Estimates of maximum cost

Using the plan outlined above, we can generate estimates of the maximum cost of a merit-pay bonus program in a particular district. These maximum costs will not be realized in a well-designed pilot program. Such a program will differentiate between the best and worst teachers, rendering it unlikely that all teachers and personnel will receive the maximum bonuses of $10,000, $7,000 or $3,000. In that case, the annual cost of the program will be considerably less than the estimated maximums we calculate here. And as noted earlier, a district and a private foundation have good reasons to consider including only some district schools, rather than all, in the program. Thus, our estimates below assume only half of the district’s personnel are involved.

We look first at the Grand Rapids Public Schools. In full-time-equivalent figures in 2007, the district had approximately 1,327 teachers, 456 paraprofessionals and 167 administrators.[57] Although these are not the actual number of people in each group, we will treat the figures as if they were (we are generating only an estimate, but a simple head count would allot too much to part-timers).

Publicly available data do not tell us how many of the teachers would be core teachers and how many would be noncore teachers, so we have generated a lower-bound estimate on the maximum cost by assuming all teachers are noncore (earning a maximum of $7,000) and an upper-bound estimate on the maximum cost by assuming all teachers are core (earning a maximum of $10,000). A rough projection of the test cost is made by assuming the $14 cost of an NWEA test[*] for all of the district’s 18,748 students.[58] Hence, the total maximum annual cost of a merit-pay bonus program in the GRPS would range between approximately $6.2 million and $8.2 million. The maximum annual cost per student would range from $330 to $436.

Similar calculations for the Fennville Public Schools[59] — a smaller, rural district with uneven test scores — indicate the total maximum cost would be between $464,000 and $617,000, with a maximum cost per student of $308 to $411. Again, the actual costs of both the Fennville program and Grand Rapids programs would be lower, since not all teachers, administrators and other personnel would earn their maximum possible bonuses.

[*]The $14 per-student cost is a reasonably accurate estimate for the kindergarten through 10th-grade students taking the NWEA exams. The cost of exams for 11th- and 12th-graders would depend on the assessment chosen by the program administrators, but given that 11th-graders already take the Michigan Merit Exam, the additional cost might be as low as $0 for 11th-graders. A $14 cost for 11th- and 12th-graders is therefore probably a reasonable estimate of the maximum cost.