Sunday, September 20, 2009

Us vs The Teacher’s Union

As was the case prior to the last election, the Hilliard Education Association (HEA) – the union representing teachers and other certified staff in our school district – invited the candidates for School Board to participate in their process for selecting who the HEA would back in the upcoming election. All three of the candidates – Justin Gardner, Don Roberts, and I – participated in the interviews (here are my comments). Yesterday we all three received letters from the HEA telling us that we would not be getting their support.

Instead, the HEA will be supporting incumbents Andy Teater and Lisa Whiting, plus Chris Courtney, the candidate supported by the Hilliard Democratic Party.

Let's remember that this time next year our School Board will be engaged in negotiating a new labor agreement with the HEA as well as the classified staff union, OAPSE Local #310. The outcome of that negotiation will be heavily influenced by who sits on the School Board, and the unions are not going to let that be left up to chance. They picked these three people because this is who they want to be negotiating with – not Justin, Don and me.

Here's one thing I want to be clear about: WE ARE NOT ANTI-UNION. Unions play an important and valuable role in our society by giving workers the strength of numbers when negotiating – even demanding – better compensation and working conditions. I grew up in a blue collar family in West Virginia, perhaps one of the most unionized states in our country, with some of the most dangerous occupations. I have no doubt that the prosperity enjoyed by my generation was facilitated by the struggles of our union forefathers.

However, that doesn't mean the unions should get whatever they want. The historic role of the union is to level the table when negotiating with the ownership of a company. Instead of being indentured servants of the powerful coal mine operators, the union leaders could sit down at the bargaining table knowing that until the owner and the union came to a compromise, no one was going to make any money. It is a kind of economic "mutually assured destruction," and the stakes run high, as do emotions. The "mine wars" in Mingo County WV were just that – not a euphemism, but a real war in which people died.

The risk to the owner is that the customers will find other suppliers if the work stoppage lasts too long. The risk to the union members is that the owner will find another way to make money, and just shut down the business. For both parties, a work stoppage is generally a bad thing.

The situation is fundamentally different when the employer is a public entity. For one thing, there is no "owner" per se. The organization is by definition an entity operated for the common good of the people, who are represented by a School Board elected from the members of the community. There is no profit objective, and the money being put on the table is that of the people, not the Board's. And it's a lot of money – to the tune of $140 million per year and growing rapidly.

On the other side of the bargaining table are the unionized workers – or more precisely, their union officers. They will be joined by professional negotiators from the state organization, the Ohio Education Association.

The process is, by design, an adversarial one. The School Board, representing the people, take a position of wanting to spend less on employees, while the union leaders, representing their membership, will want to get more. A give-and-take process follows until the parties find a mutually acceptable answer.

Here's where labor negotiations in private industry are radically different than those between School Boards and teachers: the teachers get to hold the kids of our community hostage. If the town steel mill shuts down during a strike, everyone's kids still get to go to school. If the teachers go on strike, the kids get hurt – particularly those in high school, many of whom are getting prepared to compete for a spot in college.

And so we have this situation where parents of school age children are almost frenzied to make sure the schools stay in session and the teachers are happy, to the point that just about any levy on the ballot, regardless of size, will get their support. Anyone who offers any criticism of the status quo is immediately branded an enemy of the state – because such is person is perceived to be a threat to their children. I understand this completely. I have voted in favor of every single levy that has been on the ballot for precisely this reason.

But we have been led to a dangerous place, and both our School Board and the union leaders are complicit. This dangerous place is one where critical decisions are being made on emotion rather than reason. It is this way not because the people of our community are irrational, but rather because the only thing they have to go on is hearsay and emotion.

That is the fault of our school leadership. For nearly a decade, I have recommended to our School Board that they get ahead of this looming crisis, starting with the creation of a program of community education about school economics, of which labor relations plays a large part. There have been at best feeble attempts (e.g. the ACT Committee and the Treasurer's Committee), with no real impact.

