Just the Facts: NJ Taxes, Teacher Salaries and Spending “Fluff”

Posted on March 17, 2010



Download PPT Slides (UPDATED): jersey-taxes-and-teacher-wages_r6

I’ll do my best not to editorialize too much here. Just the facts. Just a few slides in order to clarify where New Jersey stands in terms of taxes, long run economic position and growth, teacher salaries and the allocation of resources in school districts. These slides are in response to claims that;

  1. New Jersey is the most taxed state in the nation,
  2. our taxes are driving our economy into the ground and we’re falling way behind all other states,
  3. our teacher salaries which are completely out of control are the reason why our taxes are out of control,
  4. school districts don’t have to cut teachers to get their budgets in line because school districts waste most of their money on administration anyway.

Of course, these last two claims are entirely inconsistent, but often spouted by the same pundits (primarily talk radio).  If escalating teacher salaries were the cause of escalating costs, then teacher salaries – or teachers themselves – would need to be cut.

A few take home points from the slides below are:

Taxes

a) New Jersey is not, in fact, the highest taxed state in the nation. Our property taxes are high, but our income and sales taxes are modest by comparison. We’re also not number one in property taxes when all states are considered and when property taxes are measured as a percent of income.

  • Note: There has been much media buzz this week about this report: http://www.taxfoundation.org/files/f&f_booklet_20100325.pdf which identifies New Jersey as #1 on this supposed same measure for 2008 (See Table 2). The cited source for their information is their own report, footnoted as: Tax Foundation Special Report, No. 163 (from August 2008: http://www.taxfoundation.org/files/sr163.pdf.) Table 1 of this report cites advance estimates of 2008 data which would appear to be from the same sources I have used. BUT… I have chosen a simple straightforward – directly cited comparison of final data and over multiple years. I have also disaggregated debt burdens from other taxes. Here is a PDF of the actual extract of the supposed same data. State & Local Finance Data .. By these data, which you can download yourself, NJ is NOT #1. That said, I have little reason to believe that taxfoundation.org would necessarily hold a NJ bias that would cause it to want to alter the stats to put NJ at #1.  The numbers just don’t match up.

Productivity

b) New Jersey remains high in gross state product (gross domestic product – state) per capita. Our growth has been only modest, but some of those states in our region that have outpaced us in recent years are actually states with higher tax burdens (NY). This is obviously not causal – ONE WAY OR THE OTHER! New Jersey also remains high in per capita income and has held pace over time despite apocalyptic claims that all of the state’s high income residents are exiting the state in droves.

Teacher Salaries

c) Teacher salaries have actually declined with respect to non-teacher wages over time in NJ, even when comparing wages for the same number of hours and weeks worked, and at same degree level and age.

d) Despite a mythology that all non-teachers work every day of every week of the year and that teachers work about half the year, non-teachers actually report working about 48 weeks per year compared to teachers 42 weeks. Teachers worked about 87% of the weeks worked by other non-teacher workers in NJ.

e) Comparing different data sources (something I prefer not to do), teachers at specific experience and degree levels appear to earn an annual wage about 67% of that of their non-teaching peers – annually. Okay, but they don’t work as many weeks. So, they earned 67% of the wage for working 87% of the time. Still a significant disparity.

f) Teachers’ annual income return to experience (or age)  is well less than that of non-teachers over much of their careers. Assuming teachers and non-teachers start at a similar wage at age 23 with a masters degree (around $50k), by age 40, the average non-teacher will be earning over $100k, while the average teacher will be approaching $80k .

Note regarding benefits & bias: Corcoran and Mishel point out here: http://epi.3cdn.net/05447667bb274f359e_zam6br3st.pdf

…overall K-12 teacher compensation was 27.5% greater than teacher wages alone, while overall professional compensation was 23.5% greater than professional wages. These differences in benefit shares translate into a benefits “bias”of 2.8 percentage points in 2006.

That is, benefits would close little of the overall gap in wages. Costrell and Podgursky show about a 5% (slightly less) differential (10% non-teachers, 15% teachers) in the value of pensions, a portion of benefits. This too would close only part of the teacher to non-teacher wage gap in New Jersey, even if we assume New Jersey benefits for teachers to be much greater than other employee benefits.

Growing Waste in School Budgets and The “Blob”

g) Classroom instructional spending as a share of budgets has remained relatively constant over time, and poor urban districts are in line with other NJ districts in this regard.

h) Total administrative expenses as a share of school district budgets have remained relatively constant for nearly 15 years and large poor urban and Abbott district administrative expenses are in line with (and lower than) other districts.

i) School level administrators are a relatively small share of school personnel. Not shown here, but also relevant is the fact that school level administrative salaries are only marginally higher than senior teacher salaries. As such, it is highly unlikely that one can cut substantially close budget gaps by cutting “administrative fat” alone.


Posted in: Jersey