THE OHIO EDUCATION GADFLY

A Bi-Weekly Bulletin of News and Analysis from the Thomas B. Fordham Institute
Volume 3, Number 27. September 16, 2009

Gadfly On the Web

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Contents

Headliner

Editorial

News & Analysis

Flypaper's Finest

Review

Announcement

About Us

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Headliner

State's retirement systems need more than a mere nip and tuck

Two years ago the Thomas B. Fordham Institute issued a report critical of the financial sustainability of the State Teachers Retirement System (STRS) and the adverse effects the system's benefits policy has on recruiting young teachers.

The June 2007 report noted the system's unfunded liability was $19.4 billion, which then represented a debt of over $4,300 per Ohio household."At current contribution rates, STRS actuaries estimate that it will take 47.2 years to amortize the unfunded liability, a funding period that exceeds the 30-year requirement established in state law (see here)," the report noted. This was at a time when the Dow Jones Industrial Average stood at almost 14,000. Today it stands at about 9,500.

When our report came out, STRS officials angrily denied problems and essentially labeled Fordham and the report's authors -- the well-respected economists Robert Costrell and Mike Podgursky -- scaremongers.

But what a difference a couple of years make. Last week, STRS Executive Director Michael Nehf stood in front of lawmakers and state officials and admitted that without a massive infusion of taxpayers' dollars and trimming and adjusting of benefits, the fund eventually would be bankrupt.

"If no changes are made we will eventually be unable to pay benefits," Nehf told the Ohio Retirement Study Council. The timeline for amortizing the unfunded liability is now set at infinity (see here).
As far as Ohio education is concerned, the STRS plan affects more than just teachers, school districts and taxpayers. The very future of our K-12 education system is at stake if you believe that smart, talented young teachers make for good schools. The whole idea behind teacher compensation has been to scrimp on upfront pay for new teachers, promising them a nice, taxpayer guaranteed pension down the road.

As was noted in our 2007 report, "the system is out of step with the state's current teacher needs, labor markets, and career patterns. While Ohio's teacher retirement system provides impressive benefits to teachers who make it through a 30-year career, these benefits come at a serious cost to younger system members, to taxpayers, and to the state. For instance, teachers who separate from the system before the 25 or 30-year mark face substantial losses in pension wealth. Thus the system contains potent and perverse incentives that seriously hinder teacher recruitment and mobility, and that foster generational inequities between younger and older teachers."

Last week, however, the emphasis was on retirees and the here and now. It was clear that while the pension funds may consider the measures they are contemplating tough, the changes are little more than tinkering with an archaic system. Raising the contribution rates on teachers and school districts may help in the short-term but it does nothing to deal with the long-term challenges facing a system that is not only too pricey to sustain in its current manifestation, but also in need of an overhaul to reflect longer life-expectancies and changing labor markets.

Consider the average retirement age for Ohio teachers is 58 years -- well below the current minimum age for regular retirement in the Social Security system (65.5, rising to 67 in coming years). The fact that Ohio teachers retire so early also gives rise to a demand for health insurance, since Medicare coverage does not begin until 65.

Exactly, how much the current changes requested by the STRS and the state's four other public pension systems will ultimately cost taxpayers will become increasingly clear in coming months. Certainly, some kind of General Assembly action is likely given the political clout of the pension funds and the associated state employee unions like the Ohio Education Association and the Ohio Federation of Teachers.

Just meeting the request of the hemorrhaging STRS and the police and fire funds is likely to cost taxpayers at least $1 billion. This is at a time of fiscal crisis for state government. The state budget came together only after painful cuts to numerous social services, an infusion of $5 billion in one-time federal stimulus money, and $2 billion raised through what the Columbus Dispatch called "Peter-to-Paul fund transfers, accounting tricks and raids on specialized funds" (see here).

"For the overall legislature it's a tough sell," said retirement council member State Rep. Lynn Wachtmann (R-Napoleon). "But don't underestimate the political power of the OEA. There's no end to their greed in asking taxpayers for more money."

