States Struggle to Provide Teachers with Salary Increases

The issue of teacher shortages has been a primary concern for public school leaders ever since the onset of the Covid-19 pandemic in 2020. According to a survey conducted in August 2023 by the National Center for Education Statistics, 79% of public schools facing at least one unfilled teaching position struggled to fill positions for the 2023–24 academic year.

One commonly proposed solution to address the shortage of K–12 teachers is to increase K–12 education funding so that teachers can receive more competitive salaries, making the profession more appealing for prospective educators. The lack of teachers indicates a failure on the part of state legislatures to allocate sufficient funds to education in the long term.

However, increasing education spending may not necessarily lead to better teacher pay and recruitment. Data from the Reason Foundation’s recent study “Public Education at a Crossroads” suggests that states have not effectively translated additional education investments into higher teacher salaries. Despite increased spending, many states have witnessed a decline in average teacher salaries over the past two decades. States that have managed to raise teacher salaries often do so after making substantial investments in education, with a significant portion of the funds allocated to expenses other than teacher salaries.

Increased funding, stagnant salaries

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Figure 1 portrays the national trends in inflation-adjusted total revenues, instructional salary spending, and instructional benefit spending per student from 2002 to 2020, as documented by the U.S. Census Bureau. While total K–12 revenues per student increased by 25%, rising from $12,852 to $16,065 during that period, inflation-adjusted spending on instructional salaries saw minimal growth, inching up from $4,920 to $5,145 per student.

Considering that instructional salary expenditures also cover spending on newly created positions and instructional aides, the findings are even more concerning. Despite a significant increase in the number of teachers and instructional aides in public schools from 2002 to 2020, the rise in education revenues has not translated proportionally into higher teacher salaries.

Analyzing data on average teacher salaries from the National Center for Education Statistics, which excludes classroom aides and accounts for new teacher hires, reveals a decline in inflation-adjusted average teacher salaries despite a national increase in education revenues of 25% from 2002 to 2020.

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Figure 2 underscores the state-level implications of national trends in total K–12 revenues and average teacher salaries. Despite almost all states, except North Carolina, boosting inflation-adjusted education revenues per student between 2002 and 2020, 26 states witnessed declines in their average teacher salaries. These declines cannot be attributed to reductions in average teacher experience, as data from the National Center for Education Statistics suggests that teacher salaries have remained static nationwide across various experience levels.

In general, states that increased education funding the most also experienced the largest rises in average teacher salary. However, states like Pennsylvania, Illinois, and Delaware witnessed significant drops in average teacher salary despite augmenting education funding by more than $5,000 per student from 2002 to 2020. In contrast, Washington, California, and Massachusetts managed to increase teacher pay substantially while making comparable additional investments in K–12 education per student.

Assessing states’ ability to allocate funds to instructional salaries

Even in states like New York, where substantial education spending hikes have corresponded to significant teacher salary increases, the efficiency of growth in instructional salaries relative to the size of the additional investments made by those states requires examination. In essence, it raises the question of how much additional instructional salary spending an extra dollar allocated per student in education can procure.

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Returning to the Census data, Figure 3 elucidates the effectiveness of each state in leveraging a new education dollar per student to enhance spending per student on instructional salaries (including higher instructional salaries and new instructional hires, including instructional aides). Nationally, only seven cents of every new dollar allocated to education between 2002 and 2020 went towards instructional salaries. Massachusetts emerged as the top performer in adeptly translating new education spending into teacher take-home pay, with a ratio of 34 cents of each new education dollar per student.

This perspective enables a more equitable comparison among states with varied levels of new investments in public education. For instance, Nebraska, ranked 33rd in revenue growth and 29th in average teacher salary nationally from 2002 to 2020, positioned itself at second place in the nation by successfully translating 32 cents of each new dollar allocated into higher instructional spending. Conversely, Pennsylvania, ranking 6th in per-student revenue growth and 10th in average teacher salary, lagged behind the national average by directing only five cents of each new dollar to instructional salary spending from 2002 to 2020. Although Pennsylvania allocated more funds to education than Nebraska and boasted higher overall teacher pay, Nebraska exhibited superior financial prudence in funneling new funds into classroom instruction.

