Why do I get the feeling that when it comes to comparative local government spending by category, as shown in one of the spreadsheets attached to this post, I’ve been writing the same thing over and over again for more than 15 years? Some things have changed, to be sure, but the general patterns remain in place. New York City’s local taxes are higher than average primarily due to higher spending on Medicaid and social services; police and correction, interest on debts, and pensions and public employee health care. Mass transit also soaks up a lot of non-fare revenues here, though the savings from New Yorkers being able to have fewer private automobiles offsets this. Spending in other categories is often low, though in the case of public education it is much higher, relative to the national average, than it used to be.
The last time people really paid attention to public finance issues was the early 1990s. Then, most the blame for the problems of the time was assigned to the poor, minorities, immigrants, and those living in older central cities and getting by on welfare. Those grasping for money now should never be allowed to forget this, because by that time cash welfare had already ceased to be a major factor in the city and state budget, despite one million people on public assistance. Today it amounts to virtually nothing even in New York City — $1.2 billion in spending funded by all sources or 0.3% of the income of New York City residents, down from $1.9 billion (or $6.4 billion in $2006) or 1.4% of income in FY 1977. Well, that 84% inflation-adjusted decline is one real change. So where is the money going now? For the most part the same places it did in FY 2005, in FY 2004, in the last Census of Governments year in FY 2002, and in the previous one in FY1997.
Let’s start with the usual disclaimer: just because something is the national average, even after adjustment for factors such as population and the relative cost of living, doesn’t make it right, but significant deviations in either direction ought to be explained and need to be justified. Not continually expanded because they are caused by relative power. And let’s start with the usual political background – although local government does much of the work of government, and the federal government collects most of the money, most of the marginal decisions are made by state governments. Ours is in Albany, and it stinks.
First the winners.
For every $1,000 New York City residents received in personal income in FY 2006, New York City spent $13.70 on police and correction, two-thirds higher than the national average of $8.25. The rest of the state averaged $8.87, with New Jersey at $7.62. You may have read that entry-level New York City police officers had been paid just $25,000 per year, and that the peak NYPD salary is also low compared with other places. That is true, but it isn’t because an “ungrateful city” isn’t willing to pay for police protection. City residents are paying, but the money is going primarily a massively large number of police officers compared with other places, leaving less money for each one. Many are with the force, given the high ratio of officers to population here, and many are retired given the full pension after just 20 years.
Medicaid is another huge cost, in part because New York has more recipients, in part because it provides more services, in part because our politically powerful health care industry charges higher prices and attracts “customers” from other states, and in part because the federal government makes New York State pay a higher share of the total cost than most other states, and New York State makes local governments pay a higher share than other states as well. As a result New York City’s aid to New York State for Medicaid totaled $9.47 for every $1,000 of personal income earned by city residents, compared with $4.47 for the rest of the state and virtually nothing anywhere else. That isn’t the cost of Medicaid; that’s the local government contribution. For the totals, read this post.
On the spending side, it is hard to separate Medicaid from Public Hospitals because the Census Bureau counts Medicaid payments to those hospitals as aid rather than direct spending, to avoid double counting. Medicaid assistance to the state and Public Hospitals spending combined equaled $19.91 per $1,000 of personal income in New York City in FY 2006, compared with $2.84 in the rest of the state and $6.33 nationally. Much of New York’s excess spending is on senior citizens, as shown in this post.
New York City’s social services infrastructure, both private and non-profit, is huge, and spending on social services other than cash welfare and Medicaid/Public Hospitals equaled $13.00 per $1,000 of personal income in FY 2006, compared with $5.90 in the rest of the state and $3.00 nationally. In many states, however, spending in this category is counted as state spending (like Medicaid) rather than local spending. Federal and state aid covers about 70% of the cost of local government welfare, health and hospitals spending in New York City, compared with 68% in the rest of the state and 87% nationally.
In the rest of New York State, spending on public schools continues to be off the chart at 6.2% of the income of residents there, compared with 5.4% in New Jersey, 4.3% in New York City and 4.6% in the United States as a whole. Because the city and state have succeeded in driving parents in private schools or out of town, however, on a per student basis adjusted for the cost of living, New York City’s public education spending is now far higher than the national average, as I showed here, due in large part to an increase in its own local taxes, and due in large part to the benefit of falling enrollment, New York City’s expenditures per pupil increased by 56% more than inflation from FY 1996 to FY 2006. Instructional spending rose by nearly 70%, and non-instructional spending — low to start with — rose by 35.1%.
With non-instructional spending per child continuing to be low, just the “instructional” money going into the New York City public schools was enough for $228,060 for a class of 20, and spending on the schools has gone up enormously since then. It is going up significantly again this year. But most of the additional money was, is and will continue to be going to retirees, especially after the United Federation of Teachers got the Mayor and state legislature to agree that teachers, effectively immediately, should retire at age 55 instead of age 62. And according to the UFT and most education advocates, the city’s public schools are terrible and no better than they were when their funding was far below the U.S. average instead of significantly higher.
