The Indiana House of Representatives proposed eliminating all performance pay grants for teachers, which would exclude a total of $40 million that would go to Indiana’s well-performing educators. Under the House draft budget, however, no teachers at all would receive financial awards in 2017. The state's department of education, intent upon rescuing the funding for teacher performance grants, went into action to develop a fairer and more objective alternative and reached out to the Great Lakes Comprehensive Center at AIR to:

• analyze the current Indiana performance pay formula and any design flaws;
• research examples from other states; and
• develop ideas for revising the formula.

This begged the following question: What are evidence-based criteria for effective teachers? The turnaround of this request needed to be speedy given the legislative calendar provide—two weeks—so that the department could provide evidence to the state Senate for their consideration in reinstating the performance bonuses. Does this constitute lobbying on our part, and could it put AIR as a nonprofit organization at risk?

The Comprehensive Center team quickly analyzed the formula and pinpointed two major concerns. First, the formula was used to distribute funds based on school performance rather than teacher performance. If a school did not meet certain performance or graduation requirements, it did not earn money—even if teachers in that school had some of the highest achieving students in the state. Second, the formula did not include student performance in nontested subjects. This meant, for instance, that an effective social studies teacher could not directly affect the district allocation.

Within a week, Center staff shared these concerns with the Department and created a simulation model using teacher and student data for every district, which showed the equity implications of multiple alternatives. Department staff could use the model to test various scenarios, set a total allocation for the grant, determine weights for district allocations and teacher distributions, and choose an allocation method. The formula options were based on the number of districts, the number of teachers in each district (by rating), or the number of students in each district. The simulation displayed how much money each district and each “highly effective” and “effective” teacher in each district would receive based on the variables. The Comprehensive Center demonstrated this simulation model to the Department two weeks after the initial request, and the Department took it to the Senate the same week.

The Indiana legislature passed the state budget in April 2017, which included $30 million annually for teacher appreciation grants. Each district will receive an amount based on average daily membership to allocate to highly effective and effective teachers

In responding to this urgent request, the Center immediately leveraged the expertise of AIR finance and resource allocation experts, who provided the national context and shared promising approaches used in other states. Most importantly, the Center was able to quickly create an interactive tool—not just a report—that could model multiple scenarios for Department leadership to explore. With this tool, Department staff and legislators could precisely see the impact of changing the formula, enabling them to modify the reward criteria to afford greater performance pay equity among teachers throughout the state.