The FY 2012 New York City Budget Proposal: Health and Social Services

One might expect that when times are tough in the private sector, and more and more people have more and more needs, New York City’s health and social services spending would increase. But in fact that often isn’t the case. In particular, the Administration for Children’s Services has a recurring cycle. It is usually cut first and deepest (vying with parks and infrastructure) in recession until, after a lag of a few years, a notorious case of child torture and death that the agency was too overwhelmed to stop hits the media. Then there is a “reform” and increase in funding. But one type of spending in this general category increases relentlessly – Medicaid spending on senior citizens. That spending, however, is by the State of New York, not the City of New York, a fact that affects how it is presented in the city budget.

From an accounting point of view, the City of New York’s Medicaid funding often makes a round trip. Local governments in New York (but not in most states) contribute to the state Medicaid program, along with the federal government. But New York City’s public hospitals are also funded by the state Medicaid program. From FY 2008 to FY 2011, during the recession, the city’s contribution to the state’s Medicaid program (combined with and welfare and other mandated programs, which cost very little compared with Medicaid) fell 8.1%, and the city’s contribution to its Health and Hospitals Corporation (public hospitals), aside from Medicaid, fell 12.3%. Not because Medicaid and public hospital spending fell – it increased substantially — but because the federal stimulus package picked up a larger share of it.

The Cuomo Administration in Albany proposed to keep Medicaid spending approximately unchanged from FY 2011 to FY 2012, described by Local 1199 and the Greater New York Hospital Association as a devastating “cut.” But the City of New York’s Medicaid contribution (plus welfare in the city’s Budget Summary document but welfare accounts for little) is proposed to rise by 19.0%, and its contribution to the HHC is proposed to increase 10.8%. The reason is the end of the federal stimulus program, which shifted Medicaid costs back to the city and state.

Now in theory, the federal government should take a bow for the timing of the stimulus package, which increased aid to state and local governments when tax revenues were falling and reduced that aid now that tax revenues are rising. But in New York, the practice has been to defer costs, advance revenues, and generally sell the future in every recession – and in the strong economies in between. Following the stock market crash of 1987, for example, the City of New York was virtually broke…in 1994. And while the City of New York has gotten somewhat better in this regard, the State of New York is selling more and more of the future for less and less as there is less and less future left to sell.

Most of the money allocated to the city’s health and social services agencies is paid out to the private sector, generally to the non-profit social services agencies. From FY 2008 to FY 2011, agency OTPS increased just 1.9% at the Administration for Children’s Services, fell 0.5% at the Department of Health and Mental Hygene, and fell 1.1% at the Department of Social Services (not including Medicaid, welfare etc). At the Department of Homeless Services, it increased 37.4%.

From FY 2011 to FY 2012, health and social services OTPS is proposed to fall 3.4% at the Administration or Children’s Services, 25.7% at the Department of Homeless Services, 8.2% at the Department of Health and Mental Hygene, and 7.1% at the Department of Social Services. In all cases but the Department of Homeless Services, OTPS spending would be lower in FY 2012 than it had been in FY 2008, without even accounting for inflation. At the Department of Homeless Services it would be just 2.1% higher, a much smaller increase than the inflation rate.

The city reorganized and substantially privatized its social service apparatus in response to the perceived sloth at the former Human Resources Administration, which had been a combination of all these agencies save for the health programs undertaken by the Department of Health. But the city still has employees to manage the contracts, and caseworkers in agencies such as the Administration for Children’s services. Personal services spending in that agency was cut by 6.4% from FY 2008 to FY 2011, but is proposed to increase by 12.3% from FY 2011 to FY 2012. Included is a 9.2% increase in wages and salaries, based on pages 49 and 50 of the city’s February 2011 Budget Summary, the only increase in wages and salaries spending proposed for next year at this level of detail. Hmmm… did I miss a big media story of tortured and murdered children ignored by the city? In any event, wages and salary spending at the ACS is proposed to be lower than it had been in FY 2008, even without accounting for inflation, while pension contributions and fringe benefit spending are proposed to be higher.

Personal Services spending increased 8.0% from FY 2008 to FY 2011 at the Department of Homeless Services, 9.8% at the Department of Health and Mental Hygene, and 11.8% at the Department of Social Services. Wages and salaries, pension contributions, and fringe benefits all increased by more than the inflation rate. From FY 2011 to FY 2012, however, Personal Services spending is proposed to be reduced 0.6% at the Department of Homeless Services, 2.4% at the Department of Health and Mental Hygene, while increasing just 2.0% at the Department of Social Services. Wages and salaries are expected to fall significantly in each case, while pension contributions increase.

So how did New York City compare with other places in FY 2008, before the increase in OTPS spending? New York State’s Medicaid issues have discussed extensively elsewhere, so let’s focus on public employees and social services spending. In March 2008, New York City had 281 full time equivalent Public Welfare workers for every 100,000 residents, three times the national average of 92. The average payroll per worker in the public welfare category was just 6.4% above the U.S. average, not much in high-cost Downstate New York where the average private sector worker (excluding Wall Street) earned 31.0% more.

In the private Social Assistance sector, New York City had 1,913 employed per 100,000 residents compared with a national average of 776 in 2008, according to Employment and Wages (ES202) data from the Bureau of Labor Statistics. The biggest difference was in the Services for the Elderly and Disabled industry, with 977 in New York compared with 192 in the United States. In the rest of the Social Assistance category, the comparison was 935 employed per 100,000 residents in NYC vs. 583 in the U.S., or 60.4% higher in NYC.

For comparison, according to Census Bureau American Community Survey data for 2005 to 2009, NYC’s individual poverty rate was 18.6%, 37.8% above the 13.5% rate for the U.S. Its family poverty rate was 15.7%, 58.5% above the U.S. average of 9.9%. The gap between the NYC poverty rate and the U.S. poverty rate has begun to close over the past decade. While the poverty rate has presumably been higher than average in New York for most of the city’s history, due to the influx of poor immigrants, it was below average in 1969 the first year the Census Bureau measured it at the local level – before the city’s economic and social decline in the 1970s. If the recent reversal continues, the city’s need for spending on “social services” per say may diminish over time. But most of the spending in the general category is not for Medicaid, particularly senior citizens, including the non-poor. And most of that spending takes place at the state level.