The State Role in Teacher Compensation

Susanna Loeb, Luke C. Miller, & Katharine O. Strunk

Introduction
Policy makers have long been concerned with K!" teachers# com$ensation.
%ot only might increased teacher com$ensation $urchase more skilled
teachers, it might also in&uence how long teachers stay at their schools and
in the teaching $ro'ession. Similarly, changes in the structure o' teacher
salary schedules may change the a$$eal o' teaching even i' average salaries
remained the same. Much o' the e(tant research on K!" teacher salaries
shows, to no great sur$rise, that teachers res$ond to salary changes )see
'or e(am$les, *augh and Stone )!+,"- and Murnane and Olsen )!+,+,
!++.--. /eachers# salaries are 0ust one com$onent o' teachers# overall
com$ensation, however. States and school districts also $rovide other
incentives 1 both monetary and nonmonetary 1 aimed at attracting and
retaining teachers. /hese incentives o'ten target certain ty$es o' teachers
in certain ty$es o' $ositions. 2n addition, teachers receive health and
wel'are and retirement bene3ts that add to their total com$ensation
$ackages.
/his $olicy brie' e(amines the state role in these three com$onents o' total
K!" teacher com$ensation 1 base salary, bene3ts, and other incentives
showing how states across the country are going beyond sim$le salary
structures to com$ensate teachers. 4e also e(amine how teachers#
com$ensation targets teachers at di5erent $oints in their career cycles.
Some com$onents aim at recruiting teachers, others target retention o'
early career teachers, and still others aim at the retention and e5icient
release o' older and retirementeligible teachers. 4e summari6e the $olicy
a$$roaches o' all 7. states and the 8istrict o' Columbia, drawing 'rom an
e(tensive technical re$ort )Loeb and Miller, "..9-. /he in'ormation comes
'rom a variety o' sources including state statutes and administrative codes
and state websites.
!
4e characteri6e the national statelevel $olicy conte(t
as it was in "..7. 4hile some as$ects o' these $olicies may have changed,
the 'ull $icture is likely to look :uite similar today.
"
1
Our $rimary sources o' in'ormation were state statutes and administrative codes. 2nitial
data collection occurred in the summer and 'all o' "..7 with an additional wave o' data
collection in the summer and 'all o' "..;. 2nitially, we com$ared the acrossstate $olicy
summaries com$iled by the <ducation Commission on the States to the current state
statutes and administrative codes, correcting and u$dating the $olicy descri$tions where
re:uired. 4e also conducted our own search o' each state#s documents using a common set
o' keywords 'or each $olicy area to ensure a thorough review o' all relevant language. 4e
consulted state websites 'or additional in'ormation when the statutes and regulations were
unclear.
2
4e use the state as the unit o' observation throughout this discussion because we are
'ocusing on states# roles in teacher com$ensation. =owever, this necessarily generali6es
district res$onses to state $olicy as well as districts# own autonomous $olicies. /hroughout
1
Salary Schedules
More educational dollars are allocated to teacher salaries than to any other
educational e($ense. /eacher salaries there'ore 3gure $rominently in
education 3nance debates in every state, giving rise to 're:uent calls 'or
re'orming both how much teachers are $aid and the determinants o' that
$ay. /he current single district salary schedule $ay structure, used in the
ma0ority o' school districts, is based almost com$letely on education level
and years o' e($erience )see >igure ! 'or an e(am$le salary schedule 'rom
%orth Kansas City School 8istrict in Missouri-.
Pro$onents o' this structure argue that the strength o' these in$utbased
salary schedules is their ob0ectiveness. ?dministrators can accurately and
consistently assess years o' e($erience and educational attainment, leaving
little room 'or sub0ective and $ossibly biased o$inions o' teachers to
in&uence teachers# $ay. ?s such, some re'ormminded $ro$onents o' the
current system su$$ort acrosstheboard salary increases. /hey argue that
the current salary structure is e5ective, but that higher com$ensation will
better $osition the teaching $ro'ession to recruit and retain high :uality
individuals.
Figure 1: North Kansas City School District, Missouri 200!" Salary
Sche#ule
the $a$er we attem$t to clari'y when district res$onse to state $olicies is not homogenous
across a state.
2
Note: This example salary schedule has been truncated to 18 steps. There are actually 25
steps, with teachers in the fnal column with 25 years of experience earnin !"",###.
Critics o' the current system argue that a key weakness o' these in$ut
based structures is that they 'ail to reward individual e5ort, reducing
individual incentive to $er'orm at their best and to remain in the classroom
rather than move to a $ro'ession where their e5orts are rewarded by higher
com$ensation. 2n addition, in$utbased salary schedules do not distinguish
between teachers# 3elds o' e($erience so that sub0ects such as math and
science, which have high wages in nonteaching occu$ations, o'ten 'ace
shortages while elementary grades and social studies do not. Similarly,
teaching 0obs that re:uire more $re$aration or e5ort, such as s$ecial
education, can 'ace shortages while other teaching 0obs do not. /hese critics
believe that we should $ay teachers based on their sub0ect area e($ertise,
the school in which they teach and@or their $er'ormance in the classroom.
One alternative to the current structure is to allow 'or $ay di5erentials
based on sub0ect area, grade or the school in which teachers work. Other
$ro$osals suggest career ladders, which base $ay on teachers# increasing
res$onsibilities within the school. ?s teachers move u$ the ladder they
assume greater res$onsibilities in other areas such as heading de$artments,
3
organi6ing $ro'essional develo$ment activities and mentoring other
teachers. ?nother, more radically di5erent alternative is to base $ay on
teachers# Aout$uts,B or their contribution to student outcomes. Su$$orters
o' these $ro$osals believe com$ensation should be better linked to schools#
educational goals and that salaries that distinguish e5ective teachers will
encourage individuals who would be e5ective teachers to enter the
$ro'ession and encourage current teachers to seek the $ro'essional
develo$ment they need to im$rove.
Out$utbased salary structures link teacher com$ensation to a $roductive
result o' the education $rocess such as $er'ormance evaluations and
student test scores. /he results used to determine com$ensation amounts
can be at the individual, team, grade or school levels. Such structures are
not widely used and $rove highly controversial when $ro$osed or
im$lemented. /he main criti:ue o' such structures is the di5iculty in
identi'ying an a$$ro$riate $er'ormance metric. ?re $rinci$al evaluations o'
teachers ob0ective enough to 'airly determine com$ensationC 2s it
a$$ro$riate to hold teachers accountable 'or the $er'ormance o' their
students when so much that a5ects that $er'ormance is beyond the control
o' teachersC
$pproaches Ta%en $cross the Nation
?lthough the debate over a$$ro$riate salary structures rages at the state
and 'ederal levels, most states have le't decisions regarding salary
structures to local districts. =owever, states are getting in the game by
$roviding at least some guidance regarding salary structure. >or instanceD
"9 states have some kind o' statewide minimum salary scheduleE
Si( states re:uire or $rovide 3nancial incentives 'or districts to ado$t
career ladder salary structures and two other states have done so in
recent $astE
/hree states o$erate $er'ormance $ay $rograms.
