Jay P. Greene. Manhattan Institute for Policy Research. 02/2005.

Wasting the Windfall
February 1, 2005

By Jay P. Greene

THE courts may order more than $5 billion a year in added spending on New York City schools — without actually boosting student achievement.

The problem with that approach — the likely remedy in the Campaign for Fiscal Equity case — is that lack of money is not a primary explanation for the city's low student performance, so throwing even more money at the current system won't help. Only structural reforms (like merit pay for teachers) can make a real dent in the city schools' failure.

Any system where schools are guaranteed ever-greater funding regardless of how well they serve students is likely to fail educationally while costing taxpayers dearly.

The city now spends $12,000 per student, making it one of the biggest-spending districts in the nation. And what does it get for all that money? Schools so lousy the court found them unconstitutional.

But given the court's order, New York's challenge is to devise ways to spend this new money that will produce better results where previous funding increases have failed.

One promising use of new money is to create a real merit-pay system. Under such a system, large bonuses for teachers and administrators would be directly linked to increases in student achievement.

The big problem with previous spending hikes is that more and more money was provided regardless of whether students were learning. Perversely, schools and staff are even rewarded with more money when their students fail — as the court's order shows all too clearly.

A system that financially rewards failure will produce failure. What we need is a system that provides financial incentives for success.

If we look at how teachers are paid now, we see a complete absence of financial incentives for teachers to improve student achievement. Teacher pay is now based almost entirely on credentials, such as advanced degrees, and years of experience. Unfortunately, these qualities are not related to student achievement.

Eric Hanushek of Stanford University reviewed 171 scientifically valid studies on the effect of teacher credentials on student achievement. Only nine found a significant positive relationship, and five found a significant negative relationship. Out of 171 studies, we would statistically expect to see about nine false positives and nine false negatives, so the pattern Hanushek found indicates pretty strongly that there is no evidence teachers with better credentials produce higher student achievement. Recent studies have confirmed this finding.

The evidence for paying experienced teachers more is not much stronger. A review of the available research by the Abell Foundation reports that the evidence only establishes a link between teachers' years of experience and their performance in the first two or three years of teaching, as new teachers get up to speed in the classroom. After that, teachers don't get more effective with additional years of teaching. This finding is also confirmed by recent studies.

Basing teacher compensation on credentials and years of experience is like having the Mets pay players based on hat size: You would just get bigheaded players who aren't especially good at baseball. If you pay people according to factors that are largely unrelated to job performance, you shouldn't expect excellent performance.

What we need is a system that aligns teachers' and administrators' pay with student achievement. Studies of merit-pay systems in Tennessee and South Carolina find that they produce greater student learning. If New York must significantly increase school spending, it should do so by offering bonuses linked to gains in student learning.

Paying teachers more for being better teachers does not mean that teachers are bad people who will only care about kids if we pay them to. Most teachers, like most people, care about kids and want to do their jobs well. But, like most people, teachers are also likely to do a better job if they are rewarded for doing so.

Rewarding excellent teachers helps attract and retain excellent performers as teachers. Denying automatic pay increases for unsuccessful teachers may also have the benefit of encouraging less capable teachers to leave the profession. Other skilled professions link pay to performance. It's time we do the same in education.

If New York must spend significantly more on its schools, using the money to fund a meaningful merit-pay system is one of the most promising options available.

Jay P. Greene is a senior fellow at the Manhattan Institute's Education Research Office (miedresearchoffice.org). Based on his testimony to the City Council's Commission on the Implementation of the CFE Lawsuit last week.

New York Post   February 1, 2005