Compensation for School Superintendents Needs Greater Transparency, Accountability

Posted on by John Payne

 

 

Missouri students will soon be returning to school, and although most school employees are still enjoying their summer breaks, superintendents are already hard at work preparing their districts for the annual back-to-school onslaught. Superintendents are the most highly compensated employees in education, earning an average salary of $106,368 in Missouri during 2009, according to the Department of Elementary and Secondary Education (DESE).

However, salary statistics considerably understate total superintendent compensation, leaving out benefits such as insurance, car allowances, and annuities. Furthermore, according to a new study by Audrey Spalding, public information specialist at the Show-Me Institute, although superintendent pay is correlated with many school district characteristics — total student enrollment, whether a district is urban or rural, percentage of residents with a college degree, etc. — compensation does not appear to depend on measures of either superintendent performance or student achievement. Given the amount of money paid to superintendents, it behooves Missourians to take a closer look at how superintendent compensation is determined and the benefits that the public receives for that cost.

Using superintendent contracts collected from nearly 90 percent of Missouri’s 521 public school districts (all the collected contracts are available at the Show-Me Institute’s website), Spalding shows that a quarter of all superintendents receive automatic raises built into their contracts. Other school districts look to surrounding districts to determine superintendent pay. For instance, the Lindbergh School District simply averages salary figures from 11 specific school districts and adds 11 percent to determine its superintendent’s pay.

Districts are required to report superintendent salary numbers to DESE, but the value of their contractual benefits are far less transparent. All superintendents receive some form of insurance through their districts, but contracts rarely specify the monetary value of the coverage. More hidden still are the annuities received by 6.9 percent of all Missouri superintendents. The majority of annuity payments are awarded to superintendents already making more than the median salary, which indicates that annuities are a supplement to regular salary, not a replacement for it. Sometimes this additional money can be quite substantial. The Parkway School District’s superintendent, for instance, earns both $200,000 in salary and a $30,000 annuity. Some superintendents say that annuities are used to offset the difference between their salary and what they could earn managing a private firm of similar size. However, the fact that annuity payments are not reported to DESE suggests that they can also serve as a means for districts to mask the full costs of superintendent compensation from the general public.

The simplistic methods used for determining superintendent salary and lack of transparency in compensation are both cause for concern, but more troubling is the fact that superintendent pay does not seem to correlate with student academic achievement. Spalding tested whether higher scores on the mathematics portion of the Missouri Assessment Program (MAP) test led to increased pay for the superintendents and found no statistically significant relationship between the two variables. Moreover, most school districts do not have any specific method of evaluation spelled out in the contract, and less than 13 percent of districts tied superintendent raises to school board evaluations.

The point is not that school districts are overpaying superintendents. In fact, many — particularly in rural areas — may be underpaid. However, because nearly all superintendents are paid without regard to any kind of performance metric, it is extremely difficult to determine what benefits they bring to the district. If school boards tied at least some portion of superintendent salary to district goals and academic outcomes, and reported total compensation in a more transparent manner, the public would be in a better position to determine whether those resources are being employed wisely. As any good educator will tell you, knowledge is power.

John Payne is a research assistant at the Show-Me Institute, a Missouri-based think tank.

 

Related Links

Actual Pay: A Survey of Missouri Public School Superintendent Salary and Benefit Packages

Talkin’ 2 Myself

Posted on by Joseph Steelman

Eminem released a new CD in June. There is a track on the album titled “Talkin’ 2 Myself.” Sometimes I feel the exact same way:

Can anybody hear me yeah, I guess I keep talking to myself
Feels like I’m going insane, am I the one who’s crazy?

The president recently signed the Improper Payments Elimination and Recovery Act. I might favor this type of reform if the fraudulent payments it intends to target were recovered in a cost-effective manner. But is this law even needed?

Here’s a quote from the White House Blog:

Last year, improper payments by the Federal Government added up to $110 billion.

If a publicly owned corporation misplaced $110 billion dollars, it would be more than reprimanded — it would be bankrupt and out of business.

