June 2010 Dear Friends: Performance-based compensation must be financially sustainable.   Yet there is perhaps no part of compensation reform that is more regularly abused than the approaches to long-term financial sustainability. The history of pay for performance is replete with projects that have been terminated for lack of funds. These are recurring examples of poor policy and misguided practice.   If performance-based compensation is tied to student achievement, and achievement increases over time, it will cost more than current approaches to teacher compensation based on steps and ladders. Moreover, the source for long-term financial sustainability is public dollars.   Planning for long-term financing should begin at the start of the initiative and continue throughout subsequent phases of implementation. It should take into account costs above and beyond those that go directly to compensation changes such as the costs of building new data systems, developing or acquiring new assessments, and expanding professional development opportunities.   When preparing for financial sustainability, it's essential to use human resource and financial modeling to anticipate what the changed teaching force will look like over a period of years and what these changes will cost. District and union association leaders need to be well prepared to make decisions based on information related to feasibility, effect on the teaching force, cost consequences, and financing options.   To learn more about transitioning to a new compensation system, sustaining the system, and doing business differently, please refer to this section on financial sustainability from It's More Than Money: Making Performance-Based Compensation Work and visit CTAC's Institute for Compensation Reform and Student Learning. If you are interested in developing the capacity to prepare for financial sustainability or want to discuss your TIF application, please contact CTAC at (617) 423-1444. Best Regards, William J. Slotnik, Executive Director Community Training and Assistance Center (CTAC) CTAC builds capacity and addresses root causes of poverty at local, state and national levels by providing technical assistance, conducting research and evaluation, and supporting public policy initiatives. In the area of performance-based compensation, CTAC has provided assistance to numerous school districts, states, unions, and foundations, including serving as the technical assistance provider to Denver's landmark Pay for Performance initiative and conducting the comprehensive study of the initiative. In the area of underperforming schools and districts, CTAC has built the capacity of numerous urban districts and states to improve student achievement through data-informed accountability, site and district planning and management, and increased teacher and administrator effectiveness. www.ctacusa.com