This IS an emergency

I fly fairly often, both in state and cross country. On a recent return from Washington, D.C., I had an early morning flight which was delayed for several hours. I was tired and as soon as everyone was aboard the plane, I closed my eyes and tried to relax. The flight attendants began their routine with the seat belts, oxygen masks and flotation devices. I smiled, thinking of a comic I once heard who asked if there really was anyone who does not know how to buckle their seat belt. The routine was developed by government regulators and corporate elites who have never actually done the job they are regulating and with a condescending attitude toward those doing the job. After all, flight attendants just serve you drinks and tell you to buckle up, right? I was on a plane with a landing gear which did not lock and was expected to collapse as we touched down. I saw another side to flight attendants as those professionals coolly moved about the plane preparing people for a crash landing. Heroics were again on display as the flight crew safelyevacuated the passengers from the plane that recently went down in the Hudson River. So be nice to the person serving you on a plane. In an emergency, they will be the one who saves your life.

This penchant of regulators not listening to practitioners is rampant in public education. While I was in Washington, D.C. the Senate was debating the stimulus package passed by the House. Some of the money would go to education. Because of shortfalls in state revenue across the country, educators are being laid off. Many could lose their jobs at the end of this school year due to a lack of funds, not a lack of students. The federal stimulus package was supposed to help. The Senate deadlocked and it looked like they were cutting education funds, which means they would be laying people off while they say they are creating jobs. Ideology trumps peoples’ lives. I don’t recall any flight attendants or classroom teachers being elected to the Senate, or being asked to develop help for the economy, but if there were, peoples’ lives would trump ideology.

At the start of our legislative session, a group of educators and their district administrators gathered across from the capitol building in Olympia urging legislators to listen to them. Calling themselves the Twin Harbors Coalition, they tried to educate the legislators not to “cut the solution” in dealing with the current economic crisis. Speaker after speaker called on legislators to “first, do no harm.”

The response from Olympia? A group of legislators from a committee that was formed for the sole purpose of addressing our education funding problem decided to drop the ball. Ignoring the funding issue and deliberately excluding educators, they introduced a bill that neglects funding and touts education restructuring that amounts to little more than rearranging the deck chairs on the Titanic, and would cut funding and teacher pay. We already underfund our schools. Washington is 45th in per pupil spending and we pay our teachers significantly below the national average. There is no fat. Additional cuts are into flesh and down to the bone. If the goal is to increase class size, chase educators out of the profession, and diminish the quality of public education in Washington, they are right on target.

I understand this is an emergency. Who do you trust your children to in an emergency? A professional who dedicates his or her life to them, or …? I trust my children’s education to the professionals.

Evaluations

Recently, I attended a seminar at Callan College on being a trustee of a pension fund. Part of the training involved evaluating fund managers. Fund managers are the people you hire to invest the money in your trust fund. The instructors stressed how easy it is to be swayed into only looking at how much gain those managers have made over an annual or five-year basis, but that it is a mistake to evaluate only on quantitative measures. The qualitative factors are much more important, even though they are harder to evaluate. Some of the top fund managers have down times which are beyond their control.

It reminded me of people who are so short-sighted they want to evaluate teachers only on student test scores. They count only what is easy to measure and miss the most important factors. I’ve heard lots of people talk about the teacher who made a difference in their lives and I never heard any of them tearfully remember how Mr. Smith raised their test scores.

At the end of the training, there was a final exam. We students were divided into small groups to act as boards of trustees for pension funds. Each “board” was given a scenario which required us to make several decisions using the skills and principles we had acquired during our training. We then orally presented our decisions before a panel of judges consisting of our trainers.

Part of my group’s scenario involved hiring a fund manager and deciding on a fee. One option was a flat fee and the other was a smaller base fee with bonuses dependent on the amount of fund gains above a set minimum growth. Most of my group felt the bonus fees would encourage the fund manager to do better. I forcefully argued that we were hiring a professional and paying him a reasonable fee to do his best. Paying a bonus would end up costing us more without giving us more than a manager should be doing anyway. Upon evaluation, if we felt the manager was not doing what we felt was the professional work expected of him, he should be fired. If we needed to pay a bonus to get him to do what he was supposed to do, then we were not doing a good job of evaluating. As fiduciaries we should not be paying more than we needed for his best results.

Since I argued so forcefully, the group insisted I make the presentation to the judges. I was nervous. I understood that in the current business model, bonus is king, so I braced for the rebuke. But I believe you must stand on your principles, so I presented to the judges the same as I spoke to my group.

As I finished, the room was dead silent. Suddenly one of the judges slapped the table in front of him and exclaimed, “Absolutely correct! Never agree to a performance bonus!” To the nods of his fellow judges, he explained that paying a bonus will entice a fund manager to skew your fund assets toward earning the bonus, and then when the market makes a minor turn, you will end up with massive losses. You want a well-rounded, diverse portfolio. A bonus tends to skew your portfolio narrowly toward maximizing the bonus leaving you, as a trustee, worse off.

I was stunned. As I sat down, all I could think about was where are these people in the debate about tying teacher pay to test scores? We say we want our students to receive a well-rounded education but all we talk about are test scores in reading, writing, math and sometimes science. And the new mantra is to skew things even more by paying a bonus mislabeled as “merit” pay. It should be called what it actually is – child abuse. It denies students a well-rounded education and sets them up for difficulties later in life.

But who am I to criticize those titans of industry who depend on golden parachutes and manipulations to enjoy a bonus based on this quarter’s return? They brought us the financial miracle we see in our 401k accounts. Or, perhaps we need to reconsider…