This legislation shows in unadulterated clarity the inherent flaws of government. The federal agencies responsible for this irresponsible behavior will be fined and face “penalties and other repercussions,” but I wonder who exactly the federal government thinks pays for penalties levied on federal agencies.

And people wonder why consumer confidence is low.

Commission for Strategery

Posted on by Christine Harbin

Missouri’s Department of Economic Development recently released a list of the members of the statewide Steering Committee for 2010 Strategic Initiative for Economic Growth (hat tip: Missouri Watchdog).

Because it has more business leaders than bureaucrats, hopefully this committee will propose solutions that are more market-driven than government-driven. Unfortunately, I can’t say the same for the new Tax Credit Review Commission.

Additionally, I am pleasantly surprised to see that only a small minority of the committee members work for companies that have been issued state tax credits since 2000. Of the 40 individuals listed, I could only find four that received any. According to the “Show-Me: Tax Credits” application:

Hopefully, this means that they will be more willing to reduce or eliminate expensive targeted tax credit programs in Missouri.

Indeterminacy in Public Expenditure: What Is a “Historic Preservation” Tax Credit?

Posted on by Thomas Duda

I bristle when public policy advocates contend that persons who oppose a favored policy simply lack an understanding of “how well the program works.” Instead of wasting breath on patronizing dismissals of those who offer alternative perspectives, perhaps a policy advocate’s time would be best spent providing the public with valuable, unbiased information with which we can form our own opinions.

It is in this spirit that I present one of my works in progress from my summer here at the Show-Me Institute.

Backers of the 25-percent Missouri Historic Preservation Tax Credit often cite the statistic that our state is “first in the nation” for “federal historic rehab tax credit projects,” so I thought that it could prove valuable to see exactly where said federal projects occurred.

Click here to view a draft map of Missouri rehabilitation projects that received the 20-percent Federal Historic Preservation Tax Credit. Data comes from a June 2010 information request to the National Park Service, and includes projects dating from 1996 to mid-June 2010.

I see no need to editorialize about the map at this stage in my research, but I think that those who proudly support historic tax credit programs would do well by the public to explain why spending millions on certain construction activities is an appropriate use of public funds.

However, given that “historic preservation” is a catchall for education, place-making, job creation, and aesthetics, defining the precise function of public expenditures made in the name of preservation is an impossible task. Our positions as taxpayers, historians, developers, contractors, homeowners, tenants, policymakers, and tourists necessarily inform our differing and potentially divergent perceptions of these policies and expenditures. Our propensity toward repeated engagement in the same argument about the relative worth of a tax dollar spent on historic preservation as opposed to one spent on public education, while refusing to acknowledge some basic facts about the program in question, often leaves us blowing hot air.

At present in Missouri, recipients of historic preservation tax credits need not acknowledge the receipt of public funds in any format on the project site. In fact, recipients of historic preservation tax credits need not even acknowledge the historic significance of their taxpayer-supported property on site, such as in the form of a plaque. If we are to have a truly informed debate about the worth of the historic preservation tax credit, I would hope that we can all agree that disclosure is a good place to start.

Without good information, our state will never make good policy.

In my mind, the verdict is still out on whether the historic preservation tax credit really does what its backers aver.

My Next Career Move: Professional Rent-Seeker

Posted on by Christine Harbin

It may be time for a career change for me. Although I enjoy working at the Show-Me Institute very much, I am beginning to think that I would be better off if I became CEO of a mega-corporation and tilted the playing field to my favor with the help of my friends in Jefferson City. I will attempt to have more benefits concentrated on me, and more costs diffused away from me.

As the first part of my strategy, I would hire a team of lobbyists in order to enact rules and regulations that discriminate against products from other states that compete with mine. If I could keep firms from other states from entering Missouri, I would not have to work as hard to compete with them. I would try to get the state government to impose strict licensing requirements in order to keep others from entering the industry and trying to compete with me. In doing so, I could charge a higher price to consumers living within the state because this protectionist policy would reduce supply, thereby raising my profits.

