In a decade and a half, the charter school movement has gone from a glimmer in the eyes of a few Minnesota reformers to a maturing sector of America’s public education system. Now, like all 15-year-olds, chartering must find its own place in the world.

First, advocates must answer a fundamental question: What type of relationship should the nascent charter sector have with the long-dominant district sector? The tension between the two is at the heart of every political, policy, and philosophical tangle faced by the charter movement.

But charter supporters lack a consistent vision. This motley crew includes civil rights activists, free market economists, career public-school educators, and voucher proponents. They have varied aspirations for the movement and feelings toward the traditional system. Such differences are part of the movement’s DNA: a National Alliance for Public Charter Schools (NAPCS) study found that the nation’s charter laws cite at least 18 different goals, including spurring competition, increasing professional opportunities for teachers, and encouraging greater use of technology.

Because of its uniqueness, chartering is unable to look to previous reform efforts for guidance. No K–12 reform has so fundamentally questioned the basic assumptions—school assignments based on residence, centralized administrative control, schools lasting in perpetuity—underlying the district model of public education. Even the sweeping standards and assessments movement of the last 20 years, culminating in No Child Left Behind, takes for granted and makes use of the district sector.

Though few charter advocates have openly wrestled with this issue, two camps have organically emerged. The first sees chartering as an education system operating alongside traditional districts. This camp contends that the movement can provide more options and improved opportunities, particularly to disadvantaged students, by simply continuing to grow and serve more families.

The second group sees chartering as a tool to help the traditional sector improve. Chartering, the argument goes, can spur district improvement through a blend of gentle competitive nudging and neighborly information sharing.

Both camps are deeply mistaken. For numerous policy and political reasons, without a radical change in tactics the movement won’t be able to sustain even its current growth rate. And neither decades of sharing best practices nor the introduction of charter competition has caused districts to markedly improve their performance.

Both camps have accepted an exceptionally limited view of what this sector might accomplish. Chartering’s potential extends far beyond the role of stepchild or assistant to districts. The only course that is sustainable, for both chartering and urban education, embraces a third, more expansive view of the movement’s future: replace the district-based system in America’s large cities with fluid, self-improving systems of charter schools.

A Parallel System

Charter advocates are rightfully proud of their achievements. As of spring 2007, 4,046 charter schools were serving more than 1.1 million children across 40 states and the District of Columbia. In a number of cities, charters educate a significant proportion of public school students (see Figure 1). But when compared to the expanse of the traditional district-based system and the educational needs of low-income families, the movement’s accomplishments are modest.

Nationwide, only 2 percent of public school students attend charters. Over the last five years, an average of 335 new charters started annually. At this rate, it would take until 2020 for chartering to corner just 5 percent of the national market. Even these humble figures inflate the movement’s true national standing. In 2007 nearly two-thirds of charter schools were in only seven states. Today, 24 states have less than 1 percent of their students in charter schools. Though strong expansion continues in places like California and Florida, the 2006–07 school year saw 26 states open five or fewer new schools, while 5 states—because of closures—began the school year with fewer charters than they had the year before.

None of this, however, should be taken as an assault on charters’ popularity or effectiveness. In New York, 12,000 students are on charter wait lists; in Massachusetts 19,000; in Pennsylvania 27,000. Students on all of the nation’s charter wait lists would fill an estimated 1,121 new charter schools.

Research on student achievement in charters is encouraging. A recent analysis of the charter school studies since 2001 that measured student or school performance over time—the ideal way to measure a school’s “value added”—reported that 29 of 33 studies found charters performing as well as or better than traditional public schools. The New York Times Magazine spotlighted charter networks KIPP, Uncommon Schools, and Achievement First in a major feature on how to close the achievement gap. Yet despite these successes, chartering’s current status and growth trajectory won’t enable it to become a parallel system large enough to serve the millions of needy students across the country within the foreseeable future.

Some might respond, “Then just accelerate growth.” But the forces that have held chartering back over the last 15 years aren’t going away. Worse, even today’s growth levels may be in danger.

Twenty-five states have imposed some type of cap on charter expansion, and in eight states those limits currently constrain growth. The battle against caps must be fought state by state by under-resourced, overextended charter advocates against entrenched opponents. In New York, an expensive and sophisticated multiyear effort by charter advocates that was supported by the governor and New York City’s mayor and schools chancellor finally resulted in legislation that raised the cap, but only by 100 schools. The new limit will be reached in just a few years.

Unequal financing is another obstacle. A Fordham Institute study found that on average charters receive $1,800 less per student than traditional public schools, despite serving more disadvantaged students. This discourages educators from starting new charters and traditional schools from converting. It also inhibits existing charters from growing enrollment or expanding to new campuses. Facilities are a major piece of this puzzle. While traditional public schools are provided a building, charters still must find, secure, and pay for a roof and walls. Only 13 states and Washington, D.C., provide some sort of facilities assistance.

The greatest impediment to growth is the wide array of political, legal, and administrative attacks. Institutional players—teachers unions, school boards, and state and district administrators—frequently petition state leaders for charter caps and reduced charter funding and vigorously oppose alternative authorizers and facilities aid. The nationwide Democratic landslide in the 2006 elections left many state governments less charter-friendly. For example, Ted Strickland, Ohio’s new Democratic governor, made a moratorium on new charters one of his top priorities.

In a number of states, most recently Ohio and Michigan, coalitions have attacked chartering through the courts. Though these challenges have been beaten back so far, even one loss could force the closure of hundreds of schools. A 2006 Florida Supreme Court decision was foreboding. Striking down the state’s voucher plan for contravening the state constitution’s requirement of a “uniform” public education system, the court opened the door to challenges to the state’s 350 charters, which, by definition, are not uniform.

Finally, chartering is held back by its administrative arrangements. Ninety percent of authorizers are local school districts, many of which view charters as an administrative inconvenience, competitive nuisance, or worse. In a NAPCS survey of charter school leaders, nearly two-thirds said working with the district was a problem. This summer, a high-performing KIPP charter school in Annapolis, Maryland, was forced to close because it couldn’t find a permanent facility, even though the school district, according to its own study, had 900 empty seats in a nearby, underutilized school. Responding to the school’s pleas for help, the district’s superintendent told the local newspaper, “It’s not my responsibility. It’s not my school.”

The “parallel system” approach to chartering’s future rests on two mistaken assumptions: first, that by simply creating new schools and not purposely antagonizing the traditional system, chartering wouldn’t attract the ire of defenders of the status quo; and second, that if chartering proved successful and popular, the sky was the limit on growth. As it turned out, district stakeholders have fought charters tooth and nail from the beginning, and they have erected policy obstacles that have severed the link between charter demand and supply.

The District Partner

The second camp envisions a vastly improved traditional school system, achieved through charter cooperation. This group believes that consistent collaboration between the two sectors would enable charters to experiment and then share lessons learned so all students, the vast majority of whom still attend traditional public schools, could benefit. “I believe that districts and charters will benefit by building more collaborative relationships,” says Tom Hutton, a staff attorney for the National School Boards Association and a former board member of the Thurgood Marshall Charter School in Washington, D.C.

Like Hutton, many in this camp are veterans of the traditional system who recognize the value of chartering. But they assume district immortality—districts have been the sole delivery system of public education for generations—and believe a collaborative relationship to be wise, pragmatic, and ultimately necessary. The late Appleton, Wisconsin, superintendent Tom Scullen supported charters within his district but cautioned, “Charter schooling will fail if it tries to become a second track of public education. There isn’t enough money to support two systems.” Deborah McGriff, executive vice president of Edison Schools and former Detroit superintendent, agrees: “Charters need to start thinking about how we move from suspicion and competition with districts to collaboration and cooperation.”

This collaborative relationship is becoming institutionalized. The federal Charter School Program, which provides charter start-up funds, requires that states disseminate charters’ best practices to districts. KIPP has an open-door policy for local teachers and principals; they are welcome to visit and take away whatever lessons they can. Funders in particular are buying into this strategy. NewSchools Venture Fund, whose goal is to improve school districts, invests in charter entrepreneurs in the hope that they can “spark broader transformation in the public school system.” One of the Boston Foundation’s high priorities in its education giving is supporting the sharing of effective practices between chartered and traditional schools.

Though the move toward greater cooperation has emotional appeal, to embrace it you have to believe that districts, including major urban districts, are both willing and able to change and significantly improve student achievement at scale. Sadly, there is prima facie evidence that they are not. The achievement gap has been well documented for 40 years: in the Coleman Report, NAEP data, SAT scores, and state assessments. Given the threefold increase in per-pupil spending and countless policy changes, blue-ribbon panel recommendations, and foundation initiatives in the intervening years, it is undeniable that districts have already tried, or have been forced to try, to shape up.

Diane Ravitch recently reported in the Education Gadfly (June 7, 2007) on the disappointing achievement scores from New York City, whose much-heralded schools leader, Joel Klein, has implemented some of the nation’s most aggressive reforms. Ravitch found that during Klein’s five-year tenure academic gains have been smaller than during the previous five years and that the reading scores of cohorts of students are actually declining as they progress through the system. New York’s inability to improve despite major interventions is far from unique. NAEP’s Trial Urban District Assessment, which measured the performance of 11 large urban systems in 2005, provides compelling evidence of the futility of district-based reforms: even the highest-performing district studied (Charlotte) had only 29 percent of its 8th graders at or above proficient in reading.