Statewide Minimum Salary ScheduleD /wentyseven states have ado$ted
some ty$e o' statewide minimum salary schedule )see >igure "-. ?ll
teachers in these states must be $aid at least the amount s$eci3ed by the
state. Pro$onents o' $olicies that set a &oor on the minimum salary allotted
to teachers at a higher rate than districts may otherwise $rovide argue that
such $olicies will hel$ to recruit more :uali3ed $ersonnel into the teaching
$ro'ession. States with minimum salary schedules $rovide 'unds to cover
some i' not all the mandated minimums. 8istricts generally are allowed to
augment the minimums with local 'unds. >our states )?labama, Mississi$$i,
/ennessee and 4ashington- $lace some restrictions on district salary add
ons. >or e(am$le, ?labama re:uires that the local addon be the same 'or all
teachers while Mississi$$i $rohibits districts 'rom reducing their local add
4
on 'rom year to year. ?lthough ten states establish their minimum salary
schedules on an annual or biennial basis )de$ending on their budget cycle-,
other states# minimum salary schedules were last u$dated a decade or more
ago. Partly as a result o' these dated $olicies not all o' the statewide
minimum salary schedules are binding 'or districts within the state.
?lthough this in'ormation is not readily available, we were able to
determine that at least one district in ten o' the "9 states $ays its teachers
e(actly the minimums mandated by the state. 2n these states the minimum
is binding. 2n nine o' the "9 states, all districts $ay salaries in e(cess o' the
minimums. /here are eight states 'or which we are unable to determine
whether or not the statewide minimum salary is binding 'or any districts.
)See >igure ".-
Figure 2: State$i#e Minimum Salary Sche#ule, 200%
&
Career ladder salary structures: Si( states )?ri6ona, >lorida, 2ndiana,
Missouri, %evada and Ftah- have statutes that re:uire or $rovide 3nancial
incentives 'or districts to ado$t career ladder salary structures. /ennessee
and /e(as o$erated $rograms in the !+,.s and !++.s.
Per'ormance $ayD >lorida, Kentucky and %orth Carolina o$erate
$er'ormance $ay $rograms that $rovide salary bonuses related to student
$er'ormance. /he awards distributed by the $rograms in Kentucky and
%orth Carolina are schoolbased, whereas >lorida#s $rogram links an
individual teacher#s award to the $er'ormance o' his or her students.
3
Minimum salary schedule states are ?L, ?G, C?, 8<, H?, =2, 28, 2L, 2%, 2?, KI, L?, M<,
MS, MO, %J, %M, %C, %8, O=, OK, P?, SC, /%, /K, 4?, and 4L. /hey are established
annually in 8<, H?, =2, KI, MS, %C, SC, /%, /K, and 4?. Local addons are restricted in
?L, MS, /%, and 4?. Minimums are binding in ?L, =2, MS, %C, OK, SC, /K, 4?, and 4L.
5
?s is evidenced by the low :uantity o' states with $olicies encouraging
alternative salary schedules, out$utbased salary schedules are still 'ar less
common than the more standard e($erience and educationbased
schedules. Pro$onents o' these out$utbased $olicies contend that they will
attract more highly :uali3ed $eo$le into teaching by $romising them
rewards 'or a 0ob well done and will encourage such teachers to remain in
teaching because they will be rewarded 'or success as measured by a
s$eci3c out$ut.
Recruitment, Retention and Assignment Incentives
*asic salary schedules are not the only monetary com$ensation tool states
have to recruit and retain talented teachers. States have also ado$ted a
variety o' incentive $olicies to attract talented individuals to the teaching
$ro'ession, to retain them, and to encourage them to acce$t assignments in
$articular highneed sub0ect areas or schools. /hese incentives come in
'orms as varied as monetary rewards )bonuses- to housing sti$ends and
loan 'orgiveness $rograms.
/he incentive systems ado$ted by states can be characteri6ed by their
breadth, or how many stages o' a teacher#s career they target. 4e de3ne
3ve career stages that teachers may $ass through 'rom college to
retirementD
!. Period o' teacher $re$aration to initial certi3cationE
". Period 'ollowing this initial $re$aration as the teacher begins as the
teacher o' recordE
M. Period o' additional education as the teacher com$letes re:uirements
'or an additional credential, endorsement or certi3cationE
N. Period 'ollowing the com$letion o' additional training and@or the
recei$t o' an advanced credentialE
7. Period o' retirement eligibility.
States can im$lement di5erent ty$es o' incentives at di5erent stages o'
teachers# career cycles to achieve their $articular needs. 2ncentives
targeted at distinct stages o' teachers# career cycles will likely a5ect the
su$$ly o' teachers and $ossibly the :uality o' teachers in di5erent ways.
/hose that target the 3rst two and the 3nal stages o' teachers# careers may
increase states# su$$lies o' teachers, whereas incentives aimed at the third
and 'ourth stage o' teachers# careers may im$rove the skills and :uality o'
states# e(isting teaching 'orces. /able ! outlines the $otential labor market
e5ects o' incentives targeted at di5erent stages o' teachers# careers and
e(am$les o' the ty$es o' incentive $olicies states may use to recruit and
retain teachers.
6
Ta'le 1: ()ample State *ncenti+es to Recruit an# Retain Teachers
throughout Their Careers
1 2 & , %
C
a
r
e
e
r
S
t
a
g
e
2nitial
teacher
$re$aration
Post
com$letion o'
initial teacher
$re$aration
?dditional
training
Postadditional
@ advanced
training or
credential
?t or %ear
Getirement
eligibility
-
o
t
e
n
t
i
a
l
.
a
'
o
r
M
a
r
/
e
t
(
0
e
c
t
s
2ncrease
teacher
su$$ly by
enticing
$otential
teachers to
teach within
the state
2ncrease
teacher su$$ly
by enticing
$otential
teachers to
teach within
the state
2m$rove skills
and :uality o'
e(isting labor
'orce
2m$rove skills
and :uality o'
e(isting labor
'orce
2ncrease
teacher su$$ly
by enticing
retirement
eligible
teachers to
continue
working in
schools or
decrease
su$$ly o' older
teachers by
o5ering
incentives 'or
early
retirement
(
)
a
m
p
l
e
*
n
c
e
n
t
i
+
e
s
State
3nanced
'orgivable
grants and
loans
State
3nanced
scholarshi$s
?ssum$tion
o' 'ederal
loans
Salary
bonuses
=ousing
assistance
/uition
assistance 'or
teachers to
obtain
additional
education@
certi3cation
Salary
bonuses 'or
%ational
*oard
Certi3ed
teachers
Salary
bonuses 'or
s$eciali6ed
teachers
Parttime
consulting@
teaching
$rograms
Continued
service with
no loss o'
retirement
bene3ts
States# incentive systems can also be distinguished 'rom one another by the
degree to which they target s$eci3c subgrou$s o' teachers. Many incentives
are awarded only to teachers who teach sub0ect areas with critical
shortages )such as mathematics, science and s$ecial education- or di5icult
tosta5 schools )such as low$er'orming schools or schools serving high
concentrations o' students in $overty-. Others are 'urther targeted to
teachers o' critical shortage sub0ects in di5iculttosta5 schools. ?lthough
eligibility 'or some incentives are restricted to s$eci3c characteristics o' the
teacher )such as teachers o' minority racial or ethnic grou$s-, we 'ocus our
attention on the targeting to characteristics o' the 0ob assignment.