Protectionist policies may have high cost to society, but as a self-interested CEO, the profitability of my firm is my only concern. Of all business activities, lobbying has one of the highest rates of return. The Washington Post reported in April 2009 on a study finding that a single tax break in 2004 earned companies $220 for every $1 that they spent on the issue. That is a 22,000-percent rate of return!

I could invest a lot of money in research and development in an attempt to improve my product, only to have my efficiency copied and replicated by my competitors. On the other hand, I could contract with a lobbying firm to convince the Missouri state government to give me financial incentives, and then enjoy an artificial competitive advantage for a long period of time. I wouldn’t have to worry about competing with smaller companies that do not have my lobbying power. As an added benefit, by keeping these firms out of the market, Missouri workers can ensure the security of their jobs. Consumers will have the satisfaction that they are consuming products that were made by a worker in Missouri, not in another state — even if they have to pay more for their products in order to subsidize those jobs.

If this strategy doesn’t work, I could use a different one: pitting states against each other to see which will give me the most money. I’ll tell each state government that other states are offering me huge incentives to invest there, and that they must meet or exceed these offers in order for me to stay. Ford is an expert at this, and I’d definitely follow its example.

All of the large companies in Missouri engage in lobbying activities, so my firm would be at a disadvantage if I didn’t. It doesn’t matter how big or profitable the company is — they’re all doing this! Just in my recent memory, Scottrade secured $2.6 million, Ford secured $150 million, IBM secured $31 million, Mamtek got $17 million, and other, large, private developers secured TIF and tax credits.

Regarding Missouri’s New Tax Credit Review Commission

Posted on by Christine Harbin

Now that the $150 million incentive package for Ford has passed, it’s apparently time to reverse positions and talk tough on tax credits again. On Wednesday, the governor created a commission that is supposed to evaluate the effectiveness and return on investment for each of Missouri’s tax credit programs.

Unsurprisingly, rent seekers tax credit supporters are critical of the new committee. According to an article in the St. Louis Post-Dispatch (emphasis added):

While the commission does include several prominent tax credit advocates, […] it lacks any representatives from small town Main Street groups, community development organizations or historic preservation groups, “all of whom have firsthand experience in how well the program works for the average citizen,” the [Coalition for Historic Preservation and Economic Development’s] press release reads.

Judging from the list of people on the committee, I don’t foresee many calls for scaling back these programs. Not only does the committee include bureaucrats and politicians, who have an incentive to grow the size of government, it includes businessmen whose companies have been issued tax credits. The committee includes a member from Hallmark, in Kansas City, which has received $8,657,730 in tax credits from the state government since 2000, according to the “Show-Me: Tax Credits” application. There is also a member from Commerce Bank in Saint Louis, which received $5,401,975 in historic tax credits in 2002. Legacy group investments received $183,586 in historic preservation credits in 2003. In addition, many other members come from the real estate industry, which would likely benefit from increased construction activity.

As I communicated to the Missouri Watchdog, I applaud the effort to review these programs, but I am skeptical that this commission will accomplish anything, given that the governor continues to dole out tax credits to his favored few (e.g., Ford, IBM, sugar substitute producers, data centers, filmmakers, etc.).

We live in a world of second-best options, and a review process is more desirable than nothing. The optimal solution would be to cut these incentive programs altogether, because they distort the playing field.

If the governor were serious about stimulating productive economic growth in Missouri, he would eliminate the programs entirely and return the money to taxpayers to spend on their own. People tend to spend their own money better than they do other people’s money, after all.

Kansas City Zoo Tax for Kids Who Can’t Read Good and Wanna Learn to Do Other Stuff Good Too

Posted on by David Stokes

Last week, the Kansas City Star ran a story about a recent debate among local politicians in the Kansas portion of the metro area. They were asked whether they supported a regional sales tax to support the zoo, in both Missouri and Kansas counties, and they all said “no”.

This will be played in some circles as a lack of regionalism in the community, with Kansas residents unwilling to support an institution on the Missouri side of the river. I don’t think it is a big deal, because Kansas residents support the zoo every time they attend by paying an admission fee.

