If you follow education in the news, you’ve probably heard the debate regarding use of average teacher salary versus actual teacher salary in the budgeting process. It features in most discussions of the Every Student Succeeds Act (ESSA), as the US Department of Education proposed changes in how districts measure fiscal equity.
The law’s regulations suggest that districts consider actual teacher salary disparities when assessing fiscal equity within districts, even though districts typically budget using average teacher salaries.
Aaron Garth Smith of the Reason Foundation argues that the use of average teacher salaries when budgeting can hide inequities and advocates for the use of actual teacher salaries when budgeting to make inequities more transparent. In this blog, we will explore why districts use average salaries, the benefits of using averages when budgeting, and a way in which equity can remain a measurable goal when budgeting with average salaries.
Why do districts use average teacher salaries in budgeting?
Each district uses their expected local, state and federal resources to develop an operating budget for the coming year. Typically, that operating budget represents the vast majority of resources a school can expect to receive, and it must cover a wide variety of needs, from copy paper to salaries to computers.
Staff salaries are the single biggest expense in every school’s budget. NCES reports that in a typical district budget, 90% is reserved for salary and benefits (NCES). How a district budgets for staff has a dramatic effect on the overall amount of resources that are budgeted for a given school. Districts have traditionally used average salaries to simplify this budgeting process, especially in the case of teachers’ salaries, as these are both the largest component of personnel costs and have the widest variance across employees.
Average salaries are calculated by aggregating the actual salary of like positions across a district and dividing by the total number of Full-Time Equivalent (FTE) or employees in that position.
What are the benefits of using average teacher salaries?
Districts use average teacher salaries in the budgeting process because:
It makes budgeting personnel easier. The teacher unit has a standard price and becomes interchangeable across locations in the district.
Staffing with a certain number of allocated positions allows principals to hire teachers based on quality of the match instead of worrying what the teacher will earn.
However, use of average salaries in the budget process may hide fiscal inequities across schools. One prominent observation is that higher-paid teachers tend to be clustered at higher-performing schools, which will likely result in higher actual expenditures at that location in comparison to lower-performing schools in the district. This discrepancy is clear when using actual salaries, but the budget would not reflect this disparity when using average salaries.
Can equity transparency be realized while using average salaries in the budgeting process?
Districts using average salaries should address the issue of transparency by publishing an annual report of individual school budgets using both average and actual expenditures, as well as the prior year’s actual school expenditures. Such a report should also make explicit why certain differences exist between schools. Notably, equity should be measured while taking into consideration school type (elementary, middle, high school), low income, special education, English language populations, and overall performance ratings. This transparency also presents an opportunity to explain why some schools, such as magnet schools or those with high-needs populations, may cost more to operate than traditional schools.
The tradition of using average salaries when budgeting, coupled with the real advantages to assigning staff without regard to full compensation does not have to deter transparency of actual school expenditures.
Advocates for the use of actual salary believe that budgeting with actual salaries is more transparent and less likely to hide potential inequities across schools. Districts can realize the same transparency and equity when using average salary by taking proactive measures.
These measures include:
an annual report of budgets with current and prior-year actuals
setting a range for acceptable per-student spending across schools, and
specifying when differences in spending are necessary given student demographics and school goals.
Districts can simultaneously benefit from the advantages of average salary use while recognizing the importance of equity in the decision making process.
ABOUT THE AUTHOR
Allovue works with districts and state departments of education across the country to allocate, budget, and manage spending. Allovue's software suite integrates seamlessly with existing accounting systems to make sure every dollar works for every student. Allovue also provides additional services such as chart of accounts and funding formula revisions.