Teacher pay commission says $600M needed to address pay shortfalls

Gov. Eric Holcomb’s Teacher Pay Commission has determined that it will take more than $600 million to address what it says is a pay shortfall in the state and has released a report with more than three dozen recommendations for state government and school corporations on how to fund the gap.

Holcomb formed the volunteer commission in 2019 and tasked it with determining a competitive wage for teachers in Indiana and finding ways to get educators to that salary level.

The commission, chaired by Michael Smith, a former Anthem Inc. executive and co-founder of Indianapolis-based Cardinal Equity Fund, released its findings Monday in a 183-page report that includes 13 recommendations for school corporations and 24 steps state government can take to improve teacher pay.

The commission determined that a competitive teacher salary in Indiana would’ve been $60,000 as of the 2018-2019 school year. But, at that time, the average salary for educators was only $51,119. Indiana ranks 38th in the country for average teacher salary.

Since 2000, Indiana has seen the largest decline in teacher pay adjusted for inflation of any state, according to the National Center on Education Statistics, and the comparatively low pay makes it harder to recruit new teachers. Last fall, many educators went to a Statehouse rally for increased teacher, forcing districts across the state to close for the day because they couldn’t staff schools.

Smith said during a virtual press conference Monday morning that the goal was to provide schools and state government with “a full menu of options” on how to increase teacher pay.

“The recommendations in this report are not collectively a silver bullet,” Smith said. “Teacher compensation is a very complex process and there’s no easy or one-size-fits-all solution to fund our gap.”

The report recommends setting a minimum salary of $35,000 by 2021-2022 and increasing that minimum to $40,000 the following year. But the targeted average salary should be more than $60,000 to be competitive with neighboring states.

To help achieve that, five the suggestions in the report have estimated cost-saving or revenue-generating benefits that total more than $250 million:

• School districts should join the state’s pharmacy benefit plan to save an estimated $25 million per year;
• educator spouses should be limited from participation in health care plans if those individuals are working and have access to their employer’s plans, which could save an estimated $50 million per year;
• the state should follow through on Holcomb’s proposal to use $250 million to pay down debt in the pre-1996 teacher retirement fund, which would result in $50 million in annual savings;
• households earning more than $150,000 should be exempt from the tax credit for using Indiana’s CollegeChoice 529 plan, which could generate $50 million per year in new revenue for the state;
• and more school districts should pursue local tax referendums. According to the report, if school corporations educating 10% of the state’s students passed an operating referendum on the same scale as other referenda in place, it would add $80 million in revenue annually.

The Indiana State Teachers Association is not in favor of the recommendation to drop spouses from health care plans.

Dan Holub, executive director of ISTA, said he thinks the estimated savings of $50 million annually is overstated and many educators have spouses in low-wage jobs where the insurance offered by their employers is not affordable.

The commission also recommends tweaking the state’s school funding formula to increase complexity funding as a percentage of the state’s total tuition support so high poverty level school districts can pay teachers more.

Other state government-related recommendations include removing barriers for school corporation consolidation; allowing townships to financially support school districts; requiring tax increment financing districts to release money to schools after projects in the TIF district have been paid for; creating a statewide foundation to accept private donations for schools; eliminating duration restrictions on referendum tax levies; and requiring residential developers in high-growth areas to pay a one-time impact fee to support schools.

The commission also suggested that the state require schools to spend at least 45% of the district’s tuition support on teacher salaries and prohibit schools from spending less money on teacher pay than they did the prior year, except in certain cases of declining enrollments.

More than half of the 13 recommendations for school corporations were cut-cutting suggestions, including increasing utilization of centralized procurement; joining a liability risk pool; reducing staff positions where possible; sharing services with other districts or organizations and implementing best practices such as privatizing food preparation or custodial work; divesting vacant real estate; and reducing legal costs by increasing the use of arbitration.

The commission also suggested that schools exclude Medicare-eligible retirees from health care plans.

Three suggestions were made to schools on how to increase revenue, including passing operating referendums to help fund teacher salaries, increasing Medicaid reimbursement claims and seeking private contributions through education foundations that schools can establish.

Schools are also being encouraged by the commission to create local teacher career ladder systems and to offer higher salaries to teachers working with high-need students and in subject areas where there is a teacher shortage.

The commission also suggested expanding efforts to recruit more minority teachers, providing more salary transparency to teachers and to the public, and improving other non-salary-related job satisfaction elements for teachers.

Holub said it’s clear from the report that the Indiana General Assembly—not just school corporations—needs to take action.

“If the Legislature doesn’t step up, none of these efficiencies are going to go far enough,” Holub said.

In a statement, Holcomb did not take a position on any of the recommendations, but said he was “grateful to the commission for its dedication to developing these recommendations.”

“The report provides a wide range of actions for all to review and consider moving forward,” Holcomb said in a statement. “The options offer a base for continuing these important conversations about making compensation for our hard-working teachers more competitive.”

House Education Committee chairman Rep. Bob Behning, R-Indianapolis, also did not weigh in on any of the suggestions.

“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,” Behning said in a statement.

Smith said the commission knows not every recommendation will work in every school district, and addressing the situation will require action at the district level and state government level.

Smith would not comment on what he thinks lawmakers might be open to doing.

“I don’t have any way to handicap or predict what the Indiana General Assembly might be willing to do or not willing to do,” Smith said.

Chalkbeat Indiana contributed to this report.