As shown the spreadsheet attached to my previous post on local government revenues, New York’s state and local tax revenues were 47.0% above the U.S. average in New York City as a share of its residents’ personal income, 26.8% higher in the Downstate Suburbs, 17.5% higher in Upstate urban counties, and 24.0% higher in Upstate rural counties. The next few posts are about expenditures, and seek to identify the higher spending associated with those higher taxes. If the reader has not done so already, they can follow the link above, download the spreadsheet attached to it, print out the “Print Tables” worksheet (it will print on six pages) and follow along.
The data show that compared with local governments in other places, New York City spends more on housing and community development, public hospitals, social services, and aid to the state for Medicaid, along with police and correction. Mass transit and solid waste spending are also high in the city, but then many places do not have municipal solid waste collection and few have a transit system as extensive as New York. City residents are also burdened by huge pension and debt costs, cost shifted from the past with no current public services in exchange. In the rest of New York State, meanwhile, public school spending is sky-high relative the income of those who reside there. The specifics follow.
The U.S. Census Bureau classifies spending two ways: by character of expenditure (current operations, assistance and subsidies, capital expenditures, interest payments, inter-governmental) and by function (education, streets and highways, police, fire). For purposes of this tabulation, spending by function includes operating and capital expenses only, with interest payments lumped together as one separate line item. What is also lumped together is pension and, in most cases, employee health insurance expenses, the latter under “general expenditures not elsewhere classified” or “other” in the table.
Intergovernmental spending – sending money to some other government that does the work – is excluded from my “expenditures” tables, as this is a table of “direct” expenditures by governments providing services. New York City’s payments for Medicaid, discussed in the previous post, are not included because Medicaid is a state program and the local government share is tabulated as aid to the state, not direct spending.
Excluding payments by pension plans and other insurance trust funds, the total direct expenditures of U.S. all U.S. local governments added together equaled $121.82 for every $1,000 of the personal income of U.S. residents. Put another way, U.S. residents spent 12.2% of their personal income on services provided by local governments. The figure for New York City was $172.78, compared with $134.97 in the Downstate Suburbs, $140.65 in Upstate urban counties, and $166.02 in Upstate rural counties. One reason New York City’s state and local tax burden was 47.0% higher than the U.S. average, in other words, is that its local government spending was 42.1% higher than average.
Direct local government spending in Connecticut and Massachusetts was quite low per $1,000 of the (quite high) personal income of residents of those states, compared with the U.S. average, and Illinois, North Carolina and Texas were below average as well, as the tables show. California’s local governments were above average at $152.65 per $1,000 of that state’s residents’ personal incomes.
At $96.22 per $1,000 of its residents’ personal income, however, New York City’s spending on current operations other than pension spending – people actually providing public services – was only 5.7% higher than the U.S. average of $91.02, and well below the averages in other parts of the state. This despite the fact that New York City had $10.98 in mass transit current operations for each $1,000 of its residents’ personal income compared with a U.S. average of just $2.78. The averages for current operations per $1,000 of residents’ personal income were $104.87 for the Downstate Suburbs, $114.64 for Upstate urban counties, and $138.27 for Upstate rural counties. New Jersey was below average at $89.01.
What about infrastructure investment? New York City’s FY 2007 spending on capital construction, at $20.04 per $1,000 of its residents’ personal income, was 39.2% higher than the U.S average of $14.40. The Downstate Suburbs were about average at $14.61, while and Upstate urban counties, Upstate rural counties, and New Jersey were below average at $10.75, $11.41 and $13.16 respectively.
