provide their schools with maximum flexibility and space for
innovation while holding them accountable for performance, fisical integrity
and sound governance. If a school performs well, it should rarely see or hear
from its sponsor beyond basic compliance issues (mandated—sometimes to excess—by
state law) and required school site visits. If, however, the school struggles
to deliver academic achievement, faces financial problems, or encounters other
serious operational deficiencies, the sponsor has a solemn duty to push it hard
to make needed changes. Under Ohio law, such pressure may include probation and
closure—and threatening to take such actions if remedies are not forthcoming.
Quality sponsors carry out these threats if a school fails (or refuses) to
improve over time. Nothing is worse for children than to allow them to languish
in a failed school. As a sponsor, Fordham has closed four schools since 2005;
fortunately, these closures were done amicably and in partnership with the
governing boards of each school involved.
Financing our
sponsorship efforts
In contrast to many Ohio charter authorizers, we believe it
is inappropriate, unethical, and sometimes immoral for sponsors to sell any
supplemental services to the schools they authorize. Whether these services
take the form of business management, instructional support, special education,
professional development, or something else, such an arrangement creates an
inherent conflict of interest, invites profiteering by sponsors and their
agents, and pressures schools to obtain services from entities that wield
enormous power over their very existence. It also creates strong economic
incentives for sponsors to turn a blind eye to poor school performance.
Fordham doesn’t “make money” as a sponsor. To the
contrary. We’re gradually losing our shirts. While Ohio allows authorizers to
levy sponsorship fees of up to three percent of a school’s state funding,
Fordham charges just two percent while investing north of $100,000 a year in
its sponsorship operations. That’s money taken from our own endowment or raised
from external funders. (See our annual report here.)
Further, we reward performance, providing performance rebates based on a
school’s academic rating and calibrated to its enrollment.
New statewide sponsor entity
We have no need or desire to sponsor schools in the future
if a better option is available for schools and the children they serve. For
months we’ve been exploring with six other sponsoring organizations that also
subscribe to NACSA’s quality principles the joint creation of a new sponsor
entity with the scale and resources necessary to advance the improvement of Ohio’s charter program.
(Those organizations are: the Educational Service Center of Central Ohio,
Montgomery County Educational Service Center, Dayton Public Schools,
Reynoldsburg City Schools, Loveland City Schools, and the Columbus City
Schools. Others are also considering joining this venture.)
This undertaking has been driven by the need for stronger
quality in a time of tighter resources. We explained our reasoning to the State
Board of Education in May 2010 in these words:
For most sponsors in Ohio, quality
sponsorship costs more than school fees can generate. Consider the numbers for
a moment—the state has sixty-seven active sponsors. Two of these—the Lucas
County ESC and the Ohio Council of Community Schools (both based in
Toledo)—collectively authorize one third of all Ohio charter schools. The
state’s remaining sixty-five sponsors authorize on average three schools each.
Fifty-two sponsors have two or fewer. Yet quality sponsorship costs money to
deliver. For example, sponsors need the resources to meet the legal costs of
closing a school, which can accrue quickly.
It is because of limited resources
for sponsors and the need for scale and shared expertise that the Thomas B.
Fordham Foundation and the Educational Service Center of Central Ohio (ESCCO)
are proposing—with planning-grant support from the National Association of
Charter School Authorizers—to launch a new statewide charter school sponsor.
Both ESCCO and Fordham have developed the tools, resources, and expertise
needed for quality authorizing, in Fordham’s case with help from the Bill and
Melinda Gates Foundation. We are willing
to cede these assets to a new entity that we believe can help consolidate and
improve Ohio’s charter school sponsorship landscape.
Fordham remains firmly committed to advancing educational
excellence in Ohio and nationally. We embrace this struggle openly. Charter
schools are an important tool in the reform struggle, and for more than a
decade we have put our money, time, and energy where our mouth is.
Not everything we’ve done in the Buckeye State (or
elsewhere) has worked. (We’ve tried to be candid and forthcoming about the
misfires, too.) Through it all, however, we’ve been motivated by the need to
improve educational options for needy kids. We are honored to work with
policymakers, others in the state’s charter sector, and with district educators
who are committed to creating, leading, supporting, and sponsoring great
charter schools that embrace high standards of excellence. As the General
Assembly winds up its crucial work on the state’s biennial budget, we are proud
to call these individuals allies and friends.