Once the smart and talented people of our community have a better handle on how school economics work, then we can have an informed and rational conversation with the teachers about compensation. Just as diplomacy is better than war, a rational and empathetic conversation between the people of our community and the teachers is better than a strike.

But just as we cannot say that our country will never go to war regardless of the threat, we can't say the School Board will never press issues of great importance to the point of a teacher strike.

So it's up to you – the people of Hilliard – to decide whether you want your representatives on the school board to be those chosen by the teachers' union, or by independent thinkers who understand the proper role of our School Board.

Saturday, September 12, 2009

Pay Comparisons

There is an increasing amount of dialog these days about teacher compensation. There are many perspectives on how to evaluate whether teachers are underpaid, overpaid, or being paid about right.

I tend to be a proponent of the free market in determining compensation. The simple description of this viewpoint is that employee pay is the result of a negotiation between an employer and a prospective employee in which the employer would prefer to pay less, and the prospective employee wishes to be paid more. In the course of the negotiation, the employer and prospective employee make personal economic decisions. Does the employer believe the skills of the prospective employee are such that it's worth paying this candidate more, because the employer's profit could be even greater? Will the candidate accept less because the potential for future compensation is much higher?

This is grossly oversimplified of course. The decision is much more complicated, as both parties try to evaluate all kinds of objective and subjective elements during the negotiation. But in the end, the two parties have to decide whether the deal on the table is 'good enough,' or whether it is time to take a walk. In the end, this system works because employers have to compete with each other to hire qualified candidates, and candidates have to compete with each other to find acceptable jobs.

And in the larger sense, this supply and demand operation influences career choices. When I was a young engineering student at Ohio State in the early 1970s, one of the most popular fields was Aerospace Engineering. Kids of my age group grew up watching the development of the space program from Alan Shepard's first short flight to Neil Armstrong's first step on the Moon (I still have an 8mm film of John Glenn's orbital flight). The really smart, engineering-oriented kids were often drawn into dreams of working for NASA or Jet Propulsion Laboratory. It wasn't so much the pay that attracted them as it was the thought of being a part of the first generation of space pioneers.

Then in 1972, the Apollo program ended, and Congress pulled the plug on the Supersonic Transport. The demand for aerospace engineers plummeted, and many graduates in my class had no luck finding jobs in their field. The number of new aerospace engineering majors dropped, and the interest turned to other fields – notably computer science and electrical engineering. There is a similar story to tell about nuclear engineering in the aftermath of Three Mile Island.

But eventually an equilibrium was reached, and the number of majors in the various engineering fields tended to line up with the demand for skills. This state of equilibrium will tend to last until some significant sea change happens in our economy. One of those was in the 1980s, when many of the brightest young students in our country flocked to business majors. Former Ohio State professor Roger Blackwell summed it up this way: In the 1960s, the brightest kids tended to go into engineering; in the 1970s, they went into the social sciences such as psychology and sociology (the hippy days, some would say); and in the 1980s, they went into business majors, especially marketing, finance and real estate. I don't know what he said about the 1990s, but from my ongoing contact with the engineering program at OSU, I think they're headed to engineering again.

Back to the subject of this post…

There is another perspective which says that compensation – at least for some careers - should be based on some notion of societal value. In other words, it doesn't so much matter what the free-market forces are that might influence compensation; the pay rate should be set by what someone, or some agency, determines the pay should be. It matters less what the supply vs demand relationship looks like, followers of this perspective say people doing certain jobs should be paid more or less than people doing other jobs based on other criteria.

Interestingly, this perspective seems to be most prevalent in the public sector. In this case, the employer is a government. Governments aren't meant to generate a profit for their owners, they are service organizations. They do still have to compete for workers however, so they must offer a set of tangible and intangible benefits that make it worth taking a government job versus one in the private sector.

