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First Look at Arkansas’ School-Level Spending

In The View from the OEP on May 8, 2019 at 12:27 pm

Each year the Arkansas Department of Education (ADE) releases data on public school revenue and expenditures. However, those financial data have traditionally only been available at the district level. It has been nearly impossible to drill down to see how money is being spend at individual schools. But that is beginning to change. The Every Student Succeeds Act (ESSA), which passed in 2015, included a provision that required states to begin reporting school-level spending by the end of 2018 (see this EdWeek article for more info). Secretary DeVos gave states an extra year to comply with the requirement, but Arkansas is ahead of the curve and has already released school-level spending data this year as part of the school report cards. Here is the link to the data that has been posted onto our website, that sources the data from This post is the first in its series that will provide a first look at the brand-new school-level spending data.

With the new data, we can now analyze how spending is distributed across Arkansas’ schools. This is important because public education dollars are allocated to districts, and those districts have relatively broad authority to apportion dollars across the schools that they oversee. Until now it’s been very hard to compare how districts within the state allocate dollars to schools or to know if they are doing so in an equitable manner.

On average, Arkansas spent $9,914 per pupil during the 2017-18 school year. Average spending per pupil is calculated by dividing total expenditures, including state, local, and federal dollars, by the number of students in average daily membership (ADM). Dividing spending by the number of students allows us to compare expenditures across districts/schools of different sizes.

Figure 1 below shows the distribution of Arkansas school-level spending. These data include all public schools for which spending data are available, including the handful of Alternative Learning Environment (ALE) schools, charter schools, magnet schools, etc. Median school spending, the value where 50 percent of schools spend more and 50 percent spend less, was $9,814, roughly in line with the state average. The figure also displays the 25th($8,783) and 75th($11,218) percentiles. Fifty percent of schools’ per pupil spending falls between these two values, while 25 percent spend more and 25 percent spend less.

Figure 1: Distribution of 2017-18 School-Level Spending Per Pupil

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As noted earlier, we are interested to learn whether districts are allocating dollars equitably across schools serving students of varying poverty levels. To begin to answer that question, Figure 2 provides a scatter plot of school-level per pupil spending versus the percentage of students eligible for the free and reduced lunch program (FRL). To be FRL eligible a student’s family must have an income below 185 percent of the federal poverty line, and so the percentage of students in a school who are FRL eligible is a rough measure of the school’s poverty level.

The data presented in figure 2 show that Arkansas’ schools spend more the higher a school’s poverty level. Spending more in higher poverty schools helps to ensure that those students who are most in need get the support and educational opportunities that they deserve. The progressivity of Arkansas’ school funding has been well documented at the state/district level (for example here and here). However, this is the first time we have been able to show that this progressivity extends down to schools.

Figure 2: Scatter Plot of 2017-18 School-Level Spending Per Pupil vs. Percent FRL

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Digging a bit deeper, we can divide school spending into two broad categories – spending on people and everything else. The ADE’s data system calls these two categories personnel and non-personnel. Figure 3 shows how spending in these two categories is distributed at the school level. The median school spent $7,399 per pupil on people and $2,394 per pupil on everything else.

We can also look at these two categories as a percentage of total school spending. On average, 76 percent of Arkansas’ public school spending paid for public school employees’ salaries and benefits and the remaining 24 percent covered everything else. Figure 4 shows the school-level distribution of the percentage of total spending that was devoted to paying for people. While there is some variation, the vast majority of schools spend between 70 and 80 percent of their budget on people. As is the case across the country, Arkansas’s public schools spend most of their money on people.

Figure 3: School-Level 2017-18 Spending Per Pupil used for Personnel vs Non-Personnel

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Figure 4: Percent of School-Level 2017-18 Spending Used for Personnel

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We can also look at spending by activity or purpose. The ADE divides spending into several activity-based categories, but we thought four of the most interesting categories were instruction (e.g., teachers’ salaries, books, etc.), student support services (e.g., physical and mental health services, guidance counselors, etc.), instructional staff support (e.g, professional development, etc., and administration (principles, superintendents, other central office staff, etc.). The median Arkansas school spent 56 percent of its budget on instruction, 5 percent on student support services, 7 percent on instructional staff support, and 8 percent on administration. Arkansas’ schools spend most of their budgets on instruction; however the other three categories together make up approximately 25 percent of the remainder. Figure 5 shows the school-level distribution for instruction, and figure 6 shows the other three spending categories.

Figure 5: Percent of School-Level 2017-18 Spending Used for Instruction

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Figure 6: Percent of School-Level 2017-18 Spending Used for Various Activities

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It has long been extremely difficult, if not outright impossible, to analyze education spending at the school level. Most districts simply did not have accounting systems that captured the information and most states, including Arkansas, did not require districts to report school-level spending. That changed with the passage of ESSA, and now Arkansas’ parents, taxpayers, and policymakers are able to see and compare school spending across the state. This presents an excellent opportunity to use this unprecedented level of transparency to improve the equity, efficiency, and efficacy of Arkansas’ public education spending. In sum, it’s an exciting time for the school finance nerds!

In the coming weeks, we plan to publish another post or two looking at spending by school type (e.g., traditional vs charter) and by level (e.g., elementary, middle, high) as well as an investigation into whether Arkansas’ schools exhibit economies of scale (i.e., larger schools spend less on certain categories like administration). In the mean time, don’t forget to visit our website to take a look at the new School Level Financial Data that we’ve posted. Stay tuned for more info in the upcoming weeks!

What Does it Mean to be One of the “Best” High Schools?

In The View from the OEP on May 1, 2019 at 1:38 pm

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Yesterday, U.S. News & World Report released their annual “Best High Schools” rankings.  These rankings always make the news but here at the OEP, we want to make sure that you understand what the “best” title is based on. U.S. News changed their methodology this year, so we want to share what we like (and don’t) about the new methodology, and examine what we think is a missing indicator of high school success- whether or not students are enrolling in college after graduation.

First, congratulations to those Arkansas high schools that made the list for 2019! Below are the US News Top 10 for Arkansas (for context, we noted the 2016-17 free/reduced lunch rate provided in MySchoolInfo) :

#1: Haas Hall Academy (did not participate in lunch program)
#2: Haas Hall Bentonville (did not participate in lunch program)
#3: LISA Academy North Charter School (34% FRL)
#4: eStem High School (27% FRL)
#5: Arkansas Arts Academy High (25% FRL)
#6: Maumelle Charter High (20% FRL)
#7: Bentonville High School (20% FRL)
#8: Greenbrier High (32% FRL)
#9: Rogers New Tech (50% FRL)
#10: Concord High (64% FRL)

While many of these high schools have previously been recognized as “Best”, we can’t compare this year’s ranking with any prior year due to the change in methodology.

What makes these schools the “Best”?

U.S. News uses a new methodology this year, and includes six indicators to rank the nation’s high schools.  The indicators are combined to give each high school’s overall score between zero and 100 that represents what percentile position a school is in out of the 17,245 ranked schools across the nation. Listed below, along with how much weight each is given in the overall score calculation, the indicators represent advanced course taking/exam passing, performance on state assessments, and graduation rate.