It is unreasonable to believe that charter collaboration will significantly alter these stubbornly disappointing district results. High-performing low-income schools, though too rare, have been documented for decades, and yet their lessons have never been translated into comprehensive district improvement. This is despite major efforts to spread best practices widely, including the work of education schools and $15 billion spent annually on teacher professional development. All in all, the uncomfortable but unavoidable question for collaboration advocates becomes, why should chartering invest in a strategy—helping major urban districts solve the achievement gap—that has consistently failed for 40 years when pursued by others?

Many strong believers in school choice, myself included, were convinced that the competitive pressure exerted by charters would lead to a renaissance in the traditional system. The vast district improvements we expected never materialized. The clearest evidence comes from Dayton, Ohio, and Washington, D.C., two cities with significant charter sectors.

In the nation’s capital, 26 percent of students attend one of the city’s 71 charter schools. The city’s charter sector is remarkably innovative and energetic, including such standouts as KIPP KEY Academy, the SEED School, and DC Prep. Nevertheless, the District’s traditional system remains among the very worst in the nation. Of the 11 cities participating in the NAEP Trial Urban District Assessment in 2005, Washington, D.C., had the lowest scores in math and reading in both grades tested. Among its 8th-grade students, only 12 percent reached proficiency in reading and 7 percent in math. A Progressive Policy Institute study of D.C.’s charter experience summarized the situation perfectly: “There is no clear evidence that charter schools have had a direct impact on student achievement in DCPS schools or otherwise driven systemic reform.”

Charters educate 28 percent of Dayton’s students. Last year, the district reached only one of 25 state indicators and failed to make AYP. Seventy and 56 percent of its 8th graders failed to reach proficiency in math and reading, respectively. Residents are understandably frustrated: a 2005 Fordham Foundation survey found that 69 percent of Dayton residents are in favor of either major change from the district or an entirely new education system.

Some studies, like those by Hoxby (see “Rising Tide,” research, Winter 2001) and by Holmes, Desimone, and Rupp (see “Friendly Competition,” research, Winter 2006) have found a small bump in a district’s achievement when it faces charter competition. Bifulco and Ladd (see “Results from the Tar Heel State,” research, Fall 2005) and Buddin and Zimmer, however, found none. There are legitimate disagreements about the influence of additional factors in these studies, such as the amount of competition, the policy environment, and the type of test data used. But when this research is considered alongside our other experience, the only fair conclusion is that competition hasn’t dramatically altered district performance for the better.

Charter competition has caused one unexpected and fascinating phenomenon. When facing a growing number of charters, districts turn to advertising. In January 2006, the Boston Teachers Union and the district were in negotiations to spend $100,000 to promote the virtues of traditional public schools to families choosing charters. Also in early 2006, the Cincinnati district sent letters and held information sessions designed to have charter families reenroll in traditional public schools. In May 2007, the St. Louis district awarded a no-bid contract to a marketing firm to “drive the message of the negative impact of charter schools.” Seemingly unable to improve results, districts rely on public relations to stem the migration of students to other schools.

Why is it that major urban school districts are unable to improve student learning at scale? A compelling argument, and a roadmap for charter schooling’s future, can be found in Ted Kolderie’s excellent and underappreciated book, Creating the Capacity for Change. Kolderie applies to K–12 education the lessons Harvard economist Clayton Christensen has drawn from the private sector. Christensen, studying how industries evolve and improve over time, found that critical advancements don’t come from old firms changing their ways. They come from new firms (or independent subsidiaries) entering the market, introducing new products and systems, and responding nimbly to the demands of consumers.

When an industry experiences a major change, existing firms find themselves unable to adjust to navigate the new world. Every aspect of its identity—culture, staffing, practices, priorities—was geared toward succeeding in the old environment. When the environment changes, it’s impossible for the horse and carriage to transform into a steam locomotive.

The implications for public education are profound. For 150 years, public schooling has been a one-factory town: a board- and superintendent-led district manages, staffs, and oversees an area’s entire portfolio of public schools. But in this time, the world has become a radically different place and the expectations of schools have changed even more. As Kolderie points out, if private firms, which are built to respond to competition, are unable to make this kind of leap, we can’t expect gigantic, byzantine school systems, which are insulated from competition, shackled by union contracts, and constrained by a sticky web of regulations, to do so.

The system is the issue. The solution isn’t an improved traditional district; it’s an entirely different delivery system for public education: systems of chartered schools.

Watching New Orleans In the wake of Hurricane Katrina, New Orleans decided to rebuild its decimated public education system largely as a system of charter schools. The conditions were ideal for this groundbreaking shift: a citywide consensus that the old system had failed; a once-in-a-lifetime opportunity to build a new system from scratch; the availability of federal school start-up funds; and the keen interest of education entrepreneurs, foundations, and support organizations in seeing this bold reform succeed. Two years into the rebuilding effort, the Crescent City has what might be thought of as a chartered system in the making. First, 60 percent of students are in charters. Second, there is significant diversity in the types of school available, and parents are exercising choice. Third, and most interesting, there is diversity in the suppliers of K–12 public education: the Orleans Parish School board oversees a number of traditional public schools and charters; the state board of education authorizes several charters; and the Recovery School District (an entity created before Katrina to assume control of failing city schools) manages both charters and traditional public schools. Two questions will determine whether New Orleans will continue moving toward the nation’s first fully chartered system. As the city stabilizes, will leaders resist the urge to consolidate power into a single district, instead allowing permanent diversity in schools and school suppliers? Will the city be willing to consistently close poor-performing schools and open new highly accountable, choice-driven institutions so a true market of public education can emerge?

A Transformed System

Charter advocates should strive to have every urban public school be a charter. That is, each school should have significant control over its curriculum, methods, budget, staff, and calendar. Each school should have a contract that spells out its mission and measurable objectives, including guaranteeing that all students achieve proficiency in basic skills. Each school should be held accountable by an approved public body.

“Charter” will no longer be seen as an adjective, a way to describe a type of school, but as a verb, an orderly and sensible process for developing, replicating, operating, overseeing, and closing schools. The system would be fluid, self-improving, and driven by parents and public authority, ensuring the system uses the best of market and government forces. Schools that couldn’t attract families would close, as would those that ran afoul of authorizers for academic, financial, or management failures. School start-ups, both the number and their characteristics, would reflect the needs of communities and the interests of students, but would also be tightly regulated to generate a high probability of school success.

So, while the government’s role would still be significant, it would no longer operate the city’s entire portfolio of public schools. Instead, it would take on a role similar to the FAA’s role in monitoring the airline industry or a health department’s monitoring of restaurants. Today, we take airline safety for granted and make our choices based on service, connections, and so on. Similarly, we know all restaurants have fire exits and meet food safety standards, so we choose based on our tastes and schedules. A well-regulated chartered school system could guarantee that all public schools were providing a safe, high-quality education and properly managing operations, thereby allowing families to choose a school based on other criteria.

The government’s substantial oversight role in guaranteeing safety and quality would differentiate a charter system from a universal voucher program. To many, a voucher system would undesirably blur the lines between church and state, add the profit motive to schooling, remove the “public” from K–12 education, and leave too much to the vicissitudes of the market. By contrast, in a chartered system, public schools would be nonreligious, managed by nonprofits, overseen by a public authority, and held to clear performance standards.

But a chartered system would capitalize on market forces largely absent from district systems, such as constant innovation, competition, and replication. Replication is arguably the most valuable. Chartering has not only created some of America’s finest schools, it has enabled their leaders to identify the characteristics that made those schools so remarkable and then develop systems for creating additional, equally successful schools. In addition to well-known charter management organizations like KIPP, Achievement First, and Uncommon Schools, new ones continue to emerge: Green Dot, High Tech High, Aspire, Noble Street, IDEA, and more. Major funders like the Charter School Growth Fund and NewSchools Venture Fund are helping other high-performing charters expand as well.

So how do we transform today’s urban district systems into chartered systems? Absent political realities, the shift could be quite simple. Any district could decide tomorrow to relinquish day-to-day control of its schools and develop performance contracts with each. Every school could develop its own governing board and acquire control of its budget, staffing, and curriculum. The district could then change from a central operator to an authorizer, monitoring schools, closing them when necessary, and allowing new ones to open. The “every school a charter school” idea is not new; others, most prominently Paul Hill of the Center on Reinventing Public Education, have been writing variations on this theme for some time.

Unfortunately, for reasons having more to do with power than student learning, this scenario is highly unlikely. Most districts assiduously avoid the loss of one school, let alone all schools. When one of Washington, D.C.’s highest-performing traditional public schools pursued plans to convert to a charter in 2006, the district agreed to several of its demands in exchange for the school’s agreement to stop flirting with charter status. This spring, after faculty at Locke High School in Los Angeles signed petitions to convert into a Green Dot charter, district officials scrambled to put together a counterproposal and convinced some teachers to rescind their signatures.