Compared to private sector workers, government workers often have less potential financial upside, at least while they are working. They grind their way up through some civil service pay chart with predetermined pay raises, and little if any chance of individual pay negotiation. Compare that to private sector workers who get paid whatever they can negotiate with their employers, which for the past decade or so often included things like stock options. My last employer was Worldcom – through its acquisition of CompuServe Network Services – and it was their policy to grant stock options to every one of its 30,000 employees. There were many stories of low level employees who paid off their houses and sent their kids to college solely on their profits from stock options. Things like that just don't happen for public sector workers.

But then again, many of those Worldcom employees had their retirement savings tied up in Worldcom stock, so when the company went belly up, they lost not only their jobs, but their retirement savings as well.

One of the benefits of working in the public sector is that public sector jobs almost always have a defined-benefit retirement program attached to them. Work long enough – usually around twenty years – and you are guaranteed a pension for the rest of your life. That seems like a fair trade-off, lesser earnings potential while working in exchange for great retirement benefits. As someone approaching the golden years – without a pension – it looks like a darn good deal to me.

Yes, there are still some private sector pension programs out there. But they are rapidly disappearing, and some have already failed. My older brother spent his life laboring in a hot, dirty, dangerous steel mill, as did a number of other men of our family in generations past. He retired to a livable but not generous pension - right up until the day his company went bankrupt and took the pension plan down with it. Now his retirement benefits are paid by the federal Pension Benefits Guarantee Corporation (PBGC) at a small fraction of his former pension. He also lost his medical coverage at an age too young to be eligible for Medicare. His story is not unique; so many private pension programs have failed that PBGC is running out of funding.

Contrast that to the situation with the State Teachers Retirement System (STRS), which I wrote about previously in Time Bomb and Still Ticking. STRS is controlled by a Board made up of STRS members, who are all teachers or other certified or licensed education professionals. This Board oversees the management of tens of billions of dollars of money which was paid into the system by working teachers (10% of salary) and the school districts (an additional 14% of their salaries), as well as the fund's earnings over the years. They chose to take risks in the stock and real estate markets, and got burned pretty badly. In spite of these risks being entirely the choice of the STRS Board, they now seek to have the State government force school districts (meaning we the payors of property taxes) to increase their contributions in order to restore benefits. Yet another bail-out.

About this time next year, our School Board will be engaged in negotiating new union contracts with the employees of our school district. It is very likely that there will also be a levy campaign underway, asking the people to increase property taxes on the order of 7 mills ($214 per $100,000 of market value). It will a powerful opportunity to 'connect-the-dots' between the rising cost of compensation and benefits and the rate in which our property taxes are increasing (the purpose of this blog). Indeed, more than 90% of any new money raised with an additional levy is applied to the increased cost of compensation and benefits.

A component of this conversation is the question: What is fair compensation for our teachers?

We can't answer that question effectively with free market tools. In a free market, when you have many more qualified applicants for jobs than you have openings, it's a signal to employers that their compensation packages are more than good enough. That tends to drive pay scales down, or at least suggest that pay doesn't have to be raised to hire new employees.

But that's not what we see in the teacher contracts. Regardless of the number of candidates who seek employment in our school system, or the condition of our economy, the pay level has continued to increase on the order of 7% per year for over a decade (when both base pay increases and step increases are taken into account).

If free market methods won't work for determining what is appropriate pay, that seems to leave us with this notion of societal value as the way of setting pay.

How often do see one of bumper stickers which read: "If you can read this, thank a teacher"? Okay, I agree with the notion that the foundation of American society is constructed with some key building blocks, and public education is one of them. In spite of being a free-market economist, I accept that this building block of public education is so important that I'm willing to pay some amount of taxes to support it. While the US Constitution is silent on this matter, the framers of the Ohio Constitution saw fit to call out public education as a necessary good, creating a state funding requirement such that all Ohio children would receive a "thorough and efficient" education (and no, property taxes are NOT unconstitutional).

