Indiana's teacher pay problem can be fixed — for $600 million, report says
Arika HerronIndiana has a teacher pay problem.
Teachers have been saying this for years, but a new report out Monday from Gov. Eric Holcomb's commission tasked with studying the issue confirms it. Indiana is one of the lowest paying states in the region and is worst in the nation in salary growth for educators — and that is bleeding the field of current teachers and its pipeline of future teachers.
But it's not all bad news. While the state has a problem — and, the report says, it's a big one — the Next Level Teacher Compensation Commission found nothing less than 37 strategies to address the problem. Through a combination of cost-savings, spending shifts and influx of new revenue, the report says that the state can make teacher pay in Indiana competitive.
So, what will it cost?
$600 million.
The commission estimates that the state needs to make a $600 million investment in teacher pay over the next several years to raise the average teacher's salary to $60,000 a year. That wouldn't make Indiana the best paying in the region — the state would still lag behind Illinois and Michigan — but it would be a considerable jump from the current average of around $52,000 and make it the third-best paying in the Midwest. It would also start to make up for what the report says is a "20-year regression" in pay.
In 2000, Indiana’s average teacher salary was $41,850, which was better than the
national average and all but two states in the Midwest, according to the report. In today's dollars, that's would be more than $62,000, which means that Hoosier teachers' salaries have fallen more than $10,000 behind the rate of inflation.
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"Ensuring Indiana teachers receive competitive compensation is a high priority and will require everyone involved to work together toward that goal," Commission Chairman Michael L. Smith said in a statement released Monday. "Our report provides practical tools to help accomplish this."
Report outlines ways to get more money into teachers’ pockets
The report's findings are remarkably similar to one that several education-focused nonprofits released in early 2019, at the start of Indiana’s last budget-writing session. The study from Stand for Children and Teach Plus found it would take a little more than $650 million to make Indiana competitive with neighboring states. It also supported two other strategies to make the profession more attractive and give teachers new ways to earn more: career ladders and teacher residencies.
The state has piloted both programs but made little headway in raising teacher pay. A $150 million investment was made in 2019 to pay off an unfunded portion of the state's retirement fund for teachers, dropping the amount that school districts are required to pay toward the plan. At the time, Holcomb directed school districts to use those savings to raise salaries. In the most recent pay data available, the vast majority of school districts said they put at least some of those savings toward teacher pay.
The new report goes deeper, though, outlining dozens of ways to get more money into teachers’ pockets. The strategies fall into one of three main categories: cost savings and reallocations, new revenues and policy changes. About one-third of them are directed at local school districts and the rest to state policymakers.
The bulk of the estimated $300 million in savings outlined in the report come from five of its recommendations.
- Pass an operating referendum (estimated $80 million in additional annual funding)
- Pay down pension debt ($50 million in annual savings)
- Eliminate Indiana’s 529 plan tax credit for high-income households (estimated $50 million in additional revenue)
- Limit working spouses’ participation in district health care plans (estimated $50 million in annual savings)
- Join the state’s pharmacy benefit plan (estimated $25 million in annual savings)
The report acknowledges that such savings and spending reallocations are only half of the battle, though. The state will also need to invest more, either through new revenue or cuts to other parts of the state budget, to achieve its stated goals.
"After executing cost-cutting measures, competitive pay will still require hundreds of millions of new dollars annually, on top of annual tuition support increases," the report says.
Report is 'balanced'
One area not addressed by the commission: the likelihood of its recommendations to come to fruition.
Some of the report's recommendations are likely to be met with considerable consternation or may be downright impossible.
For example, the report suggests consolidation among the state's smallest school districts. This is something policymakers have sought to do for years but few districts have taken the step.
One of the biggest sources of new funding it identifies outside of the state just giving schools more money is through local districts passing property tax referendums. Passing a referendum will not be possible for all school districts, though. It's also unclear what impact the pandemic may have on a community's willingness to pass a referendum. This past November saw the fewest proposals on ballots around the state in six years.
