Suing for your supper? Teachers’ compensation, rents and finance lawsuits

Despite a large literature examining the effect of litigation on education finance, student achievement and community outcomes, relatively little attention has been paid to the effect of this litigation on teachers’ compensation. This is especially puzzling given the role that teachers unions play in supporting, and sometimes originating finance lawsuits. In fact, union support for finance lawsuits may be partly motivated by the possibility of obtaining what amount to court ordered pay increases for union members. This paper looks at the effects of high court finance rulings on school districts’ categorical education spending including the teacher wage bill. I also decompose the change in the teacher wage bill into a quantity effect from hiring new teachers and a price effect due to raising wages. I find that the largest categorical spending increase comes from rents captured by existing teachers in the form of pay increases. This also suggests that school finance litigation is unlikely to be an efficient way of raising student achievement.