As long time readers of my posts know, local governments in the rest of New York State (the portion outside New York City) have been on a hiring binge for nearly two decades, despite ongoing complaints about property taxes and a stagnant population. The trend has been particularly pronounced in education, where with the exception of New York City districts have been told that the more money they spend, the more back door school aid (via STAR) they would receive. New York City, on the other hand, has been under pressure to cut costs and staffing for 30 years. While good economic years have seen increases and bad ones cuts, the long term trend in New York City public employment has been down. In general, when fiscal times have been tight, the rest of the state hasn’t cut back at all. Rather, it is New York City’s share of state fiscal resources that has been reduced. Elsewhere, no amount of money has ever been enough, as long as New York City taxpayers, future state taxpayers, or the city’s children could be sacrificed to pay. Well this could just be a blip, or the result of sampling error or people filling out forms incorrectly, but the New York State Department of Labor reports that in October 2007 local government employment in the rest of New York State was 3,400 lower than it had been a year earlier (see attached).
I say it could be a blip because we’ve seen this before. From January to September 2006 local government employment in the rest of the state was down slightly from year earlier levels as well. With the election over, however, the rest of the state took on the new Governor by putting lots of people on the payroll and then demanding that the New York State tax New York City to pay for it, as always. Meanwhile, the Governor concentrated on taking on wasteful spending via the Medicaid program, which happens to be concentrated in New York City, leaving excessive education spending elsewhere unchallenged, all while cutting off the city’s general aid. Local government employment in the rest of the state soared, while in the city local government employment resumed its decline.
Despite an increase of 3,500 from October 2006 to October 2007, with Wall Street profits falling and the city’s unemployment rate rising, that decline is likely to resume as the city cuts services. If the rest of the state wasn’t willing to help out after 9/11, when the city’s share of state school aid was cut, then city can expect no mercy now.
The question is, has something changed in the rest of the state? And if so, might the decision to send additional “property tax relief” aid to homeowners there directly rather than via school districts have something to do with it? In the past, school districts took the aid and spent it, raised property taxes besides, and then demanded more. Perhaps that was less easy this time around.
If state aid policies finally caused local governments elsewhere in the state to stop putting everyone in sight on the payroll, then this is a policy that should be expanded on.
I recommend that, with the state facing a tough fiscal year, both school aid and school “tax relief” aid be frozen at this year’s levels. New York City, and other lower spending districts, would be permitted to increase spending per child with their own money. But over-spending districts — say those spending more than 30 percent more per child than the national average, adjusted for the cost of living — would be required to freeze spending at current levels or face a penalty. That penalty would be one dollar of STAR aid cut for every dollar of increase, requiring two dollars of local taxes for each dollar of additional spending. Since if nominal spending were held constant real spending would fall by the rate of inflation, this would require efficiencies. But it’s about time for that, and having property taxes rise below the inflation rate is something residents of the rest of the state can use.
As I reported last summer, in FY 2005 even with an adjustment for the higher cost of living here, public schools in the Downstate Suburbs averaged 32% higher spending per pupil than the national average. Upstate schools were 36% higher on average. And some districts spent vastly more. I’m certainly a person who is willing to pay for above average education funding, here and elsewhere in the state, and would find 20% more than average reasonable. But 30% more? Or 40% more? Or 50% more? And remember, downstate the figures are reduced to adjust for an average wage one-third higher than the national average.
After years of being low by every measure, New York City schools were 10% above average that year. But as long as the rest of the state spends as if money is no object, the threat of having the city’s share of state school aid slashed to pay for it, with dire consequences, again will remain. I fear a multi-billion dollar cut to the city’s share of state education funding this year, now that the Campaign for Fiscal Equity lawsuit is over and the Court of Appeals has ruled there will be no consequences for the rest of the state of a similar decision in the mid-1990s. So why wouldn’t the rest of the state want to repeat it, given the sort of people we have in the state legislature?
Based on decisions made in the wake of the Campaign for Fiscal Equity Suit, in fact, it now appears that if the city’s spending per child were to climb to 20% above average, reflecting its disadvantaged student population, spending in the rest of the state would rise to 40% or 50% more than average, with city residents paying for it. And the higher spending in the city would likely lead to a lower and lower retirement age for teachers, not additional classroom spending. Therefore the city would be better served by a freeze in education spending elsewhere, which might gradually push the rest of the state back to a more reasonable (and equitable) level of spending.
Complaints about rising property taxes, combined with greater and greater hiring, elsewhere in the state have put a target on New York City’s back. The capacity for rationalization has been remarkable. But the decline in public employment in the rest of the state may indicate that grownups are stating to take some responsibility there.
Let’s hope to see more of this next month. After all, local government employment in the portion of New York State outside New York City may have been 3,200 lower in October 2007 than in October 2006, but it was 104,500 higher than in October 1990. And all those additional employees will be entitled to retiree health insurance and pensions someday soon, something those Upstate and in the suburbs are not likely to pay for.