The U.S. Census Bureau has released elementary and secondary school finance data for fiscal year 2007, and I’m pleased to see one publication has already covered it and done a computation or two. My contribution is summarized in the attached three spreadsheets. The numbers are available, and anyone is free to interpret them.
My main finding is that FY 2007 is the year that New York City public school spending, very low a decade earlier, went over the moon, soaring to an extreme high of $19,336 per student (all future figures on that basis), compared with the national average of $11,556. It is almost as high as the Downstate Suburban average of $20,120, and is far above the average for New Jersey ($18,094) and Massachusetts ($14,422). Even adjusting downward for the higher general wage rate here (in the private sector excluding the Finance and Insurance sector), New York City came in at $14,129, still a solid 22.3% above the national average and just below the Downstate Suburbs ($14,767) and New Jersey ($14,876) though well below Upstate New York ($15,632). That adjustment cuts Massachusetts to $12,764. For instructional spending alone NYC is now higher than any of those areas, meaning that funding is no longer an excuse for any educational deficiencies in the city – far from it. From FY 2002, the last budget before Bloomberg, to FY 2007, however, New York City’s extra spending did not go to administration, no matter what you hear, nor for the most part to higher teacher pay or smaller class sizes. It went to soaring spending on debts and employee benefits such as pensions and retiree health care, a shift the city had in common with other areas. Contract spending also rose.
My workover of the data is as follows. First I downloaded the most detailed data for every school district in the country, then I crunched it down to a more manageable size. Included in the “All Unit Output” spreadsheet is data for summary categories of revenues and expenditures, for the United States, New York City, the Downstate Suburban counties collectively, all of Upstate New York, New Jersey, and (since some are interested in it) Massachusetts and the Boston City Schools. The “All Unit Output” spreadsheet also has data for every school district in New York State, for those interested.
To convert to per student expenditures in a reasonable way, I excluded spending on charter schools, adult education, and other non-school expenses, since the data item on the number of students does not include those who benefit. Revenues for these services remain included in the revenues category. The Census Bureau does not as of yet tabulate detailed data on students in and spending categories for charter schools, which I suppose would have to be by county rather than school district or individual school if it is not to get out of hand.
To adjust for the cost of living, I scaled down revenues and expenditures in New York City, the Downstate Suburbs, New Jersey and Massachusetts based on their average private sector earnings per worker, excluding the Finance and Insurance sector. That data, interesting in and of itself, is from the Bureau of Economic Analysis. Individual school districts on Long Island and the Lower Hudson Valley are presented after adjustment only; the summary areas are presented with and without adjustment. Finally, for the summary areas, I compared the FY2007 data with similar data for FY 2006 and FY 2002, taking into account inflation. The comparison data is in the FY 2002 and FY 2007 spreadsheet. The inflation adjustment is off the Consumer Price Index inflation calculator provided by the Bureau of Labor Statistics.
The comparison spreadsheet (prints two pages) shows that New York City’s spending jumped from $17,591 in FY 2006 to $19,336 in FY 2007. Adjusting the former figure up for inflation, and both figures for average wages, however, one gets an increase of just $338, equal to Upstate New York, similar to the $310 in the U.S., and less than the $621 in New Jersey. After adjustment, the Downstate Suburbs actually fell by $245. Driving this more modest measure of relative increase soaring earnings per worker, even outside of Finance and Insurance.
But the big stunner in the BEA data, however, is skyrocketing earnings per worker in Finance and Insurance. In New York City, Boston, and a few other areas, earnings per worker has always been unusually and unrepresentatively high in that sector, which is why I excluded it when comparing to public sector spending and pay. Financial pay in financial centers is driven by highly paid people presiding over transactions deals tens or even hundreds of billions of dollars, and getting massively compensated by skimming a very small percentage off. In most of the U.S., however, employment in the sector is dominated by those involved in more modest transactions: bank tellers, insurance brokers, stock brokers, credit card back offices, etc. Therefore outside the handful of major financial centers, pay per employee in the Finance and Insurance sector was below the private sector average.
But not in FY2007. It soared to a far average level everywhere, and to ridiculous heights in Manhattan, presumably pumping up the city’s tax revenues. Given what happened the following year, the phrase the comes to mind is “Yo Ho Ho and a Bottle of Rum!” Any New York decisions at that time that locked in higher spending, relative to public services provided, based on the tax revenues thrown off by the financial debt bubble will lead to disastrous reductions in public services and increases in taxes now that the bubble has burst.
Many of the findings on comparative school finance have been the same for many years. New York City is very low in per child non-instructional spending, and always has been, while other parts of New York State and New Jersey are high. Whereas in the past New York City’s non-instructional spending per child had been below the national average even without adjustment for the higher cost of living here, in FY 2007 it was below average only with adjustment. It remains much lower than other parts of New York State.
