Michelle Rhee’s Failing Report Card

Michelle Rhee gained notoriety as the chancellor of DC’s public schools under Adrian Fenty’s administration from 2007 to 2011. Her conduct in this position was one of the main reasons he was not re-elected. Among other things, she publicly took pleasure in firing large numbers of teachers and administrators. Incredibly, she also claims not to have realized that high stake testing would provide incentives for teachers or administrators to cheat on the scoring of exams.

Since she left the DC school system she started a new organization, StudentsFirst, which was created to push for the sort of changes to the school system she sought to implement as chancellor. The organization received considerable media attention for a report card it issued on the public school systems in the 50 states earlier this week. While most of the items on the report card were part of an educational agenda of questionable merit (see Diana Ravitch’s blog for specific critiques), one item had nothing to do with education whatsoever.

Rhee’s report card gave schools a failing grade if teachers received a defined benefit pension (worse if it was backloaded). The school system gets an “A” in this category if teachers only had a 401(k) type defined contribution plan or a cash balance account.

Pensions are now and have historically been an important part of teachers’ compensations. Teachers, like most public sector employees, are paid less in wages than workers in the private sector with comparable education and experience. They make up much of this gap with a better benefit package, including better pension benefits, than workers in the private sector receive.

Given this reality, it is difficult to see how students are helped if a school system replaces a defined benefit pension that guarantees teachers a specific level of income after they retire, with a defined contribution plan, where retirement income will depend on the teachers’ investment success and the timing of the market. Since state governments don’t have to care about the timing of market swings, only overall averages, assuming timing and investment risk is an important benefit that governments can provide their workers at essential zero cost. A defined benefit pension will make a job more attractive to workers than if the state gave teachers the same amount of money in the form of a contribution to a 401(k) account.

In short, Rhee’s report card means that states get credit for making their teachers more financially insecure without saving the government a penny. This position might coincide with a business agenda to eliminate defined benefit pensions, but it is very difficult to see how it will improve our children’s education.