Growth & Justice Blog

Q Comp, teacher quality and Tarvaris Jackson

February was a cruel month for Governor Tim Pawlenty’s Quality Compensation for Teachers (Q Comp) program, Minnesota’s first attempt to couple teacher salaries to their students’ performance. It started with a front-page Star Tribune article, “Is it 'merit pay' if nearly all teachers get it?” — highlighting that only 27 of the 4,200 teachers enrolled in Q Comp failed to receive a raise during the 2007-8 school year.

Two days later, the Office of the Legislative Auditor released the first independent review of the program that found: “Q Comp’s effect on student achievement cannot be adequately measured using existing data.”

As the Governor attempts to implement Q Comp statewide, it is important to contrast his praise of the program with its increasingly well-documented shortcomings.

Over the last three years, roughly a dozen states have implemented performance-pay teacher reforms based on the findings of “value-added” educational research that quantifies the effect of an individual’s teacher’s instruction. Multiple longitudinal studies found that wide discrepancies in student learning — as much as a full year of additional instruction — can be tied directly to a pupil’s teacher, independent of class size or overall school quality effects.

From a fiscal standpoint, an excellent teacher costs as much as an ineffective one, meaning that improving teacher quality may be the most direct and cost-effective way of closing the racial achievement gap. Realizing these potential gains, however, will require significant change in not only how Minnesota pays its teachers, but how we recruit, train and retain them.

So, where does Tarvaris Jackson fit into the equation? Malcolm Gladwell’s timely review of the value-added movement, “Most Likely to Succeed,” compares the process of identifying and training effective teachers to successfully drafting a NFL quarterback. 

Every year a new crop of highly touted college quarterbacks is selected early in the NFL draft. From a franchise’s perspective, the difference between drafting the right or wrong prospect will not only be measured in wins and losses, but in millions of dollars of revenue. One would assume that, over time, this pressure, plus all the upfront scrutiny and the opportunity to evaluate the results, would create a correlation between when a quarterback is selected in the draft and his performance in the NFL. It doesn’t. Superstars emerge both from the draft’s upper and lower echelons. 

Peyton Manning, three-time league Most Valuable Player, was drafted first in 1998, but other prospects like the Patriot’s Tom Brady — drafted 199th overall, as a fourth-string back-up — can become equally successful. And for every unrecognized late-bloomer there are expensive, high-profile flameouts.  Remember this guy? 

The quarterback problem is a reflection of the fact that successfully adapting to the NFL is not just a question of physical ability. Rather, it requires development of a complex blend of physical and mental attributes that can be learned, but necessarily taught. Peyton Manning was able to make those intangible adjustments, where other gifted athletes — the Vikings' Tarvaris Jackson, for example — struggle to do so. 

Teachers face a similar do-or-die transition during their first several years in the classroom.  Some develop the ability to make split-second decisions and assessments that create a highly-functioning classroom.  Others flounder, year after year, trying to cover a full year’s worth of curriculum. Until the advent of the value-added movement, however, no one was tracking in quantifiable terms who succeeded or failed.     

The performance of quarterbacks is tracked and analyzed in multiple dimensions, play by play, game by game and season by season. Measuring the effectiveness of teachers is much more difficult. The only comparable measure of a teacher’s quality of instruction is their students’ standardized test scores, an extremely small sample size. 

In order to isolate the effects of a teacher’s instruction, it takes a minimum of two, preferably three, years of testing data. Even then, only the top and bottom 15% of teachers can be separated from the mean. Given these statistical realities, any approach to true teacher quality reform must do several things: reward the most effective teachers, remove under-performing teachers and create a data infrastructure that can assess a teacher’s effect on her students.

Q Comp fails to even accomplish the one thing we could reasonably expect it to — raise the salaries of high-quality teachers. 

In its current form, value-added analysis is only one tool among several that a school district can use to create its own definition of teacher merit. But when “merit” is defined along traditional lines, i.e., time-of-service and professional credentials — neither of which has been strongly correlated with increased student achievement — we should expect the status quo to continue. 

If the Governor wants Q Comp to deliver its advertised reforms, he must mandate the use of quantified measures of teacher merit. Otherwise, the majority of districts will follow the path of least resistance and minimal results, all at increased taxpayer expense.

