Excellence in Failure

October 18, 2011

It’s long been a goal of mine to be so awful at a job that they have to pay me to leave.  Unfortunately, excellence in failure is something that has escaped me — even though I normally seek excellence in all things.

But you’ll be happy to know that football coaches, superintendents, CEOs, and even large corporations have all too often perfected the art of sucking so bad that people pay them for that failure.

These large severance packages are generally a problem when the people offering the package are doing so with OPM — Other People’s Money.  Athletic directors, school boards, boards of directors, and the government find it so much easier to be generous when the money they are offering to their failed coaches, superintendents, CEOs, and large corporations is not their own money.

The Occupy Wall Street folks have (rightly) highlighted the sweet deals offered to failed CEOs and corporations from tax funds, but they tend not to mention the frequency with which superintendents are given large severance packages with OPM.  Yes, the average size of the superintendent packages tends to be much smaller, but there are so many more of them that it adds up to real money.

A Chicago Tribune analysis last summer found:

The newspaper’s review of more than 100 superintendent contracts, financial records and severance agreements over a decade revealed that boards have handed out six-figure separation checks; district-paid health care; cash or retirement credit for hundreds of sick days; and, in one case, a Mercedes — all to be rid of superintendents….

“Boards have not been held responsible because they do not care about taxpayers, period. … They do not care about how much money they spend,” said Kenneth Williams, board president in Thornton Township High School District 205, which recently approved a $350,000-plus severance package for J. Kamala Buckner, a veteran superintendent. Williams tried unsuccessfully to rescind the package in May….

Using available state data, the Tribune tracked the number of superintendents in Illinois school districts from 2000 to 2010, finding nearly half had gone through three or more superintendents.  That turnover not only fuels buyout deals but can take a toll on issues ranging from policy to student achievement….

Changeover also means some superintendents get multiple severance payouts.

Rosemary Hendricks got a $132,000 settlement in 2009 after filing a lawsuit against Hoover-Schrum District 157, where she had served as superintendent about a year. Earlier, she had gotten a $75,000 settlement in Bellwood District 88, where she had a short stint as superintendent, records show. She is back as Bellwood superintendent.

Of course, sometimes these generous severance packages are the fault of boards, not the departing executive.  Boards sometimes choose to get rid of someone on a whim or simply because the majority composition of the board changes.  These reckless changes by boards to get rid of someone under contract or who could justly sue for wrongful termination, force boards to fork over large sums of OPM to avoid litigation.

My point is the irresponsibility that OPM encourages.  OPM encourages organizations to write contracts that are excessively long and generous and then require large severance packages to get out of them.  OPM encourages changing leadership without cause and at great cost.  OPM makes it so much easier to justify the bailout to avoid “systemic risk” or to promote “stability.”  And of course OPM facilitates coaches, superintendents, CEOs, and corporations to make unreasonable demands, take unreasonable risks, and fail catastrophically.

OPM encourages excellence in failure.

Technology and School Choice: The False Dichotomy

July 18, 2011

(Guest post by Greg Forster)

Terry Moe has a great article in today’s Journal about how entrepreneurial innovation taking advantage of new technology is putting the teacher’s unions on the road to oblivion. It’s a great article, except that it draws one false dichotomy.

Fans of JPGB know that we do love us some high-tech transformation of schooling around here. Matt has been on this beat for a long time, and hardly a week goes by that he doesn’t update us on the latest victory of “the cool kids” over “edu-reactionaries” in the reinvention of the school. But he doesn’t own that turf entirely; I made this the theme of my contribution to Freedom and School Choice (as did Matt, of course).

The problem is that Moe insists high-tech transformation of schooling, and the destruction of union control it entails, is absolutely, positively a separate phenomenon from the wave of school reform victories this year:

This has been a horrible year for teachers unions…But the unions’ hegemony is not going to end soon. All of their big political losses have come at the hands of oversized Republican majorities. Eventually Democrats will regain control, and many of the recent reforms may be undone. The financial crisis will pass, too, taking pressure off states and giving Republicans less political cover…

Over the long haul, however, the unions are in grave trouble—for reasons that have little to do with the tribulations of this year…The first is that they are losing their grip on the Democratic base…Then there’s a crucial dynamic outside of politics: the revolution in information technology.

