Thursday, December 9, 2010

Giving teachers more choice over benefits could stabilize district budgets

Seattle, WA - School districts should consider restructuring the way they supply benefits for teachers, according to a new fiscal analysis by the Center on Reinventing Public Education.

Nationwide, school districts are facing depressed revenues and budget cuts. Meanwhile, the costs of providing teacher benefits are growing at a faster rate than are salaries or total expenditures.

Higher benefits costs mean fewer dollars for salaries and fewer resources for other programs. The escalating costs and unpredictability pose enormous challenges for districts in the current economic environment, according to the brief.

Many districts provide a one-size-fits-all benefits package, creating a 'use it or lose it' system where teachers have no incentives not to take advantage of all benefits. An alternative way of structuring benefits packages is through 'cafeteria plans', which offer employees a range of options to choose from, up to a pre-set total cost to the district. Unused benefits are awarded to the employee in the form of increased wages.

"Through customizable employee benefits, districts maximize what each employee values while also bringing some predictability and stability to budgeting," write authors Noah Wepman, Marguerite Roza, and Cristina Sepe.

Their analysis considers a hypothetical cafeteria plan with a set worth and a menu of options that allows teachers to create benefits packages based on their preferences. For example, a second-year teacher without a family might make different choices regarding health insurance, life insurance, and sick days than a 15-year veteran with a family.

The brief describes how a district might structure cafeteria plans, each with different implications for predictability and stability of costs.

With federal recovery funds depleted, state budgets constrained, and projected increases in benefits costs, many districts will be faced with unpalatable tradeoffs between constraining wages, reducing benefits, or increasing employee contributions. Rather than have district leaders make these tradeoffs for their personnel, cafeteria plans enable individual employees to make their own tradeoffs, ultimately ensuring that funds are used in ways that work to retain valuable educators.

"The Promise of Cafeteria Style Benefits for Districts and Teachers" is a Rapid Response brief in the SCHOOLS IN CRISIS: MAKING ENDS MEET series, designed to bring relevant fiscal analyses to policymakers amidst the current economic crisis.

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