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The Bottom Line

    The Next 10 Years of Ed Finance: Teacher Compensation

    This article is the first in a series that reviews “10 Predictions for the Next 10 Years of Education Finance.” Read on for learnings and predictions around the dominant themes and challenges facing education finance over the next decade!

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    If I had to choose one issue that will dominate education finance discourse over the next decade, it’s teacher compensation. Teacher compensation is related, directly or indirectly, to several challenges plaguing K-12 education: teacher shortages, teacher recruitment and retention, pension debt, resource equity, and funding adequacy. 


    For about two decades, teacher compensation has fallen behind wages for professions that require similar levels of education. While it varies considerably by state, one recent estimate pins the average lag at 23.5%; if you factor in the outsize benefits that teachers receive, the gap shrinks to about 14%. Based on Allovue’s own research and recent inflation, I’d estimate that teacher wages need to increase by an average of about 20% to be truly competitive in today’s labor market. 


    Because teacher compensation makes up such a large percentage (over 60%) of district budgets overall, meaningful teacher compensation increases are nearly impossible strictly through reallocation of existing resources. Reallocating dollars from student transportation, nutrition, facilities, student support services (counselors, nurses, psychologists, etc), professional development, and technology cannot close the teacher wage gap. 



    Figure 1. There are over 3 million teachers employed by U.S. public schools. Teachers and instructional aides outnumber all administrators and coordinators nearly 11:1. (Source)


    The rising cost of benefits


    One of the core tensions with teacher compensation is that benefits now represent nearly 30% of personnel costs, largely due to health benefits costs rising at rates well above inflation. If an average teacher salary is $65,000, the district is actually spending closer to $90,000 per teacher when you include health benefits, pension contributions, other benefits, and employer payroll taxes. Over the past several decades, benefits costs have increased dramatically relative to wages. This creates a frustrating dynamic where district CFOs say they are allocating ever-increasing budget amounts to teacher compensation, teachers counter that they see little-to-no increase in their paychecks, and both parties are correct. 

    Figure 2. In 2020-2021 dollars, per-pupil expenditures on benefits have increased 110% since 1990 while salary per-pupil salary expenditures have only increased 18% over the same period. (Source)



    The Administration Myth


    There is a prevailing notion that an increase in administrative staff is to blame for depressed teacher wages. I have a hunch that the reason this misconception has taken hold so pervasively is that it’s common to see graphical representations of administrative staff versus instructional staff increases expressed as percentages. The problem is that there are ten times as many teachers as administrators—increasing administrative positions by 20% sometimes literally means adding 2 people in a district relative to dozens or hundreds of teachers. 

    Figure 3. Staff-to-student ratios demonstrate changes in staff composition over time. If this graph looks similar to Figure 1 above showing total staff counts, that’s because school staffing has remained relatively flat in terms of staff ratios over the past two decades. (Source)


    Let’s set the record straight: administrative spending is not the cause of flattening teacher compensation.  


    Here’s the truth: administrator salaries make up only 7% of public education spending—including school-based administrators like principals, assistant principals, and instructional coordinators. Only 2% of total spending is for district-level administrator costs. If public education completely eliminated central office administration, that would translate to about $150 per month in teachers’ take-home pay. In exchange, teachers and school-based leaders would have to pick up the tasks of managing ...

    • Payroll
    • Accounting
    • Budgeting
    • Human capital (including all recruitment and hiring)
    • Purchasing
    • Enrollment
    • Curriculum
    • Facilities management
    • Professional development
    • School board relations
    • Communication with parents and staff
    • Media relations
    • Information act requests
    • Grants
    • State and federal reporting
    • Compliance
    • Special education administration
    • Legal issues and litigation
    • Student transportation
    • Home and hospital programs
    • Nutrition and food services
    • Education technology management
    • Testing coordination
    • Information technology
    • Athletics
    • Devices
    • Inventory and assets
    • Capital projects
    • Liaising with state and local governments


    ... and host of other duties that are juggled by a relatively small cohort of administrators today. 