No government entity likes to lose control of any of its components and the budget and prestige that go with them, especially when the loss suggests a failure by the organization. But shifting from an operator into an authorizer would mean cutting hundreds of central office jobs as well: since charters handle their own transportation, facilities, staffing, and more, district employees filling those responsibilities would become redundant. Such a shift, then, would be vigorously opposed by district staff and those who represent them. Countless powerful organizations, like unions, book publishers, and service providers, would also be adversely affected by a decentralized system of schools.

Clearly we can’t expect the political process to swiftly bring about charter districts in all of America’s big cities. However, if charter advocates carefully target specific systems with an exacting strategy, the current policy environment will allow them to create examples of a new, high-performing system of public education in urban America.

Here, in short, is one roadmap for chartering’s way forward: First, commit to drastically increasing the charter market share in a few select communities until it is the dominant system and the district is reduced to a secondary provider. The target should be 75 percent. Second, choose the target communities wisely. Each should begin with a solid charter base (at least 5 percent market share), a policy environment that will enable growth (fair funding, nondistrict authorizers, and no legislated caps), and a favorable political environment (friendly elected officials and editorial boards, a positive experience with charters to date, and unorganized opposition). For example, in New York a concerted effort could be made to site in Albany or Buffalo a large percentage of the 100 new charters allowed under the raised cap. Other potentially fertile districts include Denver, Detroit, Kansas City, Milwaukee, Minneapolis, New Orleans, Oakland, and Washington, D.C.

Third, secure proven operators to open new schools. To the greatest extent possible, growth should be driven by replicating successful local charters and recruiting high-performing operators from other areas (see Figure 2). Fourth, engage key allies like Teach For America, New Leaders for New Schools, and national and local foundations to ensure the effort has the human and financial capital needed. Last, commit to rigorously assessing charter performance in each community and working with authorizers to close the charters that fail to significantly improve student achievement.

In total, these strategies should lead to rapid, high-quality charter growth and the development of a public school marketplace marked by parental choice, the regular start-up of new schools, the improvement of middling schools, the replication of high-performing schools, and the shuttering of low-performing schools.

As chartering increases its market share in a city, the district will come under growing financial pressure. The district, despite educating fewer and fewer students, will still require a large administrative staff to process payroll and benefits, administer federal programs, and oversee special education. With a lopsided adult-to-student ratio, the district’s per-pupil costs will skyrocket.

At some point along the district’s path from monopoly provider to financially unsustainable marginal player, the city’s investors and stakeholders—taxpayers, foundations, business leaders, elected officials, and editorial boards—are likely to demand fundamental change. That is, eventually the financial crisis will become a political crisis. If the district has progressive leadership, one of two best-case scenarios may result. The district could voluntarily begin the shift to an authorizer, developing a new relationship with its schools and reworking its administrative structure to meet the new conditions. Or, believing the organization is unable to make this change, the district could gradually transfer its schools to an established authorizer.

A more probable district reaction to the mounting pressure would be an aggressive political response. Its leadership team might fight for a charter moratorium or seek protection from the courts. Failing that, they might lobby for additional funding so the district could maintain its administrative structure despite the vast loss of students. Reformers should expect and prepare for this phase of the transition process.

In many ways, replacing the district system seems inconceivable, almost heretical. Districts have existed for generations, and in many minds, the traditional system is synonymous with public education. However, the history of urban districts’ inability to provide a high-quality education to their low-income students is nearly as long. It’s clear that we need a new type of system for urban public education, one that is able to respond nimbly to great school success, chronic school failure, and everything in between. A chartered system could do precisely that.

Andy Smarick is former congressional aide and charter school founder. Until recently, he served as chief operating officer of the National Alliance for Public Charter Schools.

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Not surprisingly, school board members agree that one of their most important goals is to help students learn. According to a 2002 national survey, student achievement ranks second only to financial concerns as school board members’ highest priority. We wondered, though, do voters hold school board members accountable for the academic performance of the schools they oversee? Do they support sitting board members when published student test scores rise? Do they vote against members when schools and students struggle under their watch?

Existing accountability policies assume that they do: states shine light on school performance by providing the public with achievement data. Voters and parents are expected to make use of these data in choosing school districts or schools, and to hold administrators and school board members accountable for the schools’ performance at each election. The idea is that voters will replace incumbents with new members when performance is poor and support incumbents over challengers when performance is strong. Indeed, there are very few other ways in which district officials can be held accountable for school performance. Neither the federal No Child Left Behind Act (NCLB) nor the states impose direct sanctions on members of school boards that oversee large numbers of underperforming schools.

Our questions led us to undertake the first large-scale study of how voters and candidates respond to student learning trends in school board elections. We analyzed test-score data and election results from 499 races over three election cycles in South Carolina to study whether voters punish and reward incumbent school board members on the basis of changes in student learning, as measured by standardized tests, in district schools. In addition, we assessed the impact of school performance on incumbents’ decisions to seek reelection and potential challengers’ decisions to join the race.

We found that in the 2000 elections, South Carolina voters did appear to evaluate school board members on the basis of student learning. Yet in the 2002 and 2004 elections, published test scores did not influence incumbents’ electoral fortunes. As we’ll see, the possible reasons our results differed so dramatically from one time period to the next hold important implications for the design of school accountability policies. But let’s first take a closer look at our methods and findings.

South Carolina

Once we set out to study local school board races, we encountered tall hurdles to obtaining election results. Only one state, South Carolina, centrally collects precinct-level election data for school board races. In all other states, obtaining precinct-level election results requires gathering and organizing election returns from hundreds of individual counties and election districts.

So we took a close look at South Carolina. In most respects, South Carolina elections and school boards are similar to those across the rest of the country. All but 4 of the state’s 46 counties hold nonpartisan school board elections. Approximately 80 percent of school board members receive some compensation, either a salary, per diem payments, or reimbursement for their expenses. Over 90 percent of South Carolina’s 85 school boards have between 5 and 9 members, while the largest board has 11. And, as is common practice in other states, nearly 9 out of 10 South Carolina school districts hold board elections during the general election in November.

Perhaps the most important difference between South Carolina and most other states when it comes to local school politics is the role played by the state’s teachers unions, which are among the weakest in the country. In other states strong teachers unions may mobilize high turnout among members, their families, and friends, and punish and reward board members for their treatment of teachers rather than hold them accountable for student test scores. South Carolina school boards are unlikely to be beholden to the unions, which should make the boards more responsive to the broader public.

Roughly half of the state’s 85 districts hold school board elections in any two-year election cycle. We collected precinct-level election returns for all school board races in three election cycles, 2000, 2002, and 2004. We also obtained school-level student achievement data from the South Carolina Department of Education. We began our analysis with 2000 because it was the first cycle of elections after South Carolina started administering the Palmetto Achievement Challenge Test (PACT) to students in grades 3 to 8 in 1999. These tests, based on the South Carolina Curriculum and Standards, are given in both reading and math. We averaged the reading and math percentile scores to produce a composite score for each school. Because we wanted to examine whether voters are more concerned with student performance districtwide or in their local neighborhood, we computed two measures of average school performance to include in our analysis. The first is the average test score for each district. The second is the average test score for the public school that is located closest to an election precinct.

Searching for Accountability

We began our analysis by comparing the vote shares of incumbent school board members who ran and faced an opponent with the test-score performance of the schools and districts they represented. We were careful to separate the effect of school performance from the effects of other factors that could reasonably influence an incumbent school board member’s vote share. For example, we considered whether voters evaluate student outcomes relative to spending by measuring the effect of changes in the district’s property tax rate. We also took into account features of the election, including whether it was held as part of the November general election or on another date, when turnout is likely to be lower. Additionally, we accounted for the partisanship of the electorate, measured by the Democratic candidate’s share of the presidential vote, and demographic characteristics, such as race, age, and gender. We also adjusted for potential differences in how voters from precincts with higher and lower average test scores respond to changes in test scores. For example, voters from precincts with lower test scores might respond more strongly when test scores improve than do voters from precincts with test scores that already were very high.

In 2000, 67 incumbents from 37 school boards ran for reelection in contested races in South Carolina. Of these 67 incumbents, 50 were reelected, and the median vote share for all incumbents in competitive races was 58 percent.

We found that incumbent school board members won a larger share of the total vote in a precinct when test scores in that precinct improved. We estimate that improvement from the 25th to the 75th percentile of test-score change—that is, moving from a loss of 4 percentile points to a gain of 3.8 percentile points between 1999 and 2000—produced on average an increase of 3 percentage points in an incumbent’s vote share. If precinct test scores dropped from the 75th to the 25th percentile of test-score change, the associated 3-percentage-point decrease in an incumbent’s vote share could substantially erode an incumbent’s margin of victory. In districts where percentile scores had increased in the year preceding the election, incumbents won 81 percent of the time in competitive elections; in districts where scores had declined, incumbents won only 69 percent of the time.

Citizens therefore did seem to base their assessment of incumbents on changes in test-score performance during a board member’s tenure, exactly the type of accountability many supporters of NCLB had hoped for.

We were interested to find that the average school test score for the precinct, rather than the district, had a significant effect on an incumbent’s vote share. The significant relationship with precinct test scores and the absence of a relationship with district scores suggests that voters were more concerned with school performance within their immediate neighborhood than across the district.

The Later Elections

With the evidence from 2000 in hand, we were initially surprised that all indications of a relationship between school performance and an incumbent school board member’s vote share vanished after the passage of NCLB in 2002.

