Paying the Pension Piper

October 27, 2008

According to an analysis of public (including teacher) pensions by Northern Trust reported in the Washington Post, those pensions lost 14.8% of their value for the year ended September 30.  They have almost certainly lost more during October in line with the continuing drop in stock prices. 

The decline only compounds a serious problem.  Even before this year’s market fall many teacher pension plans were under-funded.  According to the Post, the GAO concluded that 27 out of 65 large public pensions were inadequately funded as of 2006.

The problem, according to pension administrators cited in the article, stems in part from “an increase in pension benefits.”  That is, when the market is doing great and pension funds are flush, state policymakers are tempted to accede to teacher demands to raise benefits.  But when the market drops, the pension benefits cannot be cut.  It’s a one-way street.  Pension benefits may be increased but it is illegal to decrease them.

So, guess who is going to have to pay the pension piper?  Taxpayers.

UPDATE:  Teacher pensions also distort the labor market for teachers by having “spikes” and “valleys” in benefits.  That is, teachers leave a large amount of money on the table if they leave their positions too early and they actually begin to lose pension benefits if they remain in their job too long.  The net effect is to keep some teachers who have lost their fire for teaching in the profession too long and to drive effective and experienced teachers out of the profession too early.  See a great piece on this by my colleagues Bob Costrell and Mike Podgursky in Education Next.

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Posted by Jay P. Greene

Why Are School Construction Costs So High?

October 27, 2008

I don’t know the answer but I really think this is a topic worth exploring.  And my attention has been focused on the question by a local debate over building a new high school in Fayetteville, AR.

What I do know is that according to the 34th Annual Official Education Construction Report the median new school built in 2007 cost $188 per sq. ft. for elementary schools, $211 per sq. ft. for middle schools, and $175 per sq. ft. for high schools. By comparison, the median cost per square foot to build a three story factory in 2007 ranged from $83 in Winston-Salem to $136 in NY City, with most major metro areas hovering around $100 per square foot.  Schools cost almost double what it costs to build a three-story factory and even more than what it costs to build houses. 

Why does it cost so much?  Part of the answer is that schools are more likely to be mandated to have Project Labor Agreements (PLAs), which require the use of unionized construction workers.  Schools built with PLAs cost about $30 more per square foot according to studies conducted in Connecticut and Massachusetts. 

Some of the higher cost can be attributed to gold-plating in the school building codes.  In Florida, for example, the increase in school building code requirements following Hurricane Andrew added $500,000 to the cost of each elementary school and $2 million for each high school over a decade ago.  Every school was expected to withstand 150 mph winds rather than 121 mph and to double the thickness of the concrete roof to 4 inches.  Of course, it’s always hard to argue against the safety of school buildings, but remember that kids are not in schools when hurricanes hit.  Schools are usually closed a day or two before a hurricane is expected.  It’s true that schools may be used as shelters, but not every school needs to be a shelter.  Requiring that every school meet the highest standard for any building is a way to exploit our concern for kids’ safety to drive school construction costs up.

In addition to the price per square foot, there is also the question of how many square feet we need.  The average new school has between 100 and 158 square feet per student, depending on the grade level.  But state requirements for square footage are increasing based on the argument that “schools need more space than they did 20 years ago.”  That may be, but some states, such as Minnesota, require as many as 200 to 320 sq. ft. per student for small high schools.  The Har-Ber high school that I described in my last post has 198.25 square feet per student.  At about 200 sq. ft. per student we could teach a class of 25 kids in a 5,000 square foot mansion.  And at an average cost of $23,873 per student for new high school construction, we could build that 5,000 square foot mansion for those 25 students for around $600K. 

Not bad.  Now if only we could teach students well-enough so that they could earn their own $600K house.

8 Comments | money myth | Tagged: , , | Permalink
Posted by Jay P. Greene

Palin Backs Special Ed Vouchers

October 24, 2008

In a speech in Pittsburgh today, Governor Palin endorsed the idea of special ed vouchers saying, “In a McCain-Palin administration, we will put the educational choices for special needs children in the right hands — their parents’. Under reforms that I will lead as vice president, the parents and caretakers of children with physical or mental disabilities will be able to send that boy or girl to the school of their choice — public or private.

Under our reforms, federal funding for every special needs child will follow that child. Some states have begun to apply this principle already, as in Florida’s McKay Scholarship program. That program allows for choices and a quality of education that should be available to parents in every state, for every child with special needs.”

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Posted by Jay P. Greene

Buildings Don’t Teach Kids, People Do

October 23, 2008

Matt wrote about black-market private schools in the third world housed in open-air shacks on the same day that newspapers reported that my local school board in Fayetteville, AR wants to re-build the high school so that we have a “21st Century” facility. 

While it is better not to have schools in open-air shacks, I can’t understand why people think we need educational palaces to teach our children.  Buildings don’t teach kids.  People do. 