Much of New York’s state and local tax burden in general, in fact, goes to the past – to debts, pensions, and retiree health care obligations others have failed to pay and left behind. That share is soaring.
In FY 2006 New York City’s pension contributions totaled $11.43 for every $1,000 earned by New York City residents, most of whom are not entitled to pensions. The national average was $3.45. The city’s pension contributions equaled 15.7% of its public employee wages then but it is approaching 30% now, and may reach 50% once soaring pension costs and collapsing tax revenues force service cuts and layoffs. The national average was 7.3% in FY 2006. The city’s employees kicked in 2.5% of their wages for pensions in FY 2006, with most of that paid by younger generations of workers with less seniority. The national average was 4.8%.
New York City’s spending in the “other” category totaled $19.40 per $1,000 of personal income, compared with $6.68 nationally. While there are a number of things poured in to that category, the biggest factor is non-pension benefits — such as health insurance — that the Census Bureau could not assign to a particular government service — such as those for retirees.
New York City’s interest payments on its local government debts totaled $13.10 per $1,000 of personal income in FY 2006, compared with a national average of $6.68.
Adding these three factors together, New Yorkers had to pay an additional 2.9% of their income in local taxes in exchange for pension, debt and (mostly) retiree health care costs that did not lead to any public services and benefits today. The total local tax burden nationally was just 4.4% of personal income in FY 2006. And the city’s debt, pension and retiree health care costs are going to soar — leading to higher taxes even as public services are gutted. The practices of the past 15 years, with serial pension giveaway and soaring debts, are exactly like those in the 1960s and early 1970s that led to the horrific public services that followed. The city still has not fully recovered from than, and now never will.
New York City’s parks, libraries, and community colleges continue to be significantly under-funded, as a share of personal income, compared with the national average. On parks, recreation and culture New York City spent $1.46 per $1,000 of city residents’ personal income, less than half the national average of $3.39, even though city residents, lacking their own big back yards for the most part, are more dependent than most Americans on those public facilities. On libraries, the city spent $0.78 compared with an average of $0.92 nationally and $1.57 in the rest of New York State. On community colleges, the city spent $2.07 compared with $2.68 nationally. It is considered acceptable in the city’s community college system for those seeking two year degrees to not be able to graduate in two years, because there isn’t sufficient room for them in required courses. The same is likely to be true in the city’s public high schools in the near future, once the full lost of the age 55 retirement (in pension and extra health care) is admitted to and the state cuts state aid to the city next year.
Public services such as water, sewer, fire and solid waste collection are difficult to compare with other places, because many have wells, septic tanks, private garbage collection, and volunteer fire departments.
New York City spends a large amount, as a share of its residents’ personal income, on mass transit because it has a large mass transit system, and a large amount on housing because it has a large public housing system and Section 8 population. Excluding fare revenues, New York City’s transit system spent the equivalent of 1.3% of the income of city residents, compared with just 0.3% nationally. Although the city’s mass transit covers a higher share of its operating costs than the average transit system in the country, the total cost of mass transit over and above those fare revenues absorbs massive taxes and toll revenues as well — equal to an extra 1.0% of the income of city residents over and above their fares. The city’s spending on housing and community development totaled $9.68 per $1,000 of personal income in FY 2006, far above the $3.36 per $1,000 nationally even as the city’s public housing projects fall apart. Both the transit system and public housing system are heading for collapse, the former due to debts, the latter due to a failure to reinvest in aging facilities.
Perhaps the biggest loser in New York City and State is people who pay taxes, particularly those without tax breaks or fewer breaks than average. In the recent past, high taxes have been associated in the public mind with an egalitarian social agenda. But now high taxes are going to those with privileges not to those in need, and taxes are what they had always been previously — exploitation of the less well off by the powerful. New York City’s public services continue to be worse than they were before the fiscal crisis, and are about to get worse still. And the tax dollars are not going to the poor. They are going to the privileges of the past.
At this point, young people moving to the city and considering staying should not expect to have a reliable transit system ten or twenty years from now, nor schools they can send their children to. Prepare to pay taxes, home-school and ride a bike, or get the hell out. Those taxes are so those who control the government won’t throw you in jail, not because of anything you can expect to get in return. And the needs of the poor will have to be met outside the government, because the taxes are increasingly going to those who do not work and do not contribute. They’ve got us, they take without limits, and there appears to be nothing that anyone can do about it. In the near future I’ll have something new to write about but it will really be something old 00 even more money going to senior citizens, debts, pensions, and retiree health care, leaving vastly less for anything else.