We reanalyzed the data in a number of different ways, but were unable to find any indication that voters cast their ballots based on changes in test scores. We included administrative data from teacher, parent, and student ratings of local schools; we considered the potential relationship between vote share and test-score changes over the previous two or three years; we examined the deviation of precinct test scores from district means; we looked at changes in the percentage of students who received failing scores on the PACT; we evaluated the relationship between vote share and the percentage change in the percentile scores rather than the raw percentile point changes; and we turned to alternative measures of student achievement, such as SAT scores, exit exams, and graduation rates. None of these approaches yielded clear evidence of a link between school performance and voter behavior in school board elections.

Even when we estimated the probability that an incumbent won a majority of the votes in each precinct, or accounted for test-score changes and levels as a function of dollars spent on students, or measured the relationship between an incumbent’s vote share in one election and the previous election, the overwhelming weight of the evidence indicated that school board members were not being judged on improvement or weakening in school test scores.

Strategic Politicians

So far, we’ve discussed the experience of incumbents who ran against an opponent. Many incumbents, however, either did not run for reelection or ran unopposed. For example, in 2000, 42 of the 157 sitting board members in 39 school districts who were up for reelection did not run for office. Among the remaining 112 who sought to retain their seats, more than one-third, 45, did not face a challenger. The 67 incumbents who ran opposed in 2000 represented less than half of the sitting board members whose seats were in play that election.

School performance as measured by test scores may have helped determine which candidates sought reelection and which faced a challenger. If board members and potential challengers anticipate that voters will punish incumbents for poor school performance, declining test scores may lead board members to retire rather than endure defeat. A drop in test scores may also encourage opponents to run for office, either because they believe that incumbents are now vulnerable to defeat or because disgruntled citizens feel compelled to run for office when schools perform poorly.

Although exact election filing dates vary by school district, most candidates for seats on South Carolina’s school boards must decide whether to run by mid-September for a November election. PACT scores, however, are typically released to the public in late September or early October. Incumbents and potential challengers may not know the exact size of precinct or district test-score changes, but they could very well have impressions of the direction and rate of student learning trends. School board members and some challengers have observed the schools firsthand and have listened to accounts from principals and teachers. By monitoring the coverage of education issues on local television and in the print media, candidates may also have a sense of the extent to which voters are likely to use student test-score performance to evaluate candidates. And although we do not know this with any certainty, it is possible that school board members have access to test-score results before they are released to the public.

We decided to assess the relationship between test-score trends and incumbents’ decisions to run for reelection, and then to estimate the effect of test-score trends on the probability that an incumbent who runs faces an opponent. Our basic approach in this analysis was to compare the probability of running (or running and facing a challenger) between incumbents who oversaw districts with stronger and weaker year-over-year test scores. Because candidates either run for election in every precinct or do not run at all, we focused only on district test scores. As with our analysis of the relationship between test scores and vote share, we accounted for a number of factors that could reasonably influence a candidate’s decision to run for office. These included the incumbent’s vote share in the previous election, which might serve as a signal of the likelihood of victory to both the incumbent and potential challengers, and whether board members received compensation for their service, under the assumption that paid positions would be more attractive.

Our results indicate that incumbents may bow out in anticipation of being held accountable for poor test-score performance by schools in their district. During the 2000 election, incumbents were less likely to seek reelection when their district’s test scores declined over the preceding school year. If a district experienced a drop from the 75th to the 25th percentile of test-score change, our results lead us to expect that incumbents will be 13 percentage points less likely to run for reelection. In fact, 76 percent of incumbents sought reelection in districts with improving test scores; in districts with falling scores, only 66 percent did. The results did not hold for the later elections. Just as we found no evidence in the 2002 and 2004 elections that a large block of voters held incumbents accountable for poor test scores, we failed to find any indication that incumbents in 2002 and 2004 based their decisions about running for reelection on student learning trends.

When we looked at the behavior of the challengers, we once again saw evidence of their responding to test scores during the 2000 election, but no indication in 2002 or 2004 (see Figure 1). In 2000, a drop in test scores within the district significantly increased the likelihood an incumbent would face a challenger. If a district’s test-score change fell in the 25th rather than the 75th percentile, we estimate that an incumbent experienced an 18-percentage-point increase in the probability of facing a challenger. On the ground, the data show that 74 percent of incumbents who ran for reelection in districts with declining scores faced a challenger; in districts with improving scores, only 49 percent of incumbents faced a challenger.

What Happened in 2000?

Why did voters, incumbents, and potential challengers care about test scores in 2000 but not in 2002, or in 2004? The most likely explanation involves changes in media coverage of education issues. The amount and content of media coverage of student test scores differed substantially between 2000 and the latter two election years.

The 2000 elections were the first to follow the passage of the state’s accountability system. Journalists devoted ample space to issues that either directly or indirectly concerned student learning trends. Charleston’s Post and Courier, the Herald in Rock Hill, Columbia’s The State, and the Associated Press State & Local Wire, which serves numerous other South Carolina papers, regularly carried stories about the state of South Carolina’s schools. Both incumbents and challengers frequently identified student achievement generally, and test scores in particular, as the single most important issue in the 2000 school board election. Newspaper editorials that endorsed candidates in the 2000 election regularly underscored ways in which individual incumbents and challengers did, or said they would, improve student achievement. And 45 percent of the newspaper articles about school board races in the two months prior to the election mentioned student test scores.

In the 2002 and 2004 elections, however, media coverage shifted to other issues, such as the closing of schools, the racial composition of schools and boards, disciplinary problems, and sports programs. In these years, only 30 and 34 percent of articles, respectively, touched on test scores. The decline in media attention leads us to suspect that concerns about student learning trends probably did not stand at the forefront of voters’ or candidates’ thinking in the 2002 and 2004 elections.

The tone of articles about the state’s accountability system also shifted drastically during the 2002 and 2004 election cycles. From 1998 to 2000, most stories adopted a fairly neutral tone, introducing the public to the new accountability system and offering tepid praise and criticism of the testing regimen. After the 2000 election, journalists portrayed considerably more skepticism in their coverage of student achievement trends. Reporters devoted stories to errors in PACT’s scoring, security breaches in school testing, flaws in the science and social studies portions of PACT, district efforts to get ahead by changing their test dates, confusion regarding the comparability of test scores over time, missing PACT scores, and conflicts between school evaluations under the state and national accountability systems.

At the same time that administrative irregularities and mishaps attracted public scrutiny, teachers, district officials, and various other interest groups began to challenge the value of standardized tests more generally. One 3rd-grade teacher was quoted as saying, “These tests cannot and never will truly measure what a child actually knows, how a child sees the world, what a child genuinely understands and grasps, and what kind of life that child lives outside the school walls.” A school district associate superintendent claimed, “The problem with PACT is it doesn’t tell you what your child knows and doesn’t know.” The Palmetto State Teachers Association questioned the value of the state’s testing regimen, noting on its web site, “The current statewide tests do not provide immediate diagnostic information needed to improve student achievement or provide information to help teachers plan to meet the needs of each student. The testing process is time consuming, and spending weeks on high-stake testing is NOT in the best interest of children.” And as Andrew HaLevi, the Charlestown County School District 2000 Teacher of the Year, wrote in a 2001 op-ed for the Post and Courier, “The PACT needs to be seen for what it is: a vehicle for politicians to say that they are tough on education (and educators). This may make for good politics, but it makes for bad educational policy.” Reacting to the rising criticisms directed toward PACT, voters may have grown disenchanted with the state’s accountability system and removed test-score performance from among the criteria on which they evaluated school board candidates.

There are, of course, several other plausible explanations for why South Carolinians voted based on test score performance in 2000 but not in 2002 and 2004. The timing of the public release of the test scores is one. The 2000 scores were released in late October, whereas scores in 2002 and 2004 were released in early October and early September, respectively. In 2000, the release of scores so close to the election date and the media coverage that followed may have primed voters to evaluate candidates on student test scores. In the other two election years, the gap of a month or two between the release of scores and election day may have allowed the issue of test scores to fade from voters’ minds.

Another possibility is a major change in the reporting of test information. NCLB requires schools to notify parents directly about the performance of their schools. In 1999 and 2000, the first two years of PACT testing, scores were reported in their raw form in the materials that parents received. Beginning in 2001, official PACT reports to parents used a simpler rating scale that classified each school into one of five performance categories ranging from unsatisfactory to excellent. Under this scheme, almost every school received a rating of at least average. Indeed, a Department of Education news release in 2002 ran with the headline, “Schools receive higher Absolute ratings on report cards; 80% average or better.” Although the raw scores were contained deeper in the reports, if most schools appeared to be average or better, parents may not have been prompted to hold incumbents accountable for poor school performance. Incumbents and potential challengers may also have become less responsive to scores when the testing regimen began to give nearly every school a passing mark.

Implications for Policy

The evidence from South Carolina shows that voters do at least sometimes evaluate school board members on the basis of student learning trends as measured by average school test scores. Changes in average school test scores from year to year can affect the number of votes incumbents receive, the probabilities that they run for reelection, and the likelihood that they face competition when they do.