* Sponsors (aka authorizers) are the organizations
responsible for helping birth charters, for holding them accountable over time
for their performance, for providing technical assistance and guidance when
appropriate, and—if necessary—for closing schools that no longer work for
children.
This piece originally
appeared (in a slightly different format) in the Ohio Education Gadfly and on Fordham’s Flypaper blog. To subscribe to the Ohio
Education Gadfly, click here; to subscribe
to Flypaper, click here.
News Analysis: Detroit school reform: Take 1,362
You can’t fault Michigan for trying. And then
trying some more. To heal the ailing Detroit Public Schools, leaders of the Wolverine State have created an emergency
financial manager, have renegotiated the teacher contract, have shuttered
failing schools, and have pledged to convert nearly half of its high schools to
charters. Despite all this, DPS has remained at death’s door. But an ambitious
and experimental new treatment, announced on Monday by Governor Rick Snyder
(and backed by Arne Duncan) might well provide some relief. The new plan
(which, if effective in the Motor City, will expand out to other failing
schools and districts in the state) creates a “recovery school district” of
sorts for Motown’s bottom 5 percent of schools. This new mini-district, called
the Education Achievement System, will give its schools’ principals the
authority to hand-pick their teachers and handle their own budgets, as well as
increase total instruction time for students. The new district (along with all Detroit public schools)
will be under the purview of DPS emergency manager Roy Roberts and a small
appointed committee. Much like what’s in place for New Orleans’s RSD, EAS schools will be
required to stay in the system for at least five years, at which point improved
schools can choose to remain with EAS, return to DPS, or convert to an
independent charter. Further, the initiative will expand the lauded Kalamazoo
Promise program, a privately-funded scholarship that will foot the bill for
two years of post-secondary education for all DPS graduates. Details about the
initiative remain scarce—including how the district plans to recruit the talent
needed to staff schools in the EAS. But it’s an encouraging sign that the Motor City
may have some life left after all.
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Click to listen to commentary on Synder's reform plan from the Education Gadfly Show podcast
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“Rick Snyder to announce sweeping DPS reforms Monday,” by
David Jesse, Chastity Pratt Dawsey, and Chris Christoff, Detroit Free Press,
June 19, 2011.
“New hope for state's hopeless schools,” The Detroit News,
June 21, 2011.
“Plan aims to revitalize Detroit schools,” The Associated
Press, June 20, 2011.
“Detroit Announces New Authority For Failing Schools,” by
Joy Resmovits, The Huffington Post, June 20, 2011.
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Short Reviews
Review: METCO Merits More: The History and Status of METCO
By Alicia
Goldberg
Since 1966, the Metropolitan Council for
Educational Opportunity (METCO) program has been busing students from Boston
and Springfield, MA to quality schools in suburbs that volunteer to
participate. Today, the program now links 3,300 students—most low-income and
minority—with thirty-seven receiving districts. This white paper from Boston’s Pioneer
Institute and the Houston Institute for Race and Justice at Harvard assesses
the effectiveness of METCO and offers recommendations to expand it. Overall, the
authors find that METCO students consistently beat their peers in Boston and Springfield
on state tests. Further, 93 percent of METCO students graduate on time (30
percentage points higher than the Boston or Springfield average) and 90 percent go on to
post-secondary education. In light of these successes, Pioneer recommends
increased state funding for the program (as well as district reimbursements and
competitive grants for participation) and the expansion of METCO to other urban
districts in the Bay State. Regrettably, the authors’ analyses of the program’s
effectiveness can’t control for student motivation, parent income or education,
or selection bias. It will be up to legislators on Beacon Hill to decide
whether these promising—but less than “gold standard”—findings warrant an
additional investment.
Review: Too Simple to Fail: A Case for Educational Change
By Josh
Pierson
 This new book is based on a premise neither
novel nor eye-opening: “Learning comes from time on task, delivered at a level
appropriate to the student.” Years of data (and common sense) say that, too.
