Broken Politics and 8-year old Victims

One thing is clear about our current political system – it rarely works. Washington is a prime example. But there are examples in Raleigh as well.

Broken politics are bad enough when adults pay the price for politicians’ foibles, but when bureaucrats use third graders as political pawns, political shenanigans take on a whole new meaning.

Here’s an example: In the 2011-12 Budget the General Assembly implemented the Read to Achieve program. What the bill did was simple: It said children in the third grade needed to be able to read at a third grade level before they could be promoted to the fourth grade. That was straightforward enough – it simply laid down a marker. It didn’t require that 8-year-olds take complex batteries of statewide tests. In fact, it didn’t require any statewide testing program at all.  A child’s teacher could make the decision.

And that’s where it stood until the bureaucrats at the Department of Public Instruction (and local school boards) got into the act and turned a simple goal into  a complex system of tests upon tests upon micro-tests – that all landed squarely on the heads of 8-year-olds.

The Department of Public Instruction started informing local school boards that reading proficiency could be measured in five ways:

1. Pass the Beginning of Grade Test.

2. Pass the End of Grade Test.

3. Pass the state developed alternative test.

4. Pass a State Board of Education approved test, developed at the local level.

5. Pass (at a 70% rate) the 36 passages in the student portfolio.

Now, bear in mind, the General Assembly didn’t mandate all these tests. But, nonetheless, some local school districts proceeded to require third graders to take a barrage of multiple tests.

So, why is this an example of ‘broken politics?’ Because it’s an example of how our state education bureaucrats react to any attempt at accountability.  It reminds me of the recent budget dust up in Washington. If the President had simply laid off a few IRS auditors, no one would have minded. But, instead, he chose to shut down those parts of the government that would cause the most pain and outrage – like locking veterans out of war memorials.

Bureaucrats don’t like accountability,  so under the ruse of complying with Read to Achieve they created a plan for testing that was sure to outrage parents. To crush any attempt at accountability the bureaucrats turned a simple requirement – that third graders be able to read – into an education train wreck.

Not a Cut and Dried Question

The average North Carolina teacher receives compensation (salary plus benefits such as healthcare and retirement benefits) of around $55,000 and according to the NCAE, which serves as a union representing teachers, it’s not nearly enough.

 

But like a lot of problems that look simple at first glance, the question of fair teachers’ pay isn’t as cut and dried as it seems. Here’s an example: Should teachers receive across the board pay raises – or merit pay raises?

 

Here’s a more nuanced example: According to the Census Bureau, between 2000 and 2010 the median household income in North Carolina dropped from $51,125 to $45,570. At the same time teachers’ compensation didn’t decline – in fact, it increased slightly. And, as a result, by 2010 the average teachers’ pay was 121% more than the median household income.

 

Teachers, of course, believe they are not receiving the compensation they deserve – but, on the other hand, over the past decade, compared to the average family, teachers fared relatively well.

 

Here’s another, harder question: It’s simple to say, Let’s raise teacher’s pay – but how do we pay for the raises? Is it fair to raise taxes when many families are watching their household income drop? That’s a pretty tough proposition – the answer to that question’s not cut and dried at all.

When You Are In A Hole

The problem with today’s political debates is they’re loud, clanky, and breed confusion rather than spreading light.

Lately, I’ve been hearing a lot from the NCAE (the teacher’s union) about how wrong it is to only pay teachers, on average, $41,000 a year. So, I looked into the numbers and, well, like a lot of numbers in political debates they don’t quite tell the whole story.

Teacher salaries are $41,000 a year on average. But, in addition, like other state employees, teachers also receive benefits (like health insurance and retirement benefits) – which my friends in small business would consider generous.

Let’s look at health care benefits: A teacher receives the standard state government health insurance package, which is a deluxe package, for free. In addition, if he or she chooses, they may upgrade to an even better package by paying 5% of the total premium out of pocket.

Not long ago, a teacher wrote me, taking me “to task” for saying the state pays for her health insurance as part of her total compensation. She made it very clear she was paying for her own insurance and the money is deducted from her paycheck. In fact, it appears she’d chosen to pay for the upgrade and believed the 5% that came out of her paycheck covered the whole cost of her health insurance. She’d simply missed the fact the state was paying around $5,000 per year for her health insurance in addition to the $250 she was paying for the upgrade.