  • Indicator 1: College Readiness (30% of overall score)  The proportion of a school’s 12th graders that took and passed Advanced Placement/International Baccalaureate exams.
  • Indicator 2: Math and Reading Proficiency (20% of overall score)  A simple measure of schools’ student performance on state assessments. This measure is a weighted measure of performance, where schools are awarded 1 to 4 points per student depending on their performance on the ACT Aspire.
  • Indicator 3: Math and Reading Performance (20% of overall score)  A measure of how students in a school perform on state assessments compared to how U.S. News predicted a school would score given the demographic characteristics of it’s students.
  • Indicator 4:  College Curriculum Breadth (10% of overall score) A measure of how many 12th grade students passed multiple AP/IB exams.
  • Indicator 5:  Underserved Student Performance (10% of overall score) An evaluation of the difference between how underserved students (black, Hispanic, and low-income) scored on state assessments compared with the average for non-underserved students.
  • Indicator 6:  Graduation Rate (10% of overall score) The proportion of students who entered ninth grade in the 2012-2013 academic year who graduated four years later.

College Readiness, College Curriculum Breadth, and Graduation Rate are standardized nationally, while state assessment results were standardized within the state. The standardized scores were weighted, summed, and transformed into a percentile.

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3 things we like about the U.S. News rankings:


1. Performance on state exams factors in the racial/economic background of the students served by the school.

Schools serving a lower percentage of students who are historically underserved (defined as Black/African-American students, Hispanic/Latin students, and students who are eligible for free or reduced-price lunch) typically have higher test scores than schools serving a higher percentage of students from these groups, but the U.S. News ranking takes that into account.

2. Performance of historically underserved populations is considered.

Students who are historically underserved generally score lower on state assessments than white, Asian, and/or economically advantaged students.  Schools where the equity gap between historically underserved and non-underserved groups is smaller than the state average get higher scores.

3. AP passing rates are considered as well as AP participation.

Under Arkansas’ ESSA plan, the number of students taking an AP class is rewarded, but there is no consideration to how well students perform on the AP tests.  This is particularly important because, unlike students in most other states, Arkansas students do not have to pay to take AP tests, so we can consider the passing rates a more reliable measure of how well the AP content is being taught.

thumbs down3 things we don’t like about the rankings:

1. The data are OLD

The data used by U.S. News for the 2019 rankings are from the 2016-17 school year – nearly two years old.  We hope that stakeholders will keep that in mind as they search for their school on the “Best” list.

2. Focus is just on College

Only ‘college ready’ indicators are considered.  We would like to see U.S. News including more indices of career readiness, because not everyone wants to go to college and the ‘best’ high schools should meet the learning goals of all of their students.

3. Focus is on Proficiency, not Growth

Here at OEP, we are strong proponents of student-level growth models.  We understand that it is impossible to compare this type of student growth across states for now, because each state has a different assessment, but we feel it is important to point out that even though they consider the demographics of the students served by the school, Arkansas’ growth model provides better information about how well students are GROWING.

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Does College-Ready Mean College Going?

With the focus that these rankings place on college-readiness, here at the OEP we felt like a big piece of the success of these schools was not included in the ranking.  We wondered,  “Are students from these ‘Best’ high schools actually going to college?”.

ADE releases the College Going rates for schools through the annual state report card, so we looked up the 2016-17 rates for the top 10 U.S. News schools. (FYI: the 2017-18 rates have been updated since our previous blog). As presented in Table 1, between 25% and 76% of graduates from these high schools went on to enroll in college.

Table 1. College Going Rates for top 10 U.S. News High Schools


Does this seem weird? Only 60% of students from Haas Hall, the “best” high school in Arkansas, go on to college?  Well, the thing about the college going rates reported by ADE is that it only includes students going to college IN ARKANSAS.  Each year, about 5-6% of Arkansas graduates attend schools out of state.  When we use data (in Table 2) showing where Arkansas students enroll anywhere in the country, we see the college going rates for these high schools range from 53% to 90%.

Table 2. College Going Rates for Top 10 U.S. News High Schools, In-State and National


The schools identified as the “Best” in Arkansas in 2019 demonstrate high student achievement and lots of opportunities for college- level work. Students in those advanced classes are successful to the AP/ IB exams, and underrepresented populations seem to be performing better than expected. But the methodology used by U.S. News doesn’t tell us if students are going to college after high school, which is, in our opinion, and overlooked measure of a “Best” high school. Other indicators, such as industry certifications earned, completion of a coherent Career and Technical Education sequence, and employment after high school graduation are also indicators of a high school that is doing a great job to prepare students for their future.

Arkansas’ Achievement Gaps: Analysis By Race and Gender

In The View from the OEP on April 24, 2019 at 2:00 pm

This week we continue our examination of long-term achievement for different student groups on the state assessments. Today we are discussing differences in average achievement in math and literacy by gender and race. We think this is important descriptive work for education stakeholders throughout the state, because identifying and acknowledging the differences in achievement is a first step to ameliorating them. 

As we mentioned in our earlier blog about the achievement gap between students participating the Free and Reduced Lunch program (an indicator of low family income), for this analysis we use ten years of the annual Arkansas state assessments, which have changed over time. For the first six years of our analysis we use data from the Benchmark and End-of-Course exams. In the 2014-15 school year, students in Arkansas completed the PARCC exam, before switching to the ACT Aspire exam for 2016-17 and beyond.

All of these test changes have made it essentially impossible for Arkansas schools to examine achievement gaps over time, due to unique test scoring and reporting of each assessment. Although the assessments have varied over time, each provides a measure of how students statewide perform in literacy and mathematics. To enable the examination of performance over time, we have used a common standardizing procedure to track the relative performance of different groups.  We transform these scores into percentiles to aid in interpretation. The statewide average percentile in literacy or mathematics at each grade level is the 50th percentile each year. Note that the percentiles are standardized within year and state, meaning that they are not indicators of how ‘true’ achievement has changed over time or how performance compares to students in other states. Percentiles are used to compare the relative annual performance of Arkansas student groups over time and examine if the gap in achievement has changed (details about the methodology can be found at the end of this blog).

Are there differences in achievement by gender?

Most national studies find that, on average, males outperform females on math tests and females outperform males on reading or English Language Arts (ELA) tests. Recent work by Reardon et al. out of Stanford’s Center for Education Policy Analysis found that the average school district across the county evidenced female-favoring achievement gaps in English Language Arts, but no gender achievement gaps in mathematics. We find similar patterns when we examine the Arkansas assessment data.

Figure 1. Average Literacy Achievement by Gender, 2008-09 through 2017-18

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As can be seen in Figure 1, female students consistently perform above the state average on literacy assessments, and there is a persistent gap of 13-15 percentage points between the average performance of females and males. This difference of 0.33 standard deviations is somewhat larger than the national estimates found by Reardon and represents approximately a year of learning. The difference closed by 50% in 2014-15, the only year that the PARCC assessment was administered. Overall, average literacy achievement by student gender has been consistent over the time examined.

