Analysis: By Paying Stipends to Schools’ Teaching Staff, Districts Can Add Learning Time Without Breaking the Bank
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The $190 billion in federal relief funds presents school district leaders with a conundrum. They might want to add time for students, whether through tutoring, summer school or an extended school day or year, but this is one-time federal money, and programs like these often entail taking on recurring labor costs.
So how do districts get more labor without locking themselves into long-term financial obligations?
As my colleague Marguerite Roza has suggested, one option is to to take on additional hours. Some might want the extra paid work, and, since districts have already paid for a full year of health benefits, the hourly rate would be less than hiring a new employee would cost.
Let鈥檚 do the math.
According to from the Bureau of Labor Statistics, districts spend about $70 per hour per teacher. But teachers receive an average of only $46 per hour in salary; the rest goes mainly toward benefits.
That presents districts with an opportunity. Teachers, for example, are than other workers to take on second jobs. This year has been hard and stressful, but some educators might be willing to provide additional learning time for students and appreciate the extra income.
Our Edunomics Lab asks district leaders to run the per-hour calculations to see how stipends for current staff can help them get more for their dollar than making new hires. That鈥檚 because while most teachers work a 10-month contract, district health benefits cover a full year. If a district were to add time for students by offering stipends to existing staff, those would not come with any new health care costs.
That represents a significant saving, and it offers a way for districts to provide significantly more services for students. If a district hired new staff with health benefits, for every $1 million the district spent, it could afford to 鈥渂uy鈥 14,310 hours of programming. If instead the district used existing teachers at the same hourly rate, it could offer an additional 2,648 hours of programming to students (18.5 percent more) for the same $1 million cost.
Stipends for teachers are relatively common, but there鈥檚 an additional step districts could take to stretch their dollars even farther: As Roza and Hanine Haidar, a former Edunomics Lab research fellow, , districts could designate the stipends as non-pensionable. That is, neither the district nor the employee would make pension contributions based on the stipend amount, and the stipend would not add to the employee鈥檚 retirement benefit.
At first blush, this may sound unnecessarily stingy, but hear me out. Pension formulas in most states look only at an employee鈥檚 final three or five years of salary. That is, if someone earned a pensionable stipend but was more than five years away from retirement, the stipend would not affect the pension. In fact, offering a non-pensionable stipend would save money for everyone who wasn鈥檛 in those final years, because they also wouldn鈥檛 owe employee contributions on the money.
And there鈥檚 more: Allowing one-time stipends to enhance the pensions of late-career teachers carries a long-term financial impact for all other educators. In a 2014 paper, my colleagues estimated that every $1,000 used to boost late-career teacher salaries to a state鈥檚 pension plan. In turn, those obligations raise the amount owed by everyone else, which effectively passes the costs on to .
There鈥檚 also precedent here. Over the years, large districts such as , and have offered bonuses, retroactive pay or other one-time payments that were non-pensionable.
If districts were to offer stipends to their current staff, and make them non-pensionable, they could stretch their dollars even further. For every $1 million the district spent to add time, it could afford to 鈥渂uy鈥 6,000 more hours (42 percent more) if it used non-pensionable stipends than if it hired entirely new staff.
Teachers would also benefit from the extra stipends. Not only would they get a chance to , but all of that money (save for taxes) would go directly into their pockets.
There are other alternatives, of course. Most tutoring companies charge far less than the average teacher earns per hour. Districts could select high-quality contractors to stretch their dollars to serve even more students.
In short, districts looking to add more time for students have several options, and stipends to current staff offer a number of advantages. Educators could earn more money doing the job they love, students would get the benefit of more time with their teachers and districts would maximize their federal relief funds without adding to their long-term financial obligations.
Chad Aldeman is policy director of the Edunomics Lab at Georgetown University.
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