Two States Chart

I have been talking about NC consisting of two states. The chart below using preliminary 2013 data demonstrates a sharp divide among our urban areas with some booming and some flat lining.

Click the image below to view a larger version.

Employment by MSA Updated April 3, 2014

Privilege Taxes

Politics and sleight of hand, all too often, go hand-in-hand.

A hidden tax – like the ‘Privilege Tax’ – is an example.

Here’s how it works: A city makes a retailer (like Wal-Mart) pay a tax of, say, $25,000 for the ‘privilege’ of doing business in the city.  The retailer then plugs the new cost into its computer and adds a small amount to each purchase at the store so it can pay the tax.  So when local citizens pay their bill at the checkout line they see the sales tax added to the bottom of the receipt but the Privilege Tax amount is hidden inside the cost of each purchase. The consumer has no idea he or she just paid a tax to the city.

That’s bad for consumers.  But it’s quite lucrative for the city.  One local municipality receives $1.1 million every year from hidden Privilege Taxes.

That’s why a plan in the NC General Assembly to reform the Privilege Tax is generating a flurry of protests from NC municipalities, including a not-so-subtle threat:  The cities say if the legislators take away their hidden tax, then they will have to increase property taxes.  To hear them describe it, every city government is so lean and mean and there is no spending anywhere to be cut to avoid raising property taxes.

Of course, what they’re really saying is, “We like collecting a million dollars in taxes people don’t see and if you repeal the hidden taxes, then we’ll have to show people the total taxes (they pay on their property tax bills) and we don’t think that’s a good idea.”

One more fact:  there may be someone less interested in raising local property taxes than me, but it’s not likely.  So, I asked a few questions and got a surprise.  It turns out the very same city that imposes a hidden Privilege Tax of $1.1 million annually also has $7.8 million in uncollected property tax bills – going back years.  So here’s how the system works:  One group of people fail to pay $7.8 million in property taxes, then, to make-up for the shortfall, the city puts a hidden tax on everyone else.

How’s that for broken politics?

 

How the War on Poverty Was Lost

Here’s an article written by Robert Rector of Heritage Foundation. Of course, folks will naturally, argue over whether his conclusions are correct. But he presents the facts clearly. And makes a sensible case that simply transferring money from one group of people to another failed, because it didn’t attach to root causes of poverty.

A Little Humility

I would like to answer Rev. T. Anthony Spearman’s commentary in the Hickory Daily Record on February 25, 2014.

Reverend Spearman argues Republicans are, somehow, against the poor and vulnerable and, so, are immoral and at odds with the teachings of the Bible.

Now, political leaders wrapping themselves in the Gospels and claiming those who disagree with them are ‘immoral’ is not a new phenomenon. But, in fact, what Rev. Spearman is doing is arguing his opinions are moral and anyone who disagrees with him is immoral.

But is it ‘immoral’ to believe – as Republicans do – that government is not the answer to every problem? And that more government will not cure poverty? Because that is the heart of Rev. Spearman’s disagreement with Republicans – our belief in less government.

Spearman argues that when Republicans vote for less government, they are voting against the poor. But is that so?

Five decades ago, in 1964, government declared war on poverty. Since then, we’ve spent $20.7 trillion to eliminate poverty. And, fifty years later, the poverty rate has not gone down. President Obama spent a trillion dollars on a big government ‘Stimulus Plan’ to create jobs – and it failed. So is more government really the cure to poverty? Or unemployment?

Rev. Spearman’s answer to that question is Yes, absolutely – then he (and Rev. Barber) go a step further and brand conservatives as immoral or evil.

I’d be the first to admit Republicans are not perfect. But, it’s equally true that Rev. Spearman does not have a monopoly on ‘doing God’s bidding.’ There’s a missing piece in Rev. Spearman’s commentary – a bit of old-fashioned virtue that can make all the difference: Humility.

 

A Defining Moment

Like a hurricane roaring across the Gulf of Mexico in August, the rhubarb in Raleigh over the ‘Read to Achieve Program’ appears to be building strength rather than waning.

A couple of years back, Senator Phil Berger drew a line in the sand by passing a bill that stated a simple principle: Children in the third grade had to learn to read before they could be promoted to the fourth grade.

In addition, Senator Berger gave local school boards $72 million to set up ‘Reading Camps’ to help struggling children.

All that was simple enough – and made common sense.

But, now, Superintendent of Public Instruction June Atkinson says that holding a child back just because he or she can’t read is just plain wrong – that it is “a 20th-century artifact.” And that we should promote children even if they can’t read.

