Bruce D. Baker, 2010 1 Taxes, Teacher Wages & School District Resource Allocation in New Jersey Bruce D. Baker

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Taxes, Teacher Wages & School District Resource Allocation in

New Jersey

Bruce D. Baker

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Recurring Media Claims

• New Jersey is the most taxed state in the nation, • Our taxes are driving our economy into the ground and

we’re falling way behind all other states, • Our teacher salaries which are completely out of

control are the reason why our taxes are out of control, • 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.

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Part I

New Jersey’s Tax Burden

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Take Home Point

• 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.

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Total Taxes as Share of Personal Income

New Jersey

New Jersey New JerseyNew Jersey

8%

9%

10%

11%

12%

13%

14%

15%

16%

17%

18%

2004 2005 2006 2007

Year

% o

f P

erso

nal

In

com

e, N

om

inal

State & Local Government Finance Data Query System. http://www.taxpolicycenter.org/slf-dqs/pages.cfm. The Urban Institute-Brookings Institution Tax Policy Center. Data from U.S. Census Bureau, Annual Survey of State and Local Government Finances, Government Finances, Volume 4, and Census of Governments (Years). Date of Access: (12-Feb-10 09:55 PM)

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Property Taxes as Share of Personal Income

2%

3%

3%

4%

4%

5%

5%

6%

6%

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Year

% o

f P

erso

nal

In

com

e, N

om

inal

Connecticut

Massachusetts

New Jersey

New York

United States


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Income Taxes as Share of Personal Income

0%

1%

2%

3%

4%

5%

6%

7%

8%

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Year

% o

f P

erso

nal

In

com

e, N

om

inal

Connecticut

Massachusetts

New Jersey

New York

United States


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Sales Taxes as Share of Personal Income

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Year

% o

f P

erso

nal

In

com

e, N

om

inal

Connecticut

Massachusetts

New Jersey

New York

United States


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Part II

Economic Productivity in New Jersey over the Long Run

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Take Home Points

• 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.

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Gross Domestic Product (state) per Capita

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

$55,000

$60,000

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Year

GD

P pe

r Cap

ita (S

tate

)

Data Source: Bureau of Economic Analysis, Regional Economic Accounts, http://www.bea.gov/regional/

New Jersey

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Gross Domestic Product (state) per Capita(Northeast)

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

$55,000

$60,000

Year

GD

P pe

r Cap

ita (S

tate

)

United States

Connecticut

Delaware

Maryland

Massachusetts

New Jersey

New York

Pennsylvania

Rhode Island


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Personal Income per Capita

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Year

Inco

me

per C

apita


New Jersey

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Personal Income per Capita(Northeast)

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

$55,000

$60,000

Year

Inco

me

per C

apita

United States 3/

Connecticut

Delaware

Maryland

Massachusetts

New Jersey

New York

Pennsylvania

Rhode Island


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Total State and Local Education Expenditures as a Share of Gross Domestic Product (State) in NJ

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Year

Educ

atio

nal E

ffort

(Ed.

Exp

ense

as

Shar

e of

GSP

)


This graph presents what is perhaps the strongest evidence of an increased burden associated with public education spending in NJ, but represents a period over which funding was scaled up, then leveled off (including facilities funding). New Jersey ranks 2nd in educational effort. But, this upswing is not driven primarily by increased costs associated with certified staff salaries.

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Part III

Teacher Wages – Out of control?

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Take Home Points• 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.

• 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.

• 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.

• 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 .

• New Jersey teacher wages for teachers in the New York metro area lag well behind New York teacher wages in Westchester, Rockland, Nassau and Suffolk counties and have grown more slowly over time.

• Certified staffing salaries for public schools, as a percent of total state and local expense, have declined over time!

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Wages of Selected Occupations (National)Integrated Public Use Microdata System (IPUMS) Census 5% Samples 1980, 1990 & 2000 and

American Community Survey of 2005

$5

$10

$15

$20

$25

$30

$35

1980 1985 1990 1995 2000 2005

Year

Hou

rly

Wag

e

k12 TeachersPostsecondaryMath/ComputerArchitects/EngineersLife ScienceSocial Science (incl. Econ.)Healthcare (non-Physicians)All with BA or MA

Notes: Individuals age 25 to 40. Excludes managerial positions. Hourly wages computed from “income from wages” divided by estimated annual hours worked (usual hours per week times weeks worked last year).