This is a more complicated question in St. Louis, where residents of both St. Louis city and county pay a tax for the zoo, and everyone gets in for free. I think that residents of the surrounding counties should be given an option whether to tax themselves to support the zoo or instead have to pay an admission fee. But I don’t think certain people should pay a tax to support a free zoo so that everyone else can also enjoy it for free. (And, yes, I realize you pay for the parking lots, and the train, and the food and drink sales, and the children’s zoo, so you probably spend plenty of money when you attend no matter where you come from.)

I’d like to see St. Charles, Franklin, and Jefferson counties institute a property tax (in the long run, hopefully just a land tax) for support of the zoo. Then the rate could be lowered even further — and it is already a pretty low tax. I also think the other counties should get a representative on the governing board of the zoo if they opt in.

Again though, it’s perfectly fine with me if the residents of those counties choose not to tax themselves for the zoo. In that case, they should pay an admission fee — simple as that. I’d love to hear someone from a surrounding county argue that they should pay neither taxes nor an admission charge to come to the St. Louis Zoo. All aboard the free rider train!

Woe Is Ford! Boo Hoo!

Posted on by Christine Harbin

From an editorial on Missourinet (link via John Combest):

So if Ford develops an all-new vehicle, it’s investing about $3 billion before it even builds the production line and hires and trains the workers to put the vehicle together.

Woe is Ford! It has a high cost of production! Boo hoo!

I have no sympathy for the company and its high cost of production, given that it made $2.6 billion in profit in the second quarter alone and forecasts even more growth in the immediate future. (By comparison, the $150 million in tax credits that the Missouri legislature decided to give Ford is just a drop in the bucket!) Cars and trucks may be costly to produce, but they are also associated with high marginal revenues that cover this cost.

The debate on subsidizing Ford could benefit from a refresher on the theory of the firm.

This $3 billion investment for a new vehicle is a one-time upfront cost, and because Ford produces vehicles in very large quantities, that cost is diffused. Ford is making billions of dollars in profit, so we know that the marginal cost of producing a car is lower than the marginal revenue. Ford is a firm that operates in (what is supposed to be) a competitive industry; the perfect competition ideal is illustrated in the following graph:

Ford in the Short Run

Perfect_competition_in_the_short_run

If, perhaps, Ford finds that the marginal cost of producing a vehicle is lower than the price it can charge, it will lose money and will eventually choose to leave the market. Other firms that are able to produce the good at a lower average cost will enter the market instead because they can realize profit. This is how the competitive environment is supposed to work.

It would be beneficial if, instead of providing subsidies to profitable companies like Ford, the Missouri state government took a laissez-faire approach. Consumers would benefit, because they would be able to purchase goods at a lower cost instead of subsidizing private firms with their tax dollars. Producers in other industries would also benefit, because they would not be forced to compete at an artificial competitive disadvantage.

Grant’s Farm a National Park?

Posted on by Vince Smith

An article in the Post-Dispatch reports that the National Park Service is considering converting the St. Louis treasure that is Grant’s Farm into a national park. One of the great things about Grant’s Farm is that it is run privately by Anheuser-Busch, Inc., and the Busch family, at no cost to taxpayers. The park has been run for 55 years without charging an entrance fee, all while losing $3.5 to $4 million annually.

It is not clear who approached whom with the proposition to make Grant’s Farm a national park, but one can only hope it was not the National Park Service. The budget for our national parks is already strapped, and the lack of funds is evidenced by deteriorating infrastructure. The last thing needed is to add one more park to be maintained with public funds. Furthermore, the growing national debt makes it unlikely that the NPS will be receiving a significant increase in funding in the near future.

I believe Grant’s Farm has the potential to become sustainable if it were to charge an entrance fee. The 273-acre animal preserve is visited by 550,000 people a year, more than enough demand to allow the parks owners to cover costs — or even turn a profit, if management operates the park efficiently.

I hope the Busch family and Anheuser-Busch continue to run Grant’s Farm, even if that means charging an entrance fee. Grant’s Farm provides a unique experience that will be lost if it falls under government control.

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