But there are other roles in the public sector which are pretty important as well. Consider the members of our armed forces.

I ask you to consider the case of a young US Marine, one who also happens to be my nephew. He is now assigned to the Wounded Warrior battalion at Camp Lejeune, being treated for injuries sustained in battle in Iraq which have ended his career as a Marine. He will be discharged sometime next year having never earned much money, no pension, and with permanent disability (which brings a little compensation), but at least he'll have lifetime medical care via the Veterans Administration. Teaching is indeed a tough profession, but I don't think anyone would put it in this category.

Another argument heard for current teacher pay levels is the fact that they must all earn a Masters degree by their 10th year in order to retain their teaching license. That is true, even though there is some disagreement about whether this additional education actually manifests as improved classroom performance. I'm willing to accept that it does, but it is exceeding hard to measure. After all, if the primary argument against performance pay for teachers is that it is difficult to measure individual teacher performance, how can we tell if the achievement of a Masters degree makes any difference either?

But let's map this discussion to the military as well.

With very rare exception, all officers in our military services are required to have a Bachelor's degree. If you go to college, enter Officer's Candidate School, and successfully graduate with a commission as a 2nd Lieutenant (Ensign in the Navy), your starting pay will be $32,000/yr. You will also get a one-time allowance for uniforms, plus $200/month for food and $1,000/month for housing (if government housing is not available, like a tent in Afghanistan) - a total of $46,400.

This compares to a starting teacher salary in Hilliard of $37,245. At a minimum, some allowance would have to be made for the fact that members of our armed services are allowed 30 days of leave each year, compared to the summer vacation enjoyed by teachers. We also have to consider that a military officer can't just quit after a year if he/she decides to try something else. Nor can we forget that many - not all - members of our military will repeatedly put their lives on the line, as has my nephew.

Career military officers are expected to get a Masters degree as well, and it often takes place in the first ten years of their career, just like the teachers. Many go on to earn a second Masters degree (often in military arts), and occasionally doctoral degrees. For many career officers, their 'terminal rank' is Lieutenant Colonel (Commander in the Navy), at between 30 and 35 years of service. At this level, the base pay would be $91,000 plus a housing allowing of $22,500, or $113,500. However, an officer of this grade would have substantial responsibility, for example the command of a Navy destroyer, which has a crew of nearly 300 and nuclear weapons capability.

The top salary for a Hilliard teacher is $87,731 (for Masters + 15 and 23 years of service).

At retirement, such an military officer would be entitled to 87.5% of the average of their highest three years pay, which would work out to about $80,000/yr. Again, this is comparable to a public school teacher who under the current STRS rules would retire at 88.5% of the average of their highest three years.

However, it should be noted that the maximum retirement benefit may be dropped under proposed new STRS rules. Why? Because, as the STRS itself says: "The 35-year enhanced benefit is no longer needed to encourage teachers to work longer and is eliminated." That sounds like a free-market concept to me!

So if societal value is to be used as a basis for setting teacher pay, how do feel about the alignment between teacher pay and military pay?

What if we use effort as the basis for setting pay levels? How does the effort expended by a teacher compare to a military officer?

How about professional freedom? Teachers are granted academic freedom in their contracts, and given tenure to guarantee it. What kind of freedom does a member of our military enjoy? There's a great line in the movie "Crimson Tide" when the commanding officer says to his executive officer: "We are here to defend democracy, not to practice it!"

So what is the appropriate level of compensation and benefits for public school teachers? We are going to have to wrestle with all these issues next year, right here in Hilliard. The discussion is already well underway in other school districts such as Worthington, Olentangy and Westerville.

Don Roberts, Justin Gardner and I feel we have the education, experience and demeanor to lead this discussion as members of our School Board. If you want to learn more about us, visit the website of, a recently-formed Political Action Committee who has endorsed and is supporting our candidacy.