Figure 2. Average Math Achievement by Gender, 2008-09 through 2017-18

Math Gender

In contrast to the differences in literacy achievement, Figure 2 illustrates that Arkansas’ female and male students have performed similarly on the state mathematics assessments since 2009. Female students scored slightly higher than their male peers, and there was no evidence that the gap was different in the year the PARCC assessment was administered.  Overall, average math achievement by student gender has been consistent over the time examined.

Are there differences in achievement by race/ethnicity?

CEPA has also published work on the racial achievement gaps throughout the country.  The researchers find differences in average math and reading achievement by race, and note that one potential explanation for racial achievement gaps is that they are largely due to socioeconomic disparities between white, black, and Hispanic families. The research finds, however, that achievement gaps are still present even in states where the racial socioeconomic disparities are near zero (typically states with small black or Hispanic populations), suggesting that socioeconomic disparities are not the sole cause of racial achievement gaps. Although the CEPA research used data from the National Assessment of Educational Progress (NAEP) as the basis for the research (NAEP), we find similar racial achievement differences using the Arkansas state assessments.

Figure 3. Average Literacy Achievement by Race, 2008-09 through 2017-18

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As presented in Figure 3, White students consistently score 7 to 8 percentage points above the state average performance in literacy. The literacy achievement of Hispanic students reflects improvement from an initial percentile of 40, and has been holding steady in the 44-46th %ile range since 2011-12.  Average black student achievement on state literacy assessments is in the low 30th percentiles, beginning at the 31st in 2008-09 and demonstrating a slight increase to 33rd %ile by 2018. The difference between white and Hispanic performance is about a third of a standard deviation, representing approximately a year of learning. The difference between white and black literacy achievement is double that.  Similar to the patterns we have noted for students participating in the FRL program, black student achievement reflects a noticeable relative increase (+7 percentage points) in the 2014-15 school year, which was the year that the PARCC assessment was administered. There is a slight narrowing of the differences in achievement over the past decade, but overall, average literacy achievement by student racial groups has been consistent over the time examined.

Figure 4. Average Math Achievement by Race, 2008-09 through 2017-18

Math Race

Similar to literacy achievement, White students consistently score 7 to 8 percentage points above the state average mathematics performance. Hispanic students’ mathematics achievement reflects improvement from an initial percentile of 43, although there was a slight decline from a high of 48 in the 2013-14 and 2014-15 school years to an average of 46th percentile in 2017-18.  Average black student achievement on state mathematics assessments are in the low 30th percentiles, beginning at the 32nd in 2008-09 and declining to the 31st percentile in 2018. Mathematics differences are similar in magnitude to the literacy gaps. Similar to the pattern we noted for literacy, black students’ math achievement reflects a noticeable relative increase (+8 percentage points)  in the 2014-15 school year, which was the year that the PARCC assessment was administered.

Are there differences in achievement by race/ethnicity and gender combinations?

We were interested to learn if there were differences in average achievement on the state assessment within race by student gender. Based on what we saw in earlier figures, we anticipate that females will perform 15-17 percentage points higher than their male counterparts in literacy, while achievement in mathematics will be essentially the same.   In Figures 5-7, we present literacy achievement by race/ by gender, and in Figures 8-10 we share mathematics results.

Figure 5. Average White Literacy Achievement, by Gender, 2008-09 through 2017-18

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As expected, Figure 5 illustrates that white females achieve about 15 percentage points above their male peers in literacy, a difference of about a year of learning.  White females score well above the state average in literacy, while their male counterparts achieve just at the 50th percentile, which is average performance for the state average of the 50th percentile.  Interestingly, white female students evidenced the decline in achievement in 2014-15, the year of the PARCC assessment, but white male achievement did not reflect increased achievement that year.

Figure 6. Average Hispanic Literacy Achievement, by Gender, 2008-09 through 2017-18

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Similar to white females, Hispanic females demonstrate higher literacy achievement than their male peers in the state by around 13-14 percentage points, representing approximately a year of learning.  Hispanic females performed slightly above about the state average in literacy in 2018, up from 4 percentage points below the average in 2009.  The average literacy achievement of Hispanic males have also increased since 2008-09, leading to a slight closing the difference in achievement with Hispanic females. Unlike their white peers, Hispanic males evidenced increased relative achievement on the PARCC test in 2014-15.

Figure 7. Average Black Literacy Achievement, by Gender, 2008-09 through 2017-18

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As is other racial groups, black females demonstrate higher average achievement in literacy than their male peers. Figure 7 illustrates that black females achieve about 15 percentage points above the achievement of black males, which represents approximately a year of learning. With average literacy at the 49th percentile in 2018, however, the average achievement of black females is lower than females in other racial groups. Black males are the lowest relative achievers in literacy – consistently scoring at the 14th-26th percentile since 2008-09 with the exception of a sharp increase of 12 percentage points on the PARCC assessment in 2014-15.  Unlike females in other racial groups, who experience slight decline in 2014-15, black females evidence a score increase of 3 percentage points on the PARCC exam.

Figure 8. Average White Math Achievement, by Gender, 2008-09 through 2017-18

White Math

As anticipated based on the overall similar performance of female and male students in mathematics, Figure 8 represents how white females narrowly out perform their male counterparts on the state mathematics assessments.  Achievement of both white females and white males is above the state average mathematics achievement and has been consistent over time.

Figure 9. Average Hispanic Math Achievement, by Gender, 2008-09 through 2017-18

Hispanic Math

Hispanic math achievement by gender is depicted in Figure 9. Similar to their white peers, Hispanic females narrowly outperform their male counterparts on the state mathematics assessments. Math performance for Hispanic females and males is slightly below the state average, and average mathematics performance has increased slightly  over time for both groups.

Figure 10. Average Black Math Achievement, by Gender, 2008-09 through 2017-18

Black Math

Figure 10 reveals that the difference in average mathematics achievement between males and females is larger for black students than for Hispanic and white students. Black females achieve, on average, 5 percentage points higher than black males. Performance for both females and males, however, is well below the state average. The gap is consistent over time, and both females and males evidenced increased relative performance in 2014-15 with the PARCC assessment.

So, what does this tell us?

Literacy: Arkansas state assessment data reflect differences by gender and race in average literacy achievement that are similar to the national achievement differences. Differences in average literacy achievement between racial groups have narrowed slightly over the past decade.  Differences in literacy achievement between females and males is consistent across racial groups.

Math: Arkansas state assessment data reflect essentially no difference in average mathematics achievement by gender overall, although there are differences in average math achievement by racial groups.  Hispanic students, both females and males, are demonstrating increased math achievement, narrowing the difference between their performance and that of white students. Interestingly, black females and males evidence a greater gap in the average math performance that was present for gender difference among white and Hispanic students.