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Wages of Selected Occupations in New JerseyIntegrated Public Use Microdata System (IPUMS)

Census 5% Samples 1980, 1990 & 2000 and American Community Survey of 2005

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

1980 1985 1990 1995 2000 2005

Year

Hou

rly

Wag

e

k12 TeachersPostsecondaryMath/ComputerArchitects/EngineersLife ScienceSocial Science (incl. Econ.)Healthcare (non-Physicians)All with BA or MA

Notes: Individuals age 25 to 40. Excludes managerial positions. Hourly wages computed from “income from wages” divided by estimated annual hours worked (usual hours per week times weeks worked last year).

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Teacher Hourly Wage as % of Non-Teacher HourlyStatewide

70%

75%

80%

85%

90%

95%

100%

1990 2000 2005 2006 2007

Year

Rel

ativ

e H

ou

rly

Wag

e

Bachelors Degree

Masters Degree

All Degree Levels

Data Source: US Census 1990 & 2000, American Community Survey 2005 - 2007

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$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

1990 1992 1994 1996 1998 2000 2002 2004 2006

Year

Pre

dic

ted

Wag

e

Teacher with BANon-Teacher with BATeacher with MANon-Teacher with MA

Data Source: US Census 1990 & 2000, American Community Survey 2005 - 2007 Based on Statewide Model for worker 40yrs old, 40hrs for 40 wks

Regression Model Estimates of Teacher & Non-teacher Wages

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Hours Worked Last Year

Year Non-Teachers Teachers Share

1990 47.82 41.74 87%

2000 48.33 42.21 87%

2005 48.50 42.92 88%

2006 48.84 42.87 88%

2007 48.78 42.60 87%

Data Source: US Census 1990 & 2000, American Community Survey 2005 - 2007

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Annual Teacher Wages and Non-Teacher Wages at Fixed Age/ Experience, Location and Degree Level

TEACHERS (NJDOE Data) Non-Teachers (Census Data)

Masters Degree with 10 yrs.

(Nwk CBSA)

Masters Degree with 10 yrs.

(Nwk CBSA)

Masters Degree, 35 yr. Old, (Nwk

Metro)

Masters Degree, 35 yr.

Old, (Nwk Metro)

Teacher % of Non-Teacher

Year Exper. Const. Exper Growth Exper. Const. Exper Growth

2000 $ 70,732 $ 70,732

2001

2002 $ 50,542 $ 50,542

2003 $ 52,057 $ 53,852

2004 $ 53,865 $ 58,014

2005 $ 55,682 $ 62,489 $ 85,404 $ 92,744 65%

2006 $ 57,563 $ 66,590 $ 85,279 $ 93,258 67%

2007 $ 59,373 $ 70,437 $ 89,064 $ 95,595 67%

2008 $ 61,189 $ 74,139 $ 90,708 $ 98,654 67%

Data Sources: Non-Teacher Wages from US Census 2000, American Community Survey 2005 - 2008 based on regression model of wages controlling for age, location, degree level and year. Teacher wages based on NJDOE Personnel Files also using regression model controlling for experience, degree level, location, position type and year.

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YearMean Wage

Wage Earners

Total Wages ('000s)

(E001) Total Expenditure

('000s)

(E004) Total Current Expend ('000s)

Cert Staff Wages as % of Total State

& Local Expend

Cert Staff Wages as %

of Current State & Local

Expend

1997 $51,217 110,958 $5,682,939 $47,897,521 $43,359,183 12% 13%1998 $52,022 113,210 $5,889,465 $50,915,658 $45,714,119 12% 13%1999 $52,878 116,535 $6,162,190 $51,264,737 $46,447,220 12% 13%2000 $53,533 120,724 $6,462,689 $54,590,246 $49,638,211 12% 13%2001 $54,142 125,152 $6,776,0352002 $55,422 130,572 $7,236,526 $64,289,465 $57,609,960 11% 13%2003 $56,541 133,765 $7,563,2232004 $58,132 136,279 $7,922,223 $74,335,925 $66,861,901 11% 12%2005 $59,698 138,986 $8,297,204 $79,845,099 $71,944,445 10% 12%2006 $61,443 140,651 $8,642,062 $82,928,181 $74,854,461 10% 12%2007 $63,072 141,337 $8,914,472 $87,091,981 $78,594,281 10% 11%