$pproaches Ta%en $cross the Nation
7
/here is considerable variation among the 7. states and the 8istrict o'
Columbia in the breadth o' their incentive systems. /he ma0ority o' states
3nance incentive systems that target more than one stage o' a teacher#s
career. /he most common incentive system can be 'ound in !M states and
includes $olicies aimed at two o' the 3ve stages. Only two states, ?ri6ona
and %ew =am$shire, o5er no state3nanced incentives to attract or retain
teachers. >igure M outlines the distribution o' the breadth o' state incentive
systems.
Figure &: Num'er o1 Career Stages Targete# 'y State *ncenti+e
-rograms
,
4
States with 6ero are ?O and %=E with one, 2%, M%, M/, %<, %J, %M, OG, P?, S8, and /%E
with two, CO, 28, KS, M<, M2, MO, %L, O=, G2, F/, L/, 42, and 4IE with three, ?L, ?K, C/,
8<, 8C, =2, OK, /K, L?, 4?, and 4LE with 'our, C?, H?, 2L, 2?, KI, MS, %C, %8, %I, and
SCE and with 3ve, ?G, >L, L?, M8, and M?.
8
Figure ,: Fre2uency o1 Targete# Recruitment Retention an#
3ssignment *ncenti+es
Gecruitment, retention and assignment incentives that may result in an
increase in the su$$ly o' teachers are somewhat more common than those
that may im$rove the :uality o' the e(isting labor 'orce both across and
within states. >orty'our states have at least one $olicy targeting su$$ly
)i.e., the 3rst, second and@or 3'th career stages- while M+ states have an
incentive targeting the :uality o' current teachers )i.e., the third and@or
'ourth career stages-. ?dditionally, states are more likely to o$erate multi$le
$rograms that are likely to increase su$$ly than they are to o$erate
$rograms aimed at im$roving the :uality o' current teachers. 2ncentives
most 're:uently $rovide 3nancial su$$ort to individuals during their initial
or additional teacher $re$aration. /he least common ty$e o' incentive is
that aimed at retired or soontoberetired teachers. Most o' these $rograms
)o'ten re'erred to as 8GOP 1 8e'erred Getirement O$tion Program- $rovide
incentives 'or teachers to $ost$one their retirement. >igure N outlines the
're:uency with which states o5er incentives targeted at the di5erent stages
o' teachers# careers.
2ncentives o5ered through these state systems can also be grou$ed into 3ve
categoriesD
/uition and 'ees 'or teacher trainingE
Loan $ayment assum$tion 'or teachersE
=ousing bene3tsE
Post$oned retirement incentivesE and
Salary su$$lements.
9
Figure %: Fre2uency o1 State -ro+ision o1 *ncenti+e Type
%
>igure 7 outlines the 're:uency with which states $rovide each kind o'
incentive. 2t shows that the most $o$ular incentive ty$e is tuition or 'ee
assistance 'or teacher training, with N9 states $roviding an incentive o' this
sort. /he ne(t most $o$ular ty$e o' incentive is the $rovision o' salary
su$$lements. /hirtythree states o$erate a salary su$$lement $rogram with
the most common ty$e making awards to %ational *oard Certi3ed /eachers
)%*C/s-. /hirtyseven states and the 8istrict o' Columbia have some sort o'
incentive 'or teachers to become certi3ed by the %ational *oard 'or
Pro'essional /eacher Standards )%*P/S-, or to attract teachers who already
are so certi3ed.
2n addition to the targeting o' incentives to a $articular career stage,
eligibility 'or many incentives are 'urther restricted to teachers in s$eci3c
sub0ect areas and@or schools. States are more likely to restrict eligibility to
teachers o' critical shortage sub0ect areas )M; states- than to hardtosta5
schools )"9 states-. States are least likely to o5er incentives that restrict
eligibility to teachers o' critical shortage sub0ect areas within hardtosta5
schools, although 9 states do so. >igure ; shows how states restrict
$articular incentive ty$es to certain kinds o' teachers.
5
States available u$on re:uest.
10
Figure : Summary o1 4o' 3ssignment Targeting o1 State
Recruitment, Retention an# 3ssignment *ncenti+es, 200%
Teacher Retirement Policies
/he third $art o' teachers# total com$ensation $ackages is 'ringe bene3ts.
>ringe bene3ts encom$ass nonsalary $erks such as $aid holidays, vacation,
health insurance, and teacher retirement $olicies. Such Ae(traB bene3ts
com$rise a substantial $ortion o' teacher com$ensation 1 "; $ercent
according to one estimate )Ledder, "..M-. Getirement $olicies cover a
signi3cant amount o' this $ercentage. <ach state o$erates a retirement $lan
that $rovides bene3ts such as service and disability retirement and death or
survivor bene3ts 'or eligible $ublic school teachers. Perha$s most
im$ortantly, retirement bene3ts $rovide teachers with $ensions and@or
other 'unds o5 o' which they can su$$ort themselves once they have retired
'rom the work'orce. /hese retirement bene3ts are distinct 'rom the
retention incentives 'or retirementeligible teachers discussed in the
$revious section o' this $olicy brie'. 4hereas those incentives were geared
towards kee$ing retirementeligible teachers working in the school system,
the retirement bene3ts discussed here aim to retain teachers throughout
their careers until they are eligible 'or retirement. ?lthough retirement
$lans may in&uence a state#s ability to recruit teachers, they likely yield
greater in&uence on teacher retention as teachers remain in the classroom
long enough to 'ul3ll the service re:uirement 'or retirement bene3ts.
11
State $lans di5er on many key as$ects that may in&uence teachers#
termination and retirement decisions. 4hile state retirement bene3t
$olicies aim to retain talented teachers in the work'orce as long as $ossible,
states are also 'acing severe cost $ressures that are causing them to
diminish and change some o' their retirement $rograms. >or one, some
states are im$lementing $olicies that $rovide incentives to teachers who
choose to retire before retirement age, thus allowing states to re$lace
e($ensive more e($erienced teachers who are 'urther down the salary
schedule with newer teachers who demand lower salaries according to the
standard salary scale. /he need to contain system costs has also led states
to shi't 'rom de3ned bene3t to de3ned contribution hybrid $rograms, as
well as to alter the mandatory contribution rates 'or em$loyees and
em$loyers, service re:uirement 'or vesting, service and age eligibility
re:uirements 'or 'ull retirement bene3ts, the retirement bene3t calculation
'ormula, and retiree health insurance $remiums and coverage.
/he key as$ects o' retirement bene3ts that are addressed by state $olicies
includeD
/y$e o' $lan )8e3ned *ene3t vs. 8e3ned Contribution vs. =ybrid @
Combination-E
Plan membershi$E
Mandatory em$loyee contribution ratesE
Mandatory em$loyer contribution ratesE
Lesting service re:uirementE
Service years eligibility re:uirementE
?nnual Getirement *ene3t Calculation )including 3nal salary
calculation and service credit $ercentage-E and
=ealth insurance coverage.