PARCC: We are really interested in what was different about the PARCC assessment that resulted in higher relative achievement in both math and literacy for Black (and poor) students in Arkansas? Remember that scores from all assessments were standardized, and should be comparable across time.  The changes are interesting, but we have just one year of PARCC results, so we cannot interpret beyond just noting the change.  The performance trends present since 2009 returned when student began being assessed on the ACT Aspire, and the consistency of group achievement (apart from the PARCC year) is a good reminder of how important it is to focus on the long-term trends.

Coming out soon: Achievement trends by grade level!  Find out if the differences in achievement start large and get smaller, start small and grow over time, or stubbornly persist same over the decade.

About the methodology:

Students in grades 3-8 were consistently assessed in both content areas, but there was variation in when high school students were assessed. For our analysis we used all grades assessed in literacy and/ or math in a given year, and limited our analyses to students completing the general assessment.

Scale scores were standardized for each year within grade level and content area, creating a Z-score (mean of 0, standard deviation of 1).  These z-scores were then averaged across student groups and transformed into percentiles to ease interpretation. The statewide average percentile in literacy or mathematics at each grade level is the 50th percentile each year. Percentiles are standardized within year and state, meaning that they are not indicators of how actual achievement has changed over time or how performance compares to students in other states. Percentiles are used to compare the relative annual performance of Arkansas student groups over time and examine if the gap in achievement has changed. 

Are Arkansas’ High School Graduates Prepared to Succeed in College?

In The View from the OEP on April 17, 2019 at 1:50 pm

Earlier this week, the Arkansas Department of Education released 2018 Report Cards for schools, districts, and the state (press release). Included in these data was information on the percentage of Arkansas students who graduate from high school, go to college, and earn college credits.

While college is not the right path for every Arkansas student, college degrees are increasingly valued by employers (Harvard Business School Report). Although there has been some recent pushback on employers’ degree requirements, to compete in tomorrow’s job market, Arkansas schools will need to prepare a large proportion of their students to succeed in college. Unfortunately, this is an area where Arkansas has some ground to make up. Only 22 percent of Arkansans age 25 and older have a bachelor’s degree, which is 9 percentage points below the national average (31%) with only Mississippi (21.3%) and West Virginia (19.9%) having  lower degree attainment (Census Bureau map).

Given our degree deficit and the priority the state has put on college readiness, we were eager to see if more of Arkansas’ students were hitting important milestones on the way to college graduation. We have written about this before (here and here), but at the time only three years of data were available. With yesterday’s release, we now have 5 years of data, but unfortunately, the story is not great.

There were, however, some encouraging signs in the data. For example, Arkansas students are graduating high school in greater numbers (see Figure 1). The state’s 4-year graduation rates inched up slightly, climbing to 89 percent in 2018. Minority students also saw increases over this period, with black students experiencing the biggest gains, increasing by 5 percentage points from 81 to 86 percent.

Figure 1: Arkansas 4-Year High School Graduation Rates 2014-2018

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Even though Arkansas’ students are graduating from high school at higher rates, they are not more likely to attend college (see Figure 2). The college going rate remained relatively flat over most of the 5-year period ending in 2018. However, if the recent data is to be trusted, college going rates declined by 8 percentage points in 2018. Such a large drop makes us question the validity of the 2018 data, but if accurate, this would be a huge deal that demands more discussion and monitoring.

***IMPORTANT NOTE:  ADHE confirmed to OEP that the college-going data are not correct and they are re-calculating the values. The initial re-calculation reflects a statewide college going rate consistent with prior years. *** We will update the analyses below with the new college-going data when released, but the general information still applies.  

Figure 2: Arkansas College Going Rate 2014-2018

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One important caveat about the state’s college going data is that the values only reflect students who attend a college in Arkansas. These rates miss Arkansas high school graduates who leave the state to pursue their post-secondary education, and so understate the state’s college going rate. The National Center for Educational Statistics produced a report in 2017 that can help us estimate by how much the rates are understated (see report here). In the fall of 2016, there were 3,318 Arkansas residents attending a college outside of the state. Assuming this number includes students who graduated at some point over the previous four years and dividing by the roughly 30,000 Arkansas high school graduates per year yields an estimate of approximately 3 percent for the percentage of Arkansas high school graduates in any given year attending college out of state. So our best guess as to how much Arkansas’ college going rate is underestimated is somewhere between 2.5 and 5 percentage points. The upshot is that even accounting for underestimation, Arkansas’ high school graduates enroll in college at far lower rates than the national average of 67 percent (

As we have done in previous blog posts, we can use the state’s data on graduation and college going rates along with the data on college credit completion to estimate how many of today’s 9th graders we can expect to get to college and earn at least one year of credits (figure 3). The picture is not encouraging. Of a group of 100 hypothetical 9th graders, we would expect 89 to graduate high school, 36 to enroll in college within the next year, and only 19 to complete one year’s worth of credits in the subsequent 2 years. So only 1 in 5 of today’s 9th graders would be expected to get to college and start down the path toward degree completion. And the story is worse for the state’s minority students.

Figure 3: Expected Education Attainment for Hypothetical 9th Grade Cohort

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Part of the challenge is that even once kids get to college, 63 percent of Arkansas’ high school graduates require remediation in one or more subjects. Remedial courses do not count toward degree completion, and can make persistence and degree completion seem out of reach.

College admission exams provide another measure of college readiness. All Arkansas high school students now take the ACT, and only 17 percent of 2018’s graduating class met the ACT’s college readiness benchmarks in all four tested subjects (i.e., English, math, reading, and science; Arkansas ACT report). Missouri, which also requires students to take the ACT and is similar to Arkansas in terms of its rural/urban mix, performed significantly better, with 22 percent of 2018 graduates meeting the college readiness benchmarks in all four subjects (Missouri ACT report). You can find a table summarizing states’ 2018 ACT performance here.

Although college readiness has been a priority for many years and the state’s institutions of higher education have been working to improve remediation and college persistence, it’s clear that we are not making fast enough progress. Arkansas is still far behind in college enrollment and degree completion, and we will need to redouble our efforts and try new strategies if we expect to compete on a global stage.

Note: If you want to dig into Arkansas’ graduation rate and college going rate data, the OEP website provides handy spreadsheets that stratify the data by district and school. You can find graduation rate here and college going rate here (the 2018 rate data table will be released after re-calculated data are released by ADE).

Are We Closing the Achievement Gap?

In The View from the OEP on April 10, 2019 at 1:23 pm

ednext_XIX_3_hanushek_img01Yesterday, EducationNext discussed new research demonstrating a persistent 50 year achievement gap between “Haves and Have Nots”, and we wanted to chime in about what the gap looks like for students in Arkansas.

While the national and Arkansas-specific research use different data sources and methodologies, the conclusions are the same: the gap in academic performance between students with fewer and greater economic resources is large and isn’t getting smaller.

The national research used an index of student socioeconomic status (SES) developed from student-reported information about the education level of their parents and possessions that they have in their home. The achievement data come from four testing programs: National Assessment of Educational Progress (NAEP) Long-Term Trend;  Main NAEP; the Trends in International Mathematics and Science Study (TIMSS); and the Program for International Student Assessment (PISA). The researchers found that the gap in achievement between the highest 10% SES and the lowest 10% SES students has remained consistent over the last 50 years.  The conclusion holds when the ranges are expanded to the highest and lowest SES quartiles as well.