Minnesotans, I believe, would prefer the use of over-hyped, statistically dubious strategies be limited to the Metrodome, and kept out of their childrens' classrooms.        

— Kevin McNellis is an intern at Growth & Justice  

LGA and tax rankings can be deceptive

Real disparities among communities will be a major topic of discussion as legislators and the governor wrangle over local government aid (LGA) in the coming months. Some cities will no doubt be held up as poorly managed and leaching off more "successful" communities.

A story this weekend illustrates why it's not helpful to the debate to simplify the issue down to "Chaska, frugal" and "Minneapolis, profligate."

Chaska residents paid the least per capita in city taxes — $184, compared with the Minnesota-wide city average of about $500 per resident, according to a story in the Star Tribune. My own suburb, Golden Valley, ranked in the bottom 10 in the state, at $746 per capita. The costs were figured by combining the cities' tax levies and LGA and dividing by number of residents.

Since the two cities are roughly the same size, both well-governed, good places to live and receive essentially no LGA, I thought I'd take a quick tour of their financial statements to see what accounts for the disparity. (I compared 2006 numbers on revenues and expenses, since those reports were most immediately accessible, so these comparisons won't align precisely with the 2008 data reported in the Strib. [Golden Valley PDF] [Chaska PDF])

The story quotes Lena Gould, a policy analyst for the League of Minnesota Cities, as saying the per capita figure is an indicator of local government efficiency. Well, maybe. Though this is hardly a deep analysis, it's fair to say that this ranking should not be taken as the story's headline suggests: "Chaska, thy name is frugal, in city taxes list."

It's true that Golden Valley raises more than twice the amount of revenue from property taxes that Chaska does, but its tax base is 27.2% commercial and industrial compared to 15.8% in the more rural suburb, so the impact on households is muted. (Both cities have higher than average commercial/industrial development to diversify the tax base.) Chaska benefits considerably more from restricted operating grants and capital grants that are often attached to development activity.

Chaska has a median age ten years younger, with larger average households, which means more of those "capitas" are children, not tax payers. And it has other advantages. Some of its success may be traced back to continuing some of the vision from the planned community of Jonathon and its relative lack of legacy costs that go with being a still-growing community. Chaska also has a revenue stream from its city-owned electric utility that contributed more than $2 million in "franchise taxes."

Golden Valley, as a first-ring suburb, is built up and hemmed in. Its homes have a higher average market value.

When you compare expenses, the two cities had essentially the same total costs for government activities in 2006, with Golden Valley expending more for public safety and public works for the year and Chaska spending more on economic development; it was also carrying more debt.

All these factors make the straight levy/LGA comparisons deceiving — not just between the two suburbs, but any cities on the list.

A new website called Thank LGA has just launched to weigh in on the side of maintaining LGA.

Another useful comparison in the Citizen League's 2008 Residential Homestead Property Tax Profile, which calculates the effective tax rate on a community's average value home. By that measure, Golden Valley's 1.272% ranked 7th out of 117 metro-area communities and Chaska's 1.131% ranked 33rd out of 117 — lower, but hardly the best in the state.

— Charlie Quimby

80-year-old Welfare Queens? Please!

I went to White Bear Lake High School this week to attend one of the legislative budget hearings  and was encouraged as many have been by the robust turnout — more than 80 people had signed up to speak — and by the range of thoughtful comments and suggestions offered. I'm always impressed by how knowledgeable, civically healthy and involved Minnesotans continue to be, despite some signs that we might be losing a step on that score.   

I was also taken aback by a dark underside of resentment and selfishness that's always there, in any conversation about the role of government. A few nasty, angry moments stood out. As I handed out lapel stickers that encouraged "Invest in Minnesota,'' I got into a conversation with a pinch-faced woman who angrily announced that it was not at all fair to raise taxes on successful people so that their hard-earned money could be "redistributed to people who made bad decisions.''   

I saw a T-Shirt emblazoned with the words "Note to Government: Get Your Hand Out of My Pocket.'' And I heard a woman actually testify that budget-cutters had to clamp down on ''80-year-old welfare queens'' who were demanding three warm meals a day and cable TV in their nursing homes, and who had failed to buy long-term care insurance.  