We should invest much more in ensuring that we attract, retain, and motivate the best people as teachers rather than in “21st Century” facilities (whatever that blather means).  The systematic evidence overwhelmingly shows that the quality of school facilities in the United States has no relationship to student achievement, while the quality of teachers is very strongly related.  In the Handbook of the Economics of Education, Eric Hanushek reviews all of the research meeting minimal quality standards regarding the relationship between school facilities and student performance.  He identifies 91 analyses on the issue in the U.S. and finds that 86% of them show no statistically significant relationship.  Of the remaining 14% of analyses that did show significant effects, 9% were positive and 5% were negative. 

Research from developing countries told a different story.  Of the 34 analyses he identified on the relationship between school facilities and student performance in developing countries 65% showed significantly positive effects, 9% significantly negative, and 26% not statistically significant.  Clearly there is some level of building quality below which student achievement suffers.  But school buildings in the United States are nowhere near that threshold where the facility makes a significant difference.  The kids in the open-air shacks would probably benefit from an environment that screened out noise and dust more effectively, but almost all kids in the U.S. are in buildings that meet the minimum requirements for student learning even if they are not all luxurious.

But I suspect that is the problem in Fayetteville.  Just up the highway in Springdale, they recently built a Taj Mahal of a high school, called Har-Ber.  The marble-floored interior is pictured above.  Here is the giant-columned exterior: (Web site with photos was taken down, but you can still view pictures of the school here: http://www.wddarchitects.com/ )

Har-Ber was built for about $37 million, or about $93 per square foot.  People in Fayetteville had been talking about building a new school for more than twice that amount.  In our version of keeping up with the Joneses, some folks in town fear that the superior academic reputation of Fayetteville High School could be eclipsed if we don’t top the Har-Ber building.

Yes, Fayetteville High School is half a century old.  Yes, its cafeteria and auditorium are too small.  But there are smarter and less costly ways of addressing those problems than temporarily housing students elsewhere while we spend tens of millions to build a new one.  How about if we just build a new cafeteria and auditorium?  The recently completed appraisal of the facility said that it was in “excellent condition,” so why do we have to tear it all down and build a shinier new one? 

And how about if we take some of the money that we were willing to spend on a shiny new building and invest it intelligently in recruiting, retaining, and motivating the best teachers?

As a separate matter, someone needs to look into why exactly school buildings cost so much.  The average cost for housing construction in the area is $55.10 per square foot compared to $93 at Har-Ber and who knows what at the potential new Fayetteville High School.  My guess is that school construction firms have effective lobbies that insert all sorts of gold-plating and burdensome requirements into school building codes.  Doing so limits possible bidders who could meet all of those requirements while it drives up the construction profit.  And I imagine that most of those requirements have nothing to do with educational necessity or realistic student health and safety.

(edited for typos and pictures currently unavailable from source site but can be viewed here: http://www.wddarchitects.com/)

9 Comments | money myth, teacher quality | Tagged: , , , | Permalink
Posted by Jay P. Greene

Cascade Canyon

October 23, 2008

Matt and I went hiking in Grand Teton National Park last summer.  Here we are on the Cascade Canyon trail.  We made it all of the way from the trailhead at Jenny Lake to the western end of the canyon, about a 9 mile round-trip.  I thought the hike was going to kill a sleep-deprived Ladner, but it was nothing that buffalo burgers and drinks at the Cadillac Grille couldn’t heal. (edited for clarity)

 

 

 

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Posted by Jay P. Greene

The Federal Role In Education

October 21, 2008

Mike Petrilli has an excellent piece on Flypaper about lessons for the next administration on the limits of federal involvement in education policy.  He’s reacting to a report by Sara Mead and Andy Rotherham laying out an agenda for the federal government, which presumably they will be helping administer for an Obama administration.

Having learned these lessons the hard way, Mike warns that Sara and Andy are falling into old traps despite the best of intentions.  Mike argues that giving money to favored organizations, such as KIPP charters and Teach For America to “Grow What Works” will suffer from the same flaws as the Bush administration’s efforts to give money to favored organizations, such as Reading First.  Even if the favored groups are doing great work, giving money to them will be portrayed by opponents and the media as cronyism and pork. 

In addition, Mike notes that expanding Teach For America and KIPP requires cooperation from state and local agencies to lift caps on charters, equalize funding for charters and traditional public schools, and relax certification requirements.  The problem is that state and local agencies have perfected the art of subverting federal mandates.  At best unwilling state and local agencies will minimally comply with federal requirements while eviscerating their spirit.  At worst they will defy the requirements and dare the federal government to withhold funds.  The feds generally lack the political nerve to risk the political fallout from actually applying a sanction to a local or state education agency.