$pproach Ta%en by &tates across the Nation
12
Figure ": Types o1 -lans Sponsore# 'y State Teacher Retirement
Systems, 200%

Plan /y$eD <very state#s retirement system o5ers a de3ned bene3t $lan or a
$lan with a de3ned bene3t com$onent. /he vast ma0ority o' states o$erate
de3ned bene3t )i.e., $ension- $lans whereby the retirement bene3t is $re
de3ned rather than determined directly by the amount o' contributions the
em$loyee makes. Some states have added de3ned contribution com$onents
)e.g., N.!)k-, N.M)b-, etc.- to their systems, an action likely driven in large
$art by the need to control the burgeoning costs o' su$$lying $ensions to
longerliving bene3ciaries. 8e3ned contribution com$onents are similar to
the retirement savings $lans o'ten 'ound in the $rivate sector, and have the
e5ect o' shi'ting the burden o' $roviding retirement bene3ts 'rom the state
to individual em$loyees by directly linking bene3t levels to the amount
contributed by the em$loyee. ?s is shown in >igure 9, nine states o$erate
$lans that include an o$tional de3ned contribution com$onent whereby
teachers can augment their monthly retirement bene3t. Ohio, Oregon and
4ashington o$erate hybrid retirement $lans in which em$loyee
contributions are 'ed into the de3ned contribution com$onent and em$loyer
contributions 3nance the de3ned bene3t com$onent.
Plan Membershi$D Plan membershi$ varies across states with regard to both
the ty$es o' em$loyees and em$loyers eligible 'or $artici$ation. 2n ", states
teachers belong to retirement systems in which membershi$ is restricted to
educational em$loyees. /eachers in other states are commingled with other
$ublic em$loyees. ?ll districts $artici$ate in their state retirement $lan 'or
teachers with the e(ce$tion o' eight states. 2n these states s$eci3c districts
)usually the largest districts- are ty$ically e(cluded 'rom membershi$
because o' $ree(isting districtlevel retirement systems already in $lace at
the time the state system was 'ormed. /he e(ce$tion is ?ri6ona, in which
not all $ublic and charter school districts have elected to $artici$ate in the
state system.
6
=ybrid or de3ned contribution states are 2%, O=, OG, 4?, and 4L. 8e3ned bene3ts with
o$tional de3ned contribution com$onent states are C?, CO, C/, 8C, >L, 28, SC, S8, and F/.
13
<m$loyee ContributionsD Mandatory em$loyee contribution rates vary
signi3cantly across states as well as within states across teachers and
$lans. <m$loyee contribution rates range 'rom ... $ercent in seven states
to !7.. $ercents 'or some members o' one o' 4ashington#s hybrid $lans.
>ourteen states have a schedule o' mandatory rates 'or teachers
di5erentiated according to retirement $lan or when they enrolled in the
state retirement system.
<m$loyer ContributionsD Mandatory em$loyer contribution rates e(hibit
large variation across states. /hey range 'rom ..7, $ercent in 2llinois to
";.. $ercent in ?laska. Henerally, em$loyer contribution rates are higher
than em$loyee rates. <m$loyer rates also e($erience more variability within
state 'rom year to year than do em$loyee rates. ?lmost all em$loyee rates
are established through statute, whereas more than hal' o' all em$loyer
rates are established 'ollowing regular actuarial reviews o' the retirement
$lans# abilities to $rovide current and $ro0ected bene3ts.
2n addition to mandatory contributions to their state retirement system,
teachers in M; states also have 'ederal social security $ayroll ta(es )i.e.,
Old?ge, Survivor and 8isability 2nsurance O?S82- deducted 'rom their
$aychecks. /eachers are e(em$ted 'rom O?S82 ta(es in !7 states.
9

=owever, these teachers may still be eligible 'or Social Security bene3ts
through other em$loyment or their s$ouse. /here are two 'ederal $rovisions
which may reduce their Social Security bene3tsD )!- the 4ind'all
<limination Program )4<P- and )"- the Hovernment Pension O5set )HPO-.
/he 4<P a5ects teachers who receive both a $ension 'rom a state
retirement $lan and Social Security bene3ts earned through covered
em$loyment. 2n "..7 the ma(imum reduction was PM!M $er month )or
PM,N7; annually-. /he HPO a5ects teachers who receive both a state
$ension and social security bene3ts as a s$ouse, 'ormer s$ouse, widow or
widower. Fnder HPO, the Social Security bene3t is reduced by twothirds
the state $ension.
4hether or not teachers $ay O?S82 ta(es a$$ears to be correlated with
mandatory em$loyee and em$loyer contribution rates 'or state retirement
systems. ?lmost all the states in which teachers are not charged O?S82
ta(es have mandatory em$loyee and em$loyer contribution rates higher
7
/here are 'our states in which some teachers $ay O?S82 ta(es and others do not )M8,
M%, MO and /K-. /his is most o'ten because a state has changed its $olicy regarding
whether or not teachers $ay O?S82 ta(es such that teachers hired be'ore a certain date 'all
into one system and teachers hired a'ter that date 'all into another. 4e make distinctions
between O?S82 and nonO?S82 states based on the $olicies in $lace 'or the most recently
hired teachers. Some states o$erate two retirement systems, one o' which re:uires
teachers to $ay O?S82 ta(es while the other does not. 4e classi'y states such as these
according to the system to which the ma0ority o' teachers belong.
14
than the ;.". $ercent O?S82 rate. ?dditionally, they have the highest rates
o' all states. /his is likely because teachers who do not earn social security
bene3ts 'rom their em$loyment as teachers must rely more on their state
bene3t to su$$ort them during retirement.
Lesting Service Ge:uirementsD ? key as$ect o' state retirement systems is
the service re:uirement 'or vesting. 4hile teachers are immediately vested
in the de3ned contributions $ortions o' $lans, they must serve a set number
o' years be'ore they become vested in the de3ned bene3t as$ect o'
retirement $lans. Once vested, a teacher is eligible to receive his or her
retirement bene3t. ? vested teacher is able to leave the classroom but
$ost$one drawing a retirement bene3t until years later. Many states re'er to
this as a de'erred retirement bene3t. ?s is shown in >igure ,, the ma0ority
o' states )M"- 'ully vest teachers a'ter 3ve years o' creditable service.
/eachers in another !M states must teach 'or ten years be'ore being 'ully
vested 'or retirement bene3ts.
Figure 5: Ser+ice Re2uirements 1or 6esting in State Teacher Retirement
Systems
5

2n a hand'ul o' states, nonvested teachers are eligible 'or retirement
bene3ts once they attain a certain age. >or e(am$le, an active teacher in
%ew =am$shire with less than the !. years o' service re:uired to vest
retirement bene3ts can retire with bene3ts u$on turning ;. years old.
8
>or ?K, ?O, =2, 2?, 28, 2%, M<, O=, OG, /%, 4?, 4L, and 42 vesting eligibility
re:uirements vary across grou$s o' teachers, $lans or $lan com$onents. 2%, O=, OG, 4L,
and 42 have $lans with immediate vesting eligibilityE O=, with one yearE M%, %8, and S8,
with three yearsE 2?, MS, /%, and F/, with 'our yearsE ?K, ?O, ?G, C?, CO, 8<, 8C, =2, 2L,
KI, L?, M<, M8, MO, M/, %<, %L, %M, %I, %C, O=, OK, OG, P?, SC, /%, /K, L/, L?, 4?,
4L, and 42, with 3ve yearsE >L, with si( yearsE ?K, with eight yearsE ?L, C/, H?, =2, 2%, KS,
M<, M?, M2, %=, %J, G2, 4?, with ten yearsE and ?K and 4L with !" or more years.