The story doesn’t end there: The State has also promised to pay nearly $30 billion in health insurance benefits for teachers and state employees after they retire. Here’s how these benefits work: After teaching for twenty years and after age 50, a teacher is eligible to stop teaching and to continue to receive his or her state health insurance (paid for by the state) for the rest of his or her life. That’s called a ‘health care’ retirement benefit. Except unlike most retirement benefits it doesn’t start at age sixty-five – a teacher can claim this benefit when he or she is fifty,  fifty-five, or sixty years old.

Right now, North Carolina spends $1.35 billion a year to provide health insurance to public school teachers. Of that, one third ($450 million) goes to pay for health insurance for teachers who are no longer teaching. Even teachers who are on Medicare continue to receive a state healthcare benefit as a supplement.

The NCAE’s reaction to all this has been to say we should be ‘talking salaries, not benefit packages.’ But paying $450 million in benefits to folks who don’t teach is a pretty big number. If the legislature had $450 million to spend to give teachers pay raises, it would be an average raise of $4,500 per teacher.

It would be simple to say, Well, let’s just do that. Let’s just pay health insurance for teachers who are teaching. And use the $450 million to fund pay raises. But we can’t because the state has made a commitment to pay that $30 billion in health care retirement benefits. We can’t just say, Well, yes, we did make that promise – but that was then and this is now.

The hard truth is the state’s on the hook for a $30 billion debt and that $450 million is just this year’s payment on it.

Here’s my point: Instead of a system that pays teachers who are teaching more, we have a system that provides benefits to teachers who don’t teach. That’s another big flaw in how North Carolina pays teachers that needs to be fixed.

It Pays to Age

In his book Outliers, Malcolm Gladwell introduces us to the “10,000-Hour Rule” – a principle, originated by Anders Ericsson, which says mastery of a field requires focused effort for an extended period of time – for 10,000 hours. For example, under this theory, spending 40 hours teaching every week for five years is how to produce a ‘master teacher.’

Now, compare Malcolm Gladwell’s 10,000 hour theory to how we pay a public school teacher. Under our current system, we say that a teacher has his or her lowest value at hiring. That’s when they’re paid the least. But that value does not increase one penny for the first five years of the teacher’s career. Not a penny.

The basic problem here – the flaw in the system – is we blindly lump teachers into categories called ‘tiers’ and pay them based on which ‘tier’ they fall into – instead of how well they teach. The tiers looks like this: 

Teacher Compensation Tiers

Experience

Compensation

0 Years

$38,490

10 Years

$45,409

20 Years

$54,527

30 Years

$63,153

*         All levels assume a teacher with no advanced degree or certifications. Compensation includes state base salary, adds local supplement (using statewide average) and adds the present value of pension and healthcare benefits received after retirement. Compensation is flat for the first five years. Compensation increases annually thereafter.

 

The flaw in the system is obvious: An absolute genius teacher, who’s taught five years, is paid 40% ($25,000) less than a mediocre teacher who’s taught thirty years.

Now, I guess it is possible that the teaching profession is completely different from every other field of human endeavor – and that a teacher may not improve a bit in skill for five years. And, I guess, it’s also possible that every single one of the best teachers in North Carolina has taught over thirty years. But, after eight months in the General Assembly, when I look at a chart like this, right off, I smell politics – and suspect I’m looking at a pay system that is the result of politicians run amok and teacher union lobbying.

The NCAE likes to say if we want better teachers we have to pay them more. And that sounds fine. But it’s not the same as saying we should pay the best teachers more. And, in fact, our current ‘tier’ system dictates some of the best teachers will be paid less.

Here’s the bottom line: It is time we took a hard look at how our state compensates teachers. After all, shouldn’t the best teachers also be the best paid teachers?

If it walks like a duck…

NCAE-duckpost

It seems I offended some folks when I recently referred to the NCEA as a union. After checking with Merriam-Webster.com, it appears the correct term should be “labor union – an organization of workers formed for the purpose of advancing its members’ interests in respect to wages, benefits, and working conditions.” While words do matter and “labor union”, appears to be more accurate, I hope the shorter version is acceptable.