While the report’s estimate of an additional $80 million comes from schools educating just an additional 10% of the state’s student body passing one, there are concerns that relying on such measures to increase teacher salaries will widen the gap between “have” and “have not” districts.
“We’re very realistic that we have member schools in our association that really, politically, could not pass a referendum,” said Chris Lagoni, executive director of the Indiana Small and Rural Schools Association.
Lagoni called the report “balanced,” saying there is something in it for everyone to like, and dislike. There are concerns, he said, that relying on referendums could widen gaps but hopes that it’s just one of many strategies that state and local leaders are ready to act on.
While largely supportive of the report and its findings, the Indiana State Teachers Association has also come out against one of the biggest cost-saving recommendations: limiting spousal coverage in district health care plans. While 54 districts already restrict participation for spouses that have access to health insurance through their own employers, the report estimates this would save around $50 million annually if all districts put the measure in place.
"The state can't solve this problem by moving money around locally or taking health insurance away from educator spouses or retirees, or privatizing school lunch programs," said Dan Holub, executive director of ISTA and a member of the pay commission. "Savings and efficiencies alone won't be enough to dig us out of this hole.”
Taking COVID-19 into account
Additional recommendations in the report include reducing non-teacher salary costs, increasing private donations to school districts through foundations and incentivizing districts to reallocate more of their dollars to teacher pay through one-time funding increases.
Holcomb announced the creation of the commission during last year's State of the State address. A group of business leaders, philanthropists and advisers from the education field, he charged the 13-member panel with making recommendations to state lawmakers for strategies to increase teacher pay for the next budget session. That session starts next month but will look very different than was expected at the start of the group's effort.
The coronavirus pandemic has wiped out state coffers, meaning that some of the recommendations for new revenues are likely several years away from being feasible. Still, it outlined several new revenue streams for lawmakers to consider.
One suggestion was a modest increase in the state’s income tax rate. Raising the rate from 3.23% to 3.4% would cost Hoosiers less than $100 per state income tax filing but produce an estimated $280 to $290 million in additional annual revenue, according to the report. Another suggestion was instituting a $100 per parcel fee applied statewide, generating about $350 million per year.
"We acknowledge that COVID-19 has had an enormous financial impact on our state that we did not anticipate when we started our work," Smith said during a press conference Monday morning. "State government finances and school corporation finances are not immune to this pandemic. And we recognize that, while most of our recommendations can be implemented quickly, some may need to be on hold until the pandemic is behind us."
The 83-page report and its 37 recommendations are non-binding. It will be up to local school districts, lawmakers and Holcomb's administration to decide how to move forward.
“I am grateful to the commission for its dedication to developing these recommendations," Holcomb said in a statement released Monday. “The report provides a wide range of actions for all to review and consider moving forward. The options offer a base for continuing these important conversations about making compensation for our hard-working teachers more competitive.”
Statements from several key lawmakers released Monday afternoon, after the report’s publication, gave little indication of how many of the report’s recommendations will be adopted in the coming months or how much, if any, new money schools will receive.
“There's no doubt we are facing many challenges due to the COVID-19 pandemic, and our next state budget will not be immune from those challenges,” said Senate President Pro Tempore Rodric Bray. “My caucus members and I look forward to reviewing the Commission's recommendations and identifying more ways for the state to work in partnership with local governments and school administrations to increase teacher pay."
Rep. Bob Behning, R-Indianapolis, said that supporting teachers will remain a top priority. Behning chairs the House Education Committee.
“I appreciate the commission's work over the past 18 months, and will thoughtfully consider their recommendations as we work through proposals to strengthen our support for Hoosier teachers."
Call IndyStar education reporter Arika Herron at 317-201-5620 or email her at Arika.Herron@indystar.com. Follow her on Twitter: @ArikaHerron.