State Department of Education Certified Staffing Files

Census & Tax Policy Center State & Local Rev/Expend

Data Sources: A) NJDOE Certified Staffing filesB) State & Local Government Finance Data Query System. http://www.taxpolicycenter.org/slf-dqs/pages.cfm. The Urban Institute-Brookings Institution Tax Policy Center. Data from U.S. Census Bureau, Annual Survey of State and Local Government Finances, Government Finances, Volume 4, and Census of Governments (Years). Date of Access: (22-Mar-10 09:55 AM)

New Jersey Elementary and Secondary Certified Staffing Wages as a Percent of State and Local Expenditures

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Returns to Experience/Age for Teachers and Non-Teachers (at fixed degree level, location)

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

$110,000

$120,000

23 28 33 38 43 48 53 58

Age/Experience (23 = Year 1)

Inco

me

from

Wag

e (S

alar

y)

Public School Increase

Non-teacher Increase

Data Sources: Non-Teacher Wages from US Census 2000, American Community Survey 2005 - 2008 based on regression model of wages controlling for age, location, degree level and year. Teacher wages based on NJDOE Personnel Files also using regression model controlling for experience, degree level, location, position type and year.

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Teacher Salaries in NY and NJ Counties in NY Metro Area(BA Degree with 10 Years)

BergenBergen

BergenEssex

EssexEssex

Passaic

PassaicPassaic

Hudson

Hudson

Hudson

UnionUnion

Union

Westchester

Westchester

Westchester

Rockland

RocklandNassau

Nassau

Nassau

Suffolk

Suffolk

Suffolk

Rockland

$45,000

$50,000

$55,000

$60,000

$65,000

$70,000

2005 2006 2007

Year

Sala

ry

Data sources: Based on statistical model of individual teacher level salaries from NJDOE and NYSED certified staffing (personnel master) files. Model includes salary as a function of year, total experience and degree level.

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0Teacher Salaries in NY and NJ Counties in NY Metro Area

(MA Degree with 10 Years)

NJ-Bergen

NJ-Bergen

NJ-Bergen

NJ-Essex

NJ-EssexNJ-Essex

NJ-Passaic

NJ-Passaic

NJ-Passaic

NJ-Hudson

NJ-Hudson

NJ-Hudson

NJ-UnionNJ-Union

NJ-Union

NY-Westchester

NY-Westchester

NY-Westchester

NY-Rockland

NY-Rockland

NY-RocklandNY-Nassau

NY-Nassau

NY-Nassau

NY-Suffolk

NY-Suffolk

NY-Suffolk

$55,000

$57,000

$59,000

$61,000

$63,000

$65,000

$67,000

$69,000

$71,000

$73,000

$75,000

2005 2006 2007

Year

Sala

ry


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(MA Degree over First 30 Years, in 2007)

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29

Total Years

Sala

ry

BergenEssexPassaicHudsonUnionWestchesterRocklandNassauSuffolk


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(MA Degree over First 10 Years, in 2007)

$50,000

$55,000

$60,000

$65,000

$70,000

$75,000

$80,000

1 3 5 7 9

Total Years

Sala

ry

BergenEssexPassaicHudsonUnionWestchesterRocklandNassauSuffolk


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Note regarding benefits & bias

• Corcoran and Mishel point out here: http://epi.3cdn.net/05447667bb274f359e_zam6br3st.pdf that– “…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, even if the bias is somewhat larger in NJ.

• 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.

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Part IV

District Resources and the Growing “Administrative Blob”

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Take Home Points• 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.

• 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.

• 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.

• District and school level administrative salaries in New Jersey have been flat for a decade. They are not increasing dramatically.

• Private independent school headmaster compensation tends to be much higher than a) superintendent salaries of the district where the private school is located and b) large city superintendent salaries.

