Hi Neel,
I think you're neglecting teacher overhead, benefits, etc. Where I work, the total cost of an employee is about 2.5 times their annual salary. That's probably on the high end, but as you know employees cost much more than their salary (benefits, taxes, retirement, etc.).
For some specifics, in my school district (Fairfax County, VA), the total [link|http://www.fcps.k12.va.us/about/stats.htm#BUDGET|operating budget] is $1.4712 billion for 165,016 students. $8938 per student. 20,557 full time employees. 238 schools and centers. This budget doesn't include the costs of new schools, etc., which has a separate budget.
According to the PDF file linked on [link|http://www.fcps.edu/DHR/salary/wshbook.htm|this] page, a starting full time teacher (193 days) starts at $34,069. Someone with a PhD and at the top of the step range can make $76,915. The rate rises a little above $90k for "extended day" and some other positions.
I haven't been able to find specifics about what an employee "really" costs, but simply taking the total operating budget and dividing by the 20,557 full time employees only gives $71.6 k. There doesn't seem to be massive overhead waste there (as top salaries are above this average).
It's easy say that the school bureaucracies are bloated money-wasters. Things can always be run more efficiently, but there doesn't seem to me to be a vast amount of waste. At least in this case.
Cheers,
Scott.