15
Service Iears <ligibility Ge:uirementsD ?lthough teachers are vested a'ter a
set number o' years, as detailed in >igure ,, each state has established
se$arate eligibility re:uirements 'or the various bene3ts they o5er
including service, early retirement and disability retirement. 4e restrict our
attention here to 'ull service retirement bene3ts. ? very common criteria by
which teachers :uali'y 'or 'ull retirement bene3ts is the AK years and outB
rule whereby the teacher can retire as soon as he or she accumulates a
s$eci3c number o' years o' service regardless o' his or her age. 2n other
words, although a teacher may be vested in his retirement bene3ts, he may
not wish to retire at that vesting $oint because he is not yet eligible 'or
states# 'ull $rovision o' service retirement bene3ts. >igure + outlines states#
AK years and outB eligibility re:uirements 'or 'ull retirement bene3ts.
/he target number o' years o' service ranges 'rom ". years )M states- to M7
years )7 states-. /he most common re:uirement, established in !9 states, is
M. years o' service. Similarly, teachers can :uali'y 'or 'ull retirement
bene3ts in ten states once their age and years o' service sum to a minimum
amount 1 ty$ically ,. or ,7. Seventeen states have no AK years and outB
$olicy.
2t is im$ortant to note that all states credit only those years o' service
during which the teacher and@or the em$loyer made contributions to the
retirement system. /eachers are able to $urchase additional years o'
service, however, and are also able to remove their own contributions,
usually with accumulated interest. /here'ore, it is $ossible 'or a teacher to
use $ersonal contributions 'rom one state#s retirement system to buy into
another state#s retirement system.
Figure 7: 89 :ears an# ;ut< (ligi'ility Re2uirement 1or Full
Retirement =ene>ts, 200%
7
9
/he $olicy a$$lies to some but not all teachers in CO, 8C, L?, M?, %I, O=, OG, 4?, and
4L. ". year states are ?K, L?, and M?E "7 year states, ?L, M<, MS, M/, and %ME "9 or ",
year states, ?G, KI, G2, and SCE M. year states are CO, 8<, 8C, >L, H?, L?, M8, M?, MO,
%C, O=, OG, /%, F/, L/, and 4?. M7 year states are CO, C/, %I, P?, and 4L. 2n SC,
teachers must have at least 7 years o' earned service rather than $urchased service. 2n
8C, these teachers must have 7 years o' creditable service as a 8CPS teacher. 2n
Connecticut, at least "7 years o' the M7 years re:uired must have been rendered in
Connecticut. 2n ?O, CO, 2?, KS, M%, MO %<, %8, %M, OK, /K, and 4I teachers are eligible
'or 'ull retirement bene3ts i' the sum o' their age and years o' creditable service is at least
some amount, ty$ically ,. or ,7.
16
?nnual Getirement *ene3t CalculationD ?lmost every teacher#s 'ull )as
o$$osed to early- retirement bene3t is calculated using a three element
'ormula based on )!- years o' service, )"- 3nal salary, and )M- a service
credit $ercentage. ?lthough A3nal salaryB is always calculated as the
highest average salary earned over some $eriod o' time, there is substantial
variation across states in the number o' years included in the calculation o'
this average. >igure !. outlines the variations across states in the
de3nitions o' 3nal salary.
States also di5er in the service credit $ercentage included in retirement
bene3t calculations. ? service credit $ercentage indicates the $ercent o'
3nal salary that a retiree receives as a retirement bene3t 'or each year o'
service. /his $ercentage is also titled Abene3t 'actor,B Aage 'actor,B
Amulti$lier,B and Abene3t rate.B /he ma0ority o' states# retirement bene3t
calculations use service credit $ercentages between one and two $ercent,
although this $ercentage is as high as M.9 $ercent 'or some teachers in Ohio
and less than one $ercent 'or some teachers in Maryland, Massachusetts
and /ennessee.
Figure 10: De>nition o1 Final Salary ?se# in Retirement =ene>t
Calculations, 200%
10
10
?O, C?, KS, KI, M8, M2, OK, F/, and 4? are in multi$le grou$s. One year includes C?E
two consecutive years, H? and 4?E three years, ?L, ?K, CO, C/, 8<, =2, 2?, KS, KI, M<,
M8, M/, %=, %J, %I, %8, O=, OK, P?, SC, F/, and 42E three consecutive years, ?O, C?, 8C,
L?, M8, M?, M2, MO, %<, %L, OG, G2, S8, L/, L?, and 4IE 'our years, KS and MSE 'our
consecutive years, 2L and %CE 3ve years, ?O, >L, 2%, KI, /K, F/, and 4LE 3ve consecutive
years, M2, M%, %M, OK, /%, and 4?E and other, 28.
17
4e use Maine#s retirement bene3t calculation as an e(am$le o' how states
determine teachers# retirement bene3ts based on years o' service, 3nal
salary and service credit $ercentage. 2n Maine, a teacher#s A3nal salaryB is
based on the average o' his or her three highestearning years o' service
and the service credit $ercentage is ".. $ercent. 2' a hy$othetical teacher
has worked M. years in Maine $ublic schools and the average o' her three
highestearning years o' teaching is P;.,..., thenD
Final salary x :ears ser+ice x Ser+ice cre#it percentage Q 3nnual
Retirement =ene>t
@0,000 x &0 years x 2A0B Q @&,000C
year
/he Maine teacher#s re$lacement rate with M. years o' service is ;.
$ercent, bringing the total annual retirement bene3t to PM;,... $er year.
/he calculations are not always this straight'orward, as in most states the
service credit $ercentage varies across retirement $lans, years o' service,
and@or teacher#s age at retirement.
/able " summari6es estimated 3nal salary re$lacement rates. Our
calculations are based on each state#s service credit $ercentage schedule
and are a$$licable 'or a teacher 3rst em$loyed in the "..7.; school year.
4e assume that the teacher retires at the age o' 7,. 2n other words, we
assume that a teacher begins receiving a bene3t 'rom the state retirement
$lan at the age o' 7,. 4e choose the age o' 7, because many, i' not most,
teachers retire be'ore the o5icial retirement age o' ;7. ?s a result, many o'
the estimated re$lacement rates do not assume 'ull retirement bene3ts
because states im$ose early retirement $enalties on retirees who retire
18
$rior to age ;7 and@or $rior to com$leting a minimum number o' service
years. ?ssuming teachers retired at ;7 would have resulted in 'ull
retirement bene3ts calculations in all states. =owever, because many
teachers retire $rior to ;7 years o' age, we believe that assuming 7, as an
average retirement age $rovides greater and more relevant in'ormation.
Our estimates also assume that all years o' e($erience were either rendered
within the state#s retirement system )or were credited to the retirement
system- and that the current retirement bene3t 'ormulas continue to a$$ly
when the teacher retires.