It struck me that this was exactly the rhetoric I've heard over the years about criminals in prison. And then, I thought, aren't we lucky to have income and net worth to show who made good and bad decisions  in their lives?   

— Dane Smith

P.S.   For info on more hearings and how you can help with the Invest in Minnesota campaign, check out investinmn.org

Former Gov. Carlson on the budget

Former Gov. Arne Carlson holds forth on the state's budget problems:

The job growth in Minnesota is extremely weak, and it's been weak for a number of years. During the '90s, we led the nation in growth. Now we're rather low compared to other states. I don't have the answer to the problem. I don't know what it is. But the point is, it's imperative that the leaders know what it is.

So what I would recommend is, one, that we get a really good sense of the lay of the land. I would bring in people like Darrell Runge from the University of Minnesota. I'd bring in Tom Stinson. I'd bring in some economists from the private sector. I'd bring in Steve Lewis, the former president of Carleton College. I'd bring in Dan Laufenberg from Ameriprise, a very good economist. I would spend hours with them, and I'd ask, what is it that you believe is going on?

I'm not talking about solutions here, I'm talking about first understanding what the problem is. Because if the problem is very temporary, that suggests one kind of strategy. If the problem is rather permanent, that tells you another strategy. It's important that we know the answer to that.

Gov. Carlson says he'd welcome the help of Democrats and of tax increases.

Tax Commission report is reasoned, but...

The Governor's business tax reduction commission — can we dispense with the "21st Century Tax Reform" bit and call a spade a spade? — released its report on Friday, with the lead recommendation of repealing the state corporate franchise (income) tax. Another recommendation would exempt from taxation 20 percent of "pass-through" business income to individuals.

Given the Republican and business tilt of the group, the panel's report [PDF] is not surprising — but predictable is not the same as wrong.

You won't hear complaints from this quarter about its assessment of Minnesota's economy, the need for investment in education and academic research and the importance of business in creating wealth and well-being in the region.

And you won't even get much argument with ending the corporate franchise tax, either. If you have to cut a tax, it's not a bad one to choose. It's regressive, volatile and has a negative — though over-dramatized, in our view — effect on some business decisions.

But as we must learn over and over, not everything that's good for business is unfailingly good for the public.

In good times, the corporate franchise tax contributes a lot of revenue to the state. The recommended cuts would cost the state about $1 billion a year. 

The glossed, the obscured and the skirted

The commission was originally charged to cover the costs of reform in its proposal, but the final report avoids a specific tally of how proposed taxes would counter the cuts — settling for recommendations to expand the sales tax base and increase the tax on cigarettes by up to $1 a pack.

The commission says Minnesota's high corporate income tax rate puts the state at a disadvantage. It seems to acknowledge that our poor business tax climate is more perception than reality, but believes we must address it. (Why the financial types who drive business decisions can't see the difference between a statutory tax rate and actual total tax burden is a subject for another day.)

In support of the competition argument, since 2002, the report says, six states have reduced corporate tax rates or replaced the corporate income tax. We looked up the most recent growth rates for those states and threw in other states with no corporate income tax, plus our business-friendly neighbor, South Dakota. The growth picture for those states is definitely mixed. 

 

To its credit, the commission did not try to oversell the stimulative benefits of its corporate tax cut and other reforms. We believe they are likely to help business. The open question is how much. And the unanswered question is how even revenue-neutral reforms will help address the state's revenue shortfall.

Another point, with which we agree, is Chairman Mike Vekich's "Businesses don't pay taxes. You and I do. Where we tax businesses, we are taxing our own wealth."

But on the other hand, the commission seems reluctant to tax that wealth. Where income flows from businesses to people, the Commission also wants to see a cut. It amounts to a backdoor personal income tax cut for higher earners.

Small businesses would get a special boost -- one-fifth of owners' profits would be exempt from taxation.

House Taxes Committee Chairwoman Ann Lenczewski, DFL-Bloomington, said she was "stunned" by that recommendation.