But the absence of a relationship between average school test scores and incumbents’ electoral fortunes in the 2002 and 2004 school board elections raises important questions about the assumptions underlying accountability systems. School board elections give the public the leverage to improve their schools. If voters do not cast out incumbents when local school performance is poor, they forfeit that opportunity. As debate continues over components of NCLB, policymakers should consider whether it is realistic to assume voters will in fact use the polls to drive school improvement.

Christopher R. Berry is assistant professor at the Harris School of Public Policy Studies at the University of Chicago, where William G. Howell is associate professor.

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Ms. Brooks has the opposite dilemma. She’s been teaching in Arkansas since age 25, and at age 53, in light of her exemplary career and continuing enthusiasm, she’s just been chosen to be a mentor teacher. The problem is her pension. Every year of additional service reduces her pension wealth, despite the fact that she and her district continue to contribute 20 percent of her pay into the fund.

Welcome to the world of teacher pensions.

Pensions have long been an important part of compensation for teachers in public schools. However, the incentive structures of teacher pension systems are not widely understood, even though they can have powerful effects on the composition of our teaching force and on public finance.

In our research, we have found that teacher pension systems have two strong incentives—a pull and a push. Teachers typically earn relatively little in the way of pension benefits until they reach their early fifties, when much larger benefits start to accrue. The system therefore pulls teachers to “put in their time” until then, whether or not they are well suited to the profession. Beyond that point, the pension system quickly begins to punish teachers for staying on the job too long, pushing them out the door at a relatively young age, often in their mid-fifties, even if they are still effective teachers. These “pull-push” incentives are embedded in the patterns of pension wealth accumulation over teachers’ careers, patterns that feature dramatic peaks, cliffs, and valleys that can greatly distort work decisions for no compelling public-policy purpose.

Teacher pension systems can also have important implications for recruitment. Pension benefits may seem distant and uncertain for prospective young teachers, who often change jobs. The costs, however, are incurred from the start in contributions from employer and employee that can exceed 20 percent of the teacher’s pay. Many young teachers, who are paying off student loans, starting families, and buying homes, might prefer more of their compensation paid up front rather than diverted into a system from which they may well never benefit.

Finally, the teacher retirement benefit system has major effects on K–12 school finance. Teachers who retire in their mid-fifties are likely to draw pension benefits for at least as many years as they taught. This can be expensive. A teacher retiring at age 55 with a $50,000 inflation-indexed annual pension has received an annuity valued at over $1 million. Retiree health insurance can add much more to the bill. To fund these benefits requires large contributions from employees and employers. In Ohio, for example, contributions currently stand at 24 percent of salary (10 percent from the teacher and 14 percent from the district). But even this falls well short of what is needed and pension officials are recommending an increase to 29 percent, to shore up funding for pensions and retiree health benefits.

There is a surprising disconnect between discussions of state teacher pension systems and the larger discussion of retiree benefits in an era of longer life spans and the impending bulge of baby-boom retirees. The retirement age for Social Security is being raised, but there is little discussion of the incentives to retire early from teaching. Just as the benefit overhang of GM, Chrysler, and Ford finally forced changes in their plans, the growing share of K–12 spending consumed by these retirement benefit systems may force similar changes.

As teacher retiree benefit costs spiral upward, it is important to begin asking what effect these systems have on recruitment and retention. In this article, we analyze the incentives embedded in teacher pension systems by examining the pattern of pension wealth accumulation over a teacher’s career.

PENSION PLAN BASICS

Public school teachers are almost universally covered by traditional defined benefit (DB) pension systems. The employer has an obligation to provide a regular retirement check to employees upon their retirement, based on a legislatively determined formula (see sidebar). The key characteristic of DB systems is that the benefit is not tied to the contributions that individual teachers and employers make to the pension fund. That is what distinguishes DB from defined contribution (DC) plans, known more popularly as 401(k)-type systems.

DB plans were once the norm in both the public and private sectors. In recent decades, private sector employers have shifted in large numbers to DC systems (or closely related systems known as cash balance, discussed below). In DC systems, the employer contributes annually to a retirement account for an employee, and the employee contributes as well. For example, a common arrangement in the private sector is for the employer to match employee contributions up to a certain percentage of the employee’s salary. If the employee quits, he takes the retirement funds with him. The employer is under no obligation to provide a given payment to the employee at the time of retirement. The employee, however, can always choose at retirement to convert the accumulated funds into a stream of payments for life by buying an annuity.

Conversely, when a teacher retires under a DB plan, she is entitled to a stream of payments that has a lump-sum value (or present value) that can be readily determined using standard actuarial methods. In principle, this pension wealth represents the market value of the associated annuity: it is the size of the 401(k) that would be required to generate the same stream of payments.

Typically, a DB teacher pension plan requires that both teachers and employers make a contribution each year to a pension trust fund, much as in DC plans, but the funding characteristics are very different. Under DC plans, the pension benefits are always fully funded, since the benefit is generated directly by the contributions. Under DB plans, individual benefits are not tied to contributions, so the pension fund as a whole is supposed to accumulate enough money to pay for the accrued liabilities. But this is rarely the case. Many teacher pension systems have large unfunded liabilities (e.g., California $19.6 billion, Missouri $5.2b, Ohio $19.4b, Oklahoma $7.7b, New Jersey $10.0b, all in 2006). Matters are made worse by legislatures that juice up the benefit formula when the stock market is up and the value of pension funds is high, only to find the systems saddled with even larger unfunded liabilities when the market turns sour. And as large as these liabilities are, they do not include future costs for retiree health insurance, an issue that is now beginning to appear on education-finance radar screens.

INCENTIVES TO TEACH OR RETIRE

The decision to teach or to retire at any given age can have profound financial consequences for the individual teacher. Small, and arbitrary, differences in the timing of retirement can be worth hundreds of thousands of dollars. Teachers cannot afford to be indifferent to these consequences, and many of them surely respond to the incentives embedded in the system. To appreciate these incentives, it is necessary to understand the pattern of a teacher’s pension wealth accumulation over the course of her career.

Figure 1 depicts the pension wealth, in inflation-adjusted dollars, at various ages of separation for a 25-year-old entrant to the Ohio teaching force, the profile of our hypothetical Ms. Baker. Clearly, the accumulation of pension wealth is not smooth and steady, but rises with fits and starts after age 50, due to rules of eligibility for early retirement and the like. During her first 24 years in the classroom, she accumulates $315,000 in pension wealth. However, over the next six years she accumulates more than $100,000 per year and crosses the million-dollar mark at age 56. Pension wealth reaches a peak by her early sixties and then starts to decline.

In this system, those teachers who retire after 25 years or more (age 50 in our example) receive more in benefits than has been contributed to the system on their behalf, while those who leave teaching earlier do not. The inequities here can be quite substantial. If Ms. Baker retires at age 56, her million dollars of pension wealth exceeds the cumulative contributions (with interest) of herself and of her employer by over $370,000; if she leaves at age 49, she will receive benefits worth $100,000 less than the contributions.

The next set of figures answers the question that is critical for understanding the system’s incentives: how much does a teacher’s pension wealth change if she works an additional year? This is a measure of deferred income received from employment. If, for example, a year of work raises a teacher’s pension wealth by $50,000 (net of interest on the prior year’s pension wealth), it is as if she had a 401(k) account that received $50,000 in contributions that year. Figures 2a through 2e illustrate graphically the peaks, cliffs, and valleys in pension wealth accrual from each additional year of work over the course of a teacher’s career in five state systems.

Consider Ohio, depicted in Figure 2a (which is derived from Figure 1). A teacher who enters service at age 25 (such as Ms. Baker) accrues pension wealth during her early years on the job starting at roughly 10 percent of annual earnings and gradually rising to 34 percent in her 24th year (age 49). Her 25th year of experience yields quite a bonanza: her pension wealth jumps by about 176 percent of her annual earnings. Each of the next five years also yields deferred income that equals or exceeds her current income. Pension wealth accrual drops off dramatically over the years following, with another sharp spike at age 60 (35 years’ experience). Beyond age 60, while both she and her employer are continuing to make large contributions to the retirement fund, Ms. Baker’s pension wealth actually shrinks, and at an accelerating rate.

All five states display sharp pension spikes. In Arkansas, a particularly sharp spike occurs at age 50 (see Figure 2b). In that year, a teacher’s pension wealth increases by almost five times her salary. For a teacher with a $50,000 salary, it is as if she received a $250,000 contribution to her 401(k) account. Her pension wealth accrual drops off precipitously the next year, and turns negative by age 54, creating the dilemma of our would-be mentor teacher Ms. Brooks. Similarly, teachers in Missouri, California, and Massachusetts experience pension spikes in their early to mid-fifties, followed by much slower growth and ultimately shrinking pension wealth at various ages (see Figures 2c–2e).

The dotted lines on Figures 2d and 2e indicate the pattern of accrual prior to benefit enhancements enacted by the legislatures in California and Massachusetts. These legislated changes created spikes where none existed. In Arkansas, benefit enhancements over the years have shifted the spike to the left, to earlier retirement. Ohio’s multiple-spiked system also reflects its history of benefit enhancements; it used to have a single spike at age 60.

WHAT CAUSES PENSION PEAKS, CLIFFS, AND VALLEYS?