Ta'le 2: 3+erage (stimate# Final Salary Replacement Rates across
State Retirement -lans 1or a Teacher First (mploye# in 200%!0,
Retiring at 3ge %5, 200%
a
Type o1 Retirement -lan
:ears o1 Cre#ite# ()perience
20
:ears
DBE
2%
:ears
DBE
&0
:ears
DBE
&%
:ears
DBE
?ll de3ned bene3t only $lans
b
M".N NM.; 7,.M ;+.!
?ll Plans where /eachers 8o %ot Contribute to
Social Security
M,.N 7".N ;;., ,...
?ll Plans where /eachers Contribute to Social
Security
"+.+ N..M 77.N ;7.N
8i5erence *etween Hrou$s ,.7 !".! !!.N !N.;
a
4e e(clude states 'rom the overall averages re$resented in /able " i' teachers in those states are unable to draw
retirement bene3ts at age 7, with that s$eci3ed number o' years o' service. /eachers in ?L, 8C, H?, L?, MS, %J,
SC and L? are unable to draw retirement bene3ts at age 7, with ". years o' service. 4e were unable to calculate
re$lacement rates 'or OG and P? 'or teachers retiring at 7, with ". years o' service. /eachers in 8C and 4L are
unable to draw retirement bene3ts at age 7, with "7 years o' service. 4e were unable to calculate re$lacement
rates 'or OG 'or teachers retiring at 7, with "7 years o' service.
b
/his e(cludes three hybrid $lans )2%, O= and 4?- 'or which the re$lacement rate could only be estimated 'or
the de3ned bene3t com$onent.
?SSFMP/2O%SD Calculations assume the 'ollowingD )!- teacher 3rst em$loyed 'or the "..7.; school year, )"-
teacher retires at age 7, but could have sto$$ed teaching $rior to age 7,, and )M- current bene3t calculation
'ormulas remain constant over time.
%O/<D /he averages in this table are based on the estimated re$lacement rates 'or all retirement $lans that were
o$en to teachers 3rst em$loyed in "..7.; with a 'ew e(ce$tions. 4e were unable to estimate re$lace rates 'or
the Maryland %onContributory and /ennessee $lans as they de$end on how a teacher#s 3nal salary interacts with
the Social Security 2ntegration Limit.
?verage re$lacement rates range 'rom slightly more than M. $ercent 'or
teachers with ". years o' service to almost 9. $ercent 'or those with M7
years o' service. 2n other words, teachers who remain in the classroom
longer receive a greater $ro$ortion o' a higher salary )as salaries increase
over time according to classroom e($erience- u$on their retirement. State
$olicymakers may consider that this nearly N. $ercentage $oint di5erence
will in&uence teachers to remain in the classroom longer than they might
without the $romise o' an increased retirement bene3t. =owever, given that
teachers who retire later necessarily collect their $ensions 'or a shorter
$eriod o' time, it is uncertain whether or not teachers who retire later
actually receive greater bene3ts. 8e$ending on how states de3ne their
re$lacement rates and the service years at which di5erent rates a$$ly to
retiring teachers, state $olicies can serve either to $rovide incentives to
19
teachers to stay in the classroom 'or longer $eriods o' time, increasing
states# su$$lies o' e($erienced teachers, or to encourage teachers to leave
the classroom be'ore retirement age, creating s$ace 'or new hires and@or
reducing the costs o' $aying the relatively high salaries o' older, more
e($erienced teachers.
4hether or not a state#s teachers contribute to the 'ederal Social Security
system through O?S82 $ayroll ta(es is related to average re$lacement
rates. =igher average re$lacement rates are 'ound in states where teachers
do not $ay O?S82 ta(es than in states where they do because teachers rely
solely on their schoolbased retirement 'unds in these states rather than on
a combination o' schoolbased and Social Security retirement 'unds. /he
di5erence ranges 'rom roughly nine $ercentage $oints at ". years o'
service to almost !7 $ercentage $oints at M7 years o' service. /he higher
re$lacement rates hel$ e($lain the higher mandatory contribution rates in
these states noted above.
=ealth 2nsurance CoverageD ?s the costs o' healthcare continue to soar,
health insurance coverage increases in value to retirees, es$ecially those
not yet eligible 'or Medicare. States di5er in their a$$roach to $roviding
health insurance to their retired teachers. /eachers in at least "! states can
elect to continue coverage through their 'ormer em$loyer should the
em$loyer make it available. 8etails o' this coverage are generally sub0ect to
local collective bargaining agreements i' $resent. 4e were unable to
determine the e(tent to which districts in these states $rovide retiree health
bene3ts. Other states allow eligible retirees to $urchase membershi$ in
either a health $lan overseen by the retirement system )!N states- or a
health $lan overseen by another state agency )!+ states-. >igure !! outlines
the di5erent ways in which retired teachers are $rovided with health
insurance.
20
Figure 11: -ro+i#ers o1 Fealth *nsurance to Retire# Teachers, 200%
11
Monthly $remiums 'or health insurance coverage vary dramatically across
states and within states across insurance $lans and retiree years o' service.
?lmost all states o5er lower monthly $remiums to retirees enrolled in
Medicare with most re:uiring retires to be enrolled in both Medicare Parts
? and *. 2n res$onse to the recent im$lementation o' Medicare Part 8
)$rescri$tion coverage-, states are revam$ing their Medicare su$$lemental
insurance $lans to $rovide even lower $remiums 'or retirees no longer
needing $rescri$tion coverage. ?t least "M states subsidi6e a $ortion o' the
monthly $remiums.
Evidence of Efectiveness of These Policies
?ll o' the elements o' com$ensation $ackages discussed in this $olicy brie'
can be tied to im$ortant labor market outcomes, which can be categori6ed
into the recruitment o' teachers, the retention o' high:uality teachers
within the state, and the e5icient release o' retirementeligible teachers.
States may im$lement as$ects o' com$ensation $ackages in order to
achieve certain outcomes. Maintaining a high:uality teaching 'orce also
has $roven ties to im$roving student achievement, a clear goal o' state
governments, es$ecially in this era o' accountability.
=owever, there are still very 'ew studies 'ocusing on how well many o' the
$olicies discussed in this $olicy brie' achieve the states# stated goals o'
11
>ormer em$loyer states include C?, C/, 8C, >L, L?, M<, M8, M?, M2, M%, MO, M/, %L,
%=, %I,
OK, OG, G2, F/, L?, and 4I. State health $lan states include ?K, ?G, H?, =2, 2L, KS, KI,
MS, %L, %J, %M, %C, %8, O=, SC, /%, 4?, 4L, and 42. Getirement system states include
?L, ?O, CO, C/, 8<, 2%, KI, MS, OG, P?, G2, /K, F/, and L/. Fncertain states are 28, 2?,
%<, and S8.
21
maintaining a high:uality teaching 'orce and increasing student
achievement. /able M $rovides a brie' summary o' the current evidence o'
e5ectiveness attributed to state com$ensation $olicies. 2t shows that little
work has been done e(amining the e5ectiveness o' com$ensation $olicies in
achieving states# goals o' recruiting, retaining and e5iciently releasing a
high :uality teaching 'orce and o' im$roving student achievement.