Let me expand Mike’s observations to draw lessons for the future of No Child Left Behind.  Like Mike, I once believed that the federal government could use the carrots and sticks (mostly sticks) in NCLB to motivate local and state education agencies to improve.  Since I was convinced by evidence that incentive systems worked, why shouldn’t the federal government do what works? 

My mistake and the mistake of NCLB was in not considering how much implementation of those incentive systems matters.  The federal education bureaucracy lacks the familiarity with local circumstances, the nimbleness to respond to changing circumstances, and the political will to apply sanctions to properly implement an incentive system.  Incentive systems are good for education reform but the federal government is too big, slow, far-away, stupid, and cowardly to do it right. 

The same is likely to be the case when the federal government tries to expand Teacher For America and KIPP under an Obama administration.  As Andy and Sara will soon discover and as Mike has warned them, the federal government will be obstructed by unwilling local and state actors.  And the mandates the Feds issue to overcome that resistance will trample upon or fail to anticipate local circumstances.

So what can the federal government do right?  First, they can continue to improve the availability of information about the school system.  NCLB deepened and entrenched the testing requirements that 37 states had already adopted before NCLB was adopted.  Improving transparency facilitates better policy evaluation and the development of effective state and local accountability systems.

Second, the federal government can facilitate “redistributive” efforts that localities cannot pursue without being punished by collective action issues.  For example, no locality can operate a substantial special education or English language learner program without attracting more students needing services, which then drives up the costs of the programs and drives away the local tax base that pays for those programs.  (See Paul Peterson’s The Price of Federalism for a great discussion of this).  To the extent that we want redistribution, we need the federal government to mandate it.  And I fully confess that I depart from my Cato colleagues in that I think we need some (but very limited) redistribution.

Third, the federal government can fund pilot programs to experiment with new ideas and approaches.  But I should emphasize that I think the federal government has no business evaluating or paying for evaluations of those efforts.  The evaluation process in the US Department of Education and the small number of contract-research firms is far too politicized to be reliable.  Instead, the federal government should play its role of improving transparency by making data on the pilot programs it sponsors available to any qualified researcher rather than to a favored research firm.  The Feds should heavily be in the data collection and distribution business, much as the Department of Commerce makes economic data available, but they should leave analyses of those data to the market of ideas.

The failures of the Bush administration have been a humbling experience.  But we are doomed to repeat their mistakes if we do not learn from them and limit the federal role in education to what the Feds can actually do well.

(edited for typos)

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Posted by Jay P. Greene

Bad Timing

October 19, 2008

Just days after I wrote about how teachers enjoy exceptional job security, even in hard economic times, the Dallas Independent School District (DISD) lays off 375 teachers.  The 135 stories about it found by Google News emphasize the harship and turmoil that these layoffs are causing.

I wouldn’t want to minimize that suffering in any way, but it is worth noting that the layoffs were not caused by tough economic times.  Instead, the teachers were let go to address an $84 million deficit that “was caused by a massive miscalculation in the budget.”  It seems that Dallas public schools had to fire 375 teachers because they couldn’t do the budget math properly.  Maybe they could even out their errors by issuing a press release about the layoffs filled with grammatical mistakes. 

So I guess teachers can lose their jobs.  But, to put it in perspective, this was only 3% of DISD’s teaching workforce and a tiny fraction of the nation’s 3 million public school teachers.  My point that teachers are remarkably insulated from economic downturns still holds, even if a number of teachers in Dallas lost their job due to gross budget mismanagement.

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Posted by Jay P. Greene

McCain and Obama Agree: Competition Good for Education

October 16, 2008

Education finally came up in a presidential debate and I heard something that I never heard before — the standard-bearers for both parties agreed that competition was good for public schools.  Sure, past Democratic candidates have endorsed school choice with charters, as Obama did.  But Obama did something new.  He specifically said that competition from charter schools was important for improving traditional public schools. 

Clinton, Gore, and Kerry embraced school choice with charters as an escape hatch for students condemned to failing public schools, sounding very much like Sol Stern, Mike Petrilli, and Rick Hess.  But Obama left previous Democratic candidates and these fellows at market-oriented (?!) think tanks in the dust by saying that choice was desirable because of competition. 

Here are Obama’s exact words: “Charter schools, I doubled the number of charter schools in Illinois despite some reservations from teachers unions. I think it’s important to foster competition inside the public schools.”

Of course, Obama wants to limit choice and competition to public schools (which include charters), while McCain wants to include private schools in the mix.  But they agree on the big idea:  public schools are improved when they have to compete to earn students and the revenue those students generate.

Just think.  Only twenty years ago school choice and competition was hardly a glimmer in Ronald Reagan’s eye.  Now the idea is so widely accepted as reasonable that the leaders of both parties differ only on the mechanism for producing choice and competition.  We’ve come a long way, baby.

