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Teacher pay termed key to good economy

March 18, 2002 /

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The state could encourage economic development if it put teachers’ salaries in the 10 percent state
income tax bracket, a Billings CPA and school board member claims.

By JIM GRANSBERY
Of The Gazette Staff

Conrad Stroebe argues that such an increase in salaries can be financed in one of three ways, or a
combination of the three, and that making teachers and school staffs well paid would create an economic churn
locally and ensure the retention of quality teachers.
Stroebe’s proposal was a "last minute" offering at the governor’s economic development listening session
March 7 in Billings. He expanded on his argument for paying teachers $50,000 a year.
The 10 percent tax begins with taxable incomes in excess of $43,100, which is calculated by subtracting
deductions and exemptions from gross adjusted income.

A teacher earning $50,000 a year plus benefits
would likely make the 10 percent bracket, Stroebe
estimated.
"If we put the money into education that we have
taken out over the last 10 years, bigger teacher
paychecks get spent in every community in Montana,"
he said. "Not only would it spur local economic
development, but would increase state income tax
collections. As a rule of thumb, income in a community
can roll over in a community five to seven times before
moving out.
Stroebe said the accumulated effect of tax cuts
given by the Legislature since 1993 are about $100
million. He said the current 95 mills levied statewide
would cover much of those cuts if the tax base were
allowed to grow naturally, but that the state has kept
reducing the tax base downward.
This is especially true of the business equipment
tax which has been repeatedly reduced through the
1990s, he said. Beginning in 1989, the Legislature
reduced the rate on business equipment from 12
percent to 9 percent. In 1995, it reduced it from 9
percent to 6 percent over three years, and in 1999, dropped it to 3 percent.
"Basically the state has not put in its share – 80 percent of the cost – in the past 10 years," he said. That has
been made up on the local level through voted levies on real property and small businesses.
Most of the state’s general fund expenditures – education, institutions, state government – are paid with the
state income tax revenue. And as Stroebe notes: "You cannot get more money out of the pie that remains the
same size."
So where does the additional new money come from?
Strobe has three suggestions, using one or a mix of all three.
First, the state could impose a sales tax targeted on tourism goods and services and entertainment.
Secondly, it could add another 60 mills to the statewide levy, or third, institute an education fund liability tax
patterned after the payroll tax enacted to pay off the unfunded liability of the state’s workers’ compensation fund.
Strobe said a payroll tax for education would cost half a penny per $100 of wages paid. The worker would
pay half a penny and the employer would add half a penny.
"This has been used before. The people have the stomach for accepting it," he said.