Ta'le &: Summary o1 Stu#ies an# (+i#ence on State Compensation
-olicies, 200%
Speci>c
-olicy
-ossi'le
;utcome
s
Stu#ies (+i#ence o1 (0ecti+eness
S
a
l
a
r
y

S
c
h
e
#
u
l
e
Minimum
Salary
Schedule
Gecru
it
2
n
c
r
e
a
s
e

S
t
u
d
e
n
t

?
c
h
i
e
v
e
m
e
n
t
*oal )"..7- 1 /K, SC Schools res$ond to increase in
statemandated minimum salaries
by shrinking teaching sta5
Out$ut
*ased
Salary
Schedules
Gecru
it
Getai
n
8ee and Keys )"..N-
1 /%
Lavy )"..N- 2srael
Ladd )!+++- 1 8allas
<berts, =ollenbeck,
and Stone )".."- 1
M2
Career Ladder $rogram success'ul
at identi'ying e5ective teachers
Per'ormance $ay led to increased
student achievement
Merit $ay reduced high school
dro$outs but increased $ercentage
o' students who 'ailed
*
n
c
e
n
t
i
+
e

-
r
o
g
r
a
m
s
/uition
Su$$ort
Gecru
it
%one %o Proo'
Loan
?ssum$tio
n
Gecru
it
%one %o Proo'
=ousing
2ncentive
Gecru
it
Getai
n
%one %o Proo'
Post$oned
Getirement
2ncentive
Getai
n
%one %o Proo'
>orgivable
Loans
Gecru
it
Getai
n
SC<OC )"..N- 1SC
%o strong evidence o' success or
'ailure
Salary
Su$$lemen
ts
Gecru
it
Getai
n
Churchill et al
)"..M- 1 M?
>owler )"..M- 1 M?
Clot'elter, Ladd and
Ligdor )"..;- 1 %C
Holdhaber and
?nthony )"..7- 1 %C
%*P/S
Some $ositive e5ects on retention,
but di5icult to o$erate and su5er
early shutdown
%*P/S certi3cation somewhat
success'ul at identi'ying e5ective
teachers
Com$leting %ational *oard
assessment has no im$act on
student test score gains
22
T
e
a
c
h
e
r

R
e
t
i
r
e
m
e
n
t
-
o
l
i
c
i
e
s
2ncrease in
retirement
bene3ts
Gelea
se
>urgeson, Strauss
and Logt )"..;- 1 P?
2ncreases in retirement bene3ts
increase retirement rates among
retirementeligible
&alary &chedules:
One o' the 'ew education $olicy areas that bene3ts 'rom a si6eable body o'
research is the e5ect o' salaries on teacher recruitment and retention and
student achievement. /his literature can be s$lit into three grou$s. /he bulk
o' the research assesses the e5ects o' salary levels or the salaries relative
to those o' other $ro'essions )i.e., o$$ortunity costs-. Studies o' the e5ects
o' out$utbased $ay schemes such as career ladders and merit $ay 'orm the
second grou$. >inally, we know o' only one study that e(amines the e5ect o'
minimum salary schedules like those discussed above.
Mandated Minimum SalariesD 2n the one study o' this $o$ular $olicy, *oal
)"..7-, e(amines the e5ects o' mandated minimum salaries on the demand
'or teachers using the minimum salaries in two nonunion states, South
Carolina and /e(as. =e 3nds that schools res$ond to an increase in state
mandated minimum teacher salaries by shrinking their teaching sta5 )a
shortrun demand elasticity o' a$$ro(imately .."-. *oal )"..7- tells us that
minimum salary schedules may not actually recruit more teachers to the
work'orce because districts and schools may not be able to hire as many
teachers at higher salaries as they would at lower nonmandated salaries.
=owever, we do not learn how these minimum salary $olicies a5ect teacher
:uality. /here is also no research that we know o' assessing the im$act o'
statelevel salary schedules on student achievement.
Out$ut*ased Salary StructuresD Studies o' out$utbased $ay structures
o'ten 'ocus on their e5ects on student achievement and 3nd some $ositive
e5ects, but not without costs. 8ee and Keys )"..N- 'ound that /ennessee#s
career ladder $rogram was success'ul at identi'ying e5ective teachers. Lavy
)"..N- 'ound $ositive student achievement e5ects 'or an 2sraeli cash bonus
$rogram and Ladd )!+++- 'ound $ositive e5ects 'or a schoolbased award
$rogram in 8allas. <berts, =ollenbeck and Stone )".."- looked at another
merit $ay $rogram in Michigan that was not targeted at student
achievement and 'ound it reduced the number o' high school dro$outs but
increased the $ercentage o' students who 'ailed.
23
4hile the results o' these studies seem to su$$ort the argument that merit
$ay can im$rove student achievement, there also a$$ear to be substantial
costs to many o' these systems which may or may not outweigh the bene3ts.
>irst, it is di5icult to structure a system that $rovides incentives to more
than a 'ew teachers. /he studies above 3nd that teachers who with a bit o'
e5ort could get a reward do o'ten $ut in that e5ort and im$rove student test
scores, but that most teachers are so unlikely to get it )or alternatively so
likely to get it- that they do not change their behavior. Pro$onents o' merit
systems argue that even i' the systems do not im$rove e5ort they will
bene3t schools because they will attract into teaching those individuals who
believe they will bene3t 'rom such a system. Fn'ortunately, there is little
evidence to su$$ort or re'ute this argument.
2n addition, teachers tend not to su$$ort merit$ay systems and encourage
their re$resentative union not to as well. /hese $rograms can increase the
stress 'elt by teachers and can lead to unintended behaviors such as
cheating, 'ocusing on testtaking skills instead o' content, and narrowing o'
the curriculum. Overall, it a$$ears di5icult to design e5ective $rograms,
though *allou and Podgursky )"..!- $oint out that they may be easier to
im$lement in smaller organi6ations. >or a 'urther discussion o' the
advantages and disadvantages o' meritbased $ay see Lavy )'orthcoming-.
'ecruitment, 'etention and $ssinment (ncenti)es
8es$ite the $o$ularity o' recruitment, retention and assignment incentives,
there is s$arse research on the e5ects o' these incentive $olicies on the
recruitment, retention and assignment o' teachers in general, and in critical
shortage areas and di5iculttosta5 schools in $articular. 4e 'ound no
evaluations o' the e5ectiveness o' tuition su$$ort, loan assum$tion or
housing incentive $rograms. =owever, several states have conducted annual
reviews o' some o' these $rograms which $rovide use'ul insight into how
they o$erate. /hree $rograms in $articular $rovide e(am$lesD the South
Carolina /eacher Loan Program )/LP-, Massachusetts Signing *onus
Program 'or %ew /eaches, and the %orth Carolina Math@Science@S$ecial
<ducation )MSS<- /eacher *onus Program. 4e also discuss the im$lications
o' evaluation 3ndings 'rom a recent study o' a %*P/S incentive $rogram 'or
state %*P/S incentive $olicies.
/he available evidence on the e5ects o' these three incentive $rograms is
mi(ed. /he Massachusetts $rogram sought to recruit high achieving
candidates to the $ro'ession with an intensive sevenweek summer training
$rogram and a P".,... signing bonus distributed over 'our years yet shut
down in 'ailure a'ter three years. /he evaluation o' %orth Carolina#s
$rogram, which $aid yearly bonuses o' P!,,.. to mathematics, science, and
s$ecial education teachers in high $overty or low $er'orming schools and
24
also ended a'ter three years, 'ound some $ositive e5ects on teacher
retention, reducing turnover by a$$ro(imately !" $ercent. South Carolina#s
$rogram $rovides 'orgivable loans to individuals to enroll in a teacher
credentialing $rograms and commit to teach in areas o' critical need )either
sub0ect or geogra$hic-. 2t continues to o$erate yet with no strong evaluation
o' success or 'ailure.