Most of all, we ask for your vote on November 3rd.

Sunday, September 6, 2009

Free Speech

Sent to the Hilliard School e-news mailing list on Sept 4, 2009:

The Hilliard City School District learned of President Barack Obama's student address scheduled to air at noon on Tuesday, September 8, just two days ago from several concerned parents. Since then, we have been overwhelmed with phone calls and e-mails both in favor of and against airing the broadcast in our school buildings on Tuesday.

As a district, we take a non-partisan view towards this address. The President of the United States is our nation's leader and a world power* who will be addressing the youth of our country. The intent to speak to students is not unprecedented, as other Presidents have done the same. For educators, this address presents a teachable moment for our students. As a system, it is our responsibility to provide educational opportunities for our students.

As Superintendent of this district, I always make an effort to listen and be responsive to community concerns. This issue has resulted in a divided community outcry that cannot be ignored. In an attempt to bring some calm to our community and be responsive to the concerns on both sides of the issue, I have decided to permit our schools to air the broadcast on Tuesday. Students whose parents prefer they not participate will be provided an alternative activity during the 15-20 minute address.

I understand this decision will be met with mixed emotions; however, I believe it offers an educational opportunity that should be made available to students.

Dale A. McVey


I find it sad and more than a little troubling that the state of affairs in our country has reached a point where it is questionable whether school children should be required to watch an address by the President of the United States, especially a speech directly meant for the kids.

I understand that there are those who disagree with President Obama on things both big and small. I'm one of them. That doesn't mean I wouldn't want my kids to hear what the President has to say. Regardless of whether the name on the White House stationary is Barak Obama or John McCain, the person we elect to be the President of the United States is the constitutional head of the Executive Branch of our federal government for at least the next four years. What he or she has to say is important.

To those parents who are opposed to this, I have one thing to ask: where are you the other 179 days of the school year when your kids are getting their heads filled with stuff from schoolbooks, curriculum, and teachers' words? Do you discuss any of the points of view on other topics presented by our school district to your kids? Do you know what their textbooks say on matters important to you? Have you tried to ascertain whether your kids' teachers are injecting a degree of personal bias that you feel is inappropriate?

After all, none of us really know what the President is going to say (update: the text of the President's address is now available here). Nor will most parents take the time or make the effort to talk to their kids ahead of time about what they think of Mr. Obama's policies and politics. Likewise, few parents will listen to the President's speech, or make time afterward to talk with their kids about it.

Democracy is not a spectator sport. The First Amendment to the US Constitution preserves (not "gives") our right to freedom of speech, and that means sometimes things will be said that we don't agree with. The solution to that is not to suppress freedom of speech, but rather to engage in the debate. And not just by yelling at each other, as we see at some many of these so-called "town meetings" lately, but rather an actual informed and respectful discussion of opposing viewpoints.

This reminds me a lot of the dialog about school economics. People largely ignore the issues until it's time to vote on a levy then, rather than spending the time to gather and analyze pertinent information, make their decision to vote for or against the levy based simply on hearsay, sound bites, and emotion.

Democracy will not survive much more of this.

* I don't think it is appropriate to say "The President of the United States is ... a world power." A more appropriate description is that the United States of America is a world power, and the President of the United States is elected to serve as its Chief Executive and Commander-in-Chief.

Thursday, September 3, 2009

Still Ticking

Last December, I wrote a piece titled Time Bomb which discussed the deep trouble the State Teachers Retirement System (STRS) had gotten itself into. Today, the Columbus Dispatch published an article on the same subject. I'm glad to see this topic get more attention, because it has a direct impact on the school taxes we'll have to pay going forward.

The story is this: the STRS was created by Ohio Law to operate a retirement system for the benefit of Ohio's public school teachers. Each teacher may currently choose from one of three plan options: 1) a Defined Benefit Plan; 2) a Defined Contribution Plan; and, 3) a blended plan. Most choose the Defined Benefit Plan because, as the name implies, commitments are made to pay out certain amounts each month for life to a retired teacher based on retirement age, years of service, and the average of the three highest salary years.

