What are local governments in doing with all the extra property tax revenue they are taking in due to the unprecedented rise in housing prices? Where I live, they're wasting it, and there is going to be hell to pay when the bubble bursts, tax revenues stagnate or even decrease, and prudent fiscal policy has long been thrown out the window. My local Arlington County newspaper reports that all teachers in the county, who are already the best paid in the area, are due to get an 8% raise for the year. Particularly remarkable is how this came about. Some fraction of soaring property tax revenues are earmarked for the schools (which already spend the absurd sum of $17,000 per student). The school superintendent decided that beginning teachers with master's degrees should be paid forty-five thousand dollars, an 8% increase. Why forty-five thousand? Because this is "a nice round number." Really, that's what he said! And once these teachers received an 8% increase, he felt obligated to give all county teachers an 8% increase. New teachers with a bachelor's degree for example, will make over forty thousand dollars, making it probably the best job available to English and history majors in the D.C. area.
UPDATE: Mark Kleiman has an exceedingly silly response to this post, in which he questions why public school teachers shouldn't make a third of starting salaries at major law firms. First, on an hourly basis, teachers who make $40K a year, have summers off, work 9-3 (I understand that dedicated teachers put a lot more time in than this, but not all teachers, to say the least, are so dedicated-and many who start dedicated get frustrated very quickly by the laziness of many of their senior colleagues, who face no consequences given tenure), and have generous pensions (law firms usually have none), are probably making approximately the same as first-year associates at law firms, without the effort an expense of law school, or, for that matter, necessarily being even superior college students. And they can actually have a life (not to mention, if they stay in teaching, absolute job security). Second, and this was obvious from the post above, if the county had actually done a study, even an informal study, suggesting that higher salaries were needed to attract and retain top teachers, I could understand the increase. But the 8% increase came about only because the school district had extra money to spend, and $45K sounded like a "nice round number." Third, I could actually see a good argument, given rising housing costs in the area, for a substantial raise in school teacher starting salaries. But I don't see how this would apply to teachers already in the system, who aren't going to get any better just because you pay them more money, and who have been around long enough to have mostly benefited tremendously from rising real estate prices. Moreover, the local teachers' union has vigorously and successfully resisted any form of merit pay. In short, I'm all in favor of paying superior teachers very well--I'd scrap the entire seniority and tenure system, clean out the bad teachers, and raise pay to attract the best teachers--an amazing teacher with 30 kids would be a lot better than two mediocre teachers with 15 kids. But I'm not in favor of throwing money at teachers' salaries simply because the alternative is the horrible prospect of actually returning money to the taxpayers.
Postscript: Mark notes that starting cops, who need only two years of college, get $39K in Arlington. Does that make being a cop a "better" job than being a teacher? Given that starting cops are often on the graveyard shift, work weekends, and have a not inconsiderable risk of death or injury on the job, I hardly think so.