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Percent of District Budgets Allocated to “Classroom” Instruction over Time

40%

42%

44%

46%

48%

50%

52%

54%

56%

58%

60%

1995 1997 1999 2001 2003 2005

Year

% o

f Ope

ratin

g Ex

pens

e

Abbott

DFG_CtoH

DFG_IJ

Non-Abbott A

Non-Abbott B

Average

Data Sources: Comparative Spending Guide reconciled with Annual Financial Report detail for NJ School Districts 1995 to 2006.

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Percent of District Budgets Allocated to “Classroom” Salaries for Instruction over Time

40%

42%

44%

46%

48%

50%

52%

54%

56%

58%

60%

1995 1997 1999 2001 2003 2005

Year

% o

f Ope

ratin

g Ex

pens

e

Abbott

DFG_CtoH

DFG_IJ

Non-Abbot A

Non-Abbot B

Average


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Percent of District Budgets Allocated to Total Administrative (District and School Level) Expense

9%

10%

11%

12%

13%

14%

15%

1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

% o

f Ope

ratin

g Ex

pens

e

A

B

CD

DE

FG

GH

I

J


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Percent of District Budgets Allocated to Total Administrative (District and School Level) Expense

9%

10%

11%

12%

13%

14%

15%

1998 1999 2000 2001 2002 2003 2004 2005

Year

% o

f Ope

ratin

g Ex

pens

e

Abbott

DFG_CtoHDFG_IJ

Non-Abbot

Non-AbbotTotal

Data Sources: Comparative Spending Guide reconciled with Annual Financial Report detail for NJ School Districts 1995 to 2005. (not weighted for district enrollment)

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Elementary School Staff per 100 Pupils

0

1

2

3

4

5

6

7

8

Abbott

Abbott

Charte

r

DFG C

to H

DFG IJ

Non-A

bbott

A

Non-A

bbott

B

Oth

er

Oth

er C

harte

r

District Group

Sta

ff p

er

10

0 P

up

ils (

20

06

-07

)

Administrator

Core Academic

Extra Help

Specialist

Student Support

Data Source: NJDOE Staffing Files 2006-07

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Middle School Staff per 100 Pupils

0

1

2

3

4

5

6

7

Abbott DFG C toH

DFG IJ Non-Abbott A

Non-Abbott B

Other

District Group

Sta

ff p

er

10

0 P

up

ils (

20

06

-07

)

Administrator

Core Academic

Extra Help

Specialist

Student Support


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0

High School Staff per 100 Pupils

0

1

2

3

4

5

6

Abbott

Abbott

Charte

r

DFG C

to H

DFG IJ

Non-A

bbott

A

Non-A

bbott

B

Oth

er

District Group

Sta

ff p

er

10

0 P

up

ils (

20

06

-07

)

Administrator

Core Academic

Extra Help

Specialist

Student Support


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District Level Administrative Salaries in New Jersey

$60,000

$70,000

$80,000

$90,000

$100,000

$110,000

$120,000

$130,000

$140,000

$150,000

$160,000

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Year

Sala

ry

SuperintendentAdmin. AssistantBusiness AdministratorAsst. Sup. Non-BusinessAsst. Sup. Business

Data source: NJDOE Staffing Files. Includes cumulative salaries of individuals by job code because some district level administrators hold positions across multiple districts, collecting more than one salary.

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District Level Administrative Salaries in New JerseyECWI Adjusted ($1997 constant)

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

$110,000

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Year

Sala

ry

Superintendent

Admin. Assistant

Business Administrator

Asst. Sup. Non-Business

Asst. Sup. Business

Data source: NJDOE Staffing Files & NCES State ECWI (http://nces.ed.gov/edfin/adjustments.asp) 2006 to 2008 ECWI not available. Assumed at average rate of change from 1997 to 2005. Includes cumulative salaries of individuals by job code because some district level administrators hold positions across multiple districts, collecting more than one salary.