Listening to the pension fund executives outline their plans made clear that there wasn't much more than a cursory nod to the state and the nation's larger economic woes. Lest it be forgotten, many Ohioans have seen their 401(k)s shrink by close to half in the last two years and no one is bailing these folks out. Many have seen their property values collapse (especially Ohioans living in cities), while 11 percent of the state's adults are unemployed.

Little was said about the plight of Ohioans who will be footing the bill for the increased employer contributions for teachers and other public servants. Only the School Employees Retirement System (the janitors and bus drivers) paid any attention to the rest of us and then mostly by pointing out that their people are the lowest paid, receive the lowest pensions and are usually the first to be laid off in times of trouble.

Scarier, however, is that public pension funds have still not figured out they are gambling with taxpayer dollars. Officials are still relying on eight percent investment returns, despite the massive losses they suffered in the last 12 months. In fact, the STRS had been using a nine percent rate until earlier this year. An eight percent rate is very common in public investment circles but is it realistic?

As economists have pointed out, despite the partial recovery in financial markets, basing pension benefits on an eight percent return is dangerous (see here). Private pension funds, for example, base their benefits on a return in the neighborhood of six percent, according to an expert at the Boston College Center for Retirement Growth. That may not seem like much of a difference but, over decades, it's literally billions of dollars.

Jay Greene, a pension expert from the University of Arkansas, has pointed out that it makes far more sense to gauge growth, and benefit payments, on the risk-free but lower rate of long-term U.S. Treasury bonds. That might be more realistic, especially given the recent meltdown, but it would hardly fly in the public pension industry, where, remember, the promise of a big pension over several decades is the norm. A teacher pension that would have been 70 percent funded at eight percent would drop to 44 percent funded with a bond rate of four percent.

To get a significantly higher return requires taking on far more risk. Of course, what teacher pension funds and other public employee pension funds have been doing is gambling that the market will rebound and deliver their big payouts. The STRS portfolio dropped $24 billion from the end of its 2007 fiscal year through June 30 of this year (see here), yet the state constitution guarantees all promised pension benefits (but not healthcare) will be paid in full.

Now taxpayers are about to be asked to bail out the STRS and protect its generous benefits and backfill market loses. The STRS, for example, wants its members and school districts to pay an extra 2.5 percent each -- raising member contributions to 12.5 percent and school districts' to 16.5 percent. The police and fire fund proposal calls for an increase in the payments made by municipalities that eventually would reach 25 percent, while employees would pay 2 percent more.

In exchange, the pension funds promise to tighten benefits. The STRS promises to change the way final average salaries are calculated, increasing years for eligibility, changing the benefit formula and reducing the annual cost-of-living adjustment (COLA). But there's no real effort to address the larger problem--that teachers and other public sector employees can retire far younger than most of their fellow citizens and receive a pension that is far more generous than most Americans receive.

As we wrote in 2007, "Ohio's teacher system was designed for a different era (one in which employees were far less mobile), and for a time when life expectancies were considerably shorter than they are today. Now, many new retirees can expect to collect pensions for more years than they taught. These incongruities are expensive, and the costs rise further when relatively young people (some in their early fifties) retire."

Boston University economist Laurence J. Kotlikoff compares the running of state pension funds to a Ponzi scheme even in the best of times. In a paper (see here) published earlier this year by the National Center on Performance Incentives, he compares pension fund operations to a legal version of the cataclysmic investment fraud perpetrated by imprisoned New York City financier Bernard Madoff.

Kotlikoff wrote "...if these plans and the governments that explicitly or implicitly back them are in as bad a shape as appears to be the case then the plans are likely to renege on their commitments to young and middle age teachers in precisely the same manner that corporate America has been reneging on its obligations to its workers."

Kotikoff urges school districts to actually pay young teachers more while promising less in retirements. "The alternative -- continuing to run Ponzi schemes whose ultimate debacle is only a matter of time -- will continue to leave both teachers and taxpayers at great risk." For example, despite the run up in stock prices that pension funds like to tout, in 2007, three in five teacher pension plans in the United States were underfunded by at least 20 percent.

