What Texas teaches: Embed teacher compensation reform in the school finance formula
Happy Veterans Day, education policy people. Today, we continue our discussion of teacher pay reform, featuring comments from Heather Peske, Mary Lynn Pruneda, Dan Goldhaber, Marguerite Roza, Pat Wolf, Ben Scafidi, and Rebecca Sibilia—plus report on recent takes by Rick Hess, Holly Korbey, Paul DiPerna, Liz Cohen, Susan Pendergrass, Jude Schwalbach, Eric Hanushek, Christy Hovanetz, Chad Aldeman, Tim Daly, and yours truly.
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Last week we dug into whether schools should prioritize higher teacher salaries over other budget items, from small class sizes to instructional coaching to professional learning to tutoring. And honestly, it wasn’t as much of a slam dunk as I expected. While salaries matter, there’s a case for most other investments, too, at least when implemented effectively.
Most importantly, though, respondents agreed that across-the-board raises don’t do much good. What we need is to more aggressively differentiate pay. When districts do, the evidence is much stronger that it makes a difference, as we’ve learned from D.C. and Dallas in particular.
Most districts do a bit of differentiating—with salary supplements for special ed teachers, for example, or maybe for those with National Board Certification, and occasionally for serving in Title I and other challenging schools. But as a recent article by NCTQ’s Michael Sheehy showed, the differentiation tends to be modest, with salary stipends of just a few thousand dollars on average (versus the extra $10,000 to $20,000 per year that is required to draw the best teachers to our neediest schools).
Indeed, as NCTQ’s Heather Peske argues, we need to be much more aggressive:
We need to pay all teachers more—and effective teachers even more. Effective teachers who teach in the subjects and schools that experience persistent vacancies need to be paid the most. Why? To paraphrase, “It’s the economics, stupid.” Between 2019 and 2025, on average, beginning teacher salaries increased by 24 percent. Yet during those same years, NCTQ’s recent analysis found that home prices skyrocketed by about 47 percent and rental costs increased by about 51 percent on average. This means teachers’ purchasing power has shrunk dramatically—and many teach far from home, leading to long commutes, lower performance, and more days absent… Interest in teaching has declined sharply—and many people cite low salaries and status as the reason they are reluctant to enter a profession that might require taking an oath of poverty, especially when there are other higher paying options for high-performers.
We need to be smart about how we spend our dollars and target the highest increases to the schools and subjects with the most need. In a recent report, we found that just 18 states differentiate compensation for special education teachers, and only eight do so for teachers of English learners, two persistent shortage areas.
Hawaii stands out as a leader. Since 2020, the Hawaii Special Education Teacher Incentive Program offers financial incentives, including a $10,000 annual stipend, to attract and retain special education teachers. The program also provides additional bonuses for working in hard to staff schools (teachers in these schools can earn up to $18,000 more per year) as well as professional development opportunities and support to help teachers succeed in their roles.
An evaluation of the Hawaii program found that it significantly reduced the share of vacant teaching positions in the state by 32 percent and that far fewer positions were filled by unlicensed teachers. The additional compensation drew general education teachers (who were presumably dually certified in special education) into special education roles. The bonus system did not improve the retention of current special education teachers, which may indicate that additional pay will be most effective when coupled with improvements to special education teachers’ working conditions. The policy began in 2020 and long-term impacts are still being evaluated.
In short: We need to pay all teachers more and differentiate pay for effective teachers, especially those in high-poverty schools and shortage subjects. Talk is cheap. It doesn’t pay the grocery bill or the rent. Teachers can’t afford to teach. We need to change that.
That’s where Dan Goldhaber’s head is, too:
Yes [to investing in teacher pay], but the structure of that investment matters. Raising teacher salaries across the board might increase teacher quality some, but it’s likely an investment that is a mile wide and an inch deep. I’d invest in the pain points in the labor market.
