Skyrocketing Executive Pay and the Educational Salary Gap

Superintendent Fat Cat?

Despite the passage of California’s Proposition 30, which holds the state’s education funding steady at 2011-2012 levels, none of the $20 billion that has been slashed from K-12 funding over the past 4 years will be restored. Consequently, school districts will continue to operate on austere budgets, with overcrowded classrooms, reduced course offerings, and reduced numbers of teachers, librarians, nurses and counselors. This has led to a record 188 state school districts at risk of financial collapse. Yet, like the bailed out banks and automobile industry, many districts have managed to find the money to offer their top executives lavish raises.

Perhaps the most notable example is Los Angeles Unified School District (LAUSD)—the nation’s second largest school district—which has struggled with a $2.8 billion deficit over the past five years, while laying off 10,000 teachers. At the same time as LAUSD has cut teachers and services, it has boosted Superintendent John Deasy’s salary from $275,000 to $330,000 (according to the Bay Citizen)—roughly five times the average teacher’s salary. Since 2009, LAUSD has increased its superintendent’s salary 32%.

California Watch has investigated 40 of the largest districts on the state’s financial watch list (those at risk of financial insolvency) and found that more than half have raised their superintendents’ salaries since 2009. For example, Riverside Unified School District raised Superintendent Richard Miller’s pay from $267,208 to $314,963, despite having cut $100 million from its budget since 2008-09. The Lynwood Unified School District raised its superintendent’s pay by roughly 23%, from $200,000 to $245,000, two years ago, even though it has had ongoing budget deficits, including its current deficit of $6.8 million.

While the primary cause of California’s education budget problems has been the declining business, property and income tax rates, overly generous executive pay has added to the problem. In New Jersey, Governor Chris Christie capped superintendent salaries and New York is considering similar legislation, the Bay Citizen reported. A superintendent pay cap is not currently under consideration in California.

Proponents of high superintendent pay argue that superintendents are charged with much bigger and more important responsibilities (i.e., protecting and nurturing the “innocents”) than are corporate executives, yet they are paid only a fraction of what CEO’s of similar sized companies are paid. On the other hand, CEO pay has been skyrocketing over the past few decades and is now at its highest level ever relative to the median pay of their employees, contributing to the growing wealth and income gap and declining working and living standards for the majority of Americans.

It is also complete nonsense that executives need or deserve to earn 1,000 times, 100 times or even 2 times more than their employees. This argument is based on the fallacious notion that responsibility for large budgets and large numbers of employees is tougher and more valuable than other occupations. Yet it is the employees who do all the really difficult work. It is the employees who create the profits in private business and the bosses who pocket the difference between the wealth they create and their salaries. Though superintendents do not earn profits from their teachers’ labor, they have far more control over their own working conditions (and consequently less stress) than teachers. It is the teachers who have the most direct influence over the safety and success of the “innocents.” It is the teachers who design creative and engaging curriculum; create positive, nurturing classroom environments; and who communicate with parents about their children’s wellbeing and needs. So if it’s really all about the children, then it is the teachers, not the superintendents, who should be getting the six-figure salaries and 20-30% raises. 

Attacking Teacher Pensions is Misguided and Stupid

The following is a repost from the San Diego Education Report Blog and highlights some important points about teacher pensions and the particular plight of CalSTRS, the California educators’ pension system.

It is important to recognize that educators are forbidden from collecting social security, which is guaranteed to all other workers as a cushion against poverty after retirement. If teacher pensions, like CalSTRS, are gutted or eliminated, educators will be forced to work until death or retire as paupers. Many teachers, including me, have put in many years at other jobs prior to teaching, paying into social security, but we will never be able to get any of our contributions back as a consequence of our commitment to teaching. While this would is a significant loss, it was balanced by the knowledge that our teacher pensions were secure.

