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Published in Print: October 16, 2002, as Court Orders Tennessee To Level Teacher Pay

Court Orders Tennessee To Level Teacher Pay

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Tennessee's supreme court ordered the state last week to find a more equitable way to pay teachers, creating a quandary for lawmakers and the next governor that may cost the cash-strapped state hundreds of millions of dollars.

The five-judge court ruled unanimously Oct. 8 that the state's contributions for teacher pay produce such wide disparities in salaries that poor, rural districts cannot compete for and retain well-qualified teachers, and thus cannot provide the equal educational opportunities required by the state constitution.

It ordered the legislature to find a fix.

According to some estimates, the decision could cost the state up to $450 million or more a year.

"There's no question it's going to have a very powerful impact on the state budget, and is going to require a very substantive change in the way teachers are paid," said Jerry Winters, the government-relations director for the Tennessee Education Association.

The decision represents the third time that the high court has ruled in the case, which was filed in 1988. In 1993, the court declared the school finance system unconstitutional, ruling that it shortchanged rural districts. In a second ruling, the court conditionally approved the state's plan to fix the funding formula.

Last week's decision reverses a lower-court ruling on teacher salaries, which pitted a group of small rural districts against its large urban peers. The supreme court held that the current system of financing teacher salaries, which offers supplements to poorer districts based on the 1993 average salary of $28,094, was flawed. Tennessee's current average salary is about $38,000.

"It is clear that the target salary in this equity plan bears no relationship to the current actual cost" of teacher salaries, wrote Justice E. Riley Anderson, the lead justice in the case. Further, the plan contains no consideration of the costs of recruiting and hiring teachers, he wrote.

The first decision in the case resulted in an overhaul of the school finance system, called the Basic Education Program, a decade ago. Under the BEP, the district's tax base is calculated, and schools with fewer sources of revenue get extra state aid. Districts cannot use BEP money to raise teacher salaries. Tennessee's current salary-equity plan was adopted in 1995. Several urban districts, worried that the state would decrease their funding if the system was changed, joined the state as defendants to support the plan.

Tax Resistance

This latest court battle comes against a backdrop of financial wrangling in the state capital. The legislature struggled to craft a fiscal 2003 budget that pays for education at the court-ordered BEP levels without enacting a new income tax—a move vehemently opposed by anti-tax groups.

Over the past three years, lawmakers have borrowed from the next year's budget and raided the state's tobacco-settlement fund to make ends meet.

This year, after a standoff that resulted in a three-day government shutdown, the legislature passed a plan that increased the state's sales and business taxes.

Under the fiscal 2003 budget of $20 billion, funding for education stays mainly at last year's levels, but educators will get a 2 percent raise beginning in January. ("Tenn. Budget Crisis Is Lawmakers' Pet Project," June 19, 2002.)

Though the state is depleting emergency funds, both major candidates for governor remained in opposition to an income tax and to a hike in other taxes following the court decision last week.

U.S. Rep. Van Hilleary, a Republican, believes no new taxes will be needed to meet the court's teacher-salary demands. Frank Cagle, a spokesman for Mr. Hilleary's campaign, said that a plan could be phased in over two or three years using new revenue from this year's tax increases.

"We think the [$450 million] estimates may not be realistic," he said. Even if that figure is realistic, "it's not that great a blow to the state's fiscal picture," given the size of the total state budget, Mr. Cagle added.

Democratic gubernatorial candidate Phil Bredesen, a former mayor of Nashville, has declared the income tax a dead issue and says the state simply should spend more wisely. He said the state could rewrite its plan for teacher salaries, a move that he estimated would take three to five years to implement.

"We should not consider this a problem, but an opportunity to revisit the funding formula," Mr. Bredesen said in a statement.

Short of a major economic recovery, budget issues will haunt whoever succeeds outgoing Republican Gov. Don Sundquist, predicts James W. Guthrie, a professor of public policy and education at Vanderbilt University, in Nashville.

"It won't have any impact on the current gubernatorial election, because both candidates have pledged no taxes," he said. Once in office, though, Mr. Guthrie said, "some candidate is going to have to wrestle with this, along with the other [state budget] deficit."

Room to Improve

Several schools groups, worried that Tennessee is losing teachers to other states, want the legislature to use the Southeastern regional average, instead of the lower Tennessee average, when calculating its contribution to teacher salaries.

According to TEA data, the average salary for teachers was $37,431 in the 2000-01 school year, the latest figures available. The Southeastern average was $38,322, while the national average for that year was $43,335.

Sometimes, however, teachers can make $12,000 or $14,000 more by driving across county lines, Mr. Winters of the teachers' union said. Tennessee also loses teachers to neighboring states, where salaries are higher.

Overton County, one of the plaintiffs in the Tennessee case, has seen dozens of teachers move to Kentucky and other places with higher salaries, said William L. Needham, the superintendent of the 3,250- student district.

Mr. Needham said his satisfaction with the court's new ruling is tempered by the reality of the budget crisis and wariness over how lawmakers will handle it.

"Everybody's a little unsettled right now on what might happen," he said.

Vol. 22, Issue 7, Pages 17,19

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