The Teacher Incentive Fund: A Wise Investment in Human Capital Reform

Researchers, policymakers, and the general public agree that skilled teachers are valuable, but there is also a growing understanding that states and districts do not have adequate systems for attracting, developing, and retaining effective teachers. Improving these human capital systems would yield long-term dividends for both teachers and students, and the Obama administration’s proposed increase in funding for the Teacher Incentive Fund can help make this happen.

We know that effective teachers are critically important to students’ learning, particularly for poor and minority students. A number of recent studies have estimated the difference that a highly effective teacher can make and find that “on average, students with a teacher in the top quartile of the talent pool achieve at levels corresponding to an additional two or three months of instruction per year, compared with peers who have a teacher in the bottom quartile.” These same studies also point out that this difference “represents well over a third of the ‘achievement gap’ between students from low-income families and those from families with higher incomes.”

So ensuring highly effective teachers are working in high-poverty schools is one of the best investments school districts can make in order to reduce the achievement gap. Yet as school districts continue to face budget cuts, it’s difficult for them to find the funds to invest in promising strategies that are likely to pay off at some time in the future.

Fortunately, the Obama administration and Secretary of Education Arne Duncan understand the importance of smart, forward-looking investments in education. That’s why the administration has proposed a dramatic increase in funding for the Teacher Incentive Fund, or TIF, from $97 million this year to $487.3 million in fiscal year 2010. And it provided additional support for the program with $200 million in funding from the American Recovery and Reinvestment Act.

TIF funding goes directly to teachers since it supports performance-based teacher and principal compensation systems in high-needs schools. It also supports pay for increased roles and responsibilities for teachers and pay for teachers who teach in subject shortage areas, such as mathematics, science, and special education.

TIF is likely to incentivize significant changes in human capital systems in participating states and districts for three reasons. First, since programs must supply an increasing level of matching funds over time and a 75-percent match in the fifth year of the grant, states and districts are forced to secure an ongoing source of funding for the programs. So in effect TIF funds prompt districts to rethink how they are spending their resources on attracting, developing, and retaining skilled teachers.

Second, since the Obama administration has indicated its intention to support comprehensive approaches to compensation reform within the TIF program, the TIF grants are likely to improve other human capital-related policies in participating schools and districts. For example, comprehensive compensation reforms may include teacher evaluation systems and professional development programs. Finally, by supporting pay for increased roles and responsibilities, TIF grants can support the development of career ladders for teachers—an important tool for increasing the retention of effective teachers.

I’ll review each of these potential changes in human capital systems in more detail below.

Rethinking spending

If districts are going to improve the quality of their human capital systems, they will need to rethink their current spending practices in order to support more strategic investments. According to recent research by Karen Hawley Miles and Stephen Frank, “Research on school spending shows that it’s not just how much money a district spends that makes the difference in student learning; it’s how well the resources are used.” And currently many districts are not spending funds in ways that will lead to more effective instruction and higher student achievement.

For example, most districts still pay teachers more for earning a master’s degree even though the research is pretty clear that advanced degrees are not related to a teacher’s efficacy in the classroom. TIF grants, by requiring increasing levels of matching funds during the grant period, are encouraging participating states and districts to rethink some of their less productive investments in teacher compensation systems and related human resource policies.

Comprehensive approaches

The Obama administration has indicated that the new TIF grants will support comprehensive approaches to teacher compensation reforms. Therefore it is likely that new TIF programs would not only reform compensation systems, but would also improve other teacher-related policies such as teacher recruitment, evaluation systems, and professional development.

Comprehensive approaches to compensation reform are critical, because as both Craig Jerald and Bill Slotnik find in recent papers for the Center for American Progress, compensation reforms that operate as stand-alone efforts are unlikely to be successful. It’s easy to understand why that is the case. If a teacher compensation system rewards teacher performance according to an evaluation system, but the evaluation system is not rigorous and the professional development teachers receive doesn’t help them to improve their evaluation rating, the system is fragmented and isn’t likely to improve teacher practice or student achievement. So all components of the human resource system for teachers need to work together to improve teaching and learning.

Career ladders

TIF grants will also support career ladders for teachers, which are a critical tool for retaining the most effective teachers and at the same time improving instructional practice throughout the school. Today, teachers have few opportunities for advancement that don’t take them away from instruction. It makes little sense that the most effective teachers must move into administrative roles in order to earn greater responsibilities and pay. And most schools aren’t leveraging the talents of the most effective teachers in ways that can improve instruction schoolwide.

Career ladders offer teachers a more dynamic career path with opportunities to take on leadership roles for additional pay. For instance, teachers may become mentor teachers, coaching and supporting newer teachers who are still learning their craft. In this way, these teachers are both reaping personal benefits in pay and career satisfaction and sharing their talents to improve instruction schoolwide.

During difficult economic times it is important to continue to make wise investments that will pay dividends in student learning down the road. Thankfully the Obama administration understands this and has proposed an increase in the Teacher Incentive Fund. TIF grants provide the incentive for districts to do things differently—to reform their human capital systems to better align them with districts’ strategic goals. Congress has the opportunity to invest in these reforms and support effective teachers. It’s imperative that the Senate supports the administration’s investment in TIF through the appropriations process.

Robin Chait is Associate Director for Teacher Quality at American Progress.

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