Correction — Rick Hess emailed to say that he did not want to be counted among those who are unpersuaded by competitive effects from choice.  He does think that almost no current choice program is designed properly to produce competitive effects, but he thinks such effects are possible and desirable.

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Posted by Jay P. Greene

Huckabee Believes Aliens Caused Market Crash

October 13, 2008

Actually, he doesn’t.  But what he does suggest is almost as crazy. 

In an interview with Chuck Norris on his new Fox News show, Huckabee says that a friend of his in the financial business told him that the pattern of trading suggests that the crash may be the result of “economic terrorism.”  The Huckster emphasizes that his friend is not just some guy on the internet and that the theory is a “plausible argument.”  Norris then adds that the Chinese may have received some secret deal in exchange for our trade deficit with them that allows the Chinese to drill for oil off of the Florida coast without our knowing it. 

I’m not sure my summary could capture the full craziness of it, so David Kinkade at that great new blog, The Arkansas Project, has found a video of the exchange.

I hope stuff like this drives a stake through the vampire heart of Huck in ’12 talk. 

Why would Huck suspect the market dive to be caused by economic terrorists rather than the more obvious popping of the housing bubble and a credit-quality panic among banks?  Why is he asking Chuck Norris for his opinion?  Why does Norris offer an additional conspiracy involving the Chinese and drilling off of the Florida coast?  Why was this man ever considered a serious presidential candidate?

I have to add that it is especially scary when people who ought to be responsible start spinning conspiracy theories on TV.  The popularity of conspiracy-obsessed web sites, like Daily Kos, and Andrew Sullivan’s promotion of conspiracies about Palin show that “elites” are increasingly comfortable with conspiratorial thinking. 

Unfortunately, when elites peddle conspiracies, it lends credibility to all of the run-of-the-mill wacko-conspiracy theorists out there who feel legitimized.  In just the last month I’ve had two people freely offer their conspiracy theories to me about the Trilateral Commission, the neo-cons, etc… 

When will people learn that we have a hard enough time pulling off normal, openly-stated goals, like winning a war or regulating banks, to pull-off elaborate secret missions?  Human beings can barely walk upright let alone control global events.

8 Comments | politics | Tagged: , , , , , , | Permalink
Posted by Jay P. Greene

What Me Worry?

October 13, 2008

 

We’ve previously discussed how teachers are relatively well-paid and how the structure of their pay does not promote quality teaching.  To be sure, teachers aren’t paid like doctors, but they also aren’t paid like fast food workers.  If computed on a weekly basis, teachers are paid slightly above the average professional specialty and technical worker (the group in which they are classified by the Bureau of Labor Statistics).  But on an annual basis they are paid less.

During these times of economic turmoil and anxiety, it is worth emphasizing a non-monetary aspect of teacher compensation that also adds to the relative appeal of the profession — teachers are essentially guaranteed continued employment with a gradually increasing salary regardless of economic conditions.  That certainty of employment with an ever-increasing wage makes up for some of the perceived or real shortcomings of teacher salaries.  If you don’t believe me, just ask the bank employee, insurance agent, or restaurant manager who are about to find themselves out of a job how much salary they would forsake for the guarantee of continued employment.

Teachers are essentially guaranteed employment despite economic conditions because education spending is almost never cut and, even if it is, teachers are the last thing to be cut within the education budget.  In more than half the states the courts have intervened in education budgets, interpreting vague clauses in state constitutions about an “adequate” or “efficient” public education system as compelling certain levels of education spending.  In those states policymakers dare not cut education spending for fear of being slapped by the courts.  In Arkansas, the court has even compelled the state legislature to increase K-12 education spending by at least the level of inflation.  Colorado has a similar mandate.

No one else has this guaranteed claim on resources.  Even other essential state functions, like law enforcement or road construction can be cut if state revenue drops.  Not education.  They’ll get more almost no matter what.

And within the education budget tenured teachers are essentially guaranteed their jobs and ever-increasing pay.  In almost every school district the contract or state law mandate a step and lane pay schedule that pays teachers more every year they remain employed.  If teachers basically can’t lose their jobs and if the system pays them more each year, they enjoy a benefit that almost no other profession enjoys.  When thinking about whether more tax dollars should be devoted to increase teacher compensation further, we should remember these non-monetary benefits of guaranteed employment with ever-increasing salaries.

I should note that university professors are another occupation that enjoy essentially guaranteed employment, although not with a guarantee of annual salary increases.  And I admit that I benefit from this assured employment, even as I think it has negative effects on higher education.  But at the same time you won’t hear me arguing that university professors are woefully underpaid and are entitled to an ever-increasing amount of tax-payer dollars. 

Right now almost all tax-payers are suffering in their own economic circumstances.  It is just unseemly to see educators demanding more and more even as the pool of available resources becomes smaller and smaller.

2 Comments | teacher pay | Tagged: , , | Permalink
Posted by Jay P. Greene

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