Should NJ really try to be like DE, MD, MO, GA & WA?

Posted on October 3, 2009

I had relatively modest expectations for the Gannett series in New Jersey on state taxes to begin with. Sadly, this series managed to fall way short of these expectations by trying too hard to construct the point that New Jersey’s taxes are simply way out of line and that, for example, NJ would much better off if it behaved like all of those  smart, business friendly states out there like Delaware, Maryland, Missouri, Georgia and Washington. These states are indeed strange bedfellows.

First, lets get some numbers squared away. I like the fact that this article listed in the right margin, the average state and local per capita taxes, the average state per capita expenditure, and the average per capita income. Note that this second number should have been state and local spending. More importantly, the article failed to do the last calculation and related ranking – state and local taxes as a percent of personal income (perhaps I missed it). That is, how does our effort compare, given our income?

Typically, when looking at taxes as a share of income, NJ is not among the top few states. Above average, yes, but not the top. More specifically on the question of public education spending… state and local… NJ does rank second in the percent of Gross State Product spent on K-12 public school districts. By the way, Vermont is way ahead of us. But, as I have previously argued, to a large degree though not entirely, you get what you pay for. And the five states listed in the article as model states seem to get what they pay for.

On this previous post, I explain how “small business friendly” states tend to have particularly weak public school systems, if we assume small business friendliness to be only a function of low taxes and not high quality services.

As far as I’m concerned, having good schools is probably a critical element of business friendliness at least if you have any dreams of recruiting and retaining well educated employees who want their children to also be well educated.

So, what about those miraculous low tax states identified in this article? Within their regions, all but Georgia (which has less competition for bragging rights, and is relatively average) have relatively poorly funded public education systems and to a large extent, the outcomes to go with it.

Delaware has the lowest percent of school aged children even in the public school system. Only 77.6% of 6 to 16 year olds in Del. attend the public schools according to American Community Survey data from 2005 to 2007.  Delaware’s education spending, however, is relatively average or slightly better than average among states (after adjustments for competitive wages, size, location and relative poverty) and its outcomes are relatively average too. Yes, NJ spends more on schools than Delaware, and NJ serves a large share of its children in those schools, and NJ children generally outperform DE children on a variety of assessments.

Quite surprisingly, Washington operates one of the least well funded state school finance systems in the nation. And Washington provides negligible additional support for higher poverty and urban schools (not always one and the same). And, Washington also does less well on outcome measures.

(I have some graphs here from an earlier post on LA and MS:

Yes, within region, combining South Atlantic and Gulf Coast states, Georgia is relatively well funded (though again, not supporting poor and urban districts) compared to its peers and does outperform many states in its low performing region. But, Georgia performs much less well than NJ (okay… not a fair comparison… but that’s partly the point). GA also performs less well than Texas or Kentucky for that matter (in graphs in LA & MS post above).

Missouri, like Pennsylvania has made some efforts of late to straighten out their school funding mess into a more logical formula. But the fact remains that poor inner urban fringe and poor rural districts in Missouri have been starved of educational resources for decades and have the outcomes to match. On average, Missouri falls into that consistently below average category on inputs and outcomes. The bigger story in Missouri are the disparities – not so much with the major urban centers themselves (though they are part of the picture) but with those others noted above.

Maryland is another state with fewer than 80% of 6 to 16 year olds even in the public school system. Maryland’s spending is relatively average as are its outcomes. Which is, perhaps fine for Maryland.

By contrast, as I have pointed out here –

New Jersey, perhaps in part because of its high investment in public schooling – a major public expense, has strong performance measures either compared against other states or if treated as a separate country as I discuss in my previous post. Yes, much is cyclical here. NJ is a richer and more educated state that, as a result, values education and has the money to pay for it, compared to these states.

Do we really want to be like DE, MD, MO, GA or WA? I do like the seafood in WA better. I just moved back to NJ (no not the other way) from living a few yards away from the state line with MO and had the pleasure of both working for MO on their formula redesign and testifying against them on the remaining disparities. But I’m glad to be back.

Sadly, I think that one of the main things that would be learned from mimicking the taxing behavior of these states is that you can have lower taxes if you simply want to sacrifice the quality of your public services – primarily public education.

That said, I will continue to rant against certain major organizational inefficiencies in New Jersey public schooling and government services – that is, the multiple municipal madness issue, which I have written about and speak about (slides here)

Indeed there is real progress to be made on reducing organizational inefficiencies in local governance. I’m not sure that I hold out much hope for resolution here.


PS: I hope at some point in the near future to post some detailed numbers on the characteristics of individuals moving into and out of NJ. Last I checked, while there were net exits of middle to lower income families, there was a net inflow of individuals with graduate level education. This would conflict with the unfounded rhetoric I heard spewed on the radio the other morning that NJ is losing all of its hard working small business types and replacing them will undocumented immigrants. Then again, the undocumented part may be a bit hard to track.

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