Power in Numbers—Cost-Adjusted Revenue
Every year, there's a raft of media coverage when state spending figures are announced. We hear the same story: northeastern states, including New York and Massachusetts, are often among the highest spending states, while states in the southern part of the country are generally viewed as under–investing in their schools.
Likewise, the education sector often compares teacher salaries—particularly those of starting teachers—throughout the country. When these figures are reported, similar judgments are made regarding the apparent "value" states place on the profession based on their teachers’ salary schedules. We hear that you'll be paid well if you're a teacher in New Jersey and Connecticut, but not so much if you teach in Mississippi or Oklahoma.
However, the vast majority of education spending statistics are reported without adjustment for the relative cost of living across states. This is a shame, because almost everything related to education finance is tied to local economic conditions. Adjusting for local cost factors allows for a more accurate assessment of a state’s ability to fund schools, and of schools' ability to pay for important things, like teacher salaries.
It would most likely be shocking to hear that Massachusetts, with a nominal per student average revenue of $15,529, is actually not one of the 10 top–spending states once the numbers are adjusted for local conditions. In fact, the state's investment in its schools in cost–adjusted terms is more akin to those of North Dakota and Wisconsin than of its northeastern peers.
Likewise, regular readers of education reporting would be surprised to hear that, once local costs are taken into account, three of the states in the top tier of teacher salaries are Louisiana, Texas, and Alabama. It turns out that new teachers in those states end up with much more buying power than those in New York and Connecticut—states usually ranked near the top for teacher salaries. In fact, after cost–adjustment, New York and Connecticut both fall below the national average for starting pay.
As with many other issues related to how we fund schools, a bit of nuance and context can reveal a very rich, and often surprising, story.
When starting a new job or relocating, one of the primary considerations is the cost of living in the new town or city. Not surprisingly, due to demand for this type of information, a host of online cost-of-living adjustment (COLA) calculators have now surfaced. Because the true value of a salary is determined by the cost of everything from shelter to leisure, it’s critical to understand what a dollar buys in any given area.
It's surprising, then, that a lot of the teacher salary data made available to the public does not, in fact, adjust reported salaries based on local economic conditions, which would be necessary to provide a true picture of what a teacher can afford. The National Education Association (NEA) often collects information from affiliates and reports starting salaries for teachers in an average district for each state. In order to understand the genuine value of these salaries, we cost–adjusted the NEA's 2012-2013 figures using a 2013 county–level cost of living index published by the Council for Community and Economic Research. (Our adjustment procedure involved aggregating the county–level indices to the state level, while considering differences in student enrollments such that areas with higher enrollments were weighted more heavily.)
If you were to take states' average salaries at their nominal value, you'd rank Washington, DC, New Jersey, Alaska, New York, and Wyoming as the top five. However, after adjusting for costs, only New Jersey and Wyoming stay in the top five. In fact, the cost–of–living adjustment is so dramatic in these purportedly high–spending states that New Jersey's teacher salary actually drops by more than $8,400, yet maintains number two status. And across all states, cost–of–living adjustment impacts salaries so drastically that New Jersey is one of only eight states that moves fewer than two spots on the 51–state ranking after considering local economies.
While Wyoming takes the top spot after cost–adjusting (starting teacher salaries in the state provide $40,827 in buying power), the three states that drop from the top five in the ranking are replaced by Louisiana, Maryland, and Texas. Alabama falls just $121 short of the top five, with an adjusted starting teacher salary of $37,834.
There are several additional states where the average school district starting salary fares quite well once adjusting for county–level cost of living. Tennessee increases its rank from 28 to 12, skipping 16 states in the value of its teacher starting salaries. Arkansas and Mississippi perform even better, jumping 22 and 23 states respectively once salaries are adjusted to reflect local buying power.
For Maine and Montana, low nominal teacher salaries don’t change much with cost–adjustment—they land at the very bottom of the adjusted ranking, with starting salaries of less than $26,500. And, perhaps most damning, New Hampshire, Vermont, and Oregon free–fall to the bottom five from what appear, in nominal terms, to be "middle–of–the-–pack" starting salaries.
Click on any state in the map below to see the cost–adjusted starting salary for its average district—that is, the value of that salary when considering local costs. You'll also see at a glance which states have higher adjusted salaries than the one you've selected.
It's equally important to consider local economic conditions when it comes to education spending more broadly. As with salaries, cost–adjusting per–pupil revenues can tell us a lot about what a school district can purchase with their resources. While salaries are major drivers of school district budgets, there are other important costs that vary widely across states and should be normed for more accurate comparison.
For instance, states across the country are affected by gasoline prices differently. In Indiana, gas prices are currently $1.44 per gallon, while Californians pay $2.47 per gallon at the pump—70% more. What this means, of course, is that districts driving school buses over the same number of miles can fill up their tanks for a lot less in the central states. In this way, these districts enjoy a lower cost of similar operations, or a lower "cost of living."
We see this borne out in the numbers when we adjust for local costs. A dollar in Indiana is only "worth" 75 cents in the same terms in California. It's highly unfair, then, to compare average school district revenues across states without adjusting to reflect the local economy.
So what happens when we cost–adjust per–pupil revenues for each school district in the country, and then develop new weighted averages for each state? Most strikingly, we see that many top-spending states aren't actually investing as much as we think when we hear big nominal numbers thrown around each year.
For instance, while New York maintains top-spending status, adjustments help us understand that the real "value" of the resources New York schools have at their disposal is about 26% (or $5,672) less per student than the nominal figure of $21,317 would suggest. And while the District of Columbia maintains top school–spending status, the reported but unadjusted per–pupil revenue figure of $26,487 is actually worth $18,933 when adjusted to conform to a national norm.
Additionally, while North Carolina, Arizona, Utah, and Idaho remain in the bottom five for school investment even after adjustments, they are joined by two notable additions: California and Hawaii, both of which tumble downward with cost adjustments. In fact, the cost of living in these states affects per pupil revenues so significantly that, after adjustment, their rank falls by 12 and 16 places, respectively.
The volatility in numbers (and consequently in the national ranking) is so significant it can best be demonstrated by a state whose numbers don't change that much: Ohio. When adjusted for cost of living, Ohio's per–pupil funding of $11,826 only budges by $167 per pupil— or 1.4%. Yet simply by staying essentially constant, Ohio’s national rank improves by 8 spots, surpassing states like Illinois, Massachusetts, and Rhode Island.
Explore the numbers below to find more interesting stories. You'll find, for instance, that revenues received by schools in Washington State are on par with Georgia and Kentucky once the numbers are nationally normed. You'll see that eight states, including New Mexico and Alabama, surpass Oregon once school funding is adjusted.
In the coming weeks, EdBuild will be making use of these nationally comparable figures in two new analyses: one showing the funding support available to low– and high–income school districts in each state, and a second highlighting the dissimilar budgets of similar school districts across the country. With a foundation of good data, we can see the ways in which our education conversations have been falling short—and how troubling the disparities in education resources really are.
Explore The Data
|State||Enrollment||Cost-Adjusted Revenue Per-Pupil||Nominal Revenue Per-Pupil||Cost-Adjusted Starting Teacher Salary||Nominal Starting Teacher Salary|
|District of Columbia||44,179||$18,933||$26,487||$36,840||$51,539|