The changing face of teacher compensation

On this site, we usually write about changes teachers can make in their own lives to improve their situation. However, there is a change occurring in the teacher community that requires some attention.

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Two things have happened in the past months that have brought this to light. The first is that I’ve learned of a local district that is starting to negotiate a new employment contract and an adjusted compensation structure has been suggested. Secondly, a recent compensation overhaul in Skokie SD 69 was explained in the Spring 2014 issue of the Illinois Association of School Business Officials (IASBO) “Update” magazine. While these compensation changes may be needed to maintain the fiscal viability of districts, it is a painful adjustment to make for those involved. However, it may not be necessary if some fundamental changes are made in how school districts are funded. Let’s review changes that have been made in Skokie and what may be coming in the future.

According to Quintin Shepherd (Superintendent) and Eric Miller (Asst. Superintendent of Finance and Business), Skokie SD 69 was having financial problems and needed to have an intervention within the next 18 months. They paid teachers based on the traditional matrix – steps for years of experience and lanes for education level (degree + hours). As revenues declined and compensation expenses went up, they decided to change the structure completely.

 

This situation is completely understandable for a district in dire straights, but what happens when other districts start following suit?

 

Instead of the usual matrix, SD 69 teachers are now paid based on CPI (inflation) and increases range from 85% – 100% of inflation based on a teacher’s education.

 

For example, when inflation is 3%, a teacher with a Bachelor’s degree earning $50,000 would experience an increase of $1,275. In this same situation, a teacher with a Master’s degree plus 15 hours would be given an increase of $1,500. Almost insulting.

There is also a range of inflation numbers that can be used: 1.5%-4.5%. If the late 1970s were to return, and inflation were to exceed 8%, teachers would experience a net reduction in wages over this time (salary increases being lower than inflation). As well as lower increases, even if a teacher were to obtain an advanced degree and multiple hours of further education, a one-time stipend is paid to recognize this, and not an increased salary. Again, for a district in trouble, this may be a needed solution, but if this strategy was adopted in multiple districts, there would be minimal incentive for teachers to improve their skills through education.

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There are two main problems that could hurt the teaching profession should compensation reform continue in the same fashion as seen in SD 69:

  1. A disparity in earnings to the private sector
  2. Lack of diversification in how school districts are funded.

When I worked for a financial planning firm, I was encouraged to improve company efficiencies, increase my technical knowledge, and help the firm make more money. In doing these things, my salary increased – sometimes in big jumps. One designation that many financial planners are encouraged to pursue is the Certified Financial PlannerTM designation. It can be likened to a master’s degree in that it takes place over a couple of years, included multiple classes, a comprehensive 10-hour exam, and three years of experience to be eligible for the certification. However, when financial planners get this designation, they can expect for their career earnings to be substantially higher than without it. If they were to do it for a one-time stipend, many planners would not pursue it – leaving consumers the ones who are worse off.

What if teachers don’t feel the financial benefit of pursuing additional education? They won’t learn additional strategies of teaching, how to deal with “problem” behaviors in students, or pursue a path of betterment. Many districts may find that their teachers leave the district to find ones that do recognize this education and struggling districts will find themselves getting worse.

But this problem is not the district’s fault – it’s due to their funding. Districts in Illinois are funded by local property taxes and state aid. But what happens when a real estate bubble pops and doesn’t come back to original levels (sound familiar?). Real estate taxes are now lower for an entire region and those districts that relied on aid need it even more. Those districts that did not rely on aid, and are not at a point of qualifying for it, have now just suffered a decline in income with lower property taxes. They must meet their original budget, sometimes with an increasing salary load as teachers gain more experience and education, but with less resources – an unbelievably tough situation.

In the investment planning arena, we call this “a lack of diversification”. Relying on one source of income for your funding will eventually blow up in your face.
   


 

What if districts were funded another way? What if they were funded with a mix of property taxes, government funding, corporate sponsorship and other private funding? This way when a real estate bubble pops again there is not a drastic impact on revenues. This will be a solution at a state government level and involve corporate buy-in, but when it comes to the education of our children, should it be that hard to gain support?

There are many lines of discussion from people who have have studied the topic more than I have, but as a teacher, please be aware that this is happening.

 

So how does Finance for Teachers help people when compensation and pensions could be changing in the future?

  • We make sure you know what is actually happening in your state and district – nothing is worse than incorrect news to base decisions on.
  • When we look at what life may look like in the future, we plan conservatively. “Plan for the worst, hope for the best.” If things don’t change like we expect, then you’ll be in a better place financially.
  • We review what you’re doing now and help you make it the best it can be. As our clients are teachers, we can do this quickly, efficiently and at the lowest cost to you.

Want to find out more? Make an appointment using the green button at the top of the page, or call us at 224-357-8625.