Tuesday, January 18, 2011

Pay Freeze is not about whether teachers are overpaid--its about fiscal sanity

The other day, I had a discussion with two colleagues regarding Senate File 0056, which freezes public school employee salary and benefits for the next two years. My two colleagues began to argue. The first said that the bill is insulting to teachers, because teachers are underpaid. The second said that the bill is necessary, and that teachers are paid pretty well, considering the financial condition of school districts. The first said that without the right to strike, teachers would fall vastly further behind financially and that suspending the right to strike, or freezing wages is unthinkable. As we talked, my two friends kept coming back to the debate over whether teachers are getting paid enough, or whether they are paid too much.

I look at this issue quite differently. I don't think that teachers are overpaid, but I support the freeze, because it puts children first. I think that teachers provide as much value every day, and more, as do certainly lawyers, stock brokers or, say, actuaries and accountants. This question, in my mind has nothing to do with whether teachers are overpaid, or underpaid. Its about whether we should increase their pay when our revenues aren't increasing. Its about whether public education can survive, if we continually fund teacher pay increases by making program cuts.

The education finance system in Minnesota is fundamentally broken. Some of you say, well that is because the State hasn't increased funding enough. But that is only half-right. To fix our education finance system, we need a reliable source of revenue, without ever-growing unfunded mandates, true, but we also need the ability to control costs so that they balance with revenues. The evidence shows that when the State increases school funding significantly, school employee compensation goes up far faster. When Pawlenty and the legislature increased the funding formula by 8 percent, that is 4 percent per year, all over the State of Minnesota, school districts were increasing compensation at a far higher rate. When Pawlenty and the legislature increased the general funding formula by 3 percent (two percent and one percent) all over the State, school districts were increasing compensation and a significantly higher rate. And, during the last two years, when funding was frozen, school districts still granted substantial increases in compensation. Surely, it must be clear, that this is the road to permanent financial ruin.

The truth of the matter is that our school bargaining system is so out of whack, that school districts are making cuts to fund compensation increases when the legislature provides exceptionally large increases, and they are making cuts to fund compensation increases when they receive no revenue increases at all. Some folks say this is about local control, but its not. Its about a dysfunctional system in which the entire education community across the State has lost the capacity to balance school district budgets. To fix this problem, I believe, we need to take a time out, freeze pay, examine how we got here, and how we are going to bring the school finance system in balance. The outcome of a repaired system will not disregard the need to pay teachers well. If it ignored that requirement, it would still be fundamentally broken.

The system is so far broken, that the public education community has lost the ability even openly to discuss the true nature of our problems. We readily discuss the lack of revenue, the unfunded mandates, the forced spending on special education and other programs that exceeds the revenues provided by the State. That is an important part of the financial catastrophe that is Minnesota's school finance system. But we refuse to talk openly about the other part of the problem, which is compensation increases that persistently outpace our revenues. We need a time out to take a deep breath, look at what we have been doing across the State, and fix this problem systemically.

The public education community has adopted a number of devices to deceive ourselves as to the true extent of the financial imbalance in our system. One subtle deception is that school advocates have invented a special inflation measure, called the "price of government" index. The price of government index measures the inflation in government costs--primarily the increase in government employee compensation. According to the advocates of this measure, we should not measure our cost increases by looking at the traditional CPI --Consumer Price Index. Instead, we are supposed to use the price of government index, which shows that the State is not increasing our revenues as fast as the price of government. But this is just another way of saying that we are raising compensation costs faster than the true rate of inflation.

Another device we have begun to use to deceive ourselves in Minnesota, is to change the way that we measure the calculated percentage increase in our compensation packages. Several years ago, the Minnesota School Boards Association changed the way that these percentages are calculated to make the cost increase lower than it really was. Under the new formula, if you divide the new compensation cost by the original compensation cost, the true percentage increase is higher than the percentage that the MSBA reports. When you systemically understate increase costs in this way, how can you even come to grips with the causes of your financial problems?