Much of the growing public support for raiding teacher pensions comes from biased data that show bloated payouts to some retirees. However, it is not teachers who are receiving these bloated payouts, it is administrators, especially superintendents, some of whom receive pensions as high as $280,000, while teachers are lucky if they earn $40,000 per year after retirement. $280,000 for an individual is pretty damned cushy, but $40,000 per year is not, especially if you live in an expensive city like San Francisco or New York.

It is also important to recognize that workers pay a portion of their salaries into their pensions. To strip away their benefits retroactively, after having paid into the plans for years, is tantamount to stealing their wages. Likewise, when laws like those in California allow pension managers to invest employees’ contributions into risky stocks, it places the entire system at risk, not only jeopardizing employees’ benefits, but exacerbating state and district budget woes when a downturn causes pension assets to decline.

San Diego Union-Tribune Watchdog highlights this question: "Should there be any pension for [teacher] retirees?"

Clearly, Les Birdsall of San Diego is not interested in attracting the best and brightest to work as teachers in San Diego. Since teachers don't pay for, or receive, Social Security benefits, Mr. Birdsall seems to be asking if retired teachers should perhaps live in homeless shelters and collect food stamps. Why would the SDUT Watchdog print such a silly comment while at the same time failing to investigate costly shenanigans of insurance companies and lawyers at the San Diego County Office of Education? Has the Watchdog received any rabies shots? Is it mad?

See Slaying the Mythical Tax-Fattened Hog regarding public sector pay.

Educator pensions report raised questions
“The average education pension in $40,663. Is this too high?“
By Maureen Magee
SAN DIEGO UNION-TRIBUNE
January 31, 2011

Underfunded public pensions have made big headlines in San Diego and elsewhere, igniting a debate over the cost of retirement packages that often pits taxpayer groups against public employees, with the public somewhere in the middle.

A recent report by The Watchdog on educator pensions contributed to the debate. Some readers wrote to raise questions and voice their views — from outrage over what they call excessive pensions to sympathy for public employees whose retirement packages they believe have been unfairly called into question.

Mary Jean Word, a retired San Diego teacher, objected to our report claiming the educator pension system, like other public funds, offers “high benefits with no clear way to pay them.” She said the broad brush was unfair to those on the lower end.

“Do not include administrators with teachers,” said Word, who retired with 25 years service credit in California and receives an annual pension of $24,000. “They do not teach 20 to 150 students a day.”

Public educators from counselors to superintendents pay into the California State Teachers Retirement System. The program does not classify them by position, however, so separate data analysis was not possible. Although the top pension for a retired San Diego County educator is $281,034, the average retired educator in the county takes home just over $40,000 annually.

Much of the response to our story centered around whether that is a high number. For perspective, recent U.S. Census Bureau estimates show the average person of retirement age receives about $19,000 from retirement, pension and/or Social Security benefits.
Teacher fund status

Jim Wirt of San Diego wanted to know more about the state of the teacher pension fund. “You could have at least mentioned that CalSTRS assets have fallen...”

The fund reported good news last month when it posted 12.7 percent investment returns for 2010, raising its portfolio to $146.4 billion. The fund peaked at $180 billion in 2007 and had fallen to $112 billion in early 2009.

Even so, the system is expected to go broke by 2045 unless contributions are increased by the state, school districts and California educators. Officials say the fund needs a 15 percent hike in employer contributions this year. Only the state Legislature has the authority to approve such an increase. Since the state faces a $20 billion budget deficit, many say it’s unlikely to happen this year.
Who’s to blame?

Marty McGee of La Jolla wants to know how California got into this mess. She wrote, “In order for your watchdog reports to lead to meaningful changes, the people need to know who did it.”

Some of the blame goes to California voters.

“A little-known ballot measure a quarter century ago, Proposition 21 in 1984, opened the door for much of the current controversy over California’s public employee pensions,” former Union-Tribune reporter and pension expert Ed Mendel wrote last year. The measure passed with 53 percent of the vote.