What about Arkansas’ Gap?

Here at OEP, we looked into the achievement gap for Arkansas students and found similarly disheartening results.

For the Arkansas analysis, we use the student-level indicator of Free-Reduced Lunch (FRL) program participation as the indicator of student socioeconomic status because we don’t have information on parental education or home possessions. FRL eligibility is based on family income, and is often used as an imperfect proxy for a student’s socioeconomic status. We group students into two groups: Not participating in FRL, or participating in FRL. In 2008-09, the first year of our analysis, 56% of Arkansas students participated in FRL.  The percentage increased to 59% in 2009-10, and has remained fairly consistent since then, ranging as high as 61% before declining slightly to 60% in 2017-18 .

For the achievement data, we use ten years of the annual Arkansas state assessments, which have changed over time. For the first six years of our analysis we use data from the Benchmark and End-of-Course exams. In the 2014-15 school year, students in Arkansas completed the PARCC exam, before switching to the ACT Aspire exam for 2016-17 and beyond.

All of these test changes have made it essentially impossible for Arkansas schools to examine achievement gaps over time, because each test scores and reports performance in different ways. Although the assessments have varied over time, each provides a measure of how students statewide perform in literacy and mathematics. We think it is very important for education stakeholders to be able to examine performance over time, so we used a common standardizing procedure to track the relative performance of different groups.  We transform these scores into percentiles to aid in interpretation. The statewide average percentile in literacy or mathematics at each grade level is the 50th percentile each year. Note that the percentiles are standardized within year and state, meaning that they are not indicators of how ‘true’ achievement has changed over time or how performance compares to students in other states. Percentiles are used to compare the relative annual performance of Arkansas student groups over time and examine if the gap in achievement has changed (details about the methodology can be found at the end of this blog).

We found that in Arkansas, the difference in achievement between “Haves and Have Nots” has remained essentially unchanged over the past decade.

As seen in Figure 1, Arkansas’ literacy achievement gap closed slightly from 25 percentage points to 23 percentage points over the past 10 years. In 2008-09, students participating in the FRL program scored at the 39th percentile in literacy, while students who were not participating scored at the 65th percentile on average.  Over time, the performance on non-participating students remained consistent, while FRL-participating student performance increased slowly over time to the 42nd percentile by 2017-18. The literacy achievement gap closed slightly from 25 percentage points to 23 percentage points over the past 10 years.


As seen in Figure 2, Arkansas’ mathematics achievement gap increased slightly from 20 percentage points to 23 percentage points over the past 10 years. In 2008-09, students participating in the FRL program scored at the 42nd percentile in mathematics, while students who were not participating scored, on average, at the 62nd percentile.  Student performance fluctuated over time for students in both groups, but the performance of non-FRL participating student increased slightly over time, while the performance of their FRL participating peers remained steady, leading to the slight widening of the achievement gap in mathematics.

FRL Math

It is interesting to note that the achievement gaps in both literacy and mathematics were smallest in the 2014-15 school year, the first (and only) year that Arkansas students completed the PARCC assessment. The gaps closed due to an increase in the average performance of FRL-participating students AND to a decline in the average performance of non-FRL participating students. It is tempting to hypothesize causes behind this decreased gap, but futile because we have only a single data point, and the gap then returns to established levels.

Well Shoot!

As with the national research, we feel these are important things to consider as education/ the level of education attained is key to upward mobility. Both the national and Arkansas results show that certain subgroups are limited in their ability to achieve success academically in comparison to their peers, and that the achievement gaps have persisted over time.

Therefore, it is seen that schools in Arkansas and across the country are not truly meeting the challenge of reducing those disparities among these subgroups. How can that be addressed?

We need to keep digging in order to get to the root of this achievement gap issue. OEP is digging into these gaps more in depth, and will share more information about trends in grade-level achievement gaps, as well as gaps between racial/ethnic and gender groups. We look forward to highlighting the Arkansas schools and districts that HAVE closed the achievement gaps for some student populations.


About the methodology:

Students in grades 3-8 were consistently assessed in both content areas, but there was variation in when high school students were assessed. For our analysis we used all grades assessed in literacy and/ or math in a given year, and limited our analyses to students completing the general assessment.

Scale scores were standardized for each year within grade level and content area, creating a Z-score (mean of 0, standard deviation of 1).  These z-scores were then averaged across student groups and transformed into percentiles to ease interpretation. The statewide average percentile in literacy or mathematics at each grade level is the 50th percentile each year. Percentiles are standardized within year and state, meaning that they are not indicators of how actual achievement has changed over time or how performance compares to students in other states. Percentiles are used to compare the relative annual performance of Arkansas student groups over time and examine if the gap in achievement has changed. 

What’s the deal with vouchers?

In The View from the OEP on April 3, 2019 at 2:06 pm

The Arkansas legislature is considering two bills, SB 539 and SB 620, that would make it easier for low-income students to attend private schools. These bills highlight two different approaches for expanding school choice by offering families money to cover a portion of their children’s private school tuition – often referred to as vouchers. Discussions about private school vouchers tend to elicit strong reactions from supporters and opponents alike, making it difficult to wade through the noise and understand what they are, why they exist, what we know about their impact. In this post we hope to help our readers understand the answer to these three questions.

What are vouchers?

 Vouchers are publicly funded grants or scholarships that are used use pay for private school tuition. Vouchers are not new in education policy. As the National Council of State Legislatures’ (NCSL) notes in their summary of vouchers’ history, “state support for private school education has existed in Maine and Vermont for nearly 140 years.” Vouchers have been used in higher education since 1965, offered by the federal government in the form of Pell Grants. However, there has been renewed interest in vouchers since the early 1990s when the first modern K-12 voucher program was established in Milwaukee.

Today twenty-three states offer some form of vouchers for private K-12 education, and they come in three different flavors: 1) tax-credit scholarships, 2) state-funded scholarships, and 3) education savings accounts. Eighteen states offer a tax-credit scholarship, 15 offer a state-funded scholarships, and 6 offer education savings accounts. While program design differs somewhat across states, most of these state-based voucher programs restrict eligibility to either low-income students or students with disabilities (i.e., who have an individual education plan (IEP)). Arkansas currently offers a voucher program called Succeed Scholarship Program to students with disabilities. For more information on state-based voucher programs check out the NCSL Interactive Guide to School Choice Laws and EdChoice’s summary of state choice programs.

Why do vouchers exist?

Vouchers are a public policy tool that can be used to increase families’ schooling options. This is especially true for low-income families who, in the absence of a school choice program, often lack the resources to choose a school different from the one to which they are currently assigned based on their address. Wealthier families, on the other hand, have many more schooling options because they have the resources not only to choose amongst a wider set of neighborhoods but also to send their children to private schools. School choice programs, like vouchers, can help ameliorate the inequity in schooling options, providing low-income parents with the ability to choose the school that best fits their children’ needs.

