Do New York City principals have a financial incentive to get rid of veteran teachers?

That’s been a fiercely disputed accusation as the teachers union and city have traded shots over layoff threats in recent weeks. While the union embraces the claim as evidence that senior teachers need to be protected from layoffs, Chancellor Cathie Black denies that senior teachers are penalized at all.

Black recently told the Staten Island Advance that if a highly paid teacher is let go, a principal can go out and hire another veteran teacher without any repercussions. “It really doesn’t matter if it’s a more senior teacher making more money, or a younger teacher,” she told the newspaper. “It doesn’t change the equation. I think the UFT has really distorted that.”

The dispute is even more confusing because different Bloomberg administration officials appear to take different positions on the matter. According to a report in the New York Post, one of Black’s deputies has described the incentive structure as a problem and floated a plan to eliminate it, at least temporarily.

So again: Do New York City schools have a financial incentive to get rid of veteran teachers?

The truth is that the rules do favor less experienced and thereby cheaper teachers — but principals are so limited in firing decisions that it’s hard for them to maneuver more expensive, veteran teachers off of their budgets.

Currently, teachers are laid off citywide based on how many years they’ve been teaching and how desirable their license area is. Excessing — when principals have to cut teachers because they can’t afford them — works the same way except it happens by seniority within the school, not the entire city.

But a change introduced in 2007 to the way schools are funded inserted a new dynamic into the teacher job market.

Fair Student Funding

Since 2007, New York City has used “Fair Student Funding,” a formula that allocates money to schools based on how many students they have and what their students are like. Schools get different amounts of money if they have more special education students, how severe their students’ disabilities are, how many of them qualify for free or reduced lunch, and a host of other factors.

Though some teachers’ salaries are paid for centrally (such as speech teachers) and others are paid with Title I money, schools pay for most of their teachers with their Fair Student Funding dollars. Those funds are the least restrictive and the most abundant.

Before Fair Student Funding, schools paid for their teachers differently. Based on a teacher-to-student ratio, the city would centrally decide that a school needed to have X number of teachers. To fill those X number of positions, principals could hire low or high-salaried teachers — it didn’t matter which — because they were only charged for the citywide average salary.

If a school in Staten Island hired teachers in the $80,000 a year range and a school in the South Bronx hired beginner teachers making $40,000, both schools were charged the same amount of money per teacher — the average of $60,000. This system tended to hurt schools in poorer neighborhoods that couldn’t attract more experienced teachers. They had to share the costs of other schools’ experienced teachers, but they didn’t benefit from those teachers’ work.

When Fair Student Funding was put in place, city officials wanted to charge schools for the actual cost of their teachers, but they didn’t want to abruptly switch from one system to the next. Doing so would have the reverse effect of the formula at the time: it would hurt the schools where experienced teachers wanted to work by having teacher salaries swallow up their entire budgets. Instead, they moved to a “middle ground,” as a city document describes it.

That middle ground means that the city no longer gives schools money for teachers according to a formula. Fair Student Funding dollars form a pot of money for covering teacher salaries, and the effective price of each teacher is not the average salary of all teachers in the city — but the average salary of all teachers at the school.

Shifting the average from the city to the school changed some of the incentives working on principals. If before principals didn’t have to consider a teacher’s salary before hiring her, now they have reason to pay attention.

Today, School A and School B are no longer paying the same amount per teacher. Imagine they both have annual budgets of about $1 million and 10 teachers each. School A has more senior teachers, bumping its average teacher salary up to around $75,000. Meanwhile School B has newer teachers, keeping its average teacher salary down around $50,000. School A has to spend $750,000 a year on teacher salaries, whereas School B is spending $500,000, freeing up money for after-school programs and classroom supplies.

Consequences

The funding structure means that schools hit hardest by layoffs will also see their average teacher salaries jump the most — and their ability to hire new teachers from the pool of those available within the city will suffer.

If teacher ratings become a factor in layoffs, union leaders worry that principals might have a financial incentive to give veteran teachers low ratings, even if those teachers wouldn’t otherwise merit them. This would bring down the cost of all the teachers in their building for the following year, when budgets could become even tighter.

To some principals, the suggestion that their hiring is driven by dollars is an oversimplification.

“Your only consideration can’t just be money,” the principal of a new school told me.

“A good teacher, a teacher who has a history of experience and knowledge to share and can be a mentor — they’re worth every penny. The difference in salary is negligible when you’re looking at what they’re really bringing to the table,” she said.

But schools’ average teacher costs, and the incentive principals have to keep them low, are enough of an issue that some people in the Department of Education are trying to think of a solution. In a memo to Chancellor Black, Deputy Chancellor John White proposed freezing schools’ average teacher salaries for the next two years.

“That would mean schools that let go of highly paid staff would see no greater flexibility in spending than they see now,” he wrote.

Under White’s plan, the incentive to lay off expensive teachers would be put on hold for two years because during this time, regardless of who principals lay off, their average teacher salaries would remain the same. His plan is still under consideration, a city official said.

A Manhattan principal, who asked to remain anonymous, said that the problem with this idea is that few principals believe the DOE will maintain the same policy for two years. If principals lay off teachers with no eye to salary and then the city changes its mind, schools could find themselves with tighter budgets and high teacher costs. “There’s not much trust between us and the DOE,” she said.