The Value of a Teacher: Teacher Compensation and Resulting Budget Constraints in Public Education

Student Author(s)

Anna Slemp

Faculty Mentor(s)

Dr. Peter Boumgarden; Dr. Brian Porter

Document Type


Event Date



This project theoretically and empirically explores the relationship between teacher compensation and school performance, with specific focus on the role of higher compensation leading to budget constraints at both the district and state level. We start by exploring a theoretical puzzle. Using classical incentive theory, we argue that higher compensation of various forms has positive impact on the motivation, recruitment, and retention of individual teachers. That said, we also acknowledge that compensation for individual teachers may also have a negative impact on school performance by virtue of the resulting budget constrains created by higher compensation. This is especially true with smaller districts where compensation accounts for a larger percentage of total school costs. Using data on salary schedules, pension plans, and budgets collected from 29 districts across 26 states, we calculate discrepancies between the amount of money promised to teachers during retirement and the amount of money that districts are capable of paying. We then explore the role of such discrepancies in driving budget constraints at both the district and state levels. While our findings are preliminary due to the small sample size, this research indicates that tradeoffs exist between the district and state level when determining the extent to which each should contribute funding to district budgets and teacher pensions in the short- and long-term. Preliminary results show that when states increase educational funding, thereby taking some of the burden upon themselves, districts often decrease their respective funding towards teacher compensation, a process that releases the pressure placed on the districts while serving to increase the resulting pressure on the state. This trend is evident throughout our sample and one that we intend to explore further in both theory and analysis.

This document is currently not available here.