Some social scientists, most famously Milton Freedman, have also argued that providing more schooling choices in an environment where families have few if any options will increase overall school quality because schools will need to get better to attract and keep students.

What do we know about the impact of vouchers?

Over the years there have been many studies of K-12 education vouchers. Several of these studies are high-quality randomized controlled trials (RCTs) which provide researchers with the best chance of establishing cause and effect. Researchers have studied vouchers in many different locations/contexts and with varying designs (e.g., targeted to low-income families vs not). Despite the amount of high-quality research around vouchers, the story about their impact is equivocal. You can find good summaries of the research in Chalkbeat, Journal of Economic Literature (JEL), and School Choice at a Crossroads ch.4.

The research has studied vouchers’ impact on three main categories of outcomes: 1) voucher students’ achievement on standardized tests, 2) voucher students’ educational attainment (e.g., high school completion, college enrollment, etc.) and longer-term outcomes (e.g., criminal behavior), and 3) the effect on traditional public schools (e.g., achievement, finances, segregation, etc.).

Student Achievement

The results for the impact of vouchers on student achievement are mixed. While several older studies consistently found either no effect or a slight positive effect on achievement, four recent studies have found negative effects and one has found positive effects (see Figure 1 below, omits North Carolina results). Research design may have played a role in the studies’ findings – many of the older studies are RCTs, giving us significant confidence in their results; however, two of the recent studies are as well. The differences in the context and design of the voucher programs are likely more explanatory. The more recent studies evaluated programs that are less tightly targeted to low-income families and students with disabilities and, in some cases, included significant regulation that limited the supply of private options. Another explanation for the mixed results could be that the local public schools used for comparison in the recent research have gotten pretty good at delivering results on state tests. Regardless, while the overarching impact of vouchers on student achievement is not completely clear, it’s likely that, even when well designed, their impact is small to neutral and that the design and context of the voucher program matters a lot.

Figure 1: Math and Reading Test Score Impacts from 12 Voucher Studies

Reproduced from the Brookings Institution Evidence Speaks Reports, Vol 2, #18.

The x-axis is the estimated impact in standard deviation units. For each study, the dot represents the estimated mean impact and the bars represent the 95 percent confidence interval around the mean.

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Attainment and Longer-Term Outcomes

The research story for educational attainment and longer-term outcomes is more positive, although the evidence is not very strong. Several studies have found that vouchers increase high-school graduation and college enrollment. There is, however, mixed evidence on college completion with one study finding a positive impact and another finding none. A recent working paper produced by EDRE’s own Cory DeAngelis and Pat Wolf found that the Milwaukee voucher program reduced criminal activity and paternity suits among participants in adulthood. These results on longer-term outcomes are promising, but more evidence is needed to verify these initial findings.

Effect on Traditional Public Schools

Opponents of vouchers often claim that they harm traditional public schools by lowering the achievement of those left behind, decreasing resources, and increasing segregation. However, we are not aware of any rigorous evidence documenting these harms occurring in real-world programs. In fact, there is significant evidence that voucher programs improve traditional public school performance. As the JEL research summary linked above put it, “Evidence on both small-scale and large- scale programs suggests that competition induced by vouchers leads public schools to improve.” Likewise, there is significant evidence that voucher programs are either cost neutral or save the state and districts money. The evidence on vouchers segregation is not as robust, but does suggest that programs that target low-income families do not have a racially segregative effect (e.g., Louisiana, Milwaukee). However, just because these harms have not been documented in existing programs does not mean that they can be ignored. Policymakers must be aware of the potential harms and do their best to mitigate these concerns when they design voucher programs.

What does that mean for Arkansas?

As noted in the intro, the Arkansas legislature is considering two voucher bills.

SB 620 would create a pilot, state-funded scholarship program for low-income Pulaski County students. This bill is currently in the Senate education committee.

SB 539 would offer tax credits to individuals and corporations who make donations to a fund that will provide scholarships for low-income students to attend private schools. This bill passed out of the Senate a few days ago and is now set to be considered in the House. Seventeen other states already offer similar tax-credit scholarship programs (visit EdChoice for more info on these programs). Our colleague Julie Trivett has produced an analysis of the potential fiscal impact of SB 539, and found that under conservative assumptions the proposed tax-credit scholarship program will be effectively cost neutral.

The bills strictly limit eligibility to low-income families and cap the resources available so that the programs start small, which are both features of programs that have demonstrated positive impacts in past research. The bills also require participants to take a norm-referenced standardized test and schools to report results. Given the research evidence on private school vouchers, we see no compelling reason for policymakers not to consider piloting the proposed voucher programs. While the proposed programs are unlikely to yield large positive results or cost savings, they will increase low-income families’ schooling options and may lead to small improvements for participants and traditional public schools alike. If either of the bills are passed, the legislature should include a requirement that the programs be rigorously evaluated so that we learn from the experience.

No time for field trips?

In The View from the OEP on March 13, 2019 at 11:38 am

Photo source:  Crystal Bridges Museum of Art

As Arkansas schools enter the final month before state testing, teachers may be focusing instructional time on test prep, foregoing other ‘non-tested’ subjects and activities, but new research finds that students who attended art-related field trips demonstrated increased engagement in school, higher levels of social-emotional skills, and, unexpectedly, higher scores on standardized tests!

The study is a longitudinal, randomized controlled trial, the gold standard for research.    Conducted by Jay Greene, distinguished Professor and head of the Department of Education Reform in the College of Education and Health Professions,  and members of the University of Arkansas National Endowment for the Arts Research Lab that he directs, the study randomly assigned fourth and fifth grade public school students in Atlanta, Georgia to attend three field trips throughout a school year. Students went to an art museum, a live theater production, and a symphony performance at the Woodruff Arts Center. A control group of students within the same schools did not attend the field trips.

You might not think that attending three field trips would lead to measurable, positive outcomes for students, but it did! You can read the working paper on the social emotional effects by lead author Angela Watson here, and the paper by lead author Heidi Holmes Erickson that addresses students’ engagement and academic outcomes here,  but here’s the highlights:

  • Students who were randomly selected to attend the field trips showed significantly higher levels of social-perspective taking through survey items like, “How often do you attempt to understand your friends better by trying to figure out what they
    are thinking?” and “When you are angry at someone, how often do you try to ‘put yourself in his or her shoes?”.  (Effects reflect the limited sample of students with higher academic performance who were more likely to be able to read and interpret the questions)
  • Students who were randomly selected to attend the field trips showed significantly higher levels of tolerance through the survey item, “I think people can have different opinions about the same thing.”
  • Students who were randomly selected to attend field trips reported more positive school engagement. They were less likely to agree that ‘school is boring’, and they had fewer disciplinary infractions in middle school than their control group peers.
  • Female students who were randomly selected to attend field trips were less careless in their survey answering, a measure of conscientiousness.  Female students in the second year of field trips demonstrate even greater levels of conscientiousness, while female students who are not included in a second year of field trips exhibit the same level of conscientiousness as female students who never attended one of the field trips.