In this light, the parade of pension fund executives last week in Columbus was inevitable as is a big part of their solution -- more taxpayer dollars to meet their benefits. They're also going after younger teachers by asking for higher contribution rates from them. Young teachers will have to pay those higher rates the longest and this is sure to come at lower starting salaries.

This is surely a disincentive to enticing the best-and-brightest young Ohioans to teach. Many young teachers and young prospective teachers, who are paying off student loans, attempting to start families, and hoping to buy homes, might prefer more of their compensation up front rather than see it deferred into a system from which they may well never benefit.

For purposes of teacher quality and fairness across the generations, Ohio's lawmakers should use the current crisis with the STRS system -- and the other state retirement systems -- to ask tough questions and debate tough changes. Here are five to consider:

  1. Should defined benefit plans for public employees be phased out or drastically curtailed to reduce the risk to taxpayers and future generations?
  2. Should the state move towards defined contribution plans and/or cash balance plans as most of the private sector has in America?
  3. Is it fair for public sector employees to expect retirement at 54 or 55 when most Americans are looking at retirement ages of 65 or 67?
  4. Can STRS and the other retirement systems continue to offer generous healthcare coverage that provides 75 percent of the cost of insurance premiums for most retired teachers?
  5. Is the current system transparent? Can the STRS trustees, who are mostly teachers or former teachers themselves, really make the hard decisions necessary to reform their retirement system?

Taxpayers and pension-fund members deserve answers to these questions and only by rejecting any request for more taxpayer dollars will we actually get answers that are honest.
by Mike Lafferty and Terry Ryan

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Editorial

Judges and schools

This week, the Thomas B. Fordham Institute (along with co-publisher, Brookings Institution Press) released From Schoolhouse to Courthouse: The Judiciary's Role in American Education, a timely and important book that examines the role of the courts in modern American K-12 education. From race to speech, from religion to school funding, from discipline to special education, few aspects of education policy have escaped the courtroom. Ohio is no exception, from the Ohio Supreme Court's DeRolph rulings, to the U.S. Supreme Court's Zelman decision, to then-Attorney General Marc Dann's failed lawsuits against low-performing charter schools. In From Schoolhouse to Courthouse, experts in political science, education policy, and law describe just what the impact of judicial involvement has been. The following piece, by Fordham President Chester E. Finn, Jr. and adapted from the book's foreword, explains why Fordham embarked on this project and why this book is must-read for those of us who care about improving student learning and see education as a critical social justice issue.

Primary-secondary education is obviously not the only realm of increased litigation in American life and intense court involvement in social policy. It's most definitely not the only field in which the fruits of such litigation have sometimes turned out to be mushy if not rotten. Nor is it the only sphere where policy disputes and reform initiatives--and resistance to these--have been fought out in courtrooms as well as in legislative corridors and voting booths. In the three decades since Donald Horowitz penned The Courts and Social Policy, many forests have fallen to produce the paper on which were inscribed hundreds of thousands of court decisions in countless areas of domestic affairs. (Consider, just as a beginning, disability law, family law, welfare, health, immigration, housing and, of course, law enforcement.)

Yet the impact of all this has been sorely neglected, particularly in K-12 education. Scads of people have scrutinized the executive and legislative branches of government, both state and federal, in relation to schools and education policy. Yet few analysts have tackled the judicial branch. As a result, not a lot is known about its role in and effects on our schools, our teachers, and our children.

One can easily recount several famous decisions, particularly by the U.S. Supreme Court, that seemed to advance important education reforms (such as Brown and Zelman) and can point to others (especially state court rulings on school finance) that tended to push in the opposite direction, particularly by emphasizing resources over results and uniformity over diversity and choice. A valuable 2003 book by Richard Arum highlighted the courts' tendency to exacerbate the challenges of school discipline, and a 1997 book by Mark Kelman introduced us to the gnarly complexities of special education law.