What features of the benefit formula give rise to such sharp spikes in pension wealth accrual? One might expect that the growth in pension wealth would be fairly steady, as it is in a DC plan. After all, both the teacher and employer are making the same contributions year after year. But in a DB plan, pension wealth is not tied to contributions. The primary drivers of pension wealth accrual are changes in the annual annuity payment (determined by the benefit formula) and the number of years the teacher can expect to collect. It is the latter that is often the wild card in these systems.

Spikes in several of these states occur because teachers can start collecting their pension at an earlier age once they have worked a certain number of years. For example, during the first 24 years of teaching (to age 49), Ohio’s Ms. Baker had to wait until age 60 to collect her pension. However, her 25th year of teaching (at age 50) allows her to begin collecting pension checks five years earlier, producing a sharp spike in wealth accrual.

Another example is Missouri’s “rule of eighty,” under which a teacher is eligible to receive a full pension once the sum of age and service equals eighty, rather than the normal retirement age of 60. When our 25-year-old entrant passes age 45, each successive year of service allows her to start receiving her pension one year earlier, resulting in rapid growth in pension wealth for several years (see Figure 2c).

Once a teacher gets past the spike (or spikes), pension wealth accrual turns negative. This is not because her monthly pension check shrinks. In fact, it is growing. Rather, pension wealth falls because once she is at an age to begin collecting without deferral, each year of work requires her to forgo a year of pension, which is never recouped. The monthly payment is not enhanced sufficiently to offset this loss.

At this point in her career, the pension system serves as a twofold tax on earnings, first by the required employee contribution and second by the negative deferred income. Together, these can easily offset much or even all of her salary, in which case her total compensation is little or nothing. If the reduction in pension wealth from working an additional year exceeds the teacher’s take-home pay, her total compensation is negative and she is paying for the privilege of teaching.

DO TEACHERS RESPOND TO PENSION INCENTIVES?

The peaks and valleys of pension wealth accrual create large pull-push incentives. Teachers are pulled to stay on the job until they reap the benefit of the spikes: a few more years of “putting in time” can mean a difference of several hundred thousand dollars. Once a teacher is beyond the spike and pension wealth starts shrinking, the system is effectively pushing her into retirement.

There is ample evidence that such incentives affect behavior. Anecdotal evidence is commonplace of teachers (and others) timing their retirement decisions to the parameters of the benefit formula; pension systems routinely provide online pension calculators to help their members do so.  Labor economists have developed more systematic statistical evidence on the incentive effects of retirement benefit systems, particularly those in the Social Security system.  There has been much less research specifically on teacher pensions, but that which is available indicates strong incentive effects. In Missouri, for example, teacher labor-force data show that retirement rates spike when the sum of age and experience is around 80—consistent with the incentives embedded in that state’s “rule of eighty” eligibility formula.

UNINTENDED CONSEQUENCES: EMPLOYMENT AFTER “RETIREMENT”

Teacher pension systems typically have strong incentives for early retirement built in. Given concerns about teacher shortages and pressures from the No Child Left Behind Act to staff classrooms with qualified teachers, it makes little sense for districts to nudge experienced, credentialed, and effective teachers out the door at such early ages. Not surprisingly, all of these teacher pension systems have provisions that allow educators to continue to teach and collect their pension in certain circumstances (a practice called “double dipping”). These provisions seem to be expanding. Here are examples.

1. Part-time employment. All of the pension systems considered here allow retired teachers who are receiving pension payments to continue to work in covered employment on a part-time basis (without accruing additional benefits).

2. Employment in shortage areas. Many states permit retired educators to teach full time for a specified period of time in “shortage” fields.

3. Break in employment. Some states allow teachers to return to full-time employment and collect their pension after a specified break in service. In California the required break is 12 months. In Ohio, a retired teacher can return to work the next day, but must wait two months before receiving pension benefits.

4. DROP plans. Many states have implemented Deferred Retirement Option Plans (DROPs). These permit teachers to continue working full time for a specified period of time (up to ten years in Arkansas), during which all or most of their pension check goes into what amounts to an individual retirement account.

Of course, retired educators can resume teaching by crossing a state line or a district boundary to work in a different pension system. For example, Missouri teachers in the state pension system can retire and work full time in the St. Louis or Kansas City systems, or they can cross the border and work in Kansas.

The result of all of these postretirement options is that the decision to “retire” (i.e., collect a retirement check) is not necessarily the same as a decision to quit teaching. Unfortunately, we are aware of no comprehensive national data on this topic. Limited data from a national survey conducted by the U.S. Department of Education suggest that at least 5 percent of the public school teaching workforce is also collecting a teacher pension. A longitudinal study of Missouri teachers found that 12 percent of teachers worked at least one year part time or full time following retirement.

Reemployment provisions such as these are not found in the private sector, where early retirement incentives are usually part of a downsizing effort. In teaching, by contrast, early retirement incentives have a completely different origin, namely legislatively enacted benefit enhancements, typically under heavy union lobbying. Reemployment provisions are often a delayed response to the unintended (if often predictable) problems created by these incentives. In other words, these provisions are ad hoc fixes to enhanced pension spikes.

Postretirement employment blurs the distinction between current and deferred compensation. At the very least, this calls into question the meaning of published data on teacher compensation. In addition, as reemployment becomes easier, the incentive to “retire” at or near a pension spike becomes more pronounced, as there is no downside if employment can continue. It might also be in the district’s interest, if the pension costs are borne by the state. One might expect, therefore, that “retirements” would become even further concentrated at the spikes.

MORE UNINTENDED CONSEQUENCES: HEALTH INSURANCE

Another consequence of early teacher retirement is a linked demand for retiree health insurance coverage. Since regular Medicare eligibility does not begin until age 65, teachers who retire in their fifties have a gap of many years in coverage. In light of this, many school districts and states have extended health insurance coverage to retirees. Unlike the teacher pension system, payments for retiree health insurance are typically pay-as-you-go (i.e., no employer fund is created to pay for these future liabilities). Under new government accounting rules (GASB 43 and 45), benefit plans and employers will need to begin providing annual estimates of these liabilities in their financial statements. First hints at the figures are staggering. Los Angeles Unified, which provides complete health insurance coverage for all retirees, has an estimated $5 billion unfunded liability. A recent report by the Cato Institute estimates that the unfunded liabilities of state and local governments under GASB 45 could total $1.5 trillion. These unfunded liabilities create pressures for higher contribution rates, local tax increases, and spending cuts in other areas.

OPTIONS FOR REFORM

The underlying problem with DB systems is their distortion of retirement incentives, stemming from the broken link between benefits and contributions. DC systems and cash balance (CB) plans restore that link. Many large corporations have switched to DC and CB plans over the last 20 years. Some public entities, including a few teacher pension systems (Ohio’s is one), have also started to offer DC or CB-type options in their plans.

CB plans are similar to DC plans in that both systems tie benefits closely to contributions. The main difference is that in a CB plan, the return is guaranteed by the employer (typically at a rate comparable to risk-free Treasury bonds), so the market risk is not borne by the employee. Often the debate over DB vs. DC plans focuses on the issue of risk, rather than the retirement incentives. Since our subject here is retirement incentives, we focus on CB plans, where the issue of market risk does not arise.

The neutrality of CB plans with regard to age of separation can be simply depicted. In the pension wealth accrual graphs, the lines would be horizontal at a percentage given by the sum of employee and employer contributions (see Figure 2a). The system does not drive teachers to stay to their mid-fifties and then leave. Pension wealth never declines: if a teacher wants to work another year, the account grows by the contributions, plus the investment return. This can then be converted to an annuity. If a teacher works another year, the starting annuity is increased in an actuarially fair manner, since there is one less year of retirement to cover.

Such a retirement-neutral plan leaves the employee much more latitude to decide when to retire or switch careers based on individual preferences (such as Ms. Baker). It also makes it easier for schools to retain effective teachers (such as Ms. Brooks), who might otherwise be driven by the pull-push incentives of pension spikes. This is preferable to the heavy-handed DB formulas, supplemented by makeshift DROP formulas or other reemployment provisions. Finally, it is fiscally more stable when benefits are tied closely to contributions. Unfunded liabilities do not arise so readily, and legislatures have less opportunity to enhance benefits by shifting costs to future generations of taxpayers and teachers.

PRINCIPLES FOR REFORM

The time is ripe to consider teacher pension reform, with an eye both to teacher quality and fiscal stability. A new or reworked retirement system should embody several key features:

Neutrality. Each additional year of work should increase pension wealth in a fairly uniform way. There should be no spikes or cliffs at any particular years of service. Longevity decisions by individuals and their employers should be based on personal priorities and education needs.

Transparency. The accrual of benefits should be simple and clear. There should be no opportunities for “gaming” the system.

Portability. The private sector has moved toward systems that do not penalize young professionals for changing jobs. Portability may also help attract to teaching an energetic, talented portion of the labor pool, as well as midcareer switchers, such as engineers and other technical workers, who could make valuable math and science teachers.

Sustainability. The pension system should be self-funding. Individual benefits should be tied to contributions made by and for the individual teacher.

DC and CB systems satisfy all these conditions far better than the traditional and outdated DB systems. To build and maintain a qualified teacher workforce in today’s labor market, states should fundamentally reform their retirement benefit systems.

