Paying teachers wages comparable to Indiana's could save $780 million annually
The average pay of a Michigan public school teacher is 16.5 percent higher than it is in Indiana, according to the most recent salary comparison from the U.S. Department of Education. If Michigan were to compensate its average school teacher at what the federal government reports as Indiana’s wages, annual savings for the state budget would equal $780 million.
A family of four in Michigan is annually paying $312 to make up the difference.
A budget cut of this magnitude would be sufficient to wipe out a significant chunk of the Michigan Business Tax, which kicked $726 million into state K-12 school spending in 2010. Nearly all of the salaries for public school employee wages in Michigan are paid out of state government’s budget. K-12 schools are the largest single expenditure funded by general state tax dollars.
In a recent interview with MichCapCon.com, Governor-Elect Rick Snyder noted that he wanted to cut the MBT by $1.5 billion, to reduce the size of the state government and to reign in the cost of public employee compensation. U.S. Department of Education data shows the Great Lakes State to be paying its average teacher 6.3 percent more than the national average for the 2009 reporting period, and 16.5 percent higher than Indiana’s average.
This is happening as Michigan has become one of the 10 poorest states in the nation, as measured by its ability to produce goods and services.
When asked by MichCapCon.com which state governor he considers most worth emulating, Snyder singled out Indiana’s Republican governor, Mitch Daniels.
The average teacher wage reported for Michigan was $57,327. This is $3,417 above the national average and $8,129 above the average pay for Indiana teachers. The Department of Education reports just over 96,000 public school teachers in Michigan.
And these may be conservative calculations. The Michigan Department of Education issued a revised figure for 2009 teacher salaries, stating a new average of $62,272.
Measuring by the ability of Michigan taxpayers to afford these salaries, it would appear to be more reasonable to compare Michigan to Indiana, rather than to the nation as a whole.
As reported recently at MichCapCon.com, Michigan’s annual gross domestic product per capita in 2009 was just $34,157. The national average of $42,031 is 23.1 percent higher. This places Michigan in the bottom 10 of the 50 states for this measure of economic prowess, after being as high as 21st best back in 2000. GDP per capita measures the total goods and services being produced in Michigan and is thus one good measure of the state’s relative ability to pay its public employees.
The U.S. Bureau of Economic Analysis reports that GDP per capita for Indiana in 2009 was $37,495. This is still 9.8 percent higher than Michigan, but also well below the national average. Because Indiana is a stronger producer of goods and services per capita than Michigan, it is even arguable that a comparison with Indiana’s teacher compensation still overstates Michigan’s comparative ability to pay its teachers.
It is unclear how far Michigan’s new governor will go toward bringing public employee costs down in Michigan.
"We are talking about people and their families," said Snyder to MichCapCon.com, as he was noting that public employee pay would be a significant part of his plan to reduce the cost of state government. "We have to do it in a constructive fashion and realize that we are asking people to make sacrifices. And we need to all share in those sacrifices."
When deciding how much was needed, Snyder said two questions should be asked:
1. What is comparable with the private sector?
2. What is financially affordable?
"I don’t think you can check either of those boxes today," he noted, in answer to his own questions.