But all of this was piecemeal, addressing specific facets of K-12 schooling and their intersection with the judiciary rather than mapping the entire landscape. To find a reasonably comprehensive treatment of the whole topic, one had to look back to 1978, long before many key developments in education policy. Over the past thirty years, as best we could tell, nobody had surveyed these questions from 30,000 feet. Yet there was much that seemed important to find out. Is education litigation still on the rise? In which policy spheres? Federal or state courts? Constitutional, statutory, or regulatory? In what domains might judicial activity be fostering needed reforms and in which is it retarding them--or consuming so much attention and resources as indirectly to have that effect? What about the hot-button issues of segregation, special education, school discipline, and No Child Left Behind?

To what extent, we wondered, is court involvement an obstacle to desired reforms in primary-secondary education in twenty-first century America? To what extent is it a distraction? Might it possibly turn out to be an asset?

This was important territory for Fordham to explore, but we needed our own Lewis and Clark to lead the expedition. So we turned to two of the ablest young education-policy scholars in the land, Harvard's Martin West and Joshua Dunn of the University of Colorado at Colorado Springs. They then recruited a stellar cast of traveling companions. (And the Achelis Foundation and Searle Freedom Trust stepped up to offer some much-needed assistance in outfitting and provisioning their canoes.) The result is Fordham's (and Brookings's) hot-off-the-presses tome, From Schoolhouse to Courthouse: The Judiciary's Role in American Education (see here).

What, exactly, did these intrepid explorers discover? Four points strike me as particularly noteworthy.

First, some policy domains where we expected to find enormous amounts of litigation (notably
special education and NCLB) reveal far less than anticipated, even as others (such as school choice and free speech) display more than we imagined--and as a few areas that once dominated the field (desegregation, school finance) appear to be approaching something like a steady state if not dormancy.

Second, several realms where it briefly seemed that a climactic Supreme Court decision might clear the air and settle the matter (for example, the Zelman holding that properly-structured voucher programs do not violate the establishment clause) have instead remained fraught with lawsuits, showing how a controversial resolution under the federal Constitution does not quash the ability of agitated interest groups to continue litigating in state courts.

Third, as Mr. Dooley noted of the Supreme Court in Finley Peter Dunne's classic fin de siecle works, judges do follow the election returns--and they also possess policy minds of their own, including ideological predilections and sometimes a sense of superior wisdom. Litigation in education, as in other domains, is not something that arises in outside-the-courtroom disputes between rival interests and views and then enters the courtroom for objective resolution by disinterested and Olympian jurists. Too often, alas, it is the work of judges seeking particular policy (or political) outcomes and finding (or crafting) legal pathways to their desired destinations.

Fourth and finally, while judges are surely adept at finding and pursuing such pathways, the consequences for education are frequently mischievous if not downright damaging. The multiple roles assumed, and decisions issued, by state and federal courts in this domain in recent years add up to a large, mixed bag of influences, many of them malign, on the education enterprise and earnest efforts to reform and renew it. Most jurists know plenty about the law but little about schools and the conditions in which those responsible for teaching in and leading them are most apt to succeed. As a result, the outcome of education litigation often works better in the courtroom than in the classroom or principal's office.

A few judges seem to have figured this out and to be stepping back from efforts to micromanage schools and state or local education systems from the bench. But they are still outnumbered by jurists willing to conspire with litigants and their attorneys--there is no dearth of either--to enact (or block) policies and programs via the courtroom when they cannot prevail in the legislative or executive branches of government. We ought not be so dazzled by some of the great, transformative court rulings of yesteryear--Brown above all--as to suppose that any large fraction of the 7,000 or so education-related decisions now being rendered annually by federal and state judges are having a salutary effect on American schools or children's learning.

by Chester E. Finn, Jr.

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News & Analysis

New studies can inform teacher mentoring and staffing practices

Two recently released studies have the potential to influence policy related to teacher mentoring programs and school staffing. These studies are especially poignant for Ohio as it moves to restructure its new teacher induction programs (see here).

A study by Mathematica Policy Research (see here) found that highly structured mentoring programs for new teachers yield marginal results. These programs are known as comprehensive teacher inductions and are common in districts across the country. Such programs rely on carefully selected mentors with an intensive curriculum. They are commonly designed to support new teachers and reduce teacher turnover. In contrast, less formal mentoring programs, referred to as traditional induction programs, are usually site-based and involve a new teacher being paired up with a veteran teacher within their content area or grade level in their building.