Really? The victories of 2011 – “the year of school choice” – aren’t in the same category with the long-term path to oblivion the unions are on? On the contrary, 2011 is the year of school choice precisely because it has become obvious that the unions are on track for oblivion, for the reasons Moe identifies.

Moe’s argument relies on the assumption that when Republicans are in power, they always make dramatic and innovative school reform policies their #1 priority.

Sorry  . . . lost my train of thought I was laughing so hard . . . let me pick myself up off the floor . . . there, now where was I? Oh, yes.

The GOP hasn’t touched real school reforms with a hundred-foot pole in years. Why did it all of a sudden embrace real reform this year?

Could it be because…

  1. …the unions are losing their grip on the Democratic base, meaning squishy Republicans don’t have to worry about being demonized as right-wing loonies simply for embracing real reform, and…
  2. …the revolution in information technology has made it obvious to MSM and other key cultural gatekeepers that the unions are the reactionaries, once again reassuring squishy Republicans they won’t be demonized for embracing real reform?

Obviously the financial crisis was also a factor here, as Moe rightly points out. But is that really an immediate-term phenomenon, bound to disappear next week? What really counts is whether the nation feels so rich it can afford to ignore ballooning school costs. Technically the recession ended two years ago and we’ve been in “recovery” for two years. How’s that feeling? Do we feel rich and luxurious again? Are we on track to restore a widespread national sense of inevitable prosperity by 2012? By 2014? By 2020?

Bottom line, the unions losing Democratic support and taking their stand in opposition to entrepreneurial change was the crucial, indispensable precondition for this year’s wave of school reform success.

Oh, and guess what? Sustaining those policies, especially school choice, will be the only way this wave of advancing technology will produce the results Moe is expecting. Only school choice can prevent the blob from neutralizing any reform you throw at it. If the techno-innovators turn their back on choice and competition, they’ll be dead meat. (For more on that topic, see the aforementioned chapter by your humble servant in Freedom and School Choice.)

Flawed Comparison from OECD

June 28, 2011

The OECD has a report, Education at a Glance 2010, that provides a shockingly flawed comparison of the amount of time U.S. teachers work relative to teachers in other countries.  According to the report, U.S. teachers work 1,913 hours over a 180 day school year that is 36 weeks long.  And also according to the report, the average OECD teacher only works 1,659 hours over a school year of 187 days that is 38 weeks long.

So, if we believe these OECD numbers (which the WSJ apparently did in this blog post), U.S. teachers work 15.3% more hours per year than do their colleagues in other developed countries.

But if you believe the OECD comparison I have a lovely bridge to sell to you.  According to the report’s methodological appendix, the method by which the U.S. information was collected was different (and clearly less reliable)  than how it was collected from all of the other countries.  In every country except the U.S. the hours worked was derived from teacher contracts or laws.  But in the U.S. the information was drawn from self-reported responses to a survey of teachers.  (See p. 75 of the appendix).

A valid comparison would require that the information be collected in similar ways across all countries — either we rely upon self-reports in surveys of teachers for all countries or we rely on contractual hours for everyone.  But using self-reports for the U.S. and contractual hours for everyone else produces obvious distortions.  People may be inclined to exaggerate the hours they work in a survey.  And the definition of time worked is ambiguous.  If I think about my students while I am brushing my teeth or running on the treadmill am I working during that time?

We have good reason to suspect that the self-reports from U.S. teachers are over-stated.  If teachers really worked 1,913 hours over 180 days, as the report claims, they would be working 10.63 hours per day.  And the numbers I’ve provided are just for primary school students.  For high schools, the OECD report claims U.S. teachers are working 1,998 hours over 180 days, which works out to 11.1 hours per day.  I know some teachers are very conscientious and work long hours but I simply do not believe that the average high school teacher is working 11.1 hours per day.

I know this might invite the wrath of Diane Ravitch’s Army of Angry Teachers, but I suspect that the average hours worked by U.S. teachers is significantly less than the OECD says (and the WSJ repeats).  And I know that the comparison between U.S. and other countries is flawed by collecting the information from self-reports in the U.S. but from contracts everywhere else.

