The city budget has been released, and no doubt we are going to spend the next few months hearing about all the things the government is no longer going to do for us. Leaders of public employee unions, in particular, may be expected to talk about all the services the people of New York City no longer deserve because they aren’t paying enough. They will demand that we pay more. So you might expect, particularly given the devastation of the financial crisis, that New Yorkers are paying less. But it isn’t so.
The best way to see this is to look at the NYC “Budget Summary” documents from January 2008, with an estimate of FY 2008 spending on page 48, and the just released “Budget Summary” from February 2011, with an estimate of spending for this fiscal year (FY 2011) on page 49 and a proposal for FY 2012 on page 50. To his credit, since Mayor Bloomberg has taken office he has provided a summary of what each agency actually costs, including not only wages but also fringe benefits, contracts, pensions, debt service, and judgments and claims. Most of the pension and fringe benefit data had previously just been lumped together for all agencies combined. With the FY 2008 data, we can look back to Census Bureau data for FY2008, comparing NYC with staffing and pay by function with local governments elsewhere, and public school spending in more detail, to provide background for what has changed since. A discussion follows.
First some housekeeping. The attached spreadsheet contains data from the budget summary documents linked above, reorganized. Since I had to retype by hand, there is the possibility of a data entry error. (Remember I do these posts without the benefit of an editor, whereas everything I do at work is double-checked by someone else. Typos are inevitable, and sometimes invisible to the person who knows what they meant to type). I will be referring to Census Bureau data for FY FY 2008. The spreadsheets are attached to these posts on employment and payroll, and detailed public school finance data. But first print out the spreadsheet attached to this post, and print it (hopefully) on two 8 ½ by 11 inch pages (doesn’t always work for everyone since I started using an I-Mac at home).
Before reviewing the proposal for specific agencies in later posts, this post will look at the total. From FY 2008 to FY 2011, at a time when many companies and families were forced to cut back and retrench and the consumer price index increased by 4.3%, spending by the City of New York increased 10.1%, and the city’s spending on Personal Services (ie. public employees) increased 9.9%, well more than double the inflation rate.
Now some of this increase involved paying now for spending in the past: pension spending increased 21.7%, fringe benefits (a large share of which go to retirees not workers providing services) increased 14.3%, and payments on debts increased 32.9%. One might have expected the City to do more for the poor during this time, but its spending on welfare and (mostly) Medicaid actually fell 8.1%, presumably because the federal government picked up a larger share of Medicaid under the stimulus program and thus reduced the City’s payments to the State of New York.
Even so, however, payments for public employee wages and salaries increased by 5.3% from FY 2008 to FY 2011, even as there were fewer public employees providing fewer services. The reason is most NYC public employees were granted, by state arbitrators and the Mayor, compounded raises of 4.0% per year during the recession, which would bring the total wage increase to 12.5% during a three year period when inflation increased 4.3%. To put it in “real” rather than currency terms, because public employees have become richer compared with private sector workers (other than, say, those on Wall Street), they can buy more goods and services produced by private sector workers, who receive fewer public services in return.
Agency OPTS, for purchases of supplies and services that are contracted out, increased 12.2% from FY 2008 to FY 2011. New York’s social services, in particular, tend to be contracted out to non-profit organizations, one reason why employment in New York’s private non-profit social service industries has boomed over the years. The city’s infrastructure maintenance and improvements, as well, tend to be undertaken by private construction firms working under contract.
So the city charged more for somewhat less during the recession, with modest cutbacks in services. But now it will charge more for much less. Total spending is proposed to increase 3.6%, even as the city has to cover a higher share of its spending due to the end of the federal stimulus and state budget cutbacks. Personal Services spending, on New York City public employees, is proposed to rise 1.7%. So whatever the unions say they will no longer do for city residents is in exchange for 1.7% more money.
Again, some of the added “spending” is not spending at all, but paying now for the past. Debt service is proposed to rise 17.1%. Pension spending is proposed to rise 20.3%, an amount that I believe to be inadequate given all the pension enhancements that have been handed out for 15 years and the hole the pension funds are in. And some of the added spending is the city having to pick up a bigger share of Medicaid due to the expiration of federal stimulus funding, which will lead to a 19.0% increase in Medicaid and Welfare spending (mostly Medicaid).
At the same time, the wages and salaries of public employees actually working is proposed to fall by 3.9%, almost back to where it was in FY 2008. And fringe benefit costs are due to rise just 0.7%, presumably because a reduction in the number of working employees offsets the automatic increase in health insurance and other spending on the retired. Finally, agency OTPS is proposed to fall 4.7%, meaning less services from contractors and less supplies for public employees.
Here’s one stunning number: taxpayer pensions are expected to equal nearly 40 percent of wages in FY 2012. And even at that level, I’m not sure it’s enough, given that an independent actuary has found that New York City’s pension plans are among the most underfunded in the country – as bad as and in some cases worse than New Jersey. Which means more pension contributions, less wages and salaries, and less public services in exchange for those wages and salaries in future years. Because in my view public employees provide public services in proportion to their wage income, not their total compensation. They do not feel an obligation to do more or better work for the people in exchange for their enhanced pension benefits. For that they have the state legislature incumbents to be grateful to, and provide political support in exchange.
The bottom line is that the public employee unions, through successful lobbying and campaigning, have “won” a huge increase in spending on the retired. They defeated the people of New York City who, already having just about the highest tax burden as a share of personal income in the country, have lost public services. And business interests and the wealthy, who have advocated increases in debt rather than paying for public services and benefits in taxes over the past 30 years, have “won” a huge increase in city funds going to their triple tax-free municipal bonds. The people of New York City have lost public services and benefits to pay for that, too. Although the larger losses for the serfs as a result of the wealthy will occur at the federal level, which the wealthy control
Getting back to New York City local government we’re going to hear a lot about cuts. Let’s look at individual agencies to see where, if anywhere, cuts in the money we are paying in (as opposed to the services we are getting out) are taking place. I was going to do this all in one post, but the length is getting out of hand. So I’ll break it up in to individual posts.