The Defined Benefits Plan is funded by contributions from the teacher, currently set at 10% of their salary, and contributions from the employer – meaning us – of another 14% of the teacher's salary. However STRS members do not participate in Social Security, neither paying the Social Security tax nor receiving Social Security benefits (although some will have worked in other jobs in which Social Security tax was paid, and benefits earned).

Just like any other retirement system, the premiums paid into the retirement fund and the investment earnings on the fund are supposed to be sufficient to pay out future obligations. However, there must be decisions made about how to invest the money in the retirement fund.

One of the fundamental assumptions of investing is that risk and reward are related: the safer the investment, the lower the return. The complimentary case is also true – in order to earn larger returns, greater risk will have to be taken. It is the duty of the State Teachers Retirement Board to determine how much risk they should take with the teachers' money.

Once the risk/return parameters are established, the actuaries can calculate whether the funding, earning estimates, and benefits are in alignment. If the actuaries determine that there is more than enough money coming into the fund than is needed to pay future obligations, any or all of these factors can be adjusted by the Board. The funding requirements can be lessened, the risk profile reduced, or the benefits increased.

Conversely, if the actuaries determine that there is not enough money coming into the system, the Board can ask for an increase in contributions, choose to take greater risk, and/or reduce benefits.

For some time, the State Teachers Retirement Board has opted to manage their retirement fund inhouse, under the supervision of a Chief Investment Officer who is required to be a "licensed state retirement system investment officer." This decision was likely made to both increase perceived control over the money (versus hiring an investment firm to manage the fund), and reduce the amount of money paid out in commissions and fees.

However, to recruit and retain competent investment professionals, it would be customary for the retirement fund to pay their inhouse investment staff bonuses based on performance. Designing incentive compensation plans are one of the trickiest things one does as a manager. They always work as designed, which isn't always what the management expected.

The STRS investment managers were put on a plan where their performance was gauged relative to a well-known index, such as the S&P 500 Stock Index. The idea is that the STRS investment managers should not be rewarded for generating a 10% return on the portfolio if the market (represented by the S&P 500) went up 10% as well. The common expression is "all boats rise with the tide."

For a number of years, the STRS investment managers did indeed outperform the market, and they were paid well. There was a time in years past when the earnings of the STRS portfolio was such that the Board elected to pay out a "13th paycheck" to retirees – essentially an 8% bonus. Maybe they should have kept that extra money in the portfolio – it might have softened the blow of what came later.

But the STRS Board didn't think carefully enough about what would happen if the market crashed. It turns out that the incentive plan for the investment managers didn't take into account whether money was gained or lost, only if the earnings of the plan exceeded the market index. So if the S&P 500 went down 30%, but the portfolio value decreased by only 20%, the plan said the investment managers "beat the market" and their bonus were paid.

The retired teachers have taken great exception to this. Regardless of the fact that the investment managers were paid exactly according to the rules of their bonus plan, which was approved by the STRS Board, these teachers wanted the investment managers to give their bonuses back. In other words – in tough times, they expect their own employees to give back bonuses even though they were earned. One of the strongest voices of this faction of teachers is Kathie Bracy, who writes her own blog – you are encouraged to read a little bit of it to understand how these folks think.

And times are particularly tough for STRS, as shown in this chart from Ms. Bracy's blog.

At its lowest point, the value of the STRS retirement fund had plummeted from a high of $80 billion in Oct 2007 to $46 billion in March of this year, a loss of 42%. A respectable chuck of that has been restored with the inexplicable recovery of the stock market – rising back to $56 billion by June 2009. While this is a gain of 22% in three months, this $56 billion is still 30% less than the 2007 peak. To get back to that $80 billion peak, the fund will need to grow by another 42%. That will take either a long time at reasonable risk, or a short time at great risk. It will be interesting to see which bet the STRS Board allows its investment managers to make.