Florida Legislature Passes Landmark Merit Pay Legislation

March 17, 2011


(Guest Post by Matthew Ladner)

About 11 months ago, former Florida Governor Charlie Crist vetoed a major overhaul of teacher pay and tenure as a prelude to running for the Senate as an independent. Yesterday, the Florida Senate passed a revised version of the bill, which the new Florida Governor Rick Scott seems anxious to sign.

Stephen Sawchuck at  the Teacher Beat Blog summarized the bill:

Among other things, S. 736:

• Requires 50 percent of a teacher’s evaluation to be based on state standardized tests or other national, local, or industry measures for those subjects not gauged at the state level;

• Requires evaluations to consider four levels of teacher performance;

• As of July 1 of this year, ends the awarding of “continuing” and “professional service” contract status (the Florida equivalent of tenure) and puts all new teachers on annual contracts;

• Permits districts to extend annual contracts only to teachers with good evaluations; those with two “unsatisfactory” ratings in a row, or two “needs improvement” ratings within a three-year period, could not be renewed;

• “Grandfathers” in teachers who now have tenure but allows them to be dismissed for the performance reasons stated above;

• Requires districts to establish performance-based salary schedules by July 1, 2014, for all new hires, and to phase existing teachers onto the new schedules as student-growth measures are developed; and

• Does away with layoffs based on reverse seniority.

Teachers are not interchangeable widgets, and should not be treated as such.  Highly effective teachers deserve greater recognition, and the students of highly ineffective teachers deserve better.  While merit pay is a complex subject, we can do better than simply paying teachers to age.

Florida once again has raised the bar on education reform for the rest of the nation.


February 24, 2011

Most people are familiar with RhINOs (Republicans in Name Only), which is a pejorative for Republican officials who differ from other Republicans on certain key issues. With a new piece in Education Next, Stuart Buck and I would like to introduce to the policy lexicon the term, MPINO — Merit Pay in Name Only.

Few merit pay programs for teachers manage to overcome union-fueled political opposition to be adopted and implemented. We estimate, based on data from Vanderbilt’s National Center for Performance Incentives, that no more than 3.5% of all districts have anything even remotely resembling merit pay.

But even the few programs that aren’t blocked are largely co-opted and diluted so that they are little more than MPINO. They tend to define merit as additional credentialing, such as paying for national board certification or simply additional degrees. The bonuses tend to be small add-ons to the traditional salary schedule based entirely on seniority and credentials. And the plans are frequently not fully implemented or quickly reversed.

The problem is that merit pay programs are trying to simulate the compensation systems that one might develop in a competitive market. But without the pressure and discipline of the market there is nothing to keep these plans sensible or permit the constant tinkering necessary to address gaming or other design weaknesses. In short, we hold out little hope for merit pay improving achievement in the absence of meaningful choice and competition given the union ability to block, dilute, or co-opt merit pay proposals.

In addition, we suggest that the most powerful form of merit pay is the concern that inadequate performance might cause one to lose one’s job. Without ending tenure and burdensome fair dismissal procedures, merit pay is unlikely to do much to change a teaching workforce that cannot lose jobs for sub-par performance.

Even if we see more programs that are called merit pay, we are unlikely to get more than MPINO. Unfortunately, this won’t even result in SAINO (Student Achievement in Name Only).

Sweet are the Uses of Adversity

September 23, 2010

(Guest Post by Matthew Ladner)

Jay has lost that loving feeling after the failure of the merit pay plan in Nashville. Mike Antonucci quite rightly points out that “If we want to evaluate teachers on their performance, we should be prepared for performance pay programs to be evaluated on their performance.”

It was worth trying, but it merit pay didn’t work, so should move on to more promising reform strategies, right?


What this study seems to show is that the Nashville program didn’t work. That’s valuable information, and we might want to figure out why a program in Little Rock found positive results, while the one in Nashville did not. Inch by inch, we just might figure something out.

Greg and I have each noted in different ways that getting this figured out is a very tricky business. We agree that maximizing competition within the system is key to sorting out the incentives properly. The Nashville study seems to reinforce the view that this about drawing the right people into the teaching profession rather than dangling a carrot out in front of your current teachers. This subject however deserves careful study across multiple programs over a long period of time.

When results by teacher vary so profoundly, it strikes me as inconceivable that we cannot develop a system to treat teachers like professionals. A profession that offers summers off and high job security but has a union negotiated pay scale that incrementally rewards you for getting old doesn’t seem likely to garner as many highly capable people as needed into the profession.