Here we have a clear philosophical divide, and a pretty wide one. If a third grade child can’t read, should they be promoted?

The easier path is the one Secretary Atkinson is advising. But is it the best path?

Personally, I agree with Phil Berger. Let’s get children who’re having trouble reading extra help, but let’s stick to our guns – requiring third graders to read is the tougher path but in the long run it’s the better path.

How this debate will be resolved will tell us something about the future of education in our state. Will politicians and bureaucrats continue to talk a lot about standards – but let the education establishment off the hook ? Or will we require responsibility and accountability from the people who educate our children?

Contrary to much of what passes for public debate these days, this topic has an unusual degree of clarity. So pick your side and join the debate. Every leader should speak out. I’ll start by paraphrasing the late Senator Jesse Helms and asking the leader of the Democratic Party, Where do you stand Roy?

 

Broken Politics and 8-year old Victims

One thing is clear about our current political system – it rarely works. Washington is a prime example. But there are examples in Raleigh as well.

Broken politics are bad enough when adults pay the price for politicians’ foibles, but when bureaucrats use third graders as political pawns, political shenanigans take on a whole new meaning.

Here’s an example: In the 2011-12 Budget the General Assembly implemented the Read to Achieve program. What the bill did was simple: It said children in the third grade needed to be able to read at a third grade level before they could be promoted to the fourth grade. That was straightforward enough – it simply laid down a marker. It didn’t require that 8-year-olds take complex batteries of statewide tests. In fact, it didn’t require any statewide testing program at all.  A child’s teacher could make the decision.

And that’s where it stood until the bureaucrats at the Department of Public Instruction (and local school boards) got into the act and turned a simple goal into  a complex system of tests upon tests upon micro-tests – that all landed squarely on the heads of 8-year-olds.

The Department of Public Instruction started informing local school boards that reading proficiency could be measured in five ways:

1. Pass the Beginning of Grade Test.

2. Pass the End of Grade Test.

3. Pass the state developed alternative test.

4. Pass a State Board of Education approved test, developed at the local level.

5. Pass (at a 70% rate) the 36 passages in the student portfolio.

Now, bear in mind, the General Assembly didn’t mandate all these tests. But, nonetheless, some local school districts proceeded to require third graders to take a barrage of multiple tests.

So, why is this an example of ‘broken politics?’ Because it’s an example of how our state education bureaucrats react to any attempt at accountability.  It reminds me of the recent budget dust up in Washington. If the President had simply laid off a few IRS auditors, no one would have minded. But, instead, he chose to shut down those parts of the government that would cause the most pain and outrage – like locking veterans out of war memorials.

Bureaucrats don’t like accountability,  so under the ruse of complying with Read to Achieve they created a plan for testing that was sure to outrage parents. To crush any attempt at accountability the bureaucrats turned a simple requirement – that third graders be able to read – into an education train wreck.

Not a Cut and Dried Question

The average North Carolina teacher receives compensation (salary plus benefits such as healthcare and retirement benefits) of around $55,000 and according to the NCAE, which serves as a union representing teachers, it’s not nearly enough.

 

But like a lot of problems that look simple at first glance, the question of fair teachers’ pay isn’t as cut and dried as it seems. Here’s an example: Should teachers receive across the board pay raises – or merit pay raises?

 

Here’s a more nuanced example: According to the Census Bureau, between 2000 and 2010 the median household income in North Carolina dropped from $51,125 to $45,570. At the same time teachers’ compensation didn’t decline – in fact, it increased slightly. And, as a result, by 2010 the average teachers’ pay was 121% more than the median household income.

 

Teachers, of course, believe they are not receiving the compensation they deserve – but, on the other hand, over the past decade, compared to the average family, teachers fared relatively well.

 

Here’s another, harder question: It’s simple to say, Let’s raise teacher’s pay – but how do we pay for the raises? Is it fair to raise taxes when many families are watching their household income drop? That’s a pretty tough proposition – the answer to that question’s not cut and dried at all.

When You Are In A Hole

The problem with today’s political debates is they’re loud, clanky, and breed confusion rather than spreading light.

Lately, I’ve been hearing a lot from the NCAE (the teacher’s union) about how wrong it is to only pay teachers, on average, $41,000 a year. So, I looked into the numbers and, well, like a lot of numbers in political debates they don’t quite tell the whole story.