The same with Pat Wolf:
Mike et al., there is a lot of solid research on the positive effects of high-quality teachers on student outcomes (I’m looking at YOU Dan Goldhaber, Gema Zamarro Rodriguez and Eric Hanushek). The big question is how do we get more of them and less of the ineffective variety? Performance pay systems show some promise. In Arkansas, Governor Sarah Huckabee Sanders liberated districts from the straight jacket of the uniform salary schedule in 2023, but we don’t yet know the full effects of that reform.
But the small-p politics of schools and districts isn’t going to get us there without a push. As Marguerite Roza wrote,
The point of compensation reform would be to ensure the strongest teachers stay in the classroom in core academic positions especially in schools serving more high-needs students. That’s the near-term goal, and districts are failing at it miserably. District after district treats the workforce as uniform. It is not.
So far, most districts have been unwilling/unable to differentiate pay for more-/less-effective teachers. In fact, the trend was to move those strongest teachers out of the classroom over the last few years into specialists positions (coaches, etc.).
Indeed, the trend toward more staff versus higher-paid teachers is likely to continue, argues Ben Scafidi:
If states pass new funding formulas that give districts more state funding, we should expect the staffing surge to continue—the one that has been present since 1950 up to the present day. If states want to give more money for public education, they should do it through smart increases in teacher pay, as you suggest.
Moreover, enrollment declines ensure that students remaining in district public schools will have more resources devoted to their education moving forward, including more staff per 100 students: https://edworkingpapers.com/ai25-1266
If we want to boost teacher pay, we need to lean into differentiation. And if we want to see more differentiation, it’s only going to happen with a strong nudge from the states.
Previously I thought that meant that states should stop investing in school finance reform and put big money into teacher compensation reform instead. But as Chad Aldeman explains, the best-in-class policy today—the Texas Teacher Incentive Allotment (TIA):
…essentially works like a school finance reform in that it drives more money to high-need and rural schools. (More here.)
Indeed, as Mary Lynn Pruneda of Texas 2036 added, the TIA is not separate from the state’s school funding formula—it’s embedded within it!
I agree with Chad. Teacher pay is the same thing as funding reform in the Texas zeitgeist. When I worked for Governor Abbott, we did that very intentionally (and it was a huge lift to change the way people thought about teacher compensation). If we had passed another one-off compensation program, we would have been stuck relitigating the issue every two years. Putting it into our funding system had many downstream benefits, one of which was that we could focus on expanding the program in the later years to more teachers and then to principals.
I want to flag that our teacher compensation is keyed to the economically disadvantaged levels in our finance formulas—further tying the two systems together. The more poor a campus, the more the teacher is paid. Best teacher + most difficult classrooms = up to $36,000 in new funding per qualified teacher.
Wow! If you’re curious about the TIA, my Fordham-Ohio colleague Jessica Poiner wrote a great three-part series about how it works; see here, here, and here.
So Texas offers a great model for other states—embedding serious teacher compensation reform, differentiation included, within its school funding model. Should that be the new focus of school finance reformers, then? Versus making formulas more progressive?
School finance guru (and the PIE Network’s newest MVP) Rebecca Sibilia says hold your horses:
To answer your question, I’d pose one back: Why not both? The Tennessee and Mississippi formulas were so regressive, putting money for teacher salaries through them would only exacerbate the problem and tilt the market in favor of the wealthy.
Funding teacher salaries outside of a regressive funding formula would only serve to offset the advantage inside of the formula. Plus, most policy wonks have turned in favor of putting as much ed money through formulas as possible in order to maximize flexibility for districts.
So I’ll take the easy way out and say that we should focus on both. But we need to fix broken formulas first. Some states may be ready for a turn toward a salary boost, but some still need basic reforms in order for salary boosts to create the right market dynamic.
I followed up:
I guess the key question then is when has a state made its formula progressive enough that any more investments should focus on teacher compensation, like Texas’s TIA, rather than putting more money into the formula.
Rebecca:
I’d list a few that have sufficient funding and are progressive enough off the top of my head: Connecticut (now, thanks to recent reform), New Jersey, California, Oregon, Massachusetts, New Hampshire, and of course recent reform states (Colorado, Tennessee, Mississippi). Don’t be surprised to see a few proposals there in coming year.