Researchers also examined academic outcomes, hypothesizing that there would be no differences in standardized test scores between the students who attended the field trips and those who did not, as three days away from traditional classroom instruction was unlikely to affect students’ academic performance on math or reading exams one way or the other.

  • BUT- students who were randomly selected to attend field trips performed significantly better on their end of year standardized tests in math and English Language Arts than students in the control group.

Greene and his research team are continuing the research with another group of students, and will learn more about the students’ long-term outcomes as they observe them through middle school, high school, and beyond.

In the meantime, here at OEP we think that schools should consider the importance of field trips and arts experiences in a well-rounded education.

Making college accessible, one field trip at a time

In The View from the OEP on March 6, 2019 at 11:55 am


In the upcoming months, many high school seniors around the country will commit to attending a college or university. According to data from the Arkansas Department of Education, about 40-50% of high school graduates in Arkansas enroll in an in-state 2- or 4- year college. As students look forward to this important milestone, we thought it was a good time to take a step back to think about all of the decisions students have to make to be in a place where they’re deciding which college to attend. In particular, we want to focus on when and how students first start to get a realistic picture of what it is like to be a college student, and how those early experiences relate to students’ preparation for college.

Over the past two years, we at the OEP have been working with junior high schools and middle schools in the area to give eighth grade students information about college and to provide opportunities to visit the University of Arkansas-Fayetteville campus three times to learn more about the college experience. On these visits, students toured campus, participated in a college-readiness workshop, worked with academic departments, toured a dorm, and participated in an athletic event. (Oh, and of course they were able to experience the joys of a campus dining hall). These visits complement what schools are already doing to prepare students for their futures, such as offering career readiness courses, encouraging students to job shadow a professional in an interesting field, or making connections between coursework and potential careers.

Why did we focus on a campus experience, over and above providing information about college? The college-going process is complex, opaque, and confusing. Colleges can be difficult places to navigate, from making new friends, to adjusting to new academic expectations, to finding your way around campus. By creating an opportunity for students to navigate this type of environment and to meet successful students with similar backgrounds, we hope to make college seem less intimidating and more achievable.

Why did we focus on eighth grade? We knew we wanted to focus on early exposure to college, because research suggests many students get off a “college-preparatory” track in middle school. At the same time, students in the eighth grade are about to enroll in their first high school courses and to start building a high school GPA—in other words, they’re close enough to college for the message to resonate.

Of course, since we’re always interested in measuring the different ways schools are helping students, we had to evaluate these visits. So, within each of our partner schools, we randomized participating students to one of two groups. One group received an informational packet detailing postsecondary options in the state, discussing specific actions to take throughout high school to prepare for college, and educational requirements for different types of careers. The other group received the same packet of information and participated in the three campus visits. Then, we compared students’ responses to a survey asking about their attitudes towards and knowledge about college, as well as their course-taking decisions in ninth grade. You can read the full working paper here, but here are our main takeaways:

  1. Students who participate in the visits know more about college than students who just read the information on their own—students know more about the cost of college, what characteristics colleges look for in applicants, and how to earn college credit in high school, among other topics, if they have an experience to go along with the information.
  2. Students who participate in the visits have more conversations with school personnel about college than students who just receive printed information—in these conversations, students are talking about their college readiness, ACT scores they’ll need for their dream school, and other college-related topics.
  3. Students who participate in the visits are more academically diligent than students who just receive information—students who get a taste of the demands of college are more likely to fully complete a survey task.
  4. Students who participate in the visits are more likely to enroll in advanced math, science, and social science courses in ninth grade—students who participate in the visits are more likely to take advanced Geometry, pre-AP Biology, and pre-AP Civics in ninth grade, for example, than students who just receive printed information about college.
  5. Students who participate in the visits are less likely to want to go to a technical school after high school—as students gain a more realistic picture of the demands and benefits of a postsecondary education, they may be less likely to want a technical certificate and instead be more interested in other paths post-high school.

We’ve still got a lot of questions about how we can encourage students to prepare for college, particularly as more and more jobs require some sort of postsecondary training and college graduation rates stay flat. But it seems like providing field trips to a college campus is one strategy schools can pursue to help students think about all of their options for the future. If your school is interested in organizing a campus field trip (for any grade!), please reach out to us at the OEP! We would love to help you organize a fun, informational visit for your students that affirms their potential to succeed in any path they choose.


Discussion of the Proposed Arkansas Teacher Retirement System COLA Changes and Stress Testing

In The View from the OEP on February 27, 2019 at 1:19 pm

The Arkansas legislature is considering several bills that would affect the Arkansas Teacher Retirement System (ATRS), but two in particular have drawn the attention of teachers’ groups.

Here at OEP, we think it is important to understand these bills and the implications for current and future educators. We address the bills below, starting with HB1206, which would affect COLAs, before moving to HB1173 which would require plans to perform and publicly report the results of stress testing. HB1206 was withdrawn by its author this morning, but since COLAs will continue to be part of the policy dialog, it is still worthwhile to review the proposed changes. HB1173 is currently with the Joint Committee on Public Retirement and Social Security Programs, and is expected to be considered soon.

COLA Changes

What are COLAs? Cost of living adjustments (COLAs) are annual increases to retirees’ benefit payments that are meant to keep retirees from losing purchasing power due to inflation. When a teacher retires, he/she begins receiving a monthly retirement check based on years of service and average salary over his/her last few years on the job. If this base benefit amount remained constant throughout retirement, the teacher would lose purchasing power over time due to inflation. Prices of everything from groceries to healthcare tend to increase over time, requiring more dollars to purchase the same amount of goods and services. The purpose of COLAs is to increase retirees’ benefit payments at roughly the same rate as inflation so that they get consistent value from their checks throughout their retirement.

Because COLAs keep retirees’ monthly checks from losing value over time, they are a common part of plans that provide lifetime payments (i.e., annuities), including Social Security. Many public retirement systems’ COLAs were designed for a world in which inflation is consistently around 3 percent annually. Since the mid-90s, however, inflation has been far below that level. For example, average annual price inflation (i.e., December to December change in CPI-U as measured by the Bureau of Labor Statistics) for the south region since 1995 has been 2.13 percent and over the last 10 years it has been just 1.75 percent.

When COLAs provided by public retirement systems outpace inflation, retirees’ purchasing power over time is increased, rather than just maintained. Committing resources to COLAs that exceed actual inflation drives up plan cost and leaves less money to pay down pension debt and/or maintain benefit levels for new workers.

As governments across the country have struggled to get a handle on growing pension debt and rising retirement costs, many have made changes to COLAs. Since 2009, 30 states have reduced COLAs, and increasingly, governments are taking the logical step of linking COLAs to actual inflation (see NASRA report on COLAs). Many jurisdictions have also linked the provision of COLAs to their plans’ fiscal condition (e.g., COLAs can only be provided if the plan is greater than 90 percent funded). These types of changes not only keep plan costs in check but also ensure that COLAs fulfill their intended purpose of offsetting the negative effects of inflation on retirees’ purchasing power.