Before Proposition 21, pension funds had been required to put most of their money into bonds. The ballot measure allowed pension funds to shift most money to stocks and other riskier investments. Some have said that public pensions would be more manageable today if the funds had stuck with safer investments.

Other changes to CalSTRS have also contributed to the funding gap.

In an effort to address teacher shortages and convince veteran educators to put off retirement, CalSTRS benefits were sweetened about a decade ago under AB 1509, legislation sponsored by Mike Machado, D-Stockton.

To fund the added benefits, the legislation took a fourth of the money teachers had been contributing to their pensions and used it to seed the added benefit. The teachers no longer pay into the supplemental benefit fund, but they draw from it.
What about Social Security?

Tom Helmantoler, a retired Julian High School teacher, asks this: “What about Social Security? Why can’t someone who has qualified for Social Security in the private sector turn to teaching as a second career and keep the Social Security benefit they earned?”

More than two decades before the Social Security Act was signed, the Teachers’ Retirement Law took effect in California in 1913. Public educators decided to continue to opt out of Social Security in 1955 because CalSTRS offered better benefits. California teachers do not pay into Social Security while they pay into CalSTRS. But some have paid enough toward Social Security to qualify for the benefit from other jobs. Those retired educators see a significant reduction in Social Security benefits under a law designed to prevent double-dipping. Similarly, retired educators who qualify for Social Security as the spouse or widow/widower of a worker who was covered by Social Security also see a reduction in that benefit under the law.

Should taxpayers contribute anything?

Les Birdsall of San Diego asked broader, philosophical questions. “The story tells us the average education pension in $40,663. Is this too high? What would be a reasonable pension? Should there be any pension for retirees?”

Alicia Munnell, director of the Center for Retirement Research at Boston College, said governments must compete with private sector salaries and benefits or it will not attract a qualified work force. And that means offering a decent retirement.

“It’s very easy to say that public sector defined benefit programs are more generous than what most people get in the private sector,” she said. “But it’s really hard to say.”

http://learningboosters.blogspot.com/2011/02/san-diego-union-tribune-watchdog.html

Cuomo Attacks Superintendents

New York Hatchman Cuomo

Is New York Gov. Andrew Cuomo trying to appease unions by going after superintendents?

Not likely. He wants to cut NYC school funding to 2007 levels and reduce statewide school spending by $1.5 billion, a move that will surely result in layoffs and/or furloughs. He’s also under pressure from Bloomberg to dismantle tenure and seniority protections and has implied he is not opposed to this. There is nothing he could do to superintendents that could make up for these attacks on teachers and students.

Nevertheless, Cuomo is attacking superintendent pay as a way to help close the state’s budget deficit. He claims that over 40% of New York superintendents earn at least $200,000 per year in pay and benefits, while some earn over $500,000, more than double what he earns. Cathy Black, chancellor of NYC schools, earns $250,000 per year, not including benefits, while Carole Harkin, in Syosset Long Island, makes $386,868. The national average for superintendents is $160,000 per year.

While superintendent pay is generally a small drop in the bucket compared with the staggering deficits facing many states, it is certainly a good place to trim the fat. The idea of paying a quarter to a half million dollars per year to a fat cat who sits in an office dismantling public education while teachers are fired, classes cut, and class sizes grow, ought to be very unpopular with the public.  By setting salary caps, as Gov. Chris Christie has done in N.J., there may be less incentive for Broad-trained CEOs to consider running school districts in the first place.

Corrupt California School Superintendent

Image by Bakert

Former Beverly Hills Unified School District superintendent Jeffrey Hubbard will stand trial for misappropriation of funds, for giving illegal “stipends” to his girl friend and co-defendant Karen Anne Christiansen, former director of facilities for the district. Christiansen also used her role as a consultant with the district to obtain contracts for her private company worth more than $2.2 million.

Hubbard is currently superintendant of Newport-Mesa Unified School District. The Newport-Mesa school board placed him on paid administrative leave on Monday.