University of Arkansas Office for Education Policy

What’s Driving Teachers’ Strikes

In The View from the OEP on February 20, 2019 at 10:58 am

The op-ed re-posted below was written by new OEP faculty member Josh McGee (@jbmcgee on Twitter) and appeared in Monday’s USA Today. The piece argues that school budgets are being squeezed by large numbers of new staff and rising benefits costs. Paying for all those new people and their increasingly expensive benefits is leaving less money to effectively pay teachers. The re-posted version below includes Arkansas specific data in indented brackets.

Teachers strike for higher pay because administration and benefits take too much money

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In Denver on Feb. 11, 2019. (Photo11: David Zalubowski/AP)

U.S. public schools administrative staff and rising benefits costs are squeezing school budgets nationwide.

Not long after Los Angeles’ teachers have returned to work after a six-day strike last month, more than 5,000 teachers in Colorado’s largest school district went on strike demanding higher pay. The Denver strike was resolved after three days, but it’s likely that this is just the beginning of teacher activism in 2019. Teachers in California, West Virginia and Virginia are gearing up to fight. As the legislative season gets rolling, teacher pay and education funding are hot topics in statehouses across the country.

Given all this it would be easy to believe, as many do, that America’s schools are starved of funding. But that argument doesn’t fully match the data. While there is variation across states, school funding has increased dramatically over the past 40 years.

According to the National Center for Education Statistics, inflation-adjusted per-pupil spending on public education has more than doubled since the 1970s.

[Arkansas’ spending per pupil has grown faster than the national trend over the last 40 years. Inflation adjusted spending per pupil has more than tripled from $3,356 in 1969-70 to $10,310 in 2015-16. However, Arkansas’ per pupil spending is still well below the national average of $12,330]

So why all the unrest? To answer that, we need to take a look at how all that new money has been spent.

The first part of the answer is that U.S. public schools have added large numbers of instructional, administrative and support staff over the past four decades. Student-teacher ratios have decreased from 22 to 1 in 1970 to about 16 to 1 today. And since 2000, the number of public school administrators has increased more than five times faster than student enrollment, a fact that has not gone unnoticed by labor leaders.

[While the NCES doesn’t report data for Arkansas going back to 1970, the state’s student-teacher ratio has decreased slightly from 14.1 in 2000 to 13.7 in 2015. Arkansas’ student-teacher ratio is below the national average likely because of the state’s large number of rural schools.

NCES also does not report a state-level time series for staffing, but in 2015, district administrators and school principals made up 3.3 percent of all Arkansas public school staff, which is slightly below the national average of 3.9 percent.]

In his letter announcing the strike, Denver Classroom Teachers Association President, Henry Roman wrote, “DPS has made its choice to keep critical funding in central administration, and not to apply more of those funds to the classroom where they would provide the greatest benefit for student learning.”

As part of the deal to end the strike in Denver, the district agreed to cut 150 administrative positions and eliminate large administrator bonuses.

Teachers who made up about 60 percent of all public school staff in 1970 now make up less than half, despite there being more than a million more teachers in today’s classrooms. More employees means that the budget pie is divided more times, leaving fewer dollars for each individual teacher’s pay.

[As with other staffing data, the NCES doesn’t report state-level data going back to 1970. However, teachers as percentage of all public school staff has decreased in Arkansas from 50.6 percent in 2000 to 48.6 in 2015.]

Money is going toward paying down debt now

At the same time, rising benefits costs are squeezing school budgets nationwide. While average inflation-adjusted teacher salaries have been relatively stagnant since 1990, benefits costs have risen from 16.8 percent of expenditures in 1990 to 23 percent of today’s much larger expenditure base.

[National average inflation-adjusted teacher salaries decreased by around 2 percent between 1990 and 2017, but in Arkansas they increased by approximately 14 percent. However, Arkansas’ average teacher salary is still about $10,000 below the national average – $48,616 vs $58,950.

Arkansas’ schools spend a lower percentage of their budgets on employee benefits, 19 percent, than the national average.]

More recently, the growth of retirement costs — in particular, payments to cover unfunded benefits earned by teachers for past service — has placed pressure on school budgets. Almost every state increased teachers’ retirement benefits in the booming 1990s. But the additional promises were not accompanied by responsible funding plans. Over-funded at the turn of the millennium, by 2003, teacher pension plans were collectively short by $235 billion. By 2009, pension debt had more than doubled, to $584 billion.

The strong bull market since the Great Recession has not put a dent in the shortfall, which now totals well more than $600 billion. As a result of pension-funding shortfalls, retirement costs per pupil have more than doubled since 2004, from about $530 to more than $1,300 today.

[Arkansas has done a better job than most states managing its teachers’ retirement system (ATRS), and as a result ATRS is better funded and its costs have not risen as much as the average teachers’ plan. For a more thorough discussion of the teacher retirement system’s finances, see our previous blog post here.]

Retirement costs now exceed 10 percent of all education expenditures on average across the country. Unfortunately, the majority of these contributions do not benefit teachers in today’s classrooms because roughly 70 percent of retirement contributions are going to pay down debt rather than for new benefits.

[Retirement costs now make up around 8 percent of Arkansas education expenditures. ATRS is 79 percent funded, and approximately 57 percent of the state’s annual contribution goes to pay down pension debt.]

Growing retirement costs for these legacy-benefit promises pose a challenge for many school districts to maintain their current level of services, much less to hire new teachers and support staff or give high-quality teachers a pay raise.

What protected teachers once is a danger now

Rising benefits costs are a big part of the L.A. school district’s budget woes, limiting funds available to meet the demands of the teachers’ union for more pay and support staff. That helps explain why teachers there settled for little more than was on the bargaining table when they chose to strike.

While the L.A. district has a $1.8 billion budget surplus today, it’s burning through it at an alarming rate, and rising benefits costs are much to blame. By the 2031-32 school year, the district expects to spend more than 50 percent of its budget on health care and pensions.

Even in Texas, considered by many to be a bastion of fiscal conservatism, pension debt has ballooned. The state and school districts now owe the Teacher Retirement System $46.2 billion in benefits that teachers have already earned, a total that is roughly equivalent to all of the state’s other debt combined.

[At the end of the 2018 fiscal year, Arkansas’ total long-term debt payable for bonds, capital leases, and notes was $3.9 billion. The state and its school districts owe ATRS $4.2 billion for benefits that teachers have already earned, a total that is slightly higher than all of the state’s other debt combined.]

To be sure, there is no immediate national “crisis,” insofar as most teacher pension plans are not on the brink of failure. But it’s clear that the rising cost of benefits that were meant to protect teachers is now endangering teacher pay and larger school funding in a way that was never anticipated. Indeed, school districts will likely be seeing red for some time — both at rallies and in their budgets.

Josh B. McGee, a senior fellow at the Manhattan Institute, is a research assistant professor in the Department of Education Reform at the University of Arkansas. Follow him on Twitter: @jbmcgee

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