In the News: The Pay Leaders Deserve

In U.S. News and World Report, Rick Hess responds to the Boston Globe’s revelation that Boston’s 16 charter-school leaders  earned total compensation of $150,000 to $200,000 in 2016. Hess counters the claim that these school leaders are wildly overpaid by asking if $200,000 is really that big of a number considering the impressive academic gains Boston charters have accomplished, despite lacking the machinery of a large school district.

It may be that terrific school leaders are underpaid – and these schools are getting it right. In any line of work, those with the skills and stamina to tackle demanding leadership roles are in scarce supply.

Interestingly, a new report by the U.S. Department of Education released this week suggests Boston charter leaders’ paychecks are the exception, not the norm. In 2015-16, the national average annual salary of public school principals was $96,400 in a traditional public school, compared to $88,000 for charter school principals.

Salary comparisons are incomplete without considering total compensation packages, however. In the Fall 2013 issue of Education Next, Koedel, Ni, and Podgursky took a deep dive into the design of public school system pension systems, showing that school administrators can accrue considerable pension wealth in a defined-benefit (DB) pension plan.

Pension wealth is higher and more back-loaded for school leaders because their pay is higher than it is for teachers and, crucially, higher at the end of a career. While it is well understood that the final-average-salary DB plans favor long-term teachers over short-term teachers, what seems to have passed largely unnoticed is that that these plans also inherently favor administrators over teachers. Promoted individuals, who have large late-career salary increases, benefit disproportionately from a formula that determines the value of the annuity based on the highest few years of earnings.

— Education Next

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