Thursday, July 9, 2020

Can New Jersey Increase Teacher Salaries? Should it? A response to Mark Weber and the NJPP



The New Jersey Policy Perspective has written many reports over the years in favor of programs to benefit New Jersey's poorest residents. These include calls to increase cash assistance for poor families, raise the minimum wage to $15 an hour, end the welfare child cap, improve Medicaid, and assist immigrants.   On NJ's budget, the New Jersey Policy Perspective calls for raising taxes on high-earners, cutting New Jersey's corporate tax incentive program, and attacking the belief that NJ's outmigration is harmful or that it has anything to do with NJ's high taxes.

Yet, over the years of my following the New Jersey Policy Perspective, there's only one group of middle-class employees that the NJPP says need more money: NJ's teachers.
One could justify this attention to teacher compensation issues from the New Jersey Policy Perspective that the NJPP is defending members of "America's most embattled profession," who are subject to far more criticism than police & firefighters and the employee classes represented by the CWA.

Then again, another motivation for the NJPP's attention to teacher compensation and production of one-sided reports is that the NJPP is NJEA-funded, getting $695,000 from 2013-2017.

I lack the time to address all of the points made in the NJPP's teacher compensation reports.  This blog post will explore how Mark Weber's (aka "Jersey Jazzman") arguments about teacher salaries are incomplete in important ways and how his demand for salary increases is budgetarily impossible.

A Questionable Premise on Salaries

I find Weber's core contention that NJ teachers are badly underpaid because they make less money
than other holders of college degrees to be dubious.

I disagree with his premise that everyone who has finished the same tier of education ought to get the same compensation.  My expectation is that compensation should be determined primarily by the supply:demand dynamic for an employee's skill-set, and not a fixed amount based on credential acquired.

While teachers do make less money than other college grads, raw salary comparisons omit certain other aspects affecting compensation.
  • Public sector employment is more stable than private sector employment. Private sector jobs are usually at-will jobs, public school teaching jobs are not. 
  • Teachers have nine, continuous weeks off in the summer, which enables time for personal growth, additional income, and/or savings on childcare.
  • Teacher academic records are weaker, on average, than private sector peers.

Of course, teaching has disadvantages over private sector work, like the expectation that teachers use their own money on school supplies (which Weber criticizes) and, in NJ, $1362 per person in union fees (which Weber would never criticize).  New Jersey teachers must also pay 7.5% of their salaries to TPAF, which many might not want to do. (see below)

Looking at NJ in specific, Mike Lilley  of the Sunlight Policy Center points out the flaws in Weber's reasoning, and show that teachers are actually compensated MORE per hour than similarly-educated employees.  Looking at the US as a whole, Andrew Biggs and Jason Richwine do the same, and bust the myth that many teachers have second jobs.

Weber, who presumably received NJPP/NJEA money for his reports, also takes at face-value the NJPP's claims that NJ's pension benefits are the "least generous" in the nation, when the 2014 NJPP pension study ignored several significant issues in overall post-retirement compensation and has out-of-date information on taxes on retirement income.
  • NJ's teachers get Social Security and Post-Retirement healthcare in addition to base pension, whereas nationwide, getting the pension+Social Security+Post Retirement healthcare triple is not the rule.
  • NJ's teacher pensions are based on relatively high salaries.
  • NJ doesn't tax retirement income below $100,000 a year, which exempts virtually every teacher's pension, whereas in most other states retirement income is fully taxable or the exemption threshold is set much lower.
Further, Weber's data on teacher/non-teacher compensation is misleading:
  • The American Community Survey salary data includes private school teachers, who are paid much less per year than public school teachers.  These data is hard to come by specifically for New Jersey, but nationwide, private school teachers earn 60-80% as much as public school teachers.

    Weber admits that private school teachers are lumped into the ACS data, but doesn't disclose how large the salary gap is. 
  • He is comparing mean salary data, when private sector incomes are distorted by high-income outliers. The median salary comparisons would be closer.

    I do not have data on what percentage of NJ's college grads total income is possessed by the top 1%, but for all employees, NJ's 1% takes home 24.3% of income.
The comparison between teachers with MAs and non-teachers with MAs is nonsense because numerous studies have demonstrated that teacher MA programs lack rigor and that teachers with MAs aren't more effective than teachers without MAs.  Additionally, teacher MAs are usually paid for by the school districts, whereas in the private sector MAs are more likely to be paid for by the worker.