The Dispatch article today reports that the STRS Board doesn't believe that their investment manager can generate enough income to fully fund its future obligations. So they need to go back to the other two of their three knobs: increasing contributions and reducing benefits.

Ms. Bracy does a nice job of describing the changes proposed by the STRS Board, in a great deal more detail than the Dispatch article, so I'll not go into all of them here. Both retirees and working teachers will take a hit – significant in some aspects. Two of the big ones are that a teacher's retirement benefit will be based on the highest five (rather than three) salary years, which will almost always result in a lower number; and a reduction of the payout percentage.

In the current plan, a teacher gets 2.2% of the average of their highest three years times the number of years of service, up to 30 years. So a teacher who retires at 30 years gets 66% of the average of the three highest years. If a teacher stays to year 31, the benefit is 66% plus 2.5% for the extra year, or 68.5%. Stay to year 32 – the teacher gets 68.5% plus 2.6%. This escalation of .1% for each additional year continues theoretically until a teacher reaches 100% of their final average salary, which would happen at 42 years of service.

The real payoff is if the teacher stays to 35 years. In that case, the payout is set to 2.5% of the average of the three highest years times 31 years, plus 2.6% for the 32nd year, etc. This means that a teacher retiring after 35 years of service receives a pension of 88.5% of the final average salary for life.

A Hilliard teacher who retires after this school year at the top of the pay grid (Masters + 15 and 23 years) would receive an annual pension of $77,600 - for the rest of their life.

The new plan eliminates the special case for 35 plus years or service, saying "The 35-year enhanced benefit is no longer needed to encourage teachers to work longer and is eliminated."

No kidding. Even under the new rules, a Hilliard teacher retiring at the top of the grid with 35 years would still receive an annual lifetime benefit of $67,500.

The STRS Board also decided to increase contributions. The teachers will have a phased-in increase that reaches 2.5% by 2015, making the total teacher contribution equal to 12.5%. The employers – we taxpayers – will be required to increase our contribution from the current 14% to 16.5%, with a phase-in starting 2016 through 2020.

It could have been worse. I calculate that this increase in employer contribution will increase our 2020 employer contribution from $8.5 million to $10 million, and that the total extra paid from 2016 to 2020 will be $4.4 million. By 2010, we will be paying an extra $1.5 million/yr to cover this increase in employer contribution, representing 0.6 mills of tax burden. This assumes a 3% annual growth in salaries and a constant number of teachers.

Of course, this depends on how well the STRS investment managers handle the money. If they lose another big chunk of money on the investments, they'll come right back to us for more money. According their 2009-2010 Investment Plan, they still hope to make 7.7% return on their portfolio. To achieve this, they are keeping more than 60% of the portfolio in equities, and expect to make an 8.5% or more return on those. That doesn't sound like much for those who recall the go-go years of the 1990s, but remember that 60% of the fund is over $30 billion – and that's how much they're exposing to stock market risk which, as we've all seen, is more volatile and unpredictable now than it has ever been. This is against a backdrop of an economy that is unlike anything experienced before in America.

And I hope the teachers remember how they treated their investment managers – expecting them to give back bonuses they earned under a plan agreed upon by the STRS Board. My recollection is that most if not all did, as doing otherwise would likely have meant losing their jobs. Those teachers didn't care what the contract they negotiated in good faith said – they felt that if money was lost, the investment managers had to share in the pain – maybe even be punished.

Let's apply that same logic when the HEA contract is negotiated next year. Regardless of what the norm has been in the last several contracts, times are tough for many of us, and it's appropriate for the teachers to share that pain as well. It might even require some give-back.

Think about who it is that you want negotiating that contract. The same Board who negotiated the last one? Or a Board with a majority of new members who are finance, legal and management professionals?

Vote for the team of: