Teacher Merit Pay in Ohio

The Buckeye Institute for Public Policy Solutions

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Ohio policymakers have made improving the state’s education system a top priority, but reforms enacted so far have had marginal effects. While improving the quality of the state’s teachers is one reform that holds promise, efforts towards this goal have been extremely limited.

To address the problems of recruiting exceptional new teachers, retaining the most successful ones, and improving the current teaching workforce, merit pay systems are emerging in Ohio and other states.

Some merit pay plans are impractical for widespread implementation because they require an institutional capacity that does not exist in many schools. However, merit pay does not necessarily require a total overhaul of the current way teachers’ salaries are determined.

In fact, practical and sustainable merit pay plans can be achieved through an injection of market-based incentives–that is, the introduction of bonuses as rewards for excellence. The practical bonus-for-performance system will work with the existing workforce and can be put in place without significant increases in education spending.

Specifically, teachers could receive bonuses of up to $10,000, $7,000, and $4,000. Variation depends upon subject taught, professional responsibilities, supervisor evaluation, and student achievement. The central feature of the prototype plan is that the largest portion of the potential bonuses is based on measures of individual classroom growth and school-wide growth.

As research suggests, a well-designed merit pay program, like the one proposed here, can increase the quality of teachers, improve educational outcomes, and facilitate an environment of collegiality and cooperation among teachers

The Problem

Attempts to improve educational opportunities for rich and poor alike have included across-the-board funding increases, changes to the funding formula to create more equity, facilities improvements, the introduction of school choice programs such as vouchers and charter schools, and other smaller programs and policy changes. In the search for promising solutions, education stakeholders have also looked at ways to improve teacher quality.

Although it is now common wisdom that teacher quality matters for student success, most education reforms to date have failed to address problems of recruiting exceptional new teachers, retaining the most successful ones, or improving the current teaching workforce. Changing the incentives offered to teachers as part of their compensation packages is one promising reform.

Currently, most school districts in the United States compensate teachers using the traditional “single-salary schedule,” which bases teacher pay primarily on seniority and the number of higher education credits attained. Introduced in 1921, the single-salary schedule is used in nearly all Ohio schools, with the exception of schools participating in the Teacher Advancement Program (TAP). If lawmakers are truly committed to improving education, they should seriously consider how instituting merit pay reforms can elevate teacher performance.

To be sure, other reforms to teacher compensation have been tried, including across-the-board salary increases and need-based differential pay. Neither of these two options, however, improves the ability of districts to recruit, retain, and reward more effective teachers.

Across-the-board increases have not led to meaningful gains in student achievement. While pay raises might lead to greater teacher satisfaction and might help schools recruit higher quality teachers, they do not motivate teachers to improve their performance or examine their teaching practices. In Ohio, for example, increased spending on schools’ instructional budgets has not led to higher student achievement.

Need-based differential pay, sometimes called “combat pay,” offers higher salaries to teachers in understaffed subjects and schools. While the principle of letting labor markets determine teacher pay in these circumstances is an improvement to the status quo, differential pay fails to provide any incentives for existing teachers to innovate or work harder.

The Solution

Because “merit pay” is a very general term describing a wide variety of plans, it is important to identify what merit pay is and what it is not. Such plans, also known as “pay-for-performance” or “incentive-based” compensation plans, have been tried since the 1800s, but have varied greatly. Quality merit pay plans are compensation systems that reward teachers for improving student achievement and receiving high marks from supervisors. The central idea of merit pay is that monetary bonuses linked to student achievement do far more to improve instruction than increasing teachers’ salaries because they participate in extra classes at the local college.

The merit pay plan proposed for Ohio is rooted in the principles that self-interest brings about desirable outcomes and that market-based reforms can improve educational environments.

While some merit pay plans can have shortcomings, those that are well-designed and based on individual student achievement growth, rather than absolute achievement, have proven effective. The use of individual student achievement growth recognizes that not all classrooms are the same. That is, bonuses are based on the value added through teachers’ efforts rather than on which students are assigned to their classrooms. Basing awards on growth also takes into account the fact that students start at different points.

Since one goal of the prototype plan is to create incentives for teachers to collaborate and build a positive school environment, all instructional personnel in a school are eligible for bonuses. Moreover, a portion of every teacher’s award is based on improvements in student achievement growth school-wide. At the same time, the largest incentives should be given to those teachers who have the greatest direct impact on student achievement.

Under this proposal, core teachers are eligible for up to $10,000 in bonus pay. The largest portion of that (80%, or $8,000) is based on student achievement growth. Non-core teacher’s maximum award might be $7,000 rather than $10,000, with 80 percent ($5,600) based on student achievement growth. The other 20 percent is based on supervisor evaluations.

There are also important distinctions between different types of non-core teachers. The reading specialist, for example, likely has a greater impact on student outcomes than a teacher’s aide, and should be rewarded as such. Therefore, in this proposal, non-core educators with a smaller direct impact on student achievement could only earn a maximum total award (student achievement and evaluations) of $4,000.

For core teachers, such as math, science and language arts teachers, half of the portion of their award which is tied to student test performance would be based on the improvement of students in their classrooms, and half would be based on overall school improvement. For non-core teachers, such as art, physical education, or support teachers, the portion of their award which is tied to student test performance would be based completely on overall school improvement. Apportioning rewards in this way, while also providing a higher potential maximum award to core teachers, ensures that those with the most responsibility for key academic subjects receive the highest incentives without neglecting the contributions of other personnel.

Student improvement is calculated according to gains in standardized test scores. For example, a prior year’s test score could be subtracted from the current year score to get the individual student’s growth score. The average classroom growth for a core teacher could be calculated by adding up student growth scores and dividing that sum by the number of students. A minimum of five students would be required. The same calculation method could be used to determine school-wide growth.

Principals are also included in this plan to give them incentives to hold teachers accountable. If principals earn awards based on the effectiveness of their teachers, as measured by student test score gains, they will have an incentive to evaluate teachers fairly, thus obviating the temptation to award low-performing teachers with good reviews. Moreover, principals would have extra incentives to be active instructional leaders. Generally, principals would be eligible for the maximum award available for key non-core personnel, or $7,000.

Across all personnel types, 80 percent of award money would be based on student improvement, and the remaining 20 percent would be based on supervisory evaluations. These evaluations address concerns that standardized tests alone cannot capture all of the positive effects that teachers have on children.

School principals would clearly communicate their expectation to teachers at the beginning of the year, and then evaluate each teacher several times per year. Each teacher earning the highest possible rating on the evaluation would earn the maximum award while other teachers would earn an award on a sliding scale.

Principals and assistant principals would also receive evaluations from the super intendent or the appropriate supervisor.


Many merit pay plans require an administrative capacity and a particular type of teaching staff that most schools do not have. Although such merit pay plans can do much good, they require a substantial increase in both leadership capacity and manpower hours. Furthermore, they can be expensive to implement. The funding for the awards in this prototype plan, however, could come from currently planned budget increases. For example, Ohio’s Columbus Public School district increased its spending for teacher salaries by 17 percent from the 2004-05 to 2005-06 school years, going from $164,708,060 to $192,267,231. Setting aside just 4 percent of this increase for a merit pay program would have provided over $1 million for performance-based bonuses.

Although a few states and localities use general operating budgets for merit pay bonuses, much of the funding comes from private foundations. The federal government has also made approximately $100 million available through its Teacher Incentive Fund (TIF). To obtain these competitive grants, applicants must design plans that are heavily based on student achievement growth. The first year of awards was for the 2005-06 school year, so outcome data are not yet available. Recipients of TIF grants include school systems in Denver, Chicago, Houston, California, and New Mexico. The NEA “strongly opposes” the program.

The Benefits

This merit pay plan creates positive incentives for effective and innovative teaching by using growth scores to measure student performance. Student ability is taken into account, and teachers are rewarded not for the types of students they have but for the value that they add to the student’s education. The use of average school-wide growth offers positive incentives for collaboration among all staff members in a school.

The plan recognizes that bonuses should be based primarily on improvements in student performance, while acknowledging that supervisor evaluations also provide important measures of teacher performance. This plan offers a meaningful and fair way of allocating bonuses without requiring any radical changes to existing school compensation.

Quality merit pay plans such as the one outlined here can also help with teacher recruitment by attracting higher quality undergraduates to the teaching profession.

Policy experts who study teacher compensation have found that teacher collaboration can increase in schools with well-designed merit pay plans. Current pay structures, by contrast, do not have any incentives that promote collaboration.

One prominent study released in late 2006 by researchers at the University of Arkansas found that teachers in participating schools had greater salary satisfaction, a more positive school climate, and higher student test scores. Another 2006 study by researchers at the University of Florida found that “test scores are higher in schools that offer individual financial incentives for good performance.” Similar examples of merit-pay success exist elsewhere in the country.

Applicability to Massachusetts

Despite sometimes vociferous objections from teachers’ unions and other reform opponents, educators and policy makers are increasingly recognizing the benefits that merit pay can offer. Currently, forms of merit pay have been tried in states as diverse as Arkansas, Colorado, Florida, Minnesota, South Carolina, Tennessee, Texas, and Utah. The Milken Family Foundation’s Teacher Advancement Program (TAP), a voluntary merit pay program, is running in thirteen states, including Ohio. Like other states with pockets of particularly low performing schools, Massachusetts is a prime candidate for a merit pay program such as the one proposed here.

The implementation of a small-scale merit bonus pay program in Massachusetts would not require a major cultural shift in the education system. The state has enacted strong accountability measures, and there is widespread acceptance of judging the effectiveness of schools by their academic performance on state exams. A natural extension would be to begin to tie part of school employees’ compensation to performance on state standardized tests.

Contact the Author:
Matthew Carr
Education and Policy Director
The Buckeye Institute
88 East Broad Street, Suite 1120
Columbus, OH 43215
614-224-4644 (fax)
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