Teacher salaries are $41,000 a year on average. But, in addition, like other state employees, teachers also receive benefits (like health insurance and retirement benefits) – which my friends in small business would consider generous.

Let’s look at health care benefits: A teacher receives the standard state government health insurance package, which is a deluxe package, for free. In addition, if he or she chooses, they may upgrade to an even better package by paying 5% of the total premium out of pocket.

Not long ago, a teacher wrote me, taking me “to task” for saying the state pays for her health insurance as part of her total compensation. She made it very clear she was paying for her own insurance and the money is deducted from her paycheck. In fact, it appears she’d chosen to pay for the upgrade and believed the 5% that came out of her paycheck covered the whole cost of her health insurance. She’d simply missed the fact the state was paying around $5,000 per year for her health insurance in addition to the $250 she was paying for the upgrade.

The story doesn’t end there: The State has also promised to pay nearly $30 billion in health insurance benefits for teachers and state employees after they retire. Here’s how these benefits work: After teaching for twenty years and after age 50, a teacher is eligible to stop teaching and to continue to receive his or her state health insurance (paid for by the state) for the rest of his or her life. That’s called a ‘health care’ retirement benefit. Except unlike most retirement benefits it doesn’t start at age sixty-five – a teacher can claim this benefit when he or she is fifty,  fifty-five, or sixty years old.

Right now, North Carolina spends $1.35 billion a year to provide health insurance to public school teachers. Of that, one third ($450 million) goes to pay for health insurance for teachers who are no longer teaching. Even teachers who are on Medicare continue to receive a state healthcare benefit as a supplement.

The NCAE’s reaction to all this has been to say we should be ‘talking salaries, not benefit packages.’ But paying $450 million in benefits to folks who don’t teach is a pretty big number. If the legislature had $450 million to spend to give teachers pay raises, it would be an average raise of $4,500 per teacher.

It would be simple to say, Well, let’s just do that. Let’s just pay health insurance for teachers who are teaching. And use the $450 million to fund pay raises. But we can’t because the state has made a commitment to pay that $30 billion in health care retirement benefits. We can’t just say, Well, yes, we did make that promise – but that was then and this is now.

The hard truth is the state’s on the hook for a $30 billion debt and that $450 million is just this year’s payment on it.

Here’s my point: Instead of a system that pays teachers who are teaching more, we have a system that provides benefits to teachers who don’t teach. That’s another big flaw in how North Carolina pays teachers that needs to be fixed.

It Pays to Age

In his book Outliers, Malcolm Gladwell introduces us to the “10,000-Hour Rule” – a principle, originated by Anders Ericsson, which says mastery of a field requires focused effort for an extended period of time – for 10,000 hours. For example, under this theory, spending 40 hours teaching every week for five years is how to produce a ‘master teacher.’

Now, compare Malcolm Gladwell’s 10,000 hour theory to how we pay a public school teacher. Under our current system, we say that a teacher has his or her lowest value at hiring. That’s when they’re paid the least. But that value does not increase one penny for the first five years of the teacher’s career. Not a penny.

The basic problem here – the flaw in the system – is we blindly lump teachers into categories called ‘tiers’ and pay them based on which ‘tier’ they fall into – instead of how well they teach. The tiers looks like this: 

Teacher Compensation Tiers

Experience

Compensation

0 Years

$38,490

10 Years

$45,409

20 Years

$54,527

30 Years

$63,153

*         All levels assume a teacher with no advanced degree or certifications. Compensation includes state base salary, adds local supplement (using statewide average) and adds the present value of pension and healthcare benefits received after retirement. Compensation is flat for the first five years. Compensation increases annually thereafter.

 

The flaw in the system is obvious: An absolute genius teacher, who’s taught five years, is paid 40% ($25,000) less than a mediocre teacher who’s taught thirty years.

Now, I guess it is possible that the teaching profession is completely different from every other field of human endeavor – and that a teacher may not improve a bit in skill for five years. And, I guess, it’s also possible that every single one of the best teachers in North Carolina has taught over thirty years. But, after eight months in the General Assembly, when I look at a chart like this, right off, I smell politics – and suspect I’m looking at a pay system that is the result of politicians run amok and teacher union lobbying.

The NCAE likes to say if we want better teachers we have to pay them more. And that sounds fine. But it’s not the same as saying we should pay the best teachers more. And, in fact, our current ‘tier’ system dictates some of the best teachers will be paid less.

Here’s the bottom line: It is time we took a hard look at how our state compensates teachers. After all, shouldn’t the best teachers also be the best paid teachers?