What makes this volume interesting is where its author, a professor at the University
of Maryland at Baltimore, takes this insight. Guided by the North Star of
increased productive instructional time, the book criticizes almost every
aspect of the current public education system—from school assemblies to sports
to testing. Each of these “worthless” pursuits detracts from the time that
students spend learning the curriculum. Instead, Barker Bausell urges a number
of provocative changes. Among them: All schools should adopt a “zero-tolerance”
approach to pupil behavior (because any distraction pulls students off task). Teachers
should be evaluated based on the amount of time they spend delivering
curriculum-relevant instruction (divergences are also unwanted distractions). And
testing should be tied directly to curricular objectives (the SATs, for
example, don’t make his A-list). Ultimately, Bausell sees classrooms being
replaced with learning labs, each student learning at a computer able to tailor
a lesson to meet individual needs, much like a private tutor. Unfortunately, as
the book builds upon its original premise, cracks in the idea’s foundation are exposed—many
of which are left unaddressed. How to ensure, for example, that teachers are
following sufficiently rigorous curricula or that rote memorization doesn’t
supersede deeper knowledge. Still and all, the book pushes readers to question
current reforms. And that’s not a bad thing to do from time to time.
Review: Eliminating the Achievement Gap: A White Paper on How Charter Schools Can Help District Leaders
By Daniela
Fairchild
 This white paper (the second
in a series on portfolio districts from the Center on Reinventing Public
Education) hits the traditional school district hard, asserting that, due to
resource constraints and political shackles, it will never be able to make the
big gains necessary to ease the achievement gap and ramp up student success.
This is where the “portfolio district”—and charter schools—come into play.
Charters, the authors argue, have shown the effectiveness of extended days
(KIPP), parent involvement and school culture (YES Prep), and intensive
professional development (Mastery Public Schools). Districts would be smart to
join forces with these proven operators. Frustratingly, however, the paper’s
concluding points have little to do with either charters or the achievement
gap. Instead, the authors provide what reads like a twelve-step program for
districts looking to get on the portfolio-district wagon. Step one: Acknowledge
the problem. Step two: Agree that we have to try new things. And on, and on, and
on.
From The Web
The Education Gadfly Show Podcast: Mike and Richard play cops and robbers
Mike sits down with guest host Richard (Lee) Colvin
of Ed Sector to hash out what Michigan’s new reform efforts may mean for
Detroit, what the CCSSO accountability blueprint may mean for the feds, and
what NAEP history scores may mean for the country. Amber puts a magnifying
glass on teacher pensions in charter schools and Chris crosses the pond to play
Cowboys and Indians.
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Click to listen to the podcast on our website. You can also download the podcast here or subscribe on iTunes here.
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Flypaper's Finest: Higher spending associated with higher rates of special-education identification
By Mike
Petrilli
A few weeks ago, we at Fordham
released a short analysis, Shifting Trends in Special Education. We
noticed that some states, like Massachusetts and New York, identified almost
twice as many students as needing special education as those in other states,
like Texas and California.…
I couldn’t help but wonder if per-pupil school
spending (adjusted for cost of living) was driving the differences. After all,
you don’t have to be a rocket scientist to notice that Massachusetts and New
York spend a ton of money on their schools and California—similar to them in so
many other ways—spends a fraction as much.* Perhaps a sense of scarcity in
resource-starved states like California encourages school districts to avoid
identifying lots of kids for pricey special education services.…
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Click to read the rest on Flypaper.
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Flypaper's Finest: When you actually know the topic about which The Economist writes
By Daniela
Fairchild
…From Austin, The Economist explains that “many cities and states, struggling to
make up budget shortfalls, have put schools on the chopping block.” These cuts
will add up to billions and will be “readily apparent when schools reopen in
the autumn—among those that do re-open, that is.”
This melodramatic proclamation—both unjust and only a
bit ignorant in its assertion—doesn’t help readers understand the complexities
of America’s public school spending leviathan. Few schools are slated to close
in the coming year due strictly to budget cuts (to low student achievement,
district consolidation, underenrollment, sure). Schools aren’t being shuttered
willy-nilly, leaving little Johnnies and little Susies without. And it isn’t
simply budget cuts brought on by a slackening economy that have forced this
hand.…
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Click to read the rest on Flypaper.
