Thursday, May 13, 2010

The Danger of Buyouts

Matt Miller suggests that schools will benefit from a bailout that provides them with funds to buy out the contracts of teachers who are no longer effective. He notes, quite reasonably, that teachers' contracts protect senior teachers against layoffs, and that schools could benefit from an approach that encourages underperforming senior teachers, many of whom will also be among the highest paid teachers in a district, to retire. He suggests that this approach could also save school districts in future pension obligations.

What's the problem? You can't simply single out underperforming teachers for such a buyout. You have to offer it to everybody who is similarly situated. By the time you offer an incentive that will entice the lowest performers to retire early, you've likely sweetened the pot to the point that many of the better performing teachers will jump at the offer.

A number of years ago I was living in a city that, following a change of administration, decided it wanted its attorney to retire. It put together a very generous package and, after the deal was signed, found out it was obligated to make the same offer to any number of similarly situated senior employees. There was a stampede to the doors. But even when the offer is less generous, similar results can occur. I recall a program implemented by a county court to encourage some of its more expensive employees to retire. A valuable employee retired and, under the terms of the retirement package, agreed that he was ineligible to be rehired by the county for a number of years. The county ended up hiring him back as a consultant at a significantly higher rate of compensation. Perhaps on the whole the court saved money, but you can see where this type of offer can lead.

Simply put, a teacher who is competent and motivated may see the grant of a year (or more) of salary, and perhaps a few years of credit toward her pension, as a great opportunity to pursue a new opportunity. A teacher who has no other viable prospects may find the offer tempting, but could easily decide that certain employment and a larger pension significantly outweigh the short-term benefit of the early retirement package.

Miller closes by suggesting that if Randi Weingarten won't get on board with his ideas, she's not a visionary and "we'll need a leader respected by all sides to champion and broker this breakthrough." Um... I suggest he take a few steps back and consider the full potential consequences of his vision, such that we're sure that his proposed cure won't be worse than the disease.

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