States witnessing substantial spending growth generally excelled in converting new funds into instructional salaries. However, some states with moderate spending growth (Ohio, Mississippi) demonstrated greater efficiency than states with higher spending growth (California, New Jersey) at channeling new funds towards instructional pay. Contrarily, low-spending growth states like Georgia and Missouri witnessed a reduction in funding directed towards instructional salaries per student, indicating a systemic issue across states.

Challenges in increasing teacher salaries

Why do states struggle to prioritize teacher salaries effectively? Firstly, salaries form just one component of overall compensation. The gains in teacher compensation between 2002 and 2020 were largely offset by rising benefit costs. Notably, instructional benefit costs per student, comprising primarily retirement and healthcare expenses, surged by nearly $1,000 or 79%. For every dollar allocated to instructional salaries, four went towards benefits. The escalation in benefit costs is largely attributed to mounting unfunded liabilities in teacher pension systems, explaining why states like Pennsylvania and New Jersey, plagued by pension system frailties, struggled to augment teacher salaries despite substantial K–12 investments.

Secondly, “Public Education at A Crossroads” elucidates how states prioritized hiring new personnel, particularly non-teaching staff like school-level support personnel, over providing salary increments for existing teachers. Public school staff nationwide increased by 13.2% from 2002 to 2020, outpacing the 6.6% growth in enrollment. Non-teaching staff alone grew by 20%. The issue of benefit costs arises here as well, as new personnel also incur escalating non-salary compensation costs.

Fundamentally, compensation and staffing decisions predominantly rest at the school district level, with district leaders harboring different motivations than governors or state legislators. While state officials may benchmark their teacher salaries against those in other states, district leaders prioritize daily school operations and staff recruitment vis-à-vis neighboring districts. Moreover, district budget officers lean towards risk aversion, propelling them to channel new funds towards marginal support personnel additions over bolstering teacher salary scales that imply longer-term financial commitments. Consequently, district leaders seldom strategize to capitalize on staff attrition and redirect funds towards salary increments.

To be fair, district leaders may confront constraints in making astute budgetary decisions, especially in regions with robust teacher unions. Chief budget officers in Los Angeles or Chicago would likely dismiss any notion of making enduring budget tradeoffs, notwithstanding the critical need for financial realignments. Contractual agreements with teacher unions mitigate the latitude for financial planning in the long run, constraining funds allocation for raises.

Notably, Figure 3 highlights that union-supported states generally exceeded in directing new funds towards teacher salaries. This trend aligns with research indicating that robust collective bargaining agreements are associated with heightened teacher salaries. However, despite a comparatively better performance in channelling new funds towards teacher paychecks, union-endorsed states do not necessarily excel in striking a balance between salary hikes and other budget priorities. Union-friendly states also exhibit surplus staffing and higher benefit costs.

Complexity in addressing the issue

If state legislators aim to boost teacher salaries via fresh funds, they may need to mandate compliance from local school districts. This entails fortifying pension systems to allocate funds for salaries and consider augmenting existing tools such as minimum state salary schedules, capped class sizes, and staffing directives.

Nonetheless, imposing stringent funding constraints could curtail school district autonomy and disrupt local salary structures. Enforcing budgetary restrictions on affluent districts primarily funded via local property taxes presents a formidable challenge. Conversely, less affluent districts grappling with limited resources would face escalated financial constraints. The experiences of Arkansas districts following the recent surge in starting teacher salaries, leading to salary schedule compression across districts, underscore the challenges encountered in implementing such reforms.

Alternatively, the only available recourse within the current public education framework, albeit unappealing, involves funneling significant proportions of new funds into the education system, with the hope that a fraction would reach teacher salaries.

Christian Barnard serves as the assistant director of education reform at Reason Foundation.