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Top 100 Superintendent Salaries in New Jersey & ECWI Adjusted Salaries ($1997 constant)

$50,000

$70,000

$90,000

$110,000

$130,000

$150,000

$170,000

$190,000

$210,000

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Year

Sala

ry

Top 100 Superintendents

Adjusted

Data source: NJDOE Staffing Files & NCES State ECWI (http://nces.ed.gov/edfin/adjustments.asp) 2006 to 2008 ECWI not available. Assumed at average rate of change from 1997 to 2005. Includes cumulative salaries of individuals by job code because some district level administrators hold positions across multiple districts, collecting more than one salary.

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School Level Administrative Salaries in New Jersey

$60,000

$70,000

$80,000

$90,000

$100,000

$110,000

$120,000

$130,000

$140,000

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Year

Sala

ry

HS Principal

Assist Principal HS

Jr HS Principal

Assist Principal Jr HS

Middle Sch PrincipalAssist Prin Middle Sch

Elemementary Sch Principal

Assist Principal Elem Sch

Data source: NJDOE Staffing Files

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School Level Administrative Salaries in New JerseyECWI Adjusted ($1997 constant)

$50,000

$55,000

$60,000

$65,000

$70,000

$75,000

$80,000

$85,000

$90,000

$95,000

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Year

Sala

ry

HS PrincipalAssist Principal HSJr HS PrincipalAssist Principal Jr HSMiddle Sch PrincipalAssist Prin Middle SchElemementary Sch PrincipalAssist Principal Elem Sch

Data source: NJDOE Staffing Files & NCES State ECWI (http://nces.ed.gov/edfin/adjustments.asp) 2006 to 2008 ECWI not available. Assumed at average rate of change from 1997 to 2005.

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0

Executive Compensation in Private and Public Schoolsin New Jersey (2006-07)

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

Dwig

ht/Englew

ood

FHCDS/Som

erse

t Hill

s

PDS/Prin

ceto

n Twp.

Frisch

/Para

mus

MBS/M

orris

SRDS/Upper

Sad

dle R

iver

Morro

w

Pingry

/Ber

nards

Twp

MKA/M

ontcla

ir

Ranney/T

into

n Fal

ls

RPS/Fra

nklin T

wp.

Oak H

ill/M

iddl

etown

RCDS/Rum

son-FH

Peck/

Morri

s

GSB/Som

erset

Hill

s

Newark

Acad/L

ivin

gston

Chapin/P

rince

ton T

wp.

MFS/M

oorest

own

Ward

law/E

dison

Far B

rook/

Milb

urn

Big C

ity S

upts.

Headm

aster

Mea

n

Host Supt.

Mean

Headmaster Comp.

Local Supt. Comp.

Note: Private school headmaster compensation from Guidestar.org, IRS 990 for 2006. Local Superintendent compensation for district that is geographic home to private school. Supt. Comp based on 2006-07 (1 yr later than Headmaster Comp.). Headmaster and Supt. Comp. include salary and cash-basis benefits (not health-care, retirement contributions, etc.). Big City Supts. Includes Newark, Camden, Jersey City, Paterson and Trenton.

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Part V

State Revenues, Expenditures and Debt over Time

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Per Capita Revenue, Expenditure & Debt

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

1985 1990 1995 2000 2005

Year

Per C

apita

Rea

l 200

7$

(R01) Total Revenue

(E001) Total Expenditure

(D01) Total DebtOutstanding

Data Source: State & Local Government Finance Data Query System. http://www.taxpolicycenter.org/slf-dqs/pages.cfm. The Urban Institute-Brookings Institution Tax Policy Center. Data from U.S. Census Bureau, Annual Survey of State and Local Government Finances, Government Finances, Volume 4, and Census of Governments (Years). Date of Access: (22-Mar-10 09:55 AM)

