Why Change the Way Schools Pay for Teachers?

We used to fund schools based on the teachers they hired. This meant that we gave more money to schools for having more experienced, higher-paid teachers. The inevitable consequence is that we gave less money to schools for having less experienced, lower-paid teachers. At two schools with 100 teachers each, one with teachers earning an average of $60,000 and one with teachers earning an average of $70,000, the funding difference could reach $1 million. That difference was especially troubling when we knew that the school with lower-salary teachers likely had greater needs.

The Funding Gap

To address this inequity, under a policy announced by the Chancellor in May 2007, schools will begin to be funded based on the needs of their students, not the salaries of their teachers. Under this approach, a school will no longer receive less money because it has trouble attracting experienced teachers. Schools now receive an allocation based on their students—their Fair Student Funding allocation—and schools will begin to be responsible for paying their teachers out of that allocation. This is the kind of responsibility for managing a budget familiar to families, universities, and businesses.

Student Achievement is the Bottom Line

Some principals have expressed concern that the reforms will shift the focus to money, not learning, and discourage the hiring of successful senior teachers. That’s not accurate. We hold principals accountable for one thing above all: student achievement. And principals can never pocket financial “savings”; they can only spend resources on other supports they believe will better serve students. High-quality, experienced teachers can contribute enormously to student achievement. In important ways, they can lower costs; rather than needing support themselves, these teachers can offer support to others. The bottom line for a principal will always be simple: Make the decision that will get the best results for your students.

We are moving in the direction of schools paying for teachers in real dollars, but we’re moving very gradually so that we ensure no school will be destabilized.

Schools are not experiencing radical changes. But they already have new opportunities and new flexibility. Planning carefully is the key.

Gradual Transition

The new system preserves many key aspects of the previous approach to funding schools for teachers:

• Schools receive adequate funding for a mix of junior and senior teachers. The Fair Student Funding formula grade weights are built to allow for a school to pay its base teachers at the Citywide (CW) Average, meaning the school’s teacher salary average can be made up of a mix of new and experienced teachers.
• As the salaries of teachers on a school’s payroll prior to April 2007 increase, we will make sure the school is adequately funded to cover them. For “base” teachers (the number of teachers needed to meet contractual maximum class sizes), the Department has in the past provided additional funding to cover increases in salary due to longevity steps and differentials. The Department is committed to continuing to give schools adequate funding for the number of base teachers who were on school budgets as of April 2007 for as long as they remain on those budgets. This protection will be linked to specific staff members.
• We continue to charge schools for all teachers at a single rate, the school’s average teacher salary, which is held constant throughout the entire school year. Principals don’t have to worry about teacher salaries on a hire-by-hire, real-time basis. As previously, schools will be charged the same rate for all teachers. And as previously, we will adjust the average salary at which teachers are charged each year. That average will reflect both the salaries of existing staff and the salaries of the staff hired after April 2007.
• If they so choose, schools are able to replace departing senior teachers with other senior teachers. If a teacher with a $75,000 salary in 2007 retires, then other things being equal, the school will be able to replace that teacher with another teacher earning roughly $75,000.

New Hires

The Department no longer adjusts budgets based on the salaries of teachers newly hired into or leaving schools. Schools receive their money based on their students, through the FSF formula, and allocate it as they feel is most appropriate for the school’s bottom line: achievement.

With the greater control over budgets that the new approach creates, principals will have both new opportunities and new responsibilities. Schools can choose how to combine their investments in different types of teachers, services, and supports to improve student achievement. Smart principals will invest in great staff, but will do so in a way that is realistic for their budget.

As an example, if a principal was choosing between a $60,000 teacher and an $80,000 teacher for a base teacher position, that principal’s decision changes the school’s budget. Absent other salary changes or attrition, the budget rises $20,000 if the principal chooses the $80,000 teacher. Previously, the school was effectively not charged for the increased salary costs. In many ways, the school was also penalized for hiring a less experienced teacher.

Principals are only responsible for the increased salary of the teachers hired after April 2007. The Department will continue to fund increases in salaries for base teachers on school budgets prior to April 2007. (See section 6.3. of the Resource Guide for School Budgets for more information.)

This method of paying for teachers with actual salaries is not new. In fact, it is the way that a majority of salaries on a school budget are charged – all teachers outside of the school’s base, administration and other school staff are charged to school at their actual salaries.

It is important to note that schools have adequate funding for their teachers to have an average salary equal to the city-wide average salary. The grade weights that all students receive are structured to cover base teachers at the city-wide average, as well as cover core programming and other core schools costs.