A Nashville pilot program dangling out a $15,000 carrot doesn’t seem likely to get the best and the brightest out of Vanderbilt to forego that MBA and go into teaching. It didn’t seem to motivate the teachers who were already there either.

I don’t know the answers. I do know that we need a lot of people trying a lot of different things and sharing their results and experiences-that’s the primordial soup of innovation. Schools run by the teachers like law firms, parent and student satisfaction measurement models, hybrid model schools with rolling thunder value added assessment systems, and whatever else we can come up with- bring it on.

How about a 33 year old hedge fund manager turning out killer content from a closet? Yes please!

The same logic applies for merit pay- we need experimentation and study. There were many failed attempts to build a plane before the Wright Brothers, and even the Wright Brother plane was more likely to get you killed than fly you to another city, state or country.

We all need to take a deep breath, keep our expectations reasonable, and learn from failures like the Nashville program.

A Little Context for OFA’s Sob Story

August 10, 2010

(Guest post by Greg Forster)

The latest item making the rounds is an e-mail from Organizing for America, the old Obama campaign appendage now grafted into the DNC. A teacher from Ambler, Pa. pleads that if we don’t shovel a huge chunk of money into the EduJobs rathole, it’s theoretically possible that someone “like me” could potentially lose a job.

With that special blend of entitlement mentality and self-righteousness only the blob has mastered, she solemnly intones:

I’m not a special interest. I’m a teacher.

(Portentious boldface in original.)

Jim Geraghty would like you to be aware of the numbers featured above – this teacher’s school district, Wissahickon, has an average salary almost half again as high as the state average salary. And that’s before we look at benefits, which are much richer for teachers than in the private sector. Geraghty remarks:

When the local board of education spends money at a rate that the local tax base cannot afford, those teachers who refuse to adjust their salaries to reality do start to look like a special interest.

Mike Petrilli hammers the point home:

Your job could easily be saved if your union leaders were willing to accept some modest concessions. (Even a salary freeze might do the trick.)  But when teachers demand job protections, generous benefits, and salary increases in the midst of a recession…well, that’s expecting special treatment, indeed.

Not to mention JPGB’s own Matt Ladner, commenting on the instantly-famous chart comparing private sector job destruction in the current crisis to government job protection:

The yellow line just put another $10 billion on the credit card of the red line. Let them eat cake!

Sometimes I almost feel sorry for these people.

It’s True, She Really Doesn’t Make $83K!

May 28, 2010

(Guest post by Greg Forster)

Don’t miss this solid gold story of Chris Christie v. the dishonesty of activists claiming to represent teachers.

Buildup: Teacher in the audience challenges Christie’s statements about teacher pay, saying if his figures were right she’d be making $83,000, and she doesn’t make nearly that much. Christie replies that she does if you count benefits. She fires back that she has a master’s degree and lots of experience and she isn’t adequately paid for these. Christie remarks that if she doesn’t think she’s paid what she’s worth, she’s free to do something else with her life, and moves on to the next questioner.

Kicker:  Public records show that the teacher in question makes just under $85,000 base salary. Oops.

New Report on Teacher Pensions

April 14, 2010

[Guest post by Stuart Buck]

Yesterday, the Manhattan Institute and the Foundation for Educational Choice released a report written by me and Josh Barro. The title: “Unfunded Teacher Pension Plans: It’s Worse Than You Think.” The main finding:

According to the fifty-nine funds’ own financial statements, total unfunded liabilities to teachers—i.e., the gap between existing plan assets and the present value of benefits accrued by plan participants—are $332 billion. But according to our more conservative calculations, these plans’ unfunded liabilities total about $933 billion.

In addition, we have found that only $116 billion, or less than one quarter, of this $600 billion discrepancy is attributable to the stock market drop precipitated by the 2007 financial crisis. The Dow Jones Industrial Average would have to nearly double overnight to make up for the present underfunding of these plans.

The meat of what we did is this: Most state plans assume that their current investments will get about an 8% rate of return in perpetuity. So that means that they set aside less money now to cover the pensions that will be paid in 2015, 2020, 2025, etc. But the 8% assumption is wrong, we argue, for two reasons: First, recent history shows that it may be too optimistic. Second, investments that have an 8% expected rate of return necessarily carry some risk — risk that the plan will actually fall short in a given year or even decade. And when a plan falls short, the burden falls to the taxpayer to make up the difference.

