The real problem with teacher pay

A recent opinion piece  by Dan DiSalvo in the Wall Street Journal (subscription may be required) points out a painful truth about the current debate over teacher pay: the rising cost of benefits is making it difficult for states and local school districts to offer teachers higher salaries.

DiSalvo notes the Chicago Public Schools (CPS) has a pension shortfall of $11 billion. Retirement cost account for more than 25 percent of the money CPS receives from the state. Teachers want higher pay. But it’s getting difficult for state and local governments to even raise teacher salaries. The pay is low for the wrong reason.

Although problems in North Carolina aren’t as bleak as Illinois, the numbers are still concerning.

According to the Department of Public Instruction, in school year 2017-18, the state spent $8.752 billion on K-12 education.  However, $2.154 billion of that amount – or approximately a quarter (24.6 percent) of state dollars, was spent on employee benefits.  If we include all dollars, state, federal and local, the total for employee benefits increases to $2.9 billion, about 22 percent of the $ 13.4 billion spent on the public schools in 2017-18,

The numbers are troubling. Even more so are the trends driving them. In 2007-08, North Carolina allotted $7.890 billion for K-12 education and $1.422 billion – or approximately 18 percent of all state dollars — for employee benefits. You know where this is going.

Teachers have received pay raises in the last five budgets. When lawmakers decide on a budget, it will likely be six.  Over the past five years, teacher pay has increased from $47,792(2014-15) to $53,975 (2018-19), or by 13 percent.

While the calls for higher teacher pay appear to be endless, what is often left out of those discussions is the rising cost of benefits. I have reiterated that point repeatedly in articles listed here here and here.

In 2018-19, the value of the average benefit package for teachers in 2019 was $20,413. That includes health insurance ($6,104), retirement benefits (18.86% of salary) and social security (7.65 percent of salary).

While average teacher salary has increased approximately 13 percent over the last five years, the value of the average teacher benefits (health insurance, retirement and social security) increased 25 percent over the same time period.

The budget bill vetoed by Governor Cooper includes a provision to raise  the percentage paid for retirement costs one full percentage point to 19.86 percent as well as a provisions to increase the cost of health insurance to  $6,306 per employee, while the costs of social security are expected to remain the same at 7.65 percent of salary.

How high have the cost of benefits risen?  In 2007-08, the cost of health insurance for teachers was $4,097 per employee. The percentage of salary allotted for retirement — 7.83 percent —  was only slightly higher than  the costs of social security (7.65 percent of employee wages)  Next year retirement costs may break the 20 percent barrier.

Teachers deserve better pay.  But more than that, they deserve a pay system that rewards excellence and value. The current system fails to do so and every year asks taxpayers for more.

The current path of annual salary increases is not sustainable or desirable. Teachers have yet to receive a pay plan from the legislature.  Proposed salary increases in the conference committee report for teacher step and bonuses ranges from 1 to 6.1 percent Gov. Cooper proposed a 9 percent salary increase for teachers over two years (4.5 percent per year). What will the final number be? Who knows; likely somewhere in the middle.

People say North Carolina’s retirement system is in better shape than most states. That may be true, but trouble is ahead. Just ask State Treasurer Dale Folwell.

The cost of benefits must be a bigger part of discussions on teacher pay. While North Carolina has taken steps to hold down future costs by limiting the range of benefits for new teachers and seeking to end pension spiking, more can be done.  Teachers and state and local government need flexibility. Teachers should have the option of more benefits or more salary.

As DiSalvo suggests in his article, states should offer teachers higher salaries in exchange for retirement reforms. It’s exactly the path North Carolina should be taking.

The talk about teacher pay is endless. North Carolina will once again raise teacher pay. Before we do however, we need to understand how the rising cost of teacher benefits is hampering our ability to pay teachers.

Let’s do more than respond to the endless chorus on teacher pay. Let’s finally remedy the factors which have contributed to the current problems.