/he re$orts and evaluations o' these incentive $rograms em$hasi6e three
key lessons. One, im$lementation errors doom most $rograms. /wo,
targeting the incentives to s$eci3c teachers and schools, while a$$ealing
'rom a $olicy and 3nancial stand$oint, is challenging to carry out. ?nd
three, the ability to draw $olicyrelevant conclusions regarding the
$rograms# e5ects on teacher recruitment, retention, and assignment is
substantially ham$ered by lack o' data.
/he evidence o' the im$act o' %*C/s on student achievement in %orth
Carolina o5ered by Holdhaber and ?nthony )"..7- $rovides insight into the
$ossible e5ects o' several key as$ects o' the %*P/S incentive $rograms
im$lemented in other States. %*P/S certi3cation was 'ound to be
somewhat success'ul in identi'ying e5ective teachers. /he achievement
growth o' students o' success'ul a$$licants e(ceeded that o' unsuccess'ul
a$$licants by 7 $ercent o' a standard deviation in reading and + $ercent o'
a standard deviation in mathematics. %*P/S status is by no means a $er'ect
measure o' e5ective teachers 1 many non%*P/S teachers show
achievement gains with their students that are larger than many %*P/S
teachers. =owever, there are di5erences on average, with the students o'
%*P/S teachers showing greater testscore gains.
/he study also 'ound that com$leting the %ational *oard assessment
$rocess had no im$act on teacher e5ectiveness as measured by student test
score gains in math and reading. /eachers going through the $rocess added
no more to their students# test score gains a'ter they com$leted the
$rogram than be'ore they entered. /his result cautions against the use o'
%*C as a means o' $ro'essional develo$ment. =owever, given that the
$rocess may contribute to teachers# e5ectiveness in ways not $icked u$ by
students# $er'ormance on math and reading e(ams, the evidence is not
strong enough to com$letely condemn %ational *oard certi3cation as a
means o' $ro'essional develo$ment. >inally, the study 'ound that that
%*C/s have a larger im$act on students who are receiving 'ree or reduced
$rice lunch than on students who are not suggests the use'ulness o'
targeting the incentives to highneed schools, such as in Cali'ornia#s $olicy.
Considerable ta(dollars are e($ended on teacher recruitment, retention,
and assignment incentives. /he evidence suggests that teachers do res$ond
to incentives. =owever, we know very little about the e5ects o' di5erent
incentives, de3ned either by ty$e or by amount. State e5orts in this area
25
would bene3t greatly 'rom additional research, including costbene3t
analysis, on the 'ull array o' incentives.
Teacher 'etirement *olicies
2t is a generally held belie' that retirement systems in&uence the
termination and retirement decisions o' teachers. 8es$ite this belie', we are
aware o' only one study that e($licitly attem$ts to link retirement bene3ts
to teacher career decisions. >urgeson, Strauss, and Logt )"..;- e($loit a
change in Pennsylvania#s retirement bene3t 'ormula to assess the e5ects o'
an increase in retirement bene3ts on the retirement decisions o' eligible
teachers. ?s re$orted above, Pennsylvania has a AM7 years and outB
eligibility re:uirement 'or 'ull retirement bene3ts. 2n !++9+, and !++,++,
this eligibility re:uirement was tem$orarily reduced to M. years 'or those
years only. /hey 3nd a P!,... )or ..N $ercent- increase in the real $resent
value o' retirement bene3ts increases the $robability o' a 'emale teacher
retiring by between ..." and ..., $ercent. /hese results im$ly an elasticity
o' retirement o' between ".. and M.7. 2' a State wants to encourage long
serving teachers to retire, increases in retirement bene3ts will increase
retirement rates among the target $o$ulation.
Conclusion
2t is clear that there is a huge variety in teacher com$ensation $olicies
across the country. %o two states have im$lemented the same set o'
$olicies. ?s is the case with many education $olicies, we lack su5icient data
and evidence with which to evaluate these $otentially im$ortant tools 'or
teacher recruitment and retention and 'or the im$rovement o' student
achievement. <(isting research $oints to a 'ew im$ortant conclusionsD >irst,
teachers res$ond $ositively to increases in base salaries, 'or e(am$le,
increasing their retention. 4e also know that some incentive $olicies
achieve their desired goals by increasing teacher retention, and in the case
o' %ational *oard Certi3cation incentives, identi'ying e5ective teachers.
=owever, the news is not all good. Fnintended conse:uences can result
'rom wellintended com$ensation $olicies. >or e(am$le, /e(as and South
Carolina#s mandated minimum salary schedules were likely intended to
increase base salaries 'or new teachers thereby recruiting more highly
skilled teachers into the work'orce. =owever, the result o' the $olicy was a
decrease in district demand 'or teachers, thus lowering em$loyment levels
and increasing class si6es in order to abide by the mandated salary
increase. ?nother e(am$le o' an unintended conse:uence o' a well
intentioned $olicy is the $otential 'or detrimental res$onses, such as
cheating or 'ocusing on test taking skills instead o' content, by teachers to
merit $ay or $er'ormance $ay salary structures.
26
Lastly, research shows us that the im$lementation o' e5ective com$ensation
$olicies can be di5icult and the negative conse:uences o' $oor
im$lementation can override any $ositive bene3ts o' com$ensation $olicies.
>or e(am$le, it a$$ears to be di5icult to create a merit $ay system that
creates $ositive incentives 'or a large number o' teachers 1 many teachers
will either receive or not receive a bonus regardless o' a change in their
behavior 2ncentive $rograms are e:ually di5icult to im$lement. Success'ul
im$lementation re:uires a clear $ur$ose o' the $rogram and a $lan 'or
disseminating $rogram in'ormation to the a$$ro$riate $eo$le. >or instance,
Massachusetts# $rogram was undone in $art due to con'usion over the
$rogram#s goals, and in'ormation dissemination $roved a signi3cant hurdle
in the %orth Carolina $rogram where survey data revealed that $rinci$als
and teachers had very little knowledge about the $rogram.
Moreover, it is di5icult to understand the intricacies o' how state $olicies
are ada$ted at the district level, es$ecially given the $ressures e(erted on
districts by local collective bargaining agreements and by re:uirements
instituted by the 'ederal No +hild ,eft -ehind )N+,-- $olicy. 8istricts#
res$onses to uni'orm state $olicies will likely vary according to di5erences
in their collective bargaining agreements and relationshi$s with their local
teachers# unions. 2n addition, districts# s$eci3c teacher needs will shi't
according to the re:uirements o' N+,-, which will necessarily a5ect how
they inter$ret and im$lement state com$ensation $rovisions.
2n order to learn 'rom the e($eriences o' the 7! di5erent sets o' $olicies
across the country, we must care'ully construct and evaluate the $rograms.
27
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28
Lavy, L )'orthcoming-. AFsing Per'ormance*ased Pay to 2m$rove the
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29