    Teachers make up the bulk of employees in school districts and schools. So even small raises spread across all of those employees are incredibly costly. It’s not just that administration is a much smaller part of district spending than most assume, it’s also that each dollar for teacher compensation is spread thin. A considerable reduction in spending by percentage in areas other than instruction often has just two results:

    • teacher compensation increases that are insignificant to individuals and fail to meaningfully reduce the teacher wage gap, and
    • the destruction of a school or district’s ability to provide valuable, often mandatory services to students and families.


    Figure 4. This graph illustrates the per-pupil ratios of staff members over time. Teachers and instructional aids have the lowest ratio of students per staff with an average of 15.8 and 67.4 pupils per staff member over the past two decades. Librarians have the highest ratio with nearly 1,300 pupils per staff member. Instructional coordinators have had the greatest increase over the past two decades, although they still represent just 2% of all district administrative and instructional staff. (Source)


    “Let’s give teachers a raise”


    President Biden’s call to give teachers raises in the State of the Union address last week was met with big cheers, but it left me wondering: Who is “us” in the phrase “Let us”? With only about 8% of K-12 public education funding coming from the federal government, it’s not Biden’s raise to give. 


    There is a widespread assumption that school district superintendents and finance leaders “hold the purse strings” to school district spending. While school district administrators are responsible for building and maintaining balanced budgets, they have virtually no influence on district revenue—it’s state governments and municipal governments or school boards that determine how much districts have to spend. 


    In most states, teacher compensation is controlled by local school districts. Contract negotiations are between teachers (and where legal, their collective bargaining units) and local school boards. The structural flaw in these negotiations is that, quite often, local school boards have limited influence on the total available funding. Depending on the state and district, state general aid to districts can represent a significant portion of total revenue. And even when districts are funded largely through local taxes, many states put strict caps on how much local taxes can be raised without direct voter approval. Increasing revenue, therefore, relies on us—local voters—and state legislatures. 


    Without increased revenues, the only option to increase salaries is to reallocate from other pieces of the pie, such as student services like counselors or nurses that are also under-resourced and are often required to meet service level requirements set in law. The purse, so to speak, is not holding any loose change to give to teachers.


    Absent increased revenues for schools, and with relatively few dollars dedicated to required services beyond direct instruction, districts look to structural changes to schools and classrooms to increase teacher wages and keep up with rising benefits costs. As we are seeing playing out in Minneapolis right now, this means school closures and layoffs. Districts can afford to pay teachers more if there are fewer teachers, but also if there are fewer schools that are all operating closer to their capacity, reducing fixed costs and spreading them among the most students possible.


    As one of Allovue’s partners put it, “It’s a pie, not a well.” Expanding that pie will require new revenues and better distribution of those funds to the right schools. To do that, we need state and municipal lawmakers to shift priorities and dollars to education from other areas and/or increased taxes. We need to convince them (and voters) it will be worth it.



    This article is the first in a series that reviews “10 Predictions for the Next 10 Years of Education Finance.” Read other topics in the series now:



    Data Sources


    Figures 1, 3, 4


    U.S. Department of Education, National Center for Education Statistics, Statistics of State School Systems, various years; Statistics of Public Elementary and Secondary Schools, various years; and Common Core of Data (CCD), “State Nonfiscal Survey of Public Elementary/Secondary Education,” 1986-87 through 2019-20.


    Figure 2


    U.S. Department of Education, National Center for Education Statistics, Biennial Survey of Education in the United States, 1919-20 through 1949-50; Statistics of State School Systems, 1959-60 and 1969-70; Revenues and Expenditures for Public Elementary and Secondary Education, 1979-80; and Common Core of Data (CCD), "National Public Education Financial Survey," 1989-90 through 2018-19

    Jess Gartner & Jason Becker

    Jess Gartner is the founder and CEO of Allovue, where edtech meets fintech - #edfintech! Jason Becker is Allovue’s Chief Product Officer. Allovue was founded by educators, for educators. We create modern financial technology to give administrators the power to make every dollar work for every student.