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Extras
Briefly Noted: Rethinking "local control"
- Education
governance may not be a sexy topic; but without major changes to our current
model, all the incremental reforms thus far undertaken may be for naught. Where
do we go from here and how do we get there? Checker Finn begins to articulate
what governance should look like tomorrow in this Defining Ideas piece.
- This
week, Florida reminds us all that patience is a virtue. After an interminable
search process, the Sunshine State’s board of education voted
unanimously to hire Gerard Robinson as the state’s education commissioner. A
fantastic choice—and worth the wait.
- David
McCullough moves from author to subject in last weekend’s Wall
Street Journal interview. It’s
laced with his incisive thoughts on American K-12 education, and includes some
great zingers like, “textbooks have become ‘so politically correct as to be
comic.’”
- KIPP
recently learned that about one-third of its first middle-school cohort went on
to graduate from college (within six years of enrolling). Curious as to what
KIPP is doing with that information? Check out this
interview between Rick Hess and KIPP CEO Richard Barth for the answer.
(Hint: As part of their efforts, KIPP has teamed up with the UNCF and the
Corporation for Enterprise Development to launch the Partnership for College
Completion.)
- For
those gunning to teach in D.C., be on notice that resumes, interview suits, and
reference forms are no longer enough. The District now requires an “audition
component”—a videotaped lesson plan executed by the applicant—to be
eligible to apply.
- Duncan
Hunter’s and John Kline’s recently penned education bill, which would
grease (and in some cases unlock) doors for quality charter programs
looking to expand, has passed through committee with bipartisan backing.
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With his gruff, “I do what I
want” demeanor, Chris Christie definitely failed “Constituent Relations 101.”
But that’s what makes him so engaging if not always endearing. Watch
this video, “Where I send my kid to school is none of your business,” as a
great case-in-point.
Announcement: Do you Mind (Trust)?
The Mind Trust—an Indianapolis-based
organization dedicated to improving K-12 education through entrepreneurial
ventures—is searching for a new VP of education initiatives. If you’re ready to
lead the group’s core education programming, including its new charter-school
incubator program and renowned education-entrepreneur fellowship, apply here.
Announcement: Work those teacher incentives
Do teacher incentives
actually make schools better? According to new research from Thomas Ahn, the
answer is a resounding “yes.” If you’d like to learn more, head to AEI on June
28, from 11:30AM to 1:00PM—Ahn will be presenting his findings along with
colleague Jacob Vigdor. Register here.
Fordham's featured publication: Golden Peaks and Perilous Cliffs: Rethinking Ohio's Teacher Pension System
In this 2008 Fordham Institute report, nationally
renowned economists Robert Costrell and Mike Podgursky (co-author, with Amanda
Olberg, of our new
report on charter-school pensions) illuminate some of the serious
challenges facing Ohio’s State Teacher Retirement System (STRS). Among the
report’s findings are serious questions about the system’s long-term health and
sustainability. STRS is becoming increasingly expensive for all contributors. Even
with a total employee/employer contribution of 24 percent, STRS’s unfunded
liability is $19.4 billion, which represents a debt of over $4,300 per Ohio
household. This liability far exceeds that of the state’s other four public
pension systems combined, despite the fact that STRS’s membership is little
more than one-third of those systems. Further, the system’s lack of
transparency and perverse incentives almost certainly hinder rather than help in
the recruitment and retention of a highly qualified teaching workforce. Read
on to learn more.
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In this new "Ed Short" from
the Thomas B. Fordham Institute, Amanda Olberg and Michael Podgursky examine
how public charter schools handle pensions for their teachers. Some states give these schools the freedom to opt out of the traditional
teacher pension system; when given that option, how many charter schools take
it? Olberg and Podgursky examine data from six charter-heavy states and find
that participation rates in traditional pension systems vary greatly—from
over 90 percent in California to less than one
of every four charters in Florida.
As for what happens when schools choose not to participate in state
pension plans, the authors find that they most often provide their teachers
with defined-contribution plans (401(k) or 403(b)) with employer matches
similar to those for private-sector professionals. But some opt-out charters
offer no alternative retirement plans for their teachers (18 percent in
Florida, 24 percent in Arizona). 