"What it means is a managing partner at a small law firm will pay a smaller top rate on income than the associate partner who makes less," Lenczewski said. "The boss gets a big tax break because he owns the business, but the secretary doesn't. I agree with some of the commission's recommendations, but this one just confounds me."

And this is really the most disappointing aspect of the report. The commission skirted the issue of fairness to individuals, only acknowledging that replacing a regressive business tax with regressive sales taxes probably wouldn't make the system more regressive.

Fair seems to mean fair for business. Indeed, the word "fairness" appears only three times in the report's 34 pages, always in a list of general principles. The commission's second principle for reform is:

Tied to benefits received. There should be a strong, direct relationship between the nature and level of business taxation in the state and the cost of benefits and services provided to businesses by state and local governments.

This so-called benefits principle is a particular favorite of conservative theorists, but the devil is in the details. It wasn't the commission's charter to think about business tax reform's impact on a single, unemployed mother with a child in public school, but the legislature will.

In all, the commission's report adds another useful, philosophical perspective to the budget discussions. Progressives — and the governor — should open their minds to what it has to say.

—Charlie Quimby

Tobacco bonds: The Mother of All Shifts

Progressives sometimes support good government fiscal ideals even when they happen to work against our best interests. When it comes to the state budget roller coaster, we gravitate toward endorsing the idea that “accounting shifts” are a fiscal devil — a vile short-term solution. On goo-goo principle, perhaps, we advocate stable sources of state revenues as the remedy.

Neo-cons should celebrate.

In the real world, such thinking about shifts and revenue stability is 100 percent wrong. Accounting shifts from one biennium to the next are the ultimate cushion against budget devastation, nothing short of salvation for the fiscal troubles inherent in progressive taxation.

As we all know, tax fairness is based on ability to pay. Unfortunately, our collective ability to pay inherently stoops to swings in the economy. On the other hand, stable tax sources on consumption (sales and use) or property tend to be regressive because they are assessed without regard to fairness or ability to pay. If we want to achieve a progressive tax system in Minnesota, we must accept – and even embrace – a system of accounting shifts as our protective release valve.

As such, I was grudgingly prepared to accept the inevitable shifts that come with the huge state budget shortfall projected in FY 2010-11. Then came the Mother of All Shifts – the ultimate in fiscal irresponsibility — the so-called Tobacco Appropriation Bonds.  In the all-time understatement, even the Minnesota Department of Management and Budget (MMB) officially admits [PDF], “One-time funds such as these are not a long-term solution to the state’s current budget deficit.”

It is one thing to shift general fund dollars back and forth from one biennium to the next. It is quite another to take anticipated money every year for the next two decades.

Keep in mind, the full faith and credit of our state will back these bonds. Otherwise they almost certainly would not even be remotely marketable in the current economy. If this sounds like something that the State Constitution might prohibit, it is, in fact, a very close call. Even MMB admits, “To meet state constitutional requirements and federal regulations for tax exempt bonds, all proceeds from these bonds will be used directly for one-time, non-operating costs.”

The money conveniently goes to retire next-biennium borrowing costs. Perhaps we can rename the new U of M stadium “TCF & Tobacco Field.” Nice try skirting the rules. In reality, the plan simply ties the hands of the next 10 legislatures.

Right now, the state general fund pulls in around $200 million a year from the ongoing tobacco proceeds. The proposal would sell off about half of the slowly declining revenue stream for 20 years with a paltry projected one-time payoff of $983 million.

At just about any other time, this ill-conceived sell-off would pay out far-more handsomely. Not only is it a stupendously bad deal, but this unprecedented move surely will be poorly received by the bond-raters. We could easily see higher borrowing costs for decades to come. To be concise, this is the ultimate plan for huge long-term tax obligations in the not-too-distant future — with nothing tangible to show for it.

So if garden-variety accounting shifts give you bad dreams, the tobacco revenue sell-off qualifies as nothing short of “A Nightmare on Rev. Dr. Martin Luther King Jr. Boulevard.”

— Guest poster Jim Robins is a former Minnesota Senate Majority researcher assigned to taxes, metropolitan and local government, and transportation issues. He currently operates www.ScooterMaxi.com.

[Ed. Note: Growth & Justice will occasionally run guest posts that challenge orthodoxies on the left and right, including our own.]