The Mathematica study involved 1,009 teachers in 418 elementary schools in 17 medium and large urban school districts in 13 states. It examined a treatment group of teachers exposed to the more intensive and comprehensive teacher induction, and an equivalent control group exposed to a less structured mentoring process. Researchers used surveys and school data to measure teachers' backgrounds; receipt of induction services and alternative support services; attitudes and outcomes related to classroom practices, student achievement, and teacher retention. The researchers found that the treatment and control groups showed no discernable difference over a two year period in student achievement and teacher retention.

Conversely, a study to be released in October by C. Kirabo Jackson and Elias Bruegmann (see the abstract here) reports that good teaching has spillover effects. The study showed that teachers with a record of proven excellence helped to raise the performance of their peers.

The results from these studies can have far-reaching implications for how future mentoring programs are designed. School districts currently expend considerable time and resources creating and running comprehensive teacher inductions. Now that there is empirical proof that these inductions are not making an impact in comparison to less demanding and less costly ones, resources should be devoted to other areas of professional development.

In Ohio, new teachers have been required to go through a lengthy mentoring process to obtain a professional certificate. This program, known as Praxis III (see here), is comprehensive in nature and bases the decision to license a teacher on only one or two observed lessons. Gov. Strickland's education reform plan addresses this shortfall by proposing a four-year teacher residency program before attaining professional licensure, though many details about the residency program are still being worked out.

Bruegmann and Jackson's study also raises the issue of proximity and access to quality mentors. They found that the spillover effect occurs when experienced teachers are in the same building or grade level as their colleagues. Many new teachers tend to begin their careers in at-risk schools and then migrate to schools they consider 'better' as they gain experience. The end result is an imbalance of experience in schools within a district. Under the Praxis III system, it is possible for teachers to end up with mentors located in another building and outside of their content area. Logistical hurdles aside, larger districts should consider ways of placing their best veteran teachers as mentors in schools that have the highest numbers of new teachers.

It would be wise on the part of those crafting the new teacher induction programs in Ohio to examine these reports when designing the mentoring aspects of the residency.

by Eric Ulas

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Flypaper's Finest

A new kind of victim-blaming, by Jamie Davies O'Leary

One frequently hears arguments that redirect blame from failing schools (and their teachers and principals) to ubiquitous social monsters that are bigger and hairier (poverty, broken families, crime) but also impossible to hold accountable. I get this. There are undeniable correlations between student achievement and socioeconomic status. When I taught in Camden, New Jersey (then the second poorest city in the US) I could empathize when my colleagues said--in so many words--that a student's failure simply wasn't their fault. Having been schooled in Teach For America's no excuses curriculum, this abdication of blame was foreign to me. But seeing up close the level of poverty that ravaged our school's neighborhood, and the kinds of unspeakable problems that come with that, I couldn't help but make peace (if not always agreeing) with the tendency for educators in persistently failing schools to point to the outside social forces that make their work so difficult. (Read the rest here.)

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On the decline of stately schools, by Emmy L. Partin

Over at the Education Next blog, Martha Derthick laments the decline of "stately" schools. Derthick specifically highlights the turn-of-the-twentieth-century school buildings in Ohio's Queen City (which are also featured in 2001's An Expression of the Community: Cincinnati Public Schools' Legacy of Art and Architecture). The decline of stately schools has been hastened here in Ohio, where over the past decade the state has poured billions of dollars into renovating and replacing our public schools with the new, modernist buildings Derthick describes. A visit to any of Ohio's newly built schools will confirm that we've moved away from buildings of beauty to buildings of function. I'm certainly in favor of preserving the historic buildings whenever possible, but I see the upside to modernization as well. I attended elementary and high school in the Buckeye State in early 20th century buildings much like those she talks about, both of which have since been replaced with new facilities. But alongside the aesthetic transformations have also come much-needed improvements for modern-day learning. (Read the rest here.)

