Why Some Communities Pay More than Others? The Example of Illinois Teachers

Increased labor costs for salaries and fringe benefits is one of the budgeting consequences of growth in the employment levels of state and local governments.(1) Little research, however, determines what causes high or low public sector salaries. Using teacher salaries from Illinois school districts (Fiscal Year 1989-90) as an example, this article investigates determinants of public sector salaries from three perspectives: local characteristics of the school districts, the ability of citizens and communities to pay, and composition of the property tax base. The study compares the determinants of teacher salaries using four salary levels: entry level, average, maximum salaries, and a benefit package of average salary plus district hospitalization costs. Teachers are good examples of public employees for two reasons; first, they are highly visible public employees, and second, schools rely heavily on local revenue sources. The issue of teacher visibility is closely related to the fact that school districts rely on property taxation as a primary revenue source. While other local governments also depend on property taxes, school revenue is more prominent because of the salience of education funding, the conspicuousness of school buildings, and the presence of education tax-raising referenda in local elections. It is because tax affordability is an issue that teachers and their salaries become far more visible than other public employees. Teachers are a reasonable group to study also because states have central agencies that collect data on the salaries of teachers in all districts and the data are open to the public and relatively easy to use. Teachers my be a more visible example of all people receiving public salaries at the local level. Literature Review The effect of unionism dominates the literature regarding determinants of public salaries. Two seminal studies review much of the literature available through the early 1980s regarding determinants of teacher salaries but most works that they include focus on a single variable, unionism. Lipsky (1982) reviews the prominent literature on the effects of collective bargaining on teacher pay, while Freeman (19 86) examines a variety of public professions. More recent studies also focus on unionism and teacher salaries (Zuelke, Hill, and Franzoia, 1987; Easton, 1988; Silva, 1988; Walsh and Witney, 1988; Baldwin, 1989; Hundley, 1993; Orzechowski and Marlow, 1995; Zwerling and Thomason, 1995; Babcock and Engberg, 1997). Chandler (1994) correlates unionism with the salary of sanitation workers, Schwartz-Miller and Talley, (1995) with transit workers, whereas Jennings and Borrelli (1994) examine the effects of municipal policies and administrative choices on salaries in the public safety sector. Some literature discusses the effects of fiscal stress, ability to pay, or the property tax base on the costs of local governments (Bradbum 1982; Ladd and Yinger, 1989; Rubin, 1990; Chicoine, 1991). Only a few studies, however, apply these effects to school districts (Weber, 1980; Freeman, 1986; Ward and Fackender, 1987). The literature search identifies two problems: identifying the appropriate dependent variables and specifying the appropriate independent variables while minimizing the effects of multilinearity. This research summarizes the findings of the previous literature including that of fiscal stress, ability to pay, and property taxation into one model of salary prediction. Dependent Variables At the school district level, the teacher salary schedules are usually assembled into a matrix of different lanes where any teacher's salary is determined by years of teaching experience and level of education. The average school district has numerous measures of salary levels available. The problem 'is apparent: which measure should be studied? The literature reports the use of an array of dependent variables: Silva (1988), entry-level salaries; Zwerling and Thomason (1995), the lowest and highest salaries in school districts; Lipsky (1982), average salaries; and Delaney (1985) and Gallagher (1978), a group of several measures ranging from the lowest to highest salaries on salary schedules. …