Since the passage of the NC Budget, we have heard much about teacher salaries as if that was the only component of employee compensation. But there is a missing piece here.

The NCAE says teachers’ salaries average $41,000. But they intentionally skewed the number downward by leaving out health insurance, pension fund benefits and social security payments – all of which North Carolina provides our teachers.

Add in those benefits – complete the picture – and teacher pay (average) rises dramatically to over $55,000.

The NCAE knew this because it lobbied for all those benefits. On its website it states, “The maintenance of a viable health insurance plan and a fully funded retirement system are vital to recruiting and retaining a stable, vibrant workforce for North Carolina’s PreK-12 public schools.“

Not many of our friends in the private sector are offered pension benefits that allow them to retire after 30 years, regardless of age. That’s a fact about teacher’s compensation the NCAE never mentions when blasting Republicans.

It’s time we get beyond the political finger-pointing and posturing and determine what is fair compensation for teachers.

The salaries we pay our teachers must be competitive with the four states that surround us. I’ve been lambasted from six directions for voting for the budget but I’ve been amazed by the critics’ lack of actual, reliable data. As an engineer, I like numbers. I realize every state funds education differently. There are salaries, current benefits and even unfunded future benefits – that the state has promised and will have to pay down the road.

For instance, North Carolina has promised to pay teachers $33.3 billion in future benefits (for retirement and health care). But it hasn’t set aside a penny to meet those obligations. That’s an unfunded liability. That’s bigger than the entire state budget.

All that said, teachers’ pay is measureable and it’s not a huge task to find an economist to do a well-documented study to measure how well we pay our teachers compared to our four neighboring states.

Focusing on our neighboring states may sound a little provincial, but they are our most direct competitors, not just in education but also in jobs and economic development. Once we determine how we are doing compared to our neighbors, if needed we can look further afield. But, right now, I’d be happy to have clear, unbiased, unpoliticized numbers to see how we’re doing compared to South Carolina, Virginia, Georgia and Tennessee.

Passing the Buck

It’s not surprising the NC Association of Educators (which acts as a teacher’s union) would like to collect as much money as it can in dues. As a businessman, I understand that.

But based on the emails I’ve been receiving from teachers about pay raises, and an article just published in the Hickory Daily Record, the union also has a fundamental conflict of interest: It represents both teachers and school administrators.

Whoever heard of a union that was clever enough to represent both management and labor – at the same time?

Consider the article in the Hickory Daily Record. It reports teachers in Catawba County earn an average of $43,000 (not including benefits like healthcare and pension). The Record also listed the top administrators’ salaries – and all were earning over $100,000.

How is that a conflict?

The NCAE naturally wants teachers to be paid more – and one productive way to do that is to reduce administrative costs. But, of course, the NCAE can’t support that kind of reform because some of its members are administrators. The NCAE is caught straddling the fence. That’s the conflict of interest.

The NCAE’s solution? It passes the buck – it says, Let’s not cut anyone. Let’s give everyone a raise. Of course, that works out fine for the NCAE. But what about taxpayers?

After the Flood


In the dry jargon of weather prognosticators it’s called a 1000 year event – a storm so severe it happens only once in 1000 years. Well, it happens we had a 1000 year event in Catawba County two weeks ago. A storm dropped five inches of rainfall in less than an hour. And caused floods powerful enough to take apart a perfectly good highway, leaving a gaping crater where there was once a road traveled by thousands of people.

The storm, I guess, was Mother Nature run amuck. But what happened next was a study of human quirks.

When local officials frantically set to work to repair a dozen washed out roads and bridges, they ran straight into an unexpected hurdle. They were informed by officials at the Department of Environment and Natural Resources in Raleigh that, thousand year storm or no storm,  before the first track hoe could begin rebuilding roads they were going to have to go through the normal, routine, business-as-usual state government process of obtaining the appropriate environmental permits – which can take weeks.

I thought, What we need here is a little old-fashioned common sense. After all, when you have a thousand year storm the normal business-as-usual rules don’t exactly apply. It’s a time to cut red tape.