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Review

Why Science Standards are Important to a Strong Science Curriculum and How States Measure Up
Louise S. Mead and Anton Mates
National Center for Science Education
August, 2009

Nationally, state science standards regarding the teaching of evolution in our schools have improved a little since 2000 when the Fordham Foundation last surveyed the landscape. According to this latest survey from the National Center for Science Education (see here), 40 states and territories do an adequate job, up from 31. The survey shows that science standards tend to cover evolution more extensively than they did a decade ago, and that the average quality of the treatment has increased.

Ironically, however, creationist language is also becoming more common in state standards. And, there are still outliers such as Texas, Louisiana and nine other states that were marked unsatisfactory with an "F." Texas is cited as a particularly troubling example. Amendments to the Texas Educational Knowledge and Skills document now require the presentation of creationist claims about the complexity of the cell, the completeness of the fossil record, and the age of the universe. Ohio and other states -- notably Kansas -- went this route a few years ago and, fortunately, veered back towards the tenets of science.

Ohio grades a "B" in this new report. The state's science standards are now being reviewed again and it appears evolution will be treated in an educationally valid and scientific manner. Kansas gets an "A" this time around. On the other hand, Oklahoma's standards don't even mention the word evolution. Some states wiggle. Missouri's standards ignore human evolution, which is kind of a fallback position for anti-evolution types who, when faced with scientific reality, grudgingly argue that it may work for microbes and monkeys but not for us.

There are still lots of people of influence who believe the Earth is about 16,000 years old or, that at least the idea needs to be seriously discussed. Mead and Mates believe any discussion of alternatives to evolution that are not based on science automatically marginalizes evolution teaching and that, obviously, is what the creationist and intelligent design clique have in mind. These people remain influential. Their opposition, for example, may have discouraged any American film distributor from carrying the new film of Darwin's life (see here). I may have to go to Canada to see it. I mean, where's the controversy over unending sequels to "Halloween"?

Unfortunately, however, even if educational sanity and scientific accuracy are reflected in state science standards in Ohio and elsewhere, there's no guarantee the standards will be carried out in classrooms. This could be simply because a teacher doesn't want to teach them or because the teacher is incapable of adequately teaching science because he or she lacks the knowledge and training to do so. The dire need for competent math and science teachers in classrooms across the nation can short circuit the best of plans. At least rigorous standards ensure there is a resource for less-well-prepared teachers. Read the report here.

by Mike Lafferty

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Announcement

World-Class Academic Standards for Ohio conference October 5

National education experts and top state leaders will come together October 5 in Columbus for a one-day conference about academic content standards. Panelists and speakers will share promising practices from across the country and around the world, talk about the current 'common standards' effort, and discuss what Ohio can do to achieve "world-class" standards. See the full agenda here. For more information, contact Emmy Partin at 614-223-1580 or [email protected].

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About Us

The Ohio Education Gadfly is published bi-weekly (ordinarily on Wednesdays, with occasional breaks, and in special editions) by the Thomas B. Fordham Institute. Have something to say? Email the editor at [email protected]. Would you like to be spared from the Gadfly? Email [email protected] with "unsubscribe gadfly" in the text of your message. You are welcome to forward the Gadfly to others, and from our website you can even email individual articles. If you have been forwarded a copy of Gadfly and would like to subscribe, you may email [email protected] with "subscribe gadfly" in the text of the message. To read archived issues, go to our website and click on the Ohio Education Gadfly link. Aching for still more education news and analysis? Check out the original Education Gadfly.

Nationally and in Ohio, the Thomas B. Fordham Institute, along with its sister organization the Thomas B. Fordham Foundation, strives to close America's vexing achievement gaps by raising standards, strengthening accountability, and expanding high-quality education options for parents and families. As a charter-school sponsor in Ohio, the Foundation joins with schools to affirm a relentless commitment to high expectations for all children, accountability for academic results, and transparency and organizational integrity, while freeing the schools to operate with minimal red tape. The Foundation and Institute are neither connected with nor sponsored by Fordham University.

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