So we reanalyzed the teacher pension plans using the same interest rate that private plans are allowed to use — about 6%, based on corporate bond rates. When we do that, it turns out that pension plans are way more underfunded than they are publicly admitting.

Over at The Quick and Ed, Chad Aldeman has a response to our study:

States, unlike private companies, do not fold under. Indiana, which according to the authors has a DB pension plan for teachers that is only 42% funded, is not likely to go out of business and take its workers down with it. The state of Indiana can assume a riskier investment return for its pension fund than an employer like those mentioned above or any other modern private firm (and, just for good measure, it’s worth pointing out that Indiana assumes only a 3 percent real rate of return).

All this is lost on the report’s authors, who would prefer states lower their assumptions on stock market returns from about 8 percent down to 6, the standard rate used by corporations in their calculations. This would mean telling a state like Pennsylvania, which has accumulated a 9.23 percent return in the stock market over the last 25 years (as of February 2010), that its 8 percent investment assumption is too high.

This is all irrelevant. We’re not saying that when states engage in risky investments, teachers then are at risk of not being paid their pensions. The problem is precisely the opposite: Teacher pensions are guaranteed by states that don’t go out of business. But that doesn’t make the risk magically go away. The risk just ends up being borne by the taxpayer. So if a state decides to blow all of its pension money gambling at a horse race, the teachers will still get their pensions, but taxpayers will suddenly find themselves paying higher taxes to make up the shortfall (or else seeing huge budget cuts to other important state services).

In the last sentence, Aldeman cites a document put out by the Pennsylvania pension system, but that document actually proves our point. The Pennsylvania pension system may have made an average of 9.23% per year for the past 25 years, but they still predict that looking forward, there will still have to be “significant and perhaps prohibitive tax increases at the State and/or Local levels.”

Moreover, to focus on the 25-year rate of return, as Aldeman does, ignores three things: 1) past performance is no guarantee of future success; 2) the PA pension system now has less assets on Dec. 31, 2009 than on June 30, 2004, which means it lost money over a 5.5 year period; and 3) this kind of variability (i.e., risk) requires taxpayers to pay extra when investments are disappointing for years on end.

The problem with Pennsylvania, as with many other states, is that when times were flush (the late 1990s or the mid-2000s), legislators did not have the foresight to let pension systems accumulate some savings for possible tough times ahead. Instead, they decided to lower contributions to pension systems and/or increase pension benefits, all on the assumption that high stock market returns would magically pay for it all. But when the stock market falls, the pension systems are left with extra liabilities that no one ever paid for, and the risk ultimately rests with the taxpayer.

It’s a heads-I-win, tails-you-lose system. That’s why taxpayers need state pension systems to use an accounting method that more properly and honestly accounts for all of the risk that they’re shifting onto us.

The States Are Concealing Teacher Pension Costs of ONE TRILLION DOLLARS!

April 13, 2010

(Guest post by Greg Forster)

A new study by Josh Barro and Stuart Buck, co-sponsored by the Foundation for Educational Choice and the Manhattan Institute, finds that states have total teacher pension liabilities of ONE TRILLION DOLLARS!

These days that doesn’t sound like much, does it? We’re getting to the point where raising an alarm about ONE TRILLION DOLLARS is a little like holding the world to ransom for a measly million.

But check out some other points from the study:

  • These teacher pension liabilities are systematically concealed from the public. The states claim they’re on the hook for “only” $332 billion.
  • Not surprisingly, these concealed liabilities aren’t properly funded. Every pension fund is in shortfall – California alone by $100 billion.
  • The funding shortfalls aren’t trivial. The five worst states (by percentage) are less than 40 percent funded. Only five plans in the whole country are 75 percent funded.

The logic is simple: extravegant teacher pension promises cost nothing to make, and the people who make the promises will mostly have moved on to other things by the time the gigantic costs come due. The due date can be held off by dishonest accounting – you don’t need to put a trillion dollars into the pension fund if you just pretend you don’t owe a trillion dollars. When the chickens come home to roost, those in power can shrug their shoulders and blame the irresponsibility of previous administrations. And where will the guilty parties be by then?

It’s the perfect crime.

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