Yes, Mark Weber is correct that the number of teacher candidates has shrunk in New Jersey by a larger percentage than the national average (-63%), but the fall in completion is only 47%, a point which Weber quietly makes but not not expand on.
The decline in enrollment led to a decline in the number of people who completed teacher preparation programs (henceforth referred to as “completers”), from 6,373 in the 2009-10 academic year to just 3,366 in 2017-2018, representing a 47 percent decrease. 

Weber, to his credit, says it is possible that when New Jersey's teacher training programs were at their 2009-10 peak and enrolled 21,410 students they were producing an oversupply of novice teachers, calling this an "open question."

Weber also acknowledges that a large portion of the decrease in teacher candidates is due to restrictions in the Alternate Route program.

What are NJ's Teacher Salaries Compared to Other States?

Weber does not attempt in his report to make any kind of interstate comparison of public school teacher salaries, except when he relies on the above-mentioned 2014 propagandistic New Jersey Policy Perspective-commissioned pension report that claims NJ's pensions are extremely low in interstate comparison.

If you actually do a comparison of teacher salaries, New Jersey's instructional staff are the seventh highest paid in the US.

Average Salaries of Instructional Staff
New York$84,384
California$80,680
Massachusetts$80,357
Rhode Island$76,887
District of Columbia$76,486
Alaska$74,977
Connecticut$74,517
New Jersey$74,457
National Average$61,730
Note, these are salaries only. Pensions and post-retirement healthcare are not included.

Relative to the cost of living, New Jersey's teacher salaries are the 11th highest in the US, if analyzed according to the respected (and disinterested) MERIC ratings, but the MERIC ratings do not include taxes.  If one factored taxes in, New Jersey's teacher salaries compared to cost of living would be lower, but roughly half of NJ's taxes go to education anyway, so NJEA-funded folks don't have the same grounds to complain about taxes that everyone else has.   ( ;

However, a difference between New Jersey and teaching elsewhere is one of the lowest student:teacher ratios in the US.

A low student:teacher ratio is not exactly equivalent to having small class sizes, but it's correlated.

Student:Teacher Ratio
New York11.9
California22.7
Massachusetts13.0
Rhode Island13.2
District of Columbia12.7
Alaska16.8
Connecticut12.8
New Jersey11.9
National Average15.8
Source, NEA Rankings and Estimates

The combination of high teacher salaries, low student:teacher ratios, high overall education spending, strong unions, and other factors, have led WalletHub to rank NJ the #1 or #2 state to be a teacher in most years. 

NJ's Spending is Already Extremely High

New Jersey's education spending per student is no longer #1 in the US, but it remains among the highest in the United States.


Public School Revenue PP
Washington DC$31,230
New York$26,063
Alaska$22,392
New Jersey$21,863
Connecticut$21,828
Vermont$20,561
NEA, https://tinyurl.com/y8xk3uw3

Many New Jerseyans believe that New Jersey's high per student spending is merely proportional to our wealth, but this is erroneous.  New Jersey's spending is still extremely high even relative to GDP and income.


Education Law Center, Fiscal Effort, 2017 DataNational Science Board, 2016 Data
Edu. Spending as % of GDP
Edu. Spending as % of GDP
Vermont7.03%Vermont5.28%
New Jersey5.39%Alaska4.69%
Maine4.78%New Jersey4.61%
Wyoming4.74%West Virginia4.54%
New York4.73%Wyoming4.33%
Connecticut4.53%Maine4.33%
USA Average3.79%USA Average3.19%
Sources. Education Law Center: Making the Grade.  National Science Board.

So how much higher is NJ's education spending supposed to become?

Weber observes that NJ's teacher salaries started to lag at the Great Recession:

Figure 17 shows the unadjusted average salary of teachers in New Jersey over two decades. Unsurprisingly, salaries have risen; however, there is a clear slowing of that rise following the Great Recession of 2008.


Teacher salaries may have peaked 2008-2010, but that was an anomalously high spending period, when NJ's education spending reached 4.9% of state GDP, according to the National Science Board's analysis.  New Jersey had only sustained that level for a brief period of time, roughly two years.   It wasn't like New Jersey had always spent so much on education; rather 2010 marked a peak in education spending.

That increase in education spending, which translated into salary growth for teachers, was also powered by several tax increases, like McGreevey's income tax increase in 2004, the 2006 diversion of a half-cent increase in the sales tax into education, and then the temporary income tax increase in 2009.  New Jersey's property taxes also increased by 50% (net of rebates) in the 1999-2009 period.