2001-2002 revenue shock

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0

State General Revenues and Expenditures

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

1985 1990 1995 2000 2005

Year

Rea

l 200

7$

(R03) General Revenue(R04) Gen Rev-Own Sources(E013) General Expenditure


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0

Per Capita Debt Across States

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

1985 1990 1995 2000 2005

Year

Per C

apita

Deb

t Rea

l 200

7$

ConnecticutMassachusettsNew Jersey New York


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0

New Jersey Education Spending & New Jersey

Education Outcomes

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0

Alabama

Alaska

Arizona

Arkansas

California

Colorado

ConnecticutDelawareFlorida

Georgia

Idaho

Illinois

Indiana

Iowa

Kansas

Kentucky

Louisiana

Maine

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada

New HampshireNew Jersey

New Mexico

New YorkNorth Carolina

North DakotaOhio

OklahomaOregon

Pennsylvania

Rhode IslandSouth Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

VirginiaWashington

West Virginia

Wisconsin Wyoming

230

240

250

NA

EP

Mat

h G

r 4

2007

6000 8000 10000 12000 14000 16000Pred. Basic State & Local Rev. PP

naep_m4_07_all Fitted values

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01

0

Alabama

Alaska

ArizonaArkansas

California

Colorado

ConnecticutDelaware

Florida

Georgia

Idaho

Illinois

IndianaIowa

Kansas

Kentucky

Louisiana

MaineMaryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada


New Mexico

New York

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

Virginia

Washington

West Virginia

WisconsinWyoming

260

270

280

290

300

NA

EP

Mat

h G

r 8

2007


naep_m8_07_all Fitted values

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01

0

Alabama

Alaska

Arizona

Arkansas

California

Colorado

Connecticut

DelawareFlorida

Georgia

Idaho

Illinois

Indiana

IowaKansas

Kentucky

Louisiana

MaineMaryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada


New Mexico

New York

North Carolina

North DakotaOhio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

TexasUtah

VermontVirginia

Washington

West Virginia

Wisconsin

Wyoming

210

220

230

240

NA

EP

Rea

d G

r 4

2007


naep_r4_07_all Fitted values

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0

Alabama

Alaska

Arizona

Arkansas

California

ColoradoConnecticut

Delaware

FloridaGeorgia

Idaho

IllinoisIndiana

IowaKansas

Kentucky

Louisiana

Maine

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada


New Mexico

New York

North Carolina

North DakotaOhio

Oklahoma

Oregon

Pennsylvania

Rhode IslandSouth Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

Virginia

Washington

West Virginia

Wisconsin

Wyoming

250

255

260

265

270

275

NA

EP

Rea

d G

r 8

2007


naep_r8_07_all Fitted values

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Part VI

Notes on Tax and Expenditures Limits

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TELs & Student Teacher Ratios

• David N. Figlio– SHORT-TERM EFFECTS OF A 1990S-ERA PROPERTY

TAX LIMIT: PANEL EVIDENCE ON OREGON’S MEASURE 5

– National Tax Journal Vol 51 no. 1 (March 1998) pp. 55-70• I use a comprehensive panel of school districts

from Oregon and Washington, with annual data from before and after Oregon imposed its limitation in 1990. Controlling for unobserved heterogeneity, I find that Oregon student-teacher ratios have increased significantly as a result of the state’s tax limitation.

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TELs & Teacher Quality

• David N. Figlio and Kim S. Rueben– Tax limits and the qualifications of new teachers – Journal of Public Economics Volume 80, Issue 1, April 2001,

Pages 49-71• This paper examines the impact of local tax limits on new

teacher quality. Using data from the National Center for Education Statistics we find that tax limits systematically reduce the average quality of education majors, as well as new public school teachers in states that have passed these limits. The average relative test scores of education majors in tax limit states declined by ten percent as compared to the relative test scores of education majors in states that did not pass limits. This relationship is strengthened if we control for school finance equalization reforms or examine tax limits passed in two different periods.

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TELs & Student Outcomes

• Downes and Figlio working paper:

– http://ase.tufts.edu/econ/papers/9805.pdf

• In this paper, we find compelling evidence that the imposition of tax or expenditure limits on local governments in a state results in a significant reduction in mean student performance on standardized tests of mathematics skills.

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Massachusetts Prop 2 ½

• David M. Cutlera ,*, Douglas W. Elmendorfb, Richard Zeckhauserc– Restraining the Leviathan: property tax limitation in Massachusetts

– Journal of Public Economics 71 (1999) 313–334

• Proposition 2 ½, a ballot initiative passed in Massachusetts in 1980, sharply reduced local property taxes. We examine why voters supported Proposition 2 ½, using data on votes for the Proposition and for overrides of it a decade later. We find two reasons for the Proposition’s support: people perceived agency losses from the difficulty of monitoring government, and people judged government to be inefficient because their tax burden was high. By the 1990s, people either regretted the severity of the Proposition’s constraints or felt that its mission was accomplished.