Robert M. Costrell is professor of education reform and economics at the University of Arkansas. Michael Podgursky is professor of economics at University of Missouri–Columbia.

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All of that sounds convincing in theory, but the reality can be quite different. In state after state, when legislators introduce proposals aimed at moving students out of failing schools, activists emerge to delay, block, or sabotage the plans. The legislative history of the 2005 and 2006 tuition grant proposals in the Missouri House of Representatives offers some insights into how complex the political game can become, even when support from minority legislators is substantial.

The Missouri plan was designed to avoid the controversial label “school voucher.” Rather than reallocating dollars slated for education, supporters proposed to give tax credits to individuals and businesses that donated money to nonprofit organizations providing low-income students with scholarship grants to attend private schools (see Table 1). Described this way, the legislation had the initial support of a broad coalition of Republicans and Democrats, blacks and whites. Not surprisingly, the teachers unions mounted a vigorous campaign against the bill. Under that pressure, the tuition grant coalition fell apart during the legislative process, revealing sharp divisions within the ranks of blacks and Republicans.

The Battleground

As elsewhere, school reform in Missouri takes place amid racially polarized municipal politics. School budget crises are continuous, teachers union leadership is combative, and minority community involvement is generally ineffective. Although the legislative maneuvering took place in Jefferson City, the state capital, the real audience for the tuition grant debate was the city of St. Louis.

The politics of the St. Louis schools is a black community affair. Many of the current school leaders were in the forefront of efforts to desegregate the schools beginning in the 1970s. Jim Buford, president of the St. Louis Urban League and founder of the Black Leadership Roundtable, explained, “public schools are engrained into the fabric of the community.” African Americans represent about half of the city’s population, and 81 percent of the public school enrollment. About 80 percent of St. Louis students are in the free and reduced-price school lunch program. Unfortunately, the quality of the schools declined sharply after their peak 1983 AAA state rating; the dropout rate is high and student achievement low. By 2005, the district was only partially accredited, a serious situation with no clear solution at hand.

St. Louis has a strong public school cartel, an alliance of teachers union leaders, central board administrators, and various public-school interest groups that has an established routine for managing the schools and is typically skeptical of any proposal for change. The cartel acts as a veto player in school policymaking. Members are linked by churches, social organizations, and school ties, and these personal and political relationships drive the group’s success. Political scientist Marion Orr refers to such connections as “bonds of personalism.”

The city’s print media—including the St. Louis Post-Dispatch, which enjoys a national reputation—monitor the black leadership class and report on its interaction with the school system. St. Louis also has three African American weeklies that are widely read by both black opinion leaders and the public. Dr. Donald Suggs, a dentist and school supporter, owns the award-winning St. Louis American, which claims a readership of 90,000. His annual “Salute to Excellence” dinner attracts most of the players in school politics.

Given this rich tradition of an attentive and large black middle class, why has the St. Louis school district been so dysfunctional? St. Louis has a weak mayoral form of government. Although the mayor appoints directors of city departments, he shares budgetary powers with an elected comptroller and the Board of Aldermen. The mayor, comptroller, and president of the Board of Aldermen are members of the Board of Estimate and Apportionment, which approves the city’s annual operating budget, appropriations, and all city real-estate purchases. Hence the mayor must expend considerable energy and political capital to get other elected city officials to agree on policy. The elected school board is part of this fragmentation. Attempts to reform this Rube Goldberg system repeatedly failed.

Round 1: Learning the Ropes

In 2003, the St. Louis school district, designed for 80,000 students, enrolled only about 40,000. With fewer students, the district received less state aid, but since communities do not want to see their neighborhood schools shut down, the district had good political reasons to keep as many schools in operation as possible. That year, Mayor Francis Slay supported a winning slate of reform-minded candidates for the school board. Among them was Darnetta Clinkscale, a hospital administrator who had been active in the Black Leadership Roundtable. Later, Slay would appoint Jim Buford to fill a vacancy on the board. Facing an estimated $10 million deficit, the school board turned to the private sector for help. It hired the New York City consulting agency of Alvarez & Marsal, which specializes in turning around failing businesses, to get its fiscal house in order. The firm sent Bill Roberti, who became interim superintendent of the district. He quickly discovered that the deficit was actually $90 million.

To move the district toward financial stability, Roberti closed 16 schools and laid off 14,000 employees, 200 of whom were central office personnel, critical players in the school cartel. Roberti and his staff held no town meetings to explain the situation and took action without trying to console the school cartel or the public. In an interview, Buford suggested that they lacked “diplomacy.”

The public school cartel was still reeling when in February 2005 state representatives Ted Hoskins and Rodney Hubbard, both Democrats, and Republican Jane Cunningham introduced a bill in the Missouri House of Representatives to offer scholarships to public school students to attend parochial and private schools. Under the proposal, businesses and individuals could receive tax credits for donating money to nonprofit educational assistance organizations. These organizations could then make tuition grants ranging from $3,800 to $6,500 to eligible students. Public schools judged to be high performing would be eligible for money for textbooks, supplies, and transportation. Other funds would be available for after-school tutoring, GED programs, and apprenticeships. The proposal was named the Betty L. Thompson Scholarship Program after a well-known former black female legislator who had proposed a similar scheme in her final legislative session. The plan covered Kansas City, St. Louis, Wellston, and 13 other districts, several of them rural.

The proposal came at a time when Republicans controlled the state legislature and the governor’s office. The initial tuition grant coalition, dubbed the HHC after Hoskins, Hubbard, and Cunningham, was unique because it had a bipartisan face with support from both Republicans and some urban black Democrats. But among those in opposition were minority Democratic leaders, including key members of the Education Committee. To bypass the Education Committee, chaired by Cunningham, the coalition held hearings for the proposal in Hoskins’s Special Committee on Urban Issues, the only House committee chaired by a Democrat.

The public school cartel was appropriately alarmed. At first glance, the pilot proposal seemed small and innocuous in light of the millions of dollars Missouri spends on K–12 education. But a close examination revealed that districts would lose the state aid tied to those students who received the scholarships and left the public schools. Opponents viewed the proposal as the proverbial camel (vouchers) trying to get his nose under the tent. For them, the entire state school funding formula was at stake.

Advocates and opponents quickly emerged. Disagreement within the black community became apparent. At first, the St. Louis American attempted to be even-handed about the proposal. On the paper’s op-ed page, Jim Buford sought to reassure readers that the proposal had merit and could help the city reform its schools. Otto Fajen, the legislative director of the Missouri National Education Association (MNEA), presented the opposing view. He called the bill “tax credit vouchers” and warned that “voucher proponents seek to mislead legislators and the public regarding the true nature of this tax credit voucher by labeling it a scholarship charity.”

The characterization of the tuition grant as a “voucher” posed a public relations challenge for the sponsors, immediately putting them on the defensive. A typical voucher plan redirects per-student funding from the public schools to private schools chosen by parents and students; opposition is often vehement and backed by teachers unions. During the committee hearing, Rep. Hoskins repeatedly corrected witnesses who referred to the “voucher” bill. Nevertheless, the word voucher, with all its privatization connotations, dominated the discourse.

The public school cartel strongly opposed House Bill 639, as did the MNEA, the Missouri State Teachers Association (MSTA), and the AFL-CIO. Because two leading black representatives introduced the bill, the immediate question was whether they had the support of the entire black caucus, which included 17 state representatives and 3 state senators. They did not. Caucus member and Democrat from St. Louis Rep. Maria Chapelle-Nadal emerged as a leading opponent. She lobbied her colleagues to oppose the bill. Internecine conflicts are not uncommon in the caucus, but it was rare for members to openly campaign against a bill sponsored by a caucus member.

Opponents decided to “load up” the bill with what Jane Cunningham called “killer amendments,” which threatened to increase the cost of the program from the estimated $40 million price tag of the tax credits to $226 million. One amendment stated that the bill could not reduce state funding for education. Additional amendments required private school students to take the state’s standardized tests and the state to fully fund its school aid formula before implementing the scholarship program. To stop each of the amendments HHC needed 82 votes out of a possible 163. They got only 73 votes against the three amendments. Of the 16 African Americans in the Missouri House of Representatives, 13 voted in support of the first amendment and 9 voted for each of the others. Rep. Hoskins and his colleagues decided not to bring the bill up for a vote on the floor.

Yet the tuition grant coalition still had hope. The HHC had moved House Bill 639 further than any previous proposal to set up tax credits for scholarship donations; no prior proposal had made it to a floor debate in either the House or Senate. Also, the HHC believed it had garnered 73 solid supporters based on the amendment votes and decided to regroup and focus on how to get the additional 9 votes necessary for passage.

Round 2: Eliminating the Rural Districts

During the summer of 2005, the HHC met with Republican leaders in the Missouri House, business leaders, and Governor Matt Blunt. The governor announced during an August press conference his support of a renewed effort to pass the proposal. Reflecting on their experience during Round 1, the coalition decided rural areas liked their local schools too much to want to embrace the tax-credit idea. It would be better, they concluded, to focus on schools in the central cities, with their highly visible social problems.