Part of the explanation for high capital construction expenditures in NYC and the Downstate Suburbs is the downstate region’s large mass transit system, and major projects such as East Side Access. New York City is also making major investments in other infrastructure categories, such as the city’s third water tunnel and its water filtration plant. New York City’s capital spending on transport and utility infrastructure was $9.08 per $1,000 of personal income in FY 2007, 49.3% higher than the U.S. average of $6.08. The Downstate Suburbs were also far above average in this category at $9.34, but this figure may be inaccurate since it has become more difficult to divide MTA capital spending between New York City Transit and the commuter rail lines based on past methods, due to MTA reorganization. The Bureau records nearly $1.8 billion in transit capital construction for state mass transit agencies in FY 2007, compared with about $450 million for New York City local government mass transit. It may be that some spending on New York City transit projects, those included under the MTA Capital sub-agency for example, are now being recorded as state spending.
The level of capital construction expenditures can be influenced by the timing of contracts and payments, and vary widely from fiscal year to fiscal year. In a later tabulation, I’ll look at the level of capital construction spending over all the years with data available from FY 1972 to FY 2008. If FY 2007 is typical, however, any infrastructure problems in Downstate New York are not the result of New York City and suburban residents have spending less of their income on capital construction. They are the result of the value they have received for that spending.
Capital spending other than construction, by New York City and local governments in the Downstate Suburbs, was also high, at $8.02 and $6.05 per $1,000 of personal income compared with a national average of $4.47. Included are land acquisition and equipment purchases; the purchase of rail cars and buses presumably accounts for the higher level in downstate New York, give the extensive mass transit system there.
In Upstate urban counties, meanwhile, spending on both capital construction and other capital expenditures was low compared with the national average in FY 2007, as a share of the income of those counties. The Upstate rural counties were below average in construction, and about average in other capital expenditures, in spending as a share of their residents’ income.
Above average capital construction expenditures in New York City are associated with above average debts, but whereas the city’s capital construction spending was 39.2% above the U.S. average as a share of personal income in FY 2007, its interest payments were 131.8% higher. Debts have been run up repeatedly to cover operating expenses during recessions, both by the City of New York and the State of New York. Other “capital” expenses have merely been operating expenses in disguise, or merely the ongoing normal replacement required to keep the infrastructure from falling apart. Very little new transportation infrastructure has been added in New York City and its suburbs for 40 years, although several major projects are at an early stage of construction.
One such major project is Access to the Region’s Core, a rail tunnel the State of New Jersey may not continue to fund. New Jersey’s local government capital construction expenditures on transportation and utilities totaled $4.22 per $1,000 of state residents in FY 2007, below the national average of $6.08. New Jersey’s state and local debts, surprisingly, were below average as a share of income, as relatively low local government debts offset relatively high state government debts.
Examining spending by function, one quickly finds the primary source of the high tax burden in the Downstate Suburbs and Upstate New York. Nationally, spending on elementary and secondary education totaled $45.03 for every $1,000 of personal income of U.S. residents in FY 2007. New York City, as it has been since I started compiling this data, was below average at $42.17, but that is a much smaller gap than it used to be.
Local governments in the Downstate Suburbs were above average in elementary and secondary school spending at $52.31 per $1,000 of personal income. They directly spent $13.35 more than the U.S. average per $1,000 of personal income overall, including $7.28 extra on public schools.
Local governments in the Upstate urban counties were higher still at $62.98 spent on elementary and secondary schools per $1,000 of personal income. They spent an extra $19.03 per $1,000 of personal income overall when compared with the U.S. average, including $17.95 on public schools.
And local governments in Upstate rural counties spent an amazing $77.38 per $1,000 of personal income on public schools. They spent $44.40 extra per $1,000 of personal income overall, and $32.35 extra on the public schools.
Low and falling average incomes would mean that typical public school spending would by high as a share of income Upstate, but as I have shown using other data, public school spending per child in the region is far higher than average. As other components of the Upstate economic base, such as manufacturing and farming, have declined, the region has become more dependent on public employment as a source of middle class jobs with pensions and health insurance – and as a way of bringing in income from somewhere else. A role Medicaid-funded services has played in poorer communities in New York City. I’ll continue this discussion in my next post.