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Massachusetts Prop 2 ½• Phil Oliff and Iris J. Lav • HIDDEN CONSEQUENCES: LESSONS FROM MASSACHUSETTS FOR STATES

CONSIDERING A PROPERTY TAX CAP– http://www.cbpp.org/archiveSite/5-21-08sfp.pdf

• A tax cap won’t make government services cost less. A cap does not prevent employee health insurance costs, special education costs, or other costs beyond localities’ control from rising much faster than the cap allows. Nor does it hold down the cost of heating buildings, buying gas for police and fire vehicles, and operating schools buses when the world price of oil is skyrocketing. When these things occur, as they have in Massachusetts, other services have to be cut to fit total expenditures under the cap.

• Claims that caps will produce large savings through “efficiencies” are overblown. There are fewer efficiencies to realize from squeezing down revenues than cap proponents generally suggest. One person’s “efficiency savings,” such as the elimination of a police or fire station, may represent the loss of a critical service for another person. Ultimately, a property tax cap is highly likely to lead to reductions in basic community services and a deterioration in the quality of life in many communities — particularly in communities that cannot routinely override it.

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Massachusetts Prop 2 ½• Phil Oliff and Iris J. Lav • HIDDEN CONSEQUENCES: LESSONS FROM MASSACHUSETTS FOR STATES

CONSIDERING A PROPERTY TAX CAP– http://www.cbpp.org/archiveSite/5-21-08sfp.pdf

• Tax caps can be particularly harmful if adopted during a weak economy. Proposition 2½ took effect during a period of extraordinary economic growth — the “Massachusetts Miracle.” State revenues were rising, which allowed the state to boost aid to compensate for constrained property taxes, and construction was expanding, which allowed communities to raise their property tax revenue by more than 2.5 percent per year. If a state were to adopt a property tax cap during an economic slowdown or a period of weak state revenue growth, a major sustained infusion of state aid would not be possible and property tax revenue growth would be more constrained. As a result, schools and other services dependent on the property tax would have to be cut much more severely than in Massachusetts.

• State aid can’t be relied upon to fill the gap. Even when state policymakers fully intend to expand state aid to fill local funding gaps created by a cap, a recession or fiscal crisis will usually derail this plan. State aid to localities in Massachusetts has fluctuated greatly with the business cycle and with state policy decisions. In any other state that might implement a cap, local government and school budgets are likely to become more volatile.

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Massachusetts Prop 2 ½• Phil Oliff and Iris J. Lav • HIDDEN CONSEQUENCES: LESSONS FROM MASSACHUSETTS FOR STATES CONSIDERING A

PROPERTY TAX CAP– http://www.cbpp.org/archiveSite/5-21-08sfp.pdf

• Changes in school enrollment can have a big impact. The adoption of Proposition 2 ½ coincided with a decline in Massachusetts’ K-12 enrollment, allowing schools to operate with less revenue. If another state adopted a property tax cap during a period of steady or rising enrollment, it would be forced to impose much more extensive cutbacks in teachers, classes, and programs than those seen in Massachusetts.

• Without effectively targeted state aid, low-income communities will fall even further behind. Massachusetts has a highly targeted system of aiding local governments. The influx of state aid seems to have shielded low-income communities somewhat from Proposition 2 ½’s tendency to exacerbate differences in services between high- and low-income communities. But when state aid has receded as a result of economic downturns or state policy decisions, the poorest communities have had to make the largest budget cuts. In states that do not have a system of school aid that is targeted as effectively as Massachusetts’, students in low-income communities are likely to fall increasingly behind students in schools that have greater resources.

• Wealthier communities will override a tax cap more frequently than poorer ones. This has contributed to a growing spending gap between local governments in high-income communities and all other communities, despite Massachusetts’ progressive system of state aid. This is likely to occur in other states that implement a cap.

Documents

Bruce D. Baker, 2010 1 Taxes, Teacher Wages & School District Resource Allocation in New Jersey Bruce D. Baker