Expert urges Wyoming to update ECA and RCA, propose 2025 hedonic wage index
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Summary
Lori Taylor, head of the Department of Public Service and Administration at Texas A&M University, told the Select Committee on School Finance that Wyoming should update both its external cost adjustment and its regional cost adjustment, using Wyoming‑specific wage indices for labor and Bureau of Economic Analysis measures for energy and materials.
Lori Taylor, who identified herself as head of the Department of Public Service and Administration at Texas A&M University, told the Select Committee on School Finance that price differences across time and place mean "cost adjustments are an essential part of any funding formula that a state wants to implement in order to achieve equity with respect to real resources." Taylor spoke to the committee on behalf of an updated methodology for Wyoming's external cost adjustment (ECA) and regional cost adjustment (RCA).
Taylor recommended keeping separate ECAs for the funding model's four components — professional staff, nonprofessional staff, supplies and materials, and energy — but updating the measures used to track inflationary pressures. For labor she recommended continuing to use Wyoming‑specific comparable wage indices developed for the state rather than the Consumer Price Index, which she said "would have understated substantially the inflationary pressures that historically have been facing Wyoming." For energy and materials she recommended using the Bureau of Economic Analysis (BEA) chain‑type price indices specific to the educational services industry rather than a composite of producer price indices.
The second focal point of Taylor's presentation was the RCA, which currently takes the larger of the Wyoming cost of living index (WCLI) and a 2005 hedonic wage index. Taylor said the 2005 hedonic index is outdated, citing its reliance on two years of data and cost factors that no longer match Wyoming's economy. She argued the WCLI "tends to overweight housing" and does not adjust for local amenities, producing results that can overstate the cost of hiring in attractive places.
Taylor proposed replacing the RCA's three‑way design with a 2025 hedonic wage index recalibrated using more and newer data: six years of compensation records, improved measures of geographic isolation (road distances), updated non‑teacher wage data from NCES, and controls for teacher characteristics and non‑teacher assignments. She said the updated hedonic index could be calibrated to be revenue neutral at the state level or to any specific district and added that "20 years is a long time to go between updating these" indices; she recommended a process for periodic updates.
Committee members and legislators asked about treatment of outliers, particularly Teton County. Taylor told the committee her model includes an indicator for Teton County to prevent a single outlier from distorting estimates for other districts and said the updated model ‘‘explains 96% of the variation in teacher compensation in the state’’ for the data used to estimate it.
Taylor concluded by urging the committee to adopt Wyoming‑specific labor indices for the ECA and to replace the three‑part RCA with a regularly updated hedonic wage index to better align funding with the variation in hiring costs across the state.
The committee received follow‑up public comment on the RCA during the session’s public comment period, including district business managers and Teton County officials who described how housing and local compensation practices interact with any change to the RCA.