So I called two state officials in the Governor’s office. Neither called me back.

I called Mitch Gillespie, who now serves as Deputy Secretary of the Department – of Environment and Natural Resources – which controls the permits. After I talked to Mitch a polite lady called. Then we exchanged emails. She explained the Department of Transportation and the State Land Quality Officer and the State Environmental Assistance Coordinator would be “happy to provide information” and attend meetings and that there seemed to be “several variables” to sort out to “determine what is required.”

It was courteous to a fault but wasn’t quite reaching the level of common sense.

I wrote back, “What is it you don’t understand about the meaning of the word ‘Emergency.’”

I also sent a copy to the Governor, the Secretary of DENR and the Secretary of Transportation.

In a matter of minutes I heard back from John Skvarla, the new head of DENR. He was already at work cutting the red-tape.

That’s the kind of common sense you need when you have a 1000 year storm.

I’ll keep you posted on what happens next.

2013 Education Funding

There’s something for almost everyone to dislike in the state budget. I’ve heard from folks saying legislators spent too much or spent too little but no one has said the spending was just right.

A little perspective may help.

A time bomb went off under the budget (not once but twice during the last six months) called Medicaid. Medicaid spending exploded, soaring to an additional $1.25 billion. Like kudzu, the cost of Medicaid grew like crazy.

Wait, you might say, Medicaid is a Washington program. It is. But the state has to pay part of the cost and, this session, years of bungling and mismanagement flew home to roost.

Another issue received little attention – no one demonstrated or protested against the state’s ‘unfunded liabilities.’ But it’s a cold hard fact the state is obligated to pay $3.7 billion more than it has already to the State Retirement Fund to provide pensions for teachers and state employees. The state is also obligated to pay state employees’ future medical care – and that’s another whopping $29.6 billion ‘unfunded liability.’

Despite those hurdles, the new state budget spends more money on education than has ever been spent on education in North Carolina ($11.5 billion out of a total $20.6 billion budget). I know that’s not what Democrats like Reverend William Barber, who led the ‘Moral Monday’ protests, are saying. But what Republicans actually did this session was slow the increase in state spending – which is hardly a radical change.

The General Assembly cut taxes. The Democrats label it a tax cut for the rich. But, here again, the political rhetoric is wrong. The legislature cut taxes for everyone from single working mothers to small businessmen to retirees.

The Teachers Association doesn’t approve of the legislature ending teacher tenure – but most people in North Carolina are paid based on how well they do their job. Now teachers will now be awarded contracts based on the same principle. That’s a step in the right direction – it’s preferable to reward state employees and teachers based on how well they do their job, rather than give blanket pay raises.

The legislature funded new technologies to schools (like digital textbooks) and laid the groundwork for a new high school curriculum to teach more about technology, engineering, and other high-employment fields.

We also launched an innovative Opportunity Scholarships program to allow low-income parents who are unhappy with their children’s schools to seek other schools. The Democrats claim that will mean less money for public schools. But that’s more political rhetoric. It costs an average of $9,200 to educate a child in public schools. The maximum Opportunity Scholarship is $4,200. When a child accepts an opportunity scholarship and attends a private school, the difference ($ 5,000) stays with the public schools – meaning they have more net income.

I’ve heard from a lot of unhappy state employees and teachers – who did not receive a pay raise. I don’t know the right number for teacher’s pay but, right now, with an anemic economy it isn’t a time to raise taxes on struggling families. Hopefully, we have laid the groundwork for a stronger economy – which is the key to a brighter future.

Naturally, there were a lot of political charges thrown around during the session. Here are the key facts: The legislature didn’t cut spending. But it did cut how fast spending is increasing. It didn’t pass a tax cut for the rich – it cut taxes on almost everyone. Those aren’t, as some Democrats have charged, radical changes. They are reasonable steps in the right direction.

Some good advice

postcard

(click the postcard for a larger version)

Above is a local postcard Suzanne ran across while going through some family memorabilia. In a century, we have moved from our financial institutions telling us to save to now telling us to get, and use, all the credit we can. This will not end well and having the government behave the same way only makes it worse.