Do Weber and the NJPP think NJ can increase income tax rates, the sales tax every decade?  Do they want 5%+ annual property tax increases to come back?

"Unsurprisingly, salaries have risen; however, there is a clear slowing of that rise following the Great Recession of 2008."

According to the National Science Board, NJ's education spending rose from 3.68% of GDP to 4.9% of GDP from 2000 to 2010, a level of increase that was not sustainable and which was not paralleled on a national basis.




Can New Jersey Spend More?

Weber's reports are lengthy, but another major quantity he doesn't provide is what it would cost to bring New Jersey's teacher salaries in-line with the private sector.

It's unclear how much of a salary increase the NJEA/NJPP/Weber want, but New Jersey has 140,000 teachers, so if we increased salaries by $10,000 per teacher, that would cost $1.4 billion in direct salaries, and then tens of millions more in FICA taxes and TPAF.
  • Since the employer-side FICA tax rate is 7.65%, the state would owe an additional $107.1 million if there were a $10,000 per teacher increase.
  • TPAF is more complex since there are different tiers of employees and pensions depend on how long teacher works,  but for Tier 1 teachers who work 25 years, another $10,000 a year would equate to another $4550 per year per retiree.  For Tier 5 teachers, it would equate to another $4170 per retiree. 

    Since there are now 94,000 retirees getting money from TPAF, we are talking about something that would eventually raise pension payouts by close to $400 million a year. 
I am not an actuary and cannot estimate how much the state would have to put into TPAF to sustain higher pension payments, but it would not be a trivial amount.  Since New Jersey cannot fully fund TPAF at existing salaries, fully funding TPAF if salaries are substantially higher is impossible.

Further actual cost increases would be higher because increasing teacher salaries would create pressure to increase the salaries of other school staff, such as administrators.

Can New Jersey afford to spend another $1.5-$2 billion a year on education? 

Or, would it be worth it to increase teacher salaries if it means that New Jersey hires fewer teachers and has a higher student:teacher ratio?

There is Only a Subject-Specific and District-Specific Recruitment Problem

The biggest absence in the NJEA/NJPP/Weber report is that it does not acknowledge how teacher recruitment dynamics range from huge gluts in areas like high school social studies and elementary education to shortages in the hard sciences, math, ESL, and special ed.

https://bellwethereducation.org/sites/default/files/Nuance%20In%20The%20Noise_Bellwether.pdf

The above chart is based on data from 1998-2018, but May 2019 testimony from disinterested DOE officials corroborates that not much has changed.

During an Assembly Education Committee hearing last week, Diana Pasculli, deputy assistant commissioner of performance at the New Jersey Department of Education, told members of the panel there’s “some misalignments between the supply and demand of our workforce.” 
She said while there is an overflow of elementary school teacher candidates every year, there are teacher shortages for certain subjects, including science, math, bilingual education, English as a second language and career and technical education. 
“Those are areas of concern for us, where we don’t see enough educators going through the whole pipeline and being ready to fill those roles," she said. 
At the same time she stressed there isn't a broad-strokes shortage — "we see real struggle and concern in certain subjects.” 
And there are struggles and shortages in certain regions of the state as well, Pasculli said.
She told members of the panel close to 7,000 individuals receive teacher certifications each year, but only about 4,000 new teachers are hired every year — because of the teacher supply-and-demand mismatch.
New Jersey's official filings with the federal Department of Education indicate shortages in 37 low-income districts and the following subjects:

2017–2018 Statewide Academic Disciplines or Subject Matter 
 Bilingual/Bicultural English as a Second Language (ESL)
Mathematics Middle School (All)
Science (All)
Special Education
World Languages (All)
All Career and Technical Endorsements

Analyses of Title II reporting by the US Department of Education also shows that there are large disproportionalities in what subjects NJ teacher candidates are being prepared in.  In 2017-18, the most recent year data is available, New Jersey's education schools only had a single student who had majored in computer Science teacher (someone at Rider), only 3 Chinese majors, 19 physics majors, and 31 chemistry majors.  By contrast, NJ's ed schools had 1541 elementary education majors and 147 physical education majors.

