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In the 2001-02 school year, almost 40 percent of all education expenditures were devoted to teachers, or over $132 billion, according to the American Federation of Teachers.

Most of that money was paid out using traditional single-salary compensation schedules, a system that typically pays the same salary to all teachers with the same level of education and number of years in the classroom. But as expectations for student performance rise, experts wonder if that system still makes sense鈥攅ither to attract talented people into the profession or to recognize teachers who actually improve student learning.

鈥淪tatic steps and lanes won鈥檛 entice Generation Y and 鈥榚cho boomers鈥� into the classroom,鈥� says Chas Anderson, Minnesota鈥檚 assistant education commissioner for finance and administration.

Similarly, a report by the Committee for Economic Development, released in February 2004, argues that the single-salary schedule should be replaced with a less rigid compensation system that would 鈥渁lign pay with the realities of the teacher labor market.鈥� The report by the Washington-based group, which represents top business leaders, also calls for tying teacher pay to student outcomes.

States are making some changes.

The Education Week Research Center鈥檚 survey of all 50 states and the District of Columbia found that in the 2004-05 school year, 26 states are offering incentives鈥攕uch as bonuses, education aid, or housing assistance鈥攖o attract people to such hard-to-staff subjects as mathematics. Fourteen states have such incentives for teachers who agree to work in high-poverty or low-performing schools.

Six states have launched their own pay-for-performance systems that compensate teachers for demonstrating specific knowledge and skills in the classroom. Of those six states, four also have programs that reward teachers based on their students鈥� achievements. But most pay-for-performance efforts are in their infancy, are hampered by budget constraints, or involve few schools and districts.

John I. Wilson, the executive director of the National Education Association, defends the single-salary schedule, saying it 鈥渉as been around a long time because it鈥檚 a tried and true measure. Teachers understand the better educated you are, the better your practices should be, and the better your student test scores should be.鈥�

He adds that a student鈥檚 ability to score well on a test cannot be placed at the feet of one teacher because too many other factors shape student performance.

Two Types of Performance Pay

Supporters of pay-for-performance policies believe that when they are done well, the benefits far outweigh the drawbacks.

Allan Odden, a professor of educational administration at the University of Wisconsin-Madison, believes compensation systems that reward teachers based on classroom performance can improve instructional practice, which in turn produces higher levels of student learning.

Education Week found that six states鈥擜rizona, Delaware, Florida, Iowa, Minnesota, and New Mexico鈥攈ave performance-pay systems that reward teachers for demonstrating specific knowledge and skills.

New Mexico, for example, has a new three-tiered licensure system in which teachers are observed in the classroom and must complete professional-development dossiers. External reviewers score the dossiers. Satisfactory scores allow the teachers to advance to the next licensure tier and receive higher pay.

Minnesota provides money to districts that have developed state-approved plans for alternative teacher-compensation systems that encourage teachers鈥� ongoing improvement in the use of best practices.

Other pay-for-performance models reward teachers or schools whose students have shown improved academic growth, a method that Odden claims clarifies the most important objectives and goals for everybody in the system.

But Education Week found that only five states have pay-for-performance plans that link teacher pay to student outcomes. They are Arizona, Florida, Iowa, New Mexico, and North Carolina. North Carolina gives financial incentives to whole schools that meet or exceed projected student academic growth. The state awards $1,500 to each teacher in a school that reaches 鈥渆xemplary鈥� status under the state accountability system, and $750 to each teacher in a school that meets expected growth. The state has budgeted more than $1 million for the awards this school year.

Arizona, Arkansas, Florida, Louisiana, Minnesota, Ohio, and South Carolina are working with the Milken Family Foundation鈥檚 Teacher Advancement Program, or TAP. The program rewards teachers both for acquired knowledge and skills and growth in student achievement, as part of a more comprehensive career-development plan.

Lowell Milken, the chairman and co-founder of the Milken Family Foundation, in Santa Monica, Calif., stresses that the pay-for-performance element of TAP would be ineffective without the other components, such as access to continuing professional development.

A study that compared TAP schools in Arizona and South Carolina with nonparticipating schools found the TAP schools outperformed the control schools about 70 percent of the time on test scores.

Budget Woes

In a number of states, finding money to sustain or even launch pay-for-performance programs has proved difficult. Oklahoma has had an incentive-pay program on the books since 1990. But a lack of state funds has prevented districts whose plans were approved from carrying them out.

On paper, Iowa鈥檚 Career Path Program has four career levels, from a beginning to an advanced teacher. The state has specified skills that teachers must master and demonstrate through performance evaluations before they can climb to the next level.

Because of budget constraints, however, the state has put only the first two levels in place.

Brad Jupp, a representative of the Denver Classroom Teachers Association and a teacher-coordinator for the Denver Professional Compensation System, or ProComp, cautions that pay-for-performance programs fall apart if they are not funded in advance. Jupp adds that teacher mistrust and skepticism are valid when such programs rely on unstable financing or on business communities and philanthropists for funding.

鈥淭hat鈥檚 why Denver tried to establish a sustainable revenue source based on a property-tax increase,鈥� he says.