Increasing Teacher Compensation: How Do We Foot the ​​Bill? 

May 11, 2023

By Dana Grayson Chambers and Jason Willis 

Dana Grayson Chambers is a Project Director with WestEd’s Strategic Resource Planning and Implementation team. As the Director of Strategic Resource Planning and Implementation, Jason Willis oversees and guides the agency’s school finance, governance, and accountability efforts. 

With school systems across the country sounding alarms about teacher shortages in critical areas, and surveys of educators pointing to record levels of burnout and stress, education policymakers continue to examine how best to approach much-needed increases in teacher compensation. But how can education leaders identify and allocate the funds necessary to improve teacher compensation? While Elementary and Secondary School Emergency Relief (ESSER) pandemic relief funds have pumped billions of dollars into education, the last round of these funds will expire in September 2024, making them an unsustainable source for increasing teacher compensation. Leaders must instead find ongoing revenue sources.

In this blog post, the fourth in the Money Matters: Conversations About Teacher Compensation Series, we’ll walk through two approaches that can help implement and sustain increased teacher compensation.

Revenue-Raising vs. Expense Trade-Off

Education leaders can take two approaches to support new investments: revenue-raising or expense trade-off. In a revenue-raising approach, an education leader implements a method of increasing revenue, but it must be ongoing. For example, this approach might entail adjusting the local property tax rate and investing that additional revenue in teacher compensation. (By contrast, grants may raise revenue but are not ongoing and pose the same challenge as ESSER funds—they are short-term funds that will not cover the cost of additional expenses in the long term.) Through an expense trade-off approach, leaders determine what can be moved from one line item to another in the budget to support a new initiative. Both approaches require appropriate buy-in from all relevant groups.

Examples of Revenue-Raising Approaches

In Florida, several districts, including Palm Beach and Orange counties, raised revenue by raising property taxes to increase teacher compensation. ​​​​At the federal level, bills in the House and Senate propose increasing the starting teacher pay to a minimum of $60,000. The Senate bill would fund the increases by raising the estate tax, while the House bill would fund the increases through teacher salary incentive grants to states—both revenue-raising approaches.

In Tennessee, Governor Bill Lee has proposed raising the minimum teacher salary to $50,000 over the next four years. While short-term implementation would be funded through one-time state funding ​​​​(revenue raising through the use of one-time funds), long-term implementation will be built into the rollout of the state’s new funding formula, the Tennessee Investment in Student Achievement Act (TISA), which would protect state investments that are specifically intended for teacher pay. ​​Building teacher compensation costs into their new weighted funding formula is another example of revenue raising, through which districts will receive increased funding from the state in future years to sustain the increase in compensation.

Examples of Expense Trade-Off Approaches

In Arizona, several districts have established differentiated staffing models to expand the reach and effectiveness of teacher leaders and build the capacity of novice teacher residents through the Next Education Workforce initiative. In a few districts implementing this model, teacher leaders are offered significant stipends of $7,000–$15,000, while teacher residents receive an annual stipend of $12,000–$20,000—all through a creative expense trade-off. For the two pilot districts, the funding was provided by lever​​aging unused dollars from teacher vacancies—one unfilled teacher role could fund three residents’ annual stipends plus the teacher leader stipend for supporting those residents.

Across the nation, districts have used the federal Teacher Incentive Fund program to design and implement teacher performance pay and incentive programs. To sustain these programs beyond the grant funding period, several districts sought expense trade-offs to reallocate existing district resources. For example, Guilford County in North Carolina increased its teacher-to-student ratio in one subject area by one student in order to realize an additional $2 million to cover incentives in 20 schools where support was most needed. Similarly, Harrison County in Colorado re-examined its salary schedule to reallocate stipends previously given for degree attainment and experience to pay for performance incentives.

Deciding Which Approach to Take to Increase Teacher ​​Compensation

Increasing teacher compensation requires a comprehensive process to make the case for why the change is needed, identify who needs to be engaged, and determine what, how, and when the approach will take ​​place. As states approach the question of how to identify the resources to fund a compensation increase, the following considerations can inform which approach is right for their local context.

• Identify the specific type of compensation you want to provide or increase. Increasing teacher compensation can take many forms—raising salaries, adjusting health benefits packages, providing loan forgiveness, offering housing stipends, and more. Labor markets are local, so needs vary even within states. Identify a specific compensation goal (or goals) for increasing teacher compensation. For example, if you have a large portion of young teachers who are pursuing or have recently completed graduate-level degrees, you might decide to ​​​​invest in loan forgiveness to reduce their debt burden in exchange for a commitment to remaining in the district in a high-need position for a set length of time. If you are facing critical shortages in particular subjects (e.g., early childhood, English learners), you could explore sign-on or retention bonuses or increased compensation for teachers in those roles. You might also consider surveying your educator workforce to understand what types of compensation or benefits would be of most value to ​​​​them and most likely to influence recruitment and retention decisions. Ensuring that your compensation approach aligns with the identified priorities for your educator workforce is essential.
• Establish a rationale for why the investment is necessary. With a clear understanding of the type of compensation you want to provide and the data to support it, you can create a compelling rationale for investment. This messaging will be key to obtaining buy-in from critical partners (e.g., district leaders, the school board, the state legislature, the community) and will vary based on your approach. In an expense trade-off scenario, the messaging must provide a rationale explaining how reallocating resources from one expense to another is a more valuable allocation of resources. In a revenue-raising scenario, the messaging should explain why, for example, increasing taxes would yield a return on investment and ultimately benefit taxpayers.
• Calculate the cost of achieving your goal. Determine how much it will cost to implement your compensation increase. Work with your business office, legislature, or a research partner to create a detailed cost estimate for implementing the envisioned compensation increase. This estimate should involve both the one-time costs for implementing such a change and any sustained costs that will be required each year.
• Examine the totality of what is available. Next, examine your budget. The process of reviewing investments and deciding what to sustain or scale and what to taper is one that districts should already be engaged in as they look ahead to the sunset of ESSER dollars. Are there investments that aren’t contributing to your school or district’s goals that could be phased out? If so, explore what expense(s) you might trade off to realize your teacher compensation goals. If no expense trade-off can be made, explore revenue-raising approaches.
• Build buy-in and good will. Is there enough political will within your institution and community to adopt increased taxes to raise teacher salaries? Who would be most impacted by reallocating funds from one line item to another? Whether taking a revenue-raising or expense trade-off approach, buy-in from all groups affected will be essential to success. Leverage your “why” and rationale to build support for your approach.

The significant changes to the teaching profession caused by the pandemic have made recruiting and retaining educators more challenging. In addition to improving public perceptions of the teaching profession, increasing teacher compensation is crucial to reducing teacher shortages. Although ESSER funds can be used to compensate teachers in the short term—by providing one-time retention bonuses, or stipends for student loans or housing costs, for example—engaging continuously in conversations about expense trade-offs and ways to raise revenue are essential to making increased compensation ​​​​sustainable.

This is the final post in a series of four blog posts on teacher compensation. These posts address issues raised during a Teacher Compensation Roundtable held in Washington, DC, in November 2022. The event brought together educators, researchers, policy experts, and other leaders to discuss addressing teacher shortages through innovations in teacher compensation. Read all four posts in Money Matters: Conversations About Teacher Compensation Series.