What changes were being proposed?

HB1206 (withdrawn today) would have modified the annual cost of living adjustments (COLAs) that retirees receive.  Under current law, ATRS retirees receive an automatic 3 percent COLA each year that is calculated using their starting benefit amount. HB1206 would have altered this by allowing the ATRS board to choose to provide an annual COLA, but the amount would capped at “the lesser of three percent (3%) or the percentage change in the Consumer Price Index (CPI), South Region as determined by the United States Department of Labor over the one-year period ending in the December immediately preceding the date for which the redetermined amount is being calculated.” In other words, the proposed change would have made the COLA discretionary and would have reduced the potential COLA amount in years when actual price inflation is below 3 percent.

So, why make the proposed change? While we don’t have any particular insight into Representative House’s way of thinking, the change was likely proposed because over the last 10 years the COLA specified in current Arkansas law would have significantly outpaced inflation. Figure 1 shows the value of $1,000 in hypothetical benefit payments growing at actual price inflation over the 10 years between 2009 and 2019 (black line) compared to COLAs under current Arkansas law – a simple 3 percent annually (orange line). To keep retirees purchasing power constant, benefit payments would have needed to increase by about 19 percent over this period, or by $190 for each $1,000 in payments. However, if COLAs had been given according to current Arkansas law, retirees’ benefit payments would have increased by 30 percent or by $300 for each $1,000 in payments. If inflation persists at its currently low level, the state would be committing more resources than necessary to maintain retirees’ purchasing power – resources that could be used to pay down pension debt and prepare the plan for the next downturn.

Figure 1: 10-Year Comparison of Different COLA Structures.

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Figure 1 also includes a blue line showing how the proposed change would have performed over the past 10 years. The COLA structure proposed in HB1206 would have tracked actual price inflation much better over this period, undershooting it by just a bit. However, while the proposed COLA structure would have performed well in today’s low inflation environment, it would significantly undershoot inflation if it were to rise. Figure 2 below is analogous to Figure 1 except it uses the last 20 years of inflation data instead of 10 years. As you can see, over this longer 20-year period the proposed COLA structure would have fallen short of actual inflation by a little more than the current law would have overshot it. To keep retirees purchasing power constant, benefit payments would have needed to increase by about 52 percent over this period, or by $520 for each $1,000. Current law would have increased benefit payments by around 60 percent while the proposed change would have increased payments by around 40 percent.

Figure 2: 20-Year Comparison of Different COLA Structures.

Screen Shot 2019-02-26 at 2.50.30 PM

The overall takeaway from these exhibits is that neither current law nor the proposed change would track actual inflation particularly closely when modeled using recent data. The current law increasingly overshoots inflation as it falls below 3 percent, and while the proposed COLA change would have done better at low levels of inflation, it would significantly undershoot inflation if it were to rise toward 3 percent.

So what should we do?

Given the low inflation of the past 10 years, it is reasonable for the Arkansas legislature to want to adjust the structure of COLAs. Why commit more resources to COLAs than is necessary to maintain retirees’ purchasing power? It is also a positive step to make COLA’s more responsive to actual price fluctuations by linking them to CPI. Such a change would continue to protect retirees while also more effectively managing plan costs. However, the COLA structure that was proposed in HB1206 could potentially fall well short of inflation if it were to rise above recent levels, likely necessitating additional modifications down the road.

If the legislature’s goal is to provide retirees with reasonable inflation protection while also not over-committing resources in periods of low inflation, then they should consider COLA structures that better track CPI within some boundaries. For example, if the legislature kept the capped, CPI-linked structure of HB1206 but changed from a simple to a compound COLA (i.e., apply the percentage increase to last years’ benefit amount rather than to the initial benefit), then COLAs would track CPI much more closely (see green line in Figure 3 below).

Regardless of the specifics, we strongly encourage the legislature to maintain adequate inflation protection for retirees and consider linking COLAs to actual inflation so that they more flexibly adjust to changing economic circumstances. We also reiterate our recommendation that any future changes to benefits, like COLAs, or contribution rates should only be made in the context of having a clearly defined funding policy and cost-sharing plan. 

Figure 3: 20-Year Comparison of Different COLA Structures with Proposed New Design.

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Stress Testing

Why is Stress Testing Important?

As noted in an earlier post,  stress testing, as proposed in HB1173, is vital to the prudent and sustainable management of public pensions. We are glad that ATRS agrees that stress testing is important, and of course, the plan already performs some level of stress testing, as the executive director points out in his recent legislative summary. However, on an admittedly quick scan of ATRS’s publicly available documents, we were unable to find any stress testing results that provide projections of future cost under multiple scenarios. We could certainly be missing something, but if stress testing results are not readily available to all stakeholders, including plan members, legislators, and taxpayers, then the value of the exercise is significantly diminished. ATRS has a responsibility to be transparent with and accountable to a broad set of stakeholders.

Given the huge implications for the public school workforce and large potential call on taxpayer resources, it is perfectly reasonable for the Arkansas legislature to place more specific stress testing requirements on ATRS than are included in the general guidelines of the Government Accounting Standards Board (GASB) or the Actuarial Standards of Practice (ASOP). ATRS’s complaints about added cost, frankly, ring hollow given the stakes for teachers and the state and school budgets. Based on our experience, it’s very hard to see how the requirements proposed in HB1173 would meaningfully increase cost above what the plan is already paying their actuaries to do.

Sounds good!  So what’s the problem?

To us, ATRS’s opposition to HB1173 appears to be more about fighting to maintain as much independence as possible rather than any concern about cost, etc. However, in our view, this strategy is shortsighted. Ultimately, it is the legislature and the taxpayers they represent that backstop the plan and ensure that teachers get the benefits that they were promised. Given the challenging times retirement plans face, ATRS should seek out increased productive engagement with the legislature so that legislators have greater ownership and a stronger sense of responsibility to fully fund the plan when the inevitable next recession hits.

We have also been disappointed by the overheated rhetoric of some employee groups regarding stress testing. Arguably their members face the greatest potential impacts from unexpected cost increases, a significant risk given ATRS’s higher than average discount rate and many experts’ investment return expectations. It seems the substantive area of disagreement is with the specific scenarios required in HB1173, which the Arkansas Education Association (AEA) calls “worst case scenarios” in the post linked above. Rather than reject the useful exercise of stress testing out of hand, we encourage the AEA to propose improvements to HB1173 that would make the scenarios acceptable to provide their members and legislators with vital information that would help them plan for whatever the future may hold.

The Takeaway

Retirement policy can be very challenging. It is technically complex, politically charged, and has many legal uncertainties. We are thrilled that Arkansas has done better than most states managing its teachers’ retirement system, but costs have still risen and public retirement plans face some significant challenges going forward. Here at OEP, we think HB1206 (now withdrawn) and HB1173 propose positive improvements that would help ATRS meet the retirement needs of former, current, and future teachers, even if the details need a little work.

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


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