Public school funding is at record levels, but not enough money is making its way to teacher paychecks.
Between 2002 and 2023, the average inflation-adjusted teacher salary fell despite a 36 percent real increase in per-student funding. Public schools are increasingly spending more outside the classroom, with non-teaching staff—such as instructional aides, counselors, and social workers—increasing by 23 percent.
Many factors have contributed to this staffing surge, including special education, technology, wraparound services, and administration. But it’s a real problem, given that research shows teachers are the most important in-school factor affecting student outcomes, underscoring the significant opportunity costs of this spending. There are no quick fixes, and state lawmakers face real constraints on what they can do. But they still have an important role to play in stemming the staffing surge and encouraging more strategic use of scarce resources for teacher pay. The following analysis offers ideas for how they can tackle these challenges.
Decentralize spending decisions
Requiring school districts to spend a minimum portion of their funding on teacher compensation, as Indiana does, might be tempting. But money is fungible, and no single way to allocate resources is optimal for every school district. Instead, state lawmakers should slow the staffing surge by decentralizing spending authority, giving districts—and ultimately schools—flexibility to align resources with local needs.
A good place to start is to eliminate state categorical grants that direct funding toward non-teaching staff. For example, Arizona’s $82 million school safety program funds social workers, school counselors, and school resource officers; Michigan allocates $428 million for mental health and school safety; and Minnesota spends $45 million on student support personnel to improve students’ “academic, physical, social, and emotional outcomes.” These dollars could be redirected into the state funding formulas instead.
Funding for community schools, which now make up an estimated 6 percent to 8 percent of all public schools, deserves similar scrutiny. Community schools often provide health care, adult education, counseling, and other services that require costly investments in non-teaching staff. Lawmakers in Maryland appropriated $572 million for community schools for FY 27—more than they spend on school construction and about 50 times more than the cost of the state’s program for math and literacy coaches.
Improving mental health, school safety, and other student supports are worthwhile goals. But one-size-fits-all grants prevent local leaders from making tradeoffs between higher compensation, additional staffing, and other uses of scarce resources. And while community schools address real needs, policymakers should ensure that academics, not social services, are public schools’ priority.
Next, lawmakers should audit state laws for provisions that dictate staffing inputs. For instance, Virginia mandates one school counselor for every 325 students, one librarian for every 300 students, and one assistant principal for every 600 students in high school. Arkansas has similar requirements for counselors and librarians, while New Hampshire regulates school counseling loads. Other states go even further: Idaho, West Virginia, and North Carolina have funding systems that allocate resources based largely on staffing positions and programs.
A public school deregulation agenda, while not a cure-all, would push the ball in the right direction.
Finally, states should encourage school districts to give principals more authority over budget decisions. As it stands, most school budgets revolve around staffing positions, incentivizing school leaders to advocate for additional full-time equivalents (FTEs) rather than higher teacher salaries. Expanding principals’ role in financial decision-making, including providing a mechanism to convert staffing positions into flexible compensation dollars, can make these tradeoffs clear (more on this below).
Getting the fiscal incentives right is crucial, but policymakers also need to rethink how teachers are paid.
Modernize teacher compensation
State policymakers should avoid costly, across-the-board pay bumps that do little to attract and retain the best teachers. Instead, they should reform flawed policies and try approaches that reward high performers and differentiate pay for shortage areas such as math, science, and special education.
Most public school teachers are paid on a step-and-lane salary schedule in which pay increases with years of experience and educational attainment. While research indicates that teachers tend to improve with experience (with diminishing returns after the first ten years or so), studies show that teachers with advanced degrees are generally no more effective than teachers with bachelor’s degrees.
Paying more for teachers with advanced degrees is inefficient, but data published by the National Council on Teacher Quality (NCTQ) suggest that this practice is widespread. NCTQ examined the nation’s 148 largest districts and found that 135 pay teachers with master’s degrees more than those holding just bachelor’s degrees, with novice teachers receiving $3,581 more on average and experienced teachers receiving $9,315 more.
For many states, the first step in modernizing teacher pay is a no-brainer: stop mandating master’s degree premiums. Nearly one-third of states—including Alabama, Indiana, Mississippi, Ohio, Oklahoma, and West Virginia—have such a requirement in state law, according to NCTQ. Or they could go even further and incentivize districts to phase out the practice.
Removing collective bargaining constraints, as Wisconsin did in 2011, can also help encourage innovation in teacher pay. Research suggests that giving districts flexibility in determining their compensation structure, while politically difficult, can help improve teacher quality and student achievement.
But lawmakers might also need to try more direct approaches to rewarding the best teachers. For example, Texas’s Teacher Incentive Allotment (TIA), adopted in 2019, provides performance pay that’s awarded based on locally designed designation systems using student growth, classroom observations, and other criteria. Initial research on TIA is encouraging, with researchers finding improvements in teacher retention and student achievement.
States could go even further by piloting a bottom-up model that minimizes red tape and leverages local knowledge: Send dollars directly to principals and empower them to reward their best teachers or those in hard-to-staff positions.
This might sound radical, but principals in private schools and charters routinely have more discretion over teacher pay than their public school counterparts. Great Hearts Academies’ Teacher Excellence Fund, which gives headmasters a pot of dollars to use at their discretion for teacher bonuses, offers a glimpse of what this could look like. In an era defined by school choice policies that fund students directly, Principal Empowerment Accounts might have a fighter’s chance in state capitals.
Conclusion
Public school funding has risen drastically in the last couple of decades, but dollars are increasingly going toward non-teaching staff rather than teacher salaries. If state policymakers want to slow staffing growth—and redirect dollars toward teacher paychecks—they can start by decentralizing spending decisions and reforming how teachers are paid.