Accordingly, Hoskins and Hubbard introduced House Bill 1479 with Cunningham to establish the Angell Scholarship Program and House Bill 1783 with Speaker Pro Tempore Carl Bearden (R–St. Charles) to establish the Missouri Student Success Scholarships Tax Credit Program. The two similar bills were merged in committee. Once again the proposal was named the Betty L. Thompson Scholarship Program, but this time they eliminated the rural districts in hopes of getting the additional nine votes, the strategy used by the successful charter school coalition, according to Rep. Hoskins. Coverage was narrowed to only three districts: St. Louis, Kansas City, and Wellston, potentially reaching about 8,000 poor and at-risk students in failing schools.

Nevertheless, opposition remained vigorous. Many on both sides turned up for the debate in the House Special Committee on Urban Issues. Among supporters were the speaker of the house, the lieutenant governor, and the St. Louis Regional Chamber and Growth Association. Even the mayor of St. Louis sent word of his support for the proposal, given his district’s partial accreditation. Opponents included the St. Louis and Kansas City school districts, MSTA, MNEA, the AFL-CIO, the St. Louis Teachers Local 420, and a number of key Democratic state senators.

In an early round of verbal volleying, Rep. Hoskins declared, “The system has collapsed in the city of St. Louis, Kansas City and Wellston.” Sen. Maida Coleman (D–St. Louis) countered, “St. Louis Public Schools does as good as it can with what it has been given to work with.” Soon the rhetoric turned personal. Hubbard accused the bill’s opponents of being insufficiently sympathetic to the plight of urban children. Mary Washington, head of Local 420, responded that Hubbard had run away from the St. Louis schools when as a student he used the voluntary desegregation program to transfer to the Mehlville school district. Another opponent accused the bill’s supporters of being beholden to pro-voucher campaign donors.

AFT Local 420 mounted a full-blown campaign against the revised proposal, organizing a bus tour that traveled across the state. Campaign staff created cartoons and handed out leaflets to people on the street. Local 420 asked fellow unionists across the state to oppose the bill and lobbied rural school-board members to contact their state representatives. Rural board members and their superintendents became convinced their state aid and their traditions could be ground up by the gears of change.

Meanwhile, in the spring 2006 St. Louis school board campaign, the corporate community raised $500,000 to elect James Buford and reelect Darnetta Clinkscale. The AFT Local 420 acted as the vanguard for the opposition. Goaded by the laid-off school employees, anti-Roberti factions defeated Buford and Clinkscale, despite committing only $80,000 to the campaign. That upset victory was a watershed in the city’s school-board election politics and emboldened AFT Local 420 as it prepared to fight the pending tuition grant bill.

On April 12, 2006, a group of 200 parents and children, organized by school choice advocate Donayle Whitmore-Smith and Bertha Gilkey Bonds of the Black Alliance for Educational Options, traveled to the state house to lobby representatives for the bill. Parents and students, chanting “choice, choice, choice,” demanded to speak to their representatives. The St. Louis Post-Dispatch reported that Hoskins had exhorted the group to “go to the eight or nine black representatives and kick their butts.” According to Whitmore-Smith, “They did not want to separate into smaller groups. They wanted to stick together and go from office to office.” Although the group had e-mailed members and sent out press releases, they were not welcome in some of the offices of black representatives. There were some heated exchanges. The capitol police intervened when the group tried to enter Rep. Connie Johnson’s office.

The next day the caucus had an emergency meeting. Hubbard heard “whispers about [the Caucus] kicking us out.” Hoskins thought the meeting illegal because it violated caucus rules, which require 50 percent of members to sign a notice if the chair did not call the meeting. The caucus nonetheless voted 11–3 to remove Hoskins as chair. Vice Chairman Hubbard then resigned. The bill’s sponsors continued to search in vain for the necessary votes to pass the program in the House.

After the 2006 defeat, a new lobbying effort was organized by All Children Matter (ACM). In late 2006, Hubbard and Hoskins adopted the tactics of their opponents, touring the state trying to sell the idea of school choice in rural communities. The plan backfired. When Republican leaders brought the proposal up again in March 2007, 35 Republicans voted against the bill; 26 of them were from rural districts.

Cartel Politics

Many factors contributed to the proponents’ failure to pass tuition grant legislation, among them the inclusion of rural districts in the first version of the bill. The opponents’ success in framing the debate and effective use of proven campaign tactics were decisive. Opponents of the bill understood that if they wanted to win the framing contest, they had to discredit both the message and the messengers. In public school debates, teachers often let union leaders serve as their surrogates and speak for them. Union leaders steered the debate away from the academic records of two big city school systems. They presented their own “5-Point Plan,” which shifted blame for school failure away from classroom teachers and onto a lack of funding. The union leaders termed the tuition grant proposal a “voucher bill,” and the president of AFT Local 420 questioned Rep. Hubbard’s loyalty to the St. Louis schools. Another union strategy was to insinuate that there were sinister elements working behind the HHC and in so doing nurture the conspiracy theorists within the black community.

Ultimately, the political success of a coalition depends on the ability of members to convince nonmembers that their proposal would benefit their constituency without harming other groups. Any coalition that seeks to reduce or change the formula for state aid to schools will encounter formidable opposition, as some party is likely to lose more than it gains. As the tuition grant proposal was aimed primarily at improving education for poor black children, the black-led coalition could not avoid being accused of promoting urban black interests at the expense of rural and suburban areas. At the same time, disagreements within the black community on the merits of school choice became readily apparent.

Opponents of the proposal invested considerable time and resources and even resorted to intimidating undecided school activists. Lieutenant Governor Peter Kinder remarked, “They can threaten local candidates. They demand blind adherence to their agenda. The slightest deviation will be punished. Any experimentation with new approaches will not be tolerated.” WGNU radio talk show host Liz Brown railed against the idea of tuition grants and the Buford and Clinkscale appointments to the board. She urged her listeners to “throw the trash out.”

The print media played a critical role in the debate. The Post-Dispatch sought to identify the political winners and losers, casting the story as a power struggle within the black leadership class. The subtext was the reputation, careers, and political power of city black elected officials. Hoskins claimed that the editorial section of the St. Louis American, called “The Political Eye,” was “used to discredit us [black members of HHC].”

The dynamics of the state legislature also worked against the proposal. The ouster of Rep. Hoskins as chair of the caucus signaled to the Democratic Party and its supporters that caucus members were foursquare against school choice. The Progressive Caucus, made up of Representatives Hubbard, Hoskins, Maria Chapelle-Nadal, and Connie Johnson, has since split from the black caucus. Chapelle-Nadal and Johnson are not supporting school choice; defection is their response to the leadership of the black caucus. In the Missouri House of Representatives, Hoskins now chairs the Special Committee on Urban Education Reform.

While the confrontation between parents and legislators at the state house laid bare the split within the Missouri Legislative Black Caucus, it may have been the split in Republican ranks that doomed the bill. The tuition grant coalition began with black and white co-leadership, with Republican Jane Cunningham taking a more public role. As the process evolved, it became a black-led coalition. The decision to feature the two black legislators, Hubbard and Hoskins, was a political one. Republican state lawmakers could shield themselves from the controversy by taking a relatively passive stance. The Republicans apparently did not want to give the impression that they supported a change in the school funding formula. After Republican legislators began receiving letters from their constituencies, they abandoned the struggling HHC coalition altogether.

Throughout the campaign, the opposition effectively used the label “voucher bill” to win over rural superintendents and school boards. In a Show-Me Institute poll released in May 2007, 67 percent of Missouri voters and 77 percent of African Americans said they favored a law that would “give individuals and businesses a credit on either their property or state income taxes for contributions they make to education scholarships that help parents send their children to a school of their choice, including public, private, and religious schools.” But only one-third of African Americans expressed support for “school vouchers.”

Teachers unions had built an alliance with rural district leaders, which held even after the rural districts were dropped from the plan. These districts have few private schools, and their leaders feared the loss of state revenue for public education. Rural Republican representatives broke from their suburban counterparts, who tended to support the bill. An alliance of suburban Republicans and a handful of Democrats was not enough to pass the legislation.

The sustained public attention to the schools did unleash unprecedented disequilibrium in St. Louis school politics. The inability of the system to improve its provisional state accreditation put the public school cartel’s grip on the district in jeopardy. Continuing poor performance and general disarray in the system enabled Mayor Slay to form an alliance with the governor to take over the schools. Even the teachers unions were unable to block state intervention. In March 2007, the state board of education voted 5–1 to revoke the accreditation of the St. Louis public school district altogether and turn district operations over to a transitional board, initially consisting of three members appointed by the governor, the mayor, and president of the Board of Alderman. Eventually, the city will be able to elect members. Governor Matt Blunt nominated Rick Sullivan, a businessman, as CEO of the St. Louis schools effective in June 2007. Time will tell what role the existing superintendent and elected board members will play in the new arrangement.

Regrettably, the casualties in these ongoing battles are the students. More often than not, the public school cartel can muster sufficient defenses to quell any threat to the status quo. But even with new district leadership in St. Louis, it is unlikely that students will see much change in the quality of instruction as the public school cartel gears up for its next political battle over who gets what, when, and how.

Wilbur C. Rich is professor of political science at Wellesley College. His latest book is David Dinkins and New York City Politics: Race, Images, and the Media.

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