Prichard Committee for Academic Excellence

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Trade-offs between teacher salaries and class sizes? Recent KY data suggest another story

The Fordham Institute’s Michael Petrilli has a recent blog post that shows how teacher salaries across the U.S. have not kept up with rising expenditures for public education. If teacher salaries had kept pace with overall spending, according to these data, the average Kentucky teacher salary in 2015-16 would be $78,011 rather than $53,093.

How can this be? Policy folks have hypothesized that education leaders have prioritized hiring more teachers (to lower class sizes) and more support staff (to help teachers and students) rather than increase teacher salaries. Count me among those who have subscribed to this hypothesis over the years.

After seeing Fordham’s post, I dug into the data to illustrate how this has played out in Kentucky. I planned to write about budget trade-offs between increasing salaries and lowering class sizes, to discuss research that shows how some teachers prefer higher salaries over lower class sizes while other teachers prefer lower class sizes over higher salaries. Many parents, meanwhile, appear to prefer lower class sizes. (The research about the benefits of lower class sizes is mixed at best.)

The data, however, pointed in a different direction. The Fordham blog post mentioned, “Throughout the economy, health care expenses have eaten into pay, so that’s one likely culprit.” After analyzing the data, I agree.  The rising cost of benefits such as health insurance may explain a good deal of recent increases in per-student spending in Kentucky.

For the analysis, I used data from the National Center for Education Statistics – the Common Core of Data (CCD) survey that covers enrollment, staffing, etc. and the National Public Education Financial Survey (NPEFS) that covers revenues and expenditures. The NPEFS data go through the 2015-16 school year so I adjusted all financial data to 2016 dollars (using the Bureau of Labor Statistics Consumer Price Index – annual average).

The CCD data show that Kentucky’s pupil-teacher ratio changed little over time, from 16.5 students per teacher in 1998 to 16.3 students per teacher in 2017. You can see a few economic boom years where the ratios fell to as low as 15.3 (2007-08) and 15.4 (1999-2000) before rising again, but in general, we do not appear to have a story about lower class sizes over these years.

The NPEFS data show that between 2003-04 and 2015-16, per-student current expenditures rose from $8721 to $9831, an increase of $1110 in 2016 dollars. (see note (1) below for more on per-student current expenditures)

What drove this increase? It took some number crunching to figure it out:

Instructional – Spending on teacher salaries decreased by $54 on a per-student basis, while spending on benefits for teachers increased $481 per student. (see note (2) below for the definition of benefits)

Support services – Salaries for instructional aides and coordinators, support services staff, administrators, bus drivers, etc. increased $137 per student between 2003-04 and 2015-16. (Looking at the CCD data, I see a lot of fluctuations in these staffing levels over the years, but it does look like there has been a trend toward more instructional coordinators in schools and districts.) Benefits, meanwhile, increased $327 for employees in this category.

Non-instructional – The data also show an increase in $142 per student in non-instructional expenditures, which are primarily food service and other “enterprise services” for which the district receives payment or reimbursement.

In total, $808 of the $1110 increase in current expenditures went to increasing costs of benefits for teachers and staff.

Breaking this out by year, all of the increase in current expenditures happened between 2004 and 2010. Between 2011 and 2016, current expenditures per student decreased by about $16! Spending on instructional and support services benefits continued to increase between 2011 and 2016, but per-student spending on salaries decreased by more.

As the Fordham blog post predicted, rising health expenses are a likely reason. These are the costs that are in the NPEFS data and could rise on a per-employee basis over these years. For instance, the data for instructional benefits do not include extra state payments into the KY Teachers’ Retirement System to meet the annual required contribution, so that does not help us explain what has happened here. It’s not clear to me yet whether the support services benefits data include district payments into the Kentucky Retirement System for classified employees, but if those are included, and the per-employee payment rose over these years, that could be part of the story.

For local school districts, the budget trade-off, such as it is, appears to be between meeting rising costs of providing employee benefits such as health coverage, and everything else.

(1) Current expenditures exclude spending on capital outlay and debt service. For per-student amounts, the CCD/NPEFS data use the total number of enrolled students, also known as “fall membership”, in the denominator. You may ask why the per-student amounts here are lower than the per-student amounts reported on the Kentucky School Report Card for 2015-16 (I wondered that too). It turns out that the CCD/NPEFS “fall membership” numbers include public preschool students while the KDE numbers do not, so the CCD/NPEFS data have a larger denominator. In case you’re curious (again, I was), I ran the analysis above excluding preschool students from the denominator and ended up with a similar result.

(2) The NPEFS defines benefits as “amounts paid by, or on behalf of, an LEA for retirement contributions, health insurance, social security contributions, unemployment compensation, worker’s compensation, tuition reimbursements, and other employee benefits.” These do not include payments for actuarily required contributions to pension plans.

 

Since 1983, the Prichard Committee has worked to study priority issues, inform the public and policy makers about best practices and engage citizens, business leaders, families, students, and other stakeholders in a shared mission to move Kentucky to the top tier of all states for education excellence and equity for all children, from their earliest years through postsecondary education.