I’m back, and from what I read in the newspapers, it appears that while I was out of town the city budget passed. In a triumph of the (actual rather than theoretical) liberal values of Democratic New York, this year’s cost of having teachers retire at age 55 instead of 62 (after working just 25 years) will be borne by the poor residents of NYC public housing projects, rather than children in the classroom. The schools were spared, for now, or so I read. Ironic, because not too long ago residents of public housing projects weren’t expected to do an work to benefit other people at all, but post-welfare reform, and given that none of them will get pensions, they’ll be working until age 67, at the earliest, when Social Security kicks in. This shows that the easiest cuts are to the “unaccountable” agencies that the group of politicians making them can disclaim responsibility for, such as the New York City Housing Authority, the MTA. The Department of Education will likely join them after Mayoral control ends, and after the recent pension deal and given the likely alternative of Mayoral accountability without real authority, it might as well.
I won’t comment further on the city budget at this time, because what is passed doesn’t always reflect what actually happens, and almost certainly won’t this year. The big decisions, the tough decisions, are yet to come. Instead, let’s look to something that is less likely to change — the past, and the trend in government (and related) employment prior to the new budget, as tabulated by Current Employment Survey data from the New York State Department of Labor. Here, while most trends remained in place based on the change in jobs in the year to May, one changed course – New York City’s local government employment rose significantly. Expect that trend, along with libraries that are actually open rather than just dead spots on the commercial street, to be short-lived.
New York City’s local government employment was 7,600 (1.7%) higher in May 2008 than in May 2007. Excluding education, it was up 6,400 (2.1%). The city’s local government employment in general, and employment outside the schools in particular, had been falling, with some partial reversals, since 1989. You may recall my repeated posts contrasting the long-term local government boom in the rest of the state with the city’s ongoing public employment decline. Although some of that decline may have reflected a shift from public employees to contractors, and the current reversal may in part represent a shift back, it may be that for one year the city actually added some workers and work. If so that may turn out to have been a poorly timed increase, because the New York State policy that the more local governments hire, the more state money has to be allocated to support them, only applies outside New York City not inside it.
In the rest of New York State, where the teacher’s union is claiming insufficient funds despite perhaps the highest spending on the planet, and fighting a proposal to limit property tax increases to a mere 20% more than inflation from those levels, the schools added 7,400 workers (2.0%) in the year to May. Workers who, based on past political trends, now have a right to their jobs. If money gets tight, will state education aid to New York City’s schools be slashed and money borrowed to pay for them, as in the mid-1990s? Or will state aid to New York City merely decline as a share of the total, with a big tax increase targeted at New York City and more money borrowed, as happened earlier in this decade. Or will it be even worse for the future, city taxpayers, and the Children of a Lesser God? We’ll see within a year.
Note that in the rest of New York State, if one excludes the schools, local government employment is down by 2,700 (0.9%) year-over-year. The “if you spend it and complain about taxes New York City has to pay for it” deal has traditionally only applied to schools, and local government employment and spending in the rest of the state, Long Island police and upstate fire departments excepted, generally hasn’t been so out of line with national averages as it has been in education. Even so, local government employment in the rest of the state had been rising outside education as well, so this also represents a reversal.
Overall, local government employment rose by a greater percent in New York City than in the rest of the state in the year to May. To say that hasn’t happened that often is an understatement.
New York State’s state and local spending, staffing and pay has generally been out of line compared with the national average in categories where one group of elected officials gets to reward interest groups with excess funding, while someone else gets the blame for the cost. New York City’s Medicaid program for example. Here, there has been a concerted effort to cut costs in recent years, and the city’s employment in the private (though substantially government-funded) Health Care and Social Assistance sector was up only 9,300 (1.7%) in the year to May, a small gain by its standards.
The rest of the state, however, is showing less restraint, with spending in this sector up 16,800 (2.5%). As I described in earlier posts, the New York State now has a policy of picking up virtually all the non-federal costs of Medicaid populations and services that are concentrated outside New York City (nursing homes, Family Health Plus) while imposing a huge 25% local share (50% for non-federally participating) for those populations and services concentrated in New York City (hospitals, home health care, homeless).
I believe it is the incentive effect of shifted costs, and the legislative dominance of interests that either represent producers of public services (who want to charge more for less) and certain taxpayers (who don’t need public services and benefits and don’t want to pay for others to have them) that explain New York’s relative tax and spending patterns. As long as one group of politicians can hand out special deals to the few, without getting blamed for high taxes and diminished services by the many, that is what they will continue to do. The other suspect – local government duplication – will be the subject of my next post.