These are the data for teachers trained at Montclair State in 2017-19, NJ's largest teacher program.
Source, 2019 Title II Report



The common sense solution to NJ teacher recruitment issues is to pay teachers of hard-to-staff subjects more money, but that notion of differential pay is anathema the unionist preference for lockstep salary guides.


Do DB Pensions and Post-Retirement Healthcare Help Recruitment?

Weber defends Defined Benefit pension plans and warns against any attempts to reform them.
New Jersey must shore up its teacher pension system and stop degrading teacher health care benefits. There is an indisputable wage gap between teachers and other college-educated employees. Good benefits can help close this gap, but New Jersey has, over the past decade, degraded the value of teacher pensions and health care benefits.  The decline in enrollees in teacher preparation programs suggests that these policies have had detrimental consequences. The state must take steps to reverse the eroding value of retirement and health care benefits for teachers.

New Jersey's teacher compensation is heavily backloaded due to the structure of district salary guides, the vesting of pensions after 10 years of employment, and the eligibility for post-retirement healthcare only after 25 years of employment.

Source, TPAF Actuarial Valuation Report, https://www.state.nj.us/treasury/pensions/documents/financial/actuarial2019/2019tpaf.pdf

Notice how small the salary jump is from 1-4 years to 5-9 years (only $5216 per year) versus 5-9 years to 10-14 years (+$10,373) and then from 10-14 years to 15-19 years (+$13,484).  Increases are smaller after 20 years, but that is when non-salary increases in pensions and post-retirement healthcare come in.

One can assume that having a backloaded compensation structure helps with teacher retention, although it's debatable if that is the public's educational interest because sometimes veteran teachers may be burned out and/or have more frequent absences.  But does a backloaded compensation program help with recruitment in the first place?

For the type of person who expects to spend his or her entire working life in the same career and in the State of New Jersey, a DB pension and Post-Retirement Healthcare program would likely be a magnet, but for people who expect to have several careers and think they may not live their entire working lives in New Jersey, it's difficult to imagine how DB pensions and Post-retirement healthcare are strong draws.

There is disinterested polling and research evidence, documented by Laura Waters of NJLeftBehind in a blog post "OK Boomer," that today's young generation expects to be highly mobile in careers and not tied down to a single career.


According to TPAF's Actuarial Valuation Report,  45% of NJ teachers leave the TPAF system before their pension vests.  Another 41% of teachers leave before year 24, which is one year shy of post-retirement healthcare eligibility.

So, at least 80% of people who start teaching never get the Post-Retirement Healthcare which is a $1 billion state expense, or nearly 3% of NJ's combined state + local education spending.

Young people considering teaching are probably not aware of pension formulas or the vesting points, but it's probable that they do know that New Jersey's pensions are badly underfunded and the promised benefits of today are likely going to be cut.  They likely suspect that pension deduction that is taken out of every paycheck and  is used to prop up a Pyramid Scheme they will not get full benefits of.



Teacher Shortages in the Future? 

Clearly NJ is producing fewer new teachers than it was a decade ago, although he exaggerates the fall by not acknowledging the low completion rate of the past, but does this mean we are going to have a teacher shortage?

Certainly staffing will become more difficult in in-demand fields, but New Jersey's student enrollment is expected to decline over the next few decades.

The number of babies born in NJ peaked in 1990 (123,125 births) and the NJ's K-12 student enrollment peaked in 2005-06 (1.4 million).

In 2019 there were only 99,549 births in NJ and 1.34 million students.

As smaller cohorts of people enter into adulthood, birthcounts will continue to fall.  The Coronavirus Recession will likely have a large negative impact on births as well though that won't show up in kindergarten enrollment until 2026.

Although the decline in NJ births is smaller than the decline in teacher candidates, the decline will mitigate any teacher shortages into the future.

The caption above is incomplete, NJ had 99,549 births in 2019.

Conclusion


I have not been able to address all of the points in Weber's reports which merit attention, but Weber's reports have a large gap in that they do not acknowledge there is only a subject-specific and district-specific teacher shortage.

Weber exaggerates the teacher/non-teacher pay gap by using salary data that includes private school teachers and using mean salary instead of median salary, but I can agree that higher salaries would likely improve recruitment.  However,  an across-the-board teacher shortage doesn't exist and since New Jersey is a fiscal disaster, it must target its money where the need to improve recruitment is the greatest.

New Jersey should encourage districts to publicly pay a premium to teachers of hard-to-state subjects and continue the full funding of SFRA to enable higher salaries in less desirable-to-teach-in districts.

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