More specifically, NYC spending on general administration is so low it isn’t worth talking about, and yet it fell by half from FY 2002 to FY 2007, after adjustment for inflation. NYC spending on pupil support is a tenth of the national average, and it fell too. NYC spending on instructional support is a quarter the national average, despite nearly doubling from FY 2002 to FY2007. NYC spending on Student Transportation is much higher than the national average per child, even after adjustment for the cost of living and despite the higher share of the city’s children who live within walking distance, and jumped nearly 40% more than inflation from FY 2002 to FY 2007. Consider that the political class’s first big victory over Mayor Bloomberg in the Mayoral Control era.
Others are coming. From FY 2002 to FY 2007, instructional wages and salaries per NYC student, adjusted for inflation and the cost of living, rose just 12.7%. This figure is generated by a combination of how many students there are for teacher, and how much each teacher is paid. Adjusted instructional wages and salaries per child were essentially flat in the Downstate Suburbs, Upstate NY, and the U.S. during the period. On the other hand per child spending on instructional employee benefits soared 59.7% on an adjusted basis, somewhat more than in the other areas. Rising pension and health insurance costs are the main reason, with a substantial share of the rise in health insurance associated with the retired. (Similarly, for non-instructional spending, NYC wages and salaries per child rose by 8.3% adjusted for inflation and the cost of living, while employee benefits rose by 63.7%).
Like the increase in student transportation spending, the rise in pension and other benefit spending, and the inability to put more money in the classroom, cannot be attributed to Mayor Bloomberg through FY 2007. It is the result of excess health care inflation, inadequate employer pension contributions during past administrations (based on assumptions of unrealistic investment returns), and past pension deals that both reduced the amount that employees had to contribute to the funds and sweetened their benefits, many passed in 2000 at the top of the stock market bubble.
After FY 2007, however, the shift from spending on education to spending on retirement will be Mayor Bloomberg’s responsibility, and it will be huge, as discussed here previously. In the long run, that irrevocable deal will overwhelm the effect of every other fiscal priority decision made by Mayor Bloomberg with regard to education. Unless the Finance and Insurance sector can figure out a way to earn steal as much in the future as it did in 2007, everything else will be slashed to pay for it; the only questions are how long the disaster can be deferred by making the hole even deeper, and whether bankruptcy is an option.
New York’s public employee unions have a long institutional memory, and their goal has always been diminished public services and resentful workers despite high total compensation and taxes and spending, through higher spending on those who don’t work and less money for those who do, particularly new hires. And in the end they have always gotten their way, from Republicans, Democrats, and independents like Mayor Bloomberg, generally through back room deals that no one pays attention to. If anyone should have been financially savvy enough to know better it is Mayor Bloomberg. We’ll be tracking his contribution to “uncontrollable costs” for a decade or more.
Through FY 2007, Mayor Bloomberg had one other significant fiscal effect, a 29.7% increase in instructional spending in categories other than teacher wages and benefits. Part of the increase is higher spending on school supplies and equipment, but part of it is a rise in spending on contracts that the United Federation of Teachers has objected to. No worries. To pay for earlier retirement, in addition to paying new teachers less to make NYC jobs available to the less motivated and qualified, the contractual services are already disappearing, or so I have read. So too will the equipment and supplies.
One piece of good news is that despite rising sharply, NYC’s school debts (unlike its transit debts) were not out of line with the national average, per child and adjusted for relative wages here. Then again NYC school enrollment is falling, and so are the wages of its taxpayers. Enrollment is also falling in Upstate New York and the Downstate Suburbs, which may be one reason their adjusted capital expenditures fell by about 40% from FY 2002 to FY 2007. New York was up slightly based on general inflation, although construction cost inflation was much greater during the period.
A decade ago, the most important issue in NYC public school finances was the way the rest of the state was cheating the city’s children through the school aid formula. For a million or more older and former New York City children and their parents, that is still the most important issue, and nothing that happened subsequently can ever change how little they owe those living in the rest of the state. In FY 2007, however, the rest of the state may have been said to have stopped cheating NYC on school aid. From FY 2002 to FY 2007, state school funding per child for NYC rose by 29.7% adjusted for inflation and general wages, compared with a 6.2% increase for the Downstate Suburbs and a 10.0% increase for Upstate New York, allowing the city to catch up with where it should have been all along. The city’s local funding rose by 54.4% during the period. From FY 2006 to FY 2007, moreover, adjusted state funding per child rose by $978 for NYC, compared with gains of just $62 for the Downstate Suburbs and $389 for Upstate.
Then the Campaign for Fiscal Equity lawsuit was settled. We’ll see what happens next.
Somehow I get the feeling that for the NYC schools, it just doesn’t get any better than this. But at this level of total spending, or even with a reduction in funding proportional to those elsewhere in the state AND what other New Yorkers earn (and thus the cost of living and what they can afford to pay in taxes), I’m not in the mood to hear ANY excuses. In fact, after years of arguing NYC school spending was too low, it’s almost to the point where (like the rest of New York State) it seems too high. Bear that in mind over the next two years, as we see what we get for it.