Ever since the teacher evaluation reform effort collapsed over a decade ago, serious efforts to change teacher compensation have been MIA. Thanks to the TIA, that is no longer the case. Let’s all learn from Texas and take its lessons nationwide!
Rick Hess adds to the teacher pay debate with a timely post demonstrating that New York City could easily double teacher salaries, given that the typical Big Apple fourth-grade classroom brings in almost a million dollars in public funds! Even after subtracting reasonable expenses for instructional support and the like, there are hundreds of thousands of dollars available that could go toward teacher pay. But: “Decades of increases in school spending have led to more bureaucracy, benefits, and staff positions, rather than higher teacher pay,” Rick writes. “I suspect more spending increases would only deliver more of the same. And I don’t think that’s a good deal for students, taxpayers, or teachers.”
Liz Cohen of 50CAN is out with a new book on the promise of tutoring, which is the subject of a new interview with instructional maven Holly Korbey. My only complaint is that there’s no discussion about the budgetary trade-offs—given that (and this should sound familiar) spending big bucks on tutoring makes it harder to boost (and differentiate) teacher pay.
Speaking of interviews, Paul DiPerna questions Susan Pendergrass about her recent analysis of ESA spending in Arizona. The unbundling has arrived; as Susan explains, “This shows up in the data as a move away from predominantly using ESA funds for tuition to using them for a wide variety of curricula, extracurricular activities, and access to a broad field of professionals, such as tutors.” She’s not kidding. The state now has over 6,000 vendors participating in the program. Does that represent the great unleashing of innovation? Or 6,000 chances for waste, fraud, and abuse?
While we’re on the theme of quality control in education choice programs, I recently floated an (obvious) idea for how the private sector could nudge taxpayer donations under Trump’s new tax credit toward the best Scholarship Granting Organizations, and encourage stronger outcomes at the same time.
For years, the Reason Foundation’s Jude Schwalbach has been a staunch advocate for public school choice—especially the intra- and inter-district variety. Now he takes to The Hill to argue that policymakers from left, right, and center are getting the memo. Nevada, in particular, might be a state to watch, where “Gov. Joe Lombardo (R) and Assembly Member Selena Torres-Fossett (D) collaborated to pass a strong within-district open enrollment policy, bolstered by robust transparency provisions.” Given that the vast majority of kids in Nevada attend a single district, this sounds like a big deal.
Speaking of big deals, Eric Hanushek and Christy Hovanetz say learning loss since 2013 could cost the country $90 trillion in future economic growth, and offer some commonsense ideas for addressing it. I’m sure the detractors would rather fight about the term “learning loss” instead.
Chad Aldeman reminds us that “surveys are not real life” and digs into why citizens act differently in the voting booth than when answering pollsters’ questions, as has been the case recently with school choice referenda.
Finally, here’s Tim Daly with an evidence-based and anecdote-packed plea to save the school field trip.
“Teachers Value ‘Patriotic’ Education More Than Most Americans” —Sarah D. Sparks, Education Week
North Carolina’s commitment to expanding access to advanced learning is paying off: Across the state, more kids are taking—and passing—AP tests. —Sergio Osnaya-Prieto, EdNC
“Public school districts have two options. They can sit back and hope the pendulum of support swings back to public education, or they can use increased competition as a driving force for innovation to best serve their students’ specific needs.” —Trent Bowers, The 74
Illinois officials plan to redo their accountability categories, sorting schools from “comprehensive” to “exemplary.” How the heck is a parent supposed to know that “comprehensive” means their kid’s school is terrible? —Becky Vevea, Chalkbeat
“The most reliable path to individual economic security is to obtain the skills that lead to stable jobs and adequate pay. The facts are stark: Nearly a third of adults without a high school diploma live in poverty, compared with just 6 percent of college graduates. These differences do not just reflect underlying differences in the types of people who graduate high school or college—research confirms that greater education causally leads to improved economic security.” —Melissa S. Kearney and James X. Sullivan, The Dispatch
My guess is that you won’t see much reform in states like NY with politically powerful teachers unions. They want higher pay for all, but little differentiation and no evaluations.