Many school districts have taken to separating the cuts that they make from their settlements. One way of doing this is to cut lots of teachers in April, but say that many will be called back in September. Then, in between April and September, if the school district settles its contract for more than it can afford, it isn't as clear to the public why half of the teachers "temporarily" laid off never came back. In this way, nobody ever focuses on the amount of the cuts that are coming from compensation increases, and the amount that are coming from revenue shortfalls. And, in the last four years of the Pawlenty administration, there has been a whole lot of both: compensation increases beyond our means, and a gross insufficiency in state revenue increases to cover our legitimate increasing costs. The two together, a lack of proportion in compensation costs, and a failure to provide reasonable funding increases, have combined to throw school districts into financial chaos.

As we discuss these issues, and try to confront them head on, we simply cannot solve them by pretending the issue is whether teachers are overpaid or underpaid. Teachers are not overpaid in my opinion, but that's not the issue. The issue is whether the industry that funds their paychecks, public education, can survive if it is constantly making cuts, year after year, to fund compensation increases that it cannot afford. Teachers earn their pay. Administrators earn their pay. Their work is hard, and they work dang hard. People who think that this issue is about whether public educators are overpaid are just plain wrong. The issue is about running public education based on simple principles of financial sustainability. If we want to pay our employees more, and I believe that is a good thing to do, then we cannot accomplish it by cutting school libraries, eviscerating our textbook supplies, cutting needed programs and raising class size. Once you go down that road, the cutting never ends, and the compensation problems never get solved. The more cuts you make, the less the public wants to support their schools.

If we want the legislature to fund public education adequately, I believe we must begin by creating a structure that assures long term financial stability in the balance between costs and revenues. The proposed pay freeze gives us a needed time out, a reprieve, during which we can all work together to put public education on a new path to sustainability.

Some people argue that, well, the governor must veto a pay freeze, out of loyalty to labor. That would be a tragedy for the Governor, for public education, and for children. If public education goes through another four years, like the last four years, we will be on the brink of moral and fiscal bankruptcy. Whoever allows the cycle of crippling cuts to continue, is going to carry as well the political price of being responsible for school closing, increasing class sizes, massive teacher and staff layoffs, and a reduction in educational quality. The Governor would be better off to stick to his guns on revenues, and insist that education receive sufficient funding, and buy that adequate funding, by signing a the proposed pay freeze. That's what both parties will do, if they put children first.


  1. What if some of those programs, they are so worried about, are not worth it? I am pretty sure there are many people in the MSP district that don't do much for the children but get great pay.

    How about all those rural districts which have remained out of debt and royally underpaid their teachers for years? Why should they suffer now? The statement that most people suffer and so teachers should too is so lame, it sounds like someone who has missed the school a lot came up with it. So then in two years this will get fixed how? Or you'd prefer our kids' teachers all share the bus with kids cause they can't afford to drive to work? They are people who deserve to get paid for their work? Or would you like your job if you took home less year after year?

  2. Thanks for the Comment Rob. I think that several things are going on in rural districts, but I don't pretend to be an expert on rural districts. I think that perhaps teachers in rural districts tend to be more connected in terms of community to their own districts. So perhaps they are not willing to make the demands on their districts that teachers unions in larger are willing to demand.

    I certainly wouldn't have a problem with an exemption that would allow districts to depart from the freeze voluntarily, and not under threat of strike. I would suggest, as to who is being frugal, that you take a look at the difference in special education costs of the districts that you think are not frugal, and the ones that are frugal, because I think that accounts almost all of the difference. My own District, for example, has a special education mandate deficit of more than $8 million per year, or over $800 per year.

    Other school districts, typically the less urban districts, have special education deficits less than half that number per student. You can build up one heck of a reserve with that difference.

    I don't see a freeze as a permanent, or comprehensive solution. I see it as a desperately needed time-out that should lead to a comprehensive far reaching solution.Its interesting: Tom Dooher's recent article in the Strib argues that teachers in Minnesota have fallen behind other states. Yet, Minnesota has one of the most aggressive state unions, and one of the most pro-labor legal regimens. Is it possible that the strategy taken by Education Minnesota is actually counter-productive? Its not my place to judge: but as an outsider, I cannot for the life of me what the strategy of the Minnesota teachers' movement at the union level is going to accomplish.


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