Census FY 2009 Public Finance Data: Background

It is late in coming, and only preliminary, but comparative local government finance data from the Governments Division of the U.S. Census Bureau became available for FY 2009 late last year. As in the past, I’ve crunched this down into tables that compare local government revenues, expenditures and debts for New York City, the rest of New York State, New Jersey and the United States for fiscal 2002 and 2009. I chose FY 2002 for a comparison year because it was a recession year for the economy, like FY2009, and because it was the last budget passed before now-Mayor Bloomberg took office. When the more detailed data from the 2007 Census of Governments was out, I had compared that year with 2000, another peak year for the economy, for the same reason – the need to separate the effect of trends in the economy from the effect of actual decisions by state and local officials, here and elsewhere, on the margins. The more detailed 2007 Census of Government data is attached to this post, and further described in this post.

Unfortunately, the part of the Room Eight program that allows spreadsheets to be attached no longer works, so I had to ask the site owners to post the new data here. The “output” worksheet was set up to print on two 8 ½ by 11 inch pages; the other worksheet show what I did with the data, step by step after downloading, to not only present it but also to make it comparable across areas to the extent possible, as described after the break.  I suggest downloading the data, printing it, and then reading on.

This post contains background information to help the reader understand the tables. Much of it is repeated from previous posts with earlier data, so if you have taken the trouble to study my compilations of Census Bureau Governments data in the past, you can skim through this. Otherwise, it should be read carefully.

I express government finance data as a share of personal income because places where average personal income is high also tend to have a high cost of living. With their higher incomes, residents of such places can afford to pay higher taxes per person without it reducing their income as much, but local governments must pay their public employees and contractors more to attract workers of equal quality, given the higher cost of living. Measuring revenues and expenditures as a share of personal income adjusts for both these factors. So the fact that New York is expensive has already been taken into account in these comparisons, in a fair way.

Bear I mind, however, that spending per $1,000 in personal income can change due to both factors: changes in spending, and changes in income. If a part of the state becomes poorer but still employs the same number of local government workers at the same level of pay, adjusted for inflation, it will have to raise taxes on the falling income of other residents to pay fund the same cost of government. Taxes and spending per $1,000 of personal income will rise even if inflation-adjusted spending does not. Removing the effect of the business cycle on personal income is one reason to use comparable economic years.

Every five years, the U.S. Census Bureau conducts a Census of Governments, adding up public finance and employment information on every state and local government in the United States, and presenting the local government totals for every county in the country. The last was 2007. The next is 2012.

In general, between census years the Bureau surveys some of the local governments to produce estimates of total state and local government activity, for each state and the national average. It also, however, provides individual government data for those included in the survey. New York City and the Port Authority of New York and New Jersey are always included, and (other than a harbor commission with virtually no employment or spending) they are the only local governments in New York City. So by adding the two up one can get data on local government in New York City between census years, and by subtracting New York City from the state total one can get an estimate of the rest of New York State as well. For other states, the estimate for all local governments in the state is all that is available for FY 2009. In some past years I had divided up the Port Authority, allocating some of its spending to New Jersey, but I did not do so this year, to save time. Bear in mind that all the revenues, expenditures and debts of the Port Authority are assigned to New York City in this data set.

There are several government functions that are generally local government activities, but are sometimes state activities. Some states, notably New Jersey, operate local schools in districts they have taken over, and virtually all the mass transit in New Jersey and New York State outside New York City is counted as state government, not local government. To adjust for this, I compare the state and local totals with New York City in these categories. State and local government totals for the U.S. and New Jersey are also compared with New York local government for cash welfare, which is recorded as local government spending in New York and most other places, even though most of the funding comes from federal and state taxes.

I focus on local government because local governments do most of the work of government, while state governments generally just collect and then pass on money to either local governments as aid, or the private sector as payment for public services (ie. the health care and social services industries), or individuals (unemployment compensation). States are generally directly responsible for public universities, state prisons, and state unemployment and worker compensation insurance programs.

The Census Bureau distinguishes between “direct” expenditures and “inter-governmental” expenditures — the latter are simply transfers between one government and another. Based on total expenditures, one can count the same dollar multiple times. For example, if a dollar is spent in a New York City public hospital, it is counted as “direct” local government public hospital spending. But if that dollar came from Medicaid, it is also “spent” as state to local aid for public hospitals. But since New York State requires New York City to fund part of its Medicaid program, which it is credited for administering, that same dollar may be counted a third time as local to state aid for public welfare. Money is only spent “directly” once. The data shows direct expenditures except where specified.

Nearly all Medicaid payments to private health care providers, classified as “Medical Vendor Payments,” take place at the state level. Some Medicaid funding, however, is used to pay for services at public hospitals, including those of the New York City Health and Hospitals Corporation. This data, therefore, includes just part of the Medicaid spending in New York City.

One of the advantages of accessing detailed data from the Bureau, as opposed to the spreadsheets it publishes, is that more detail is available on revenues. In summary tables, charges for services and revenues from other governments are summed to totals. Using the details, I’m able to figure out how much of NYC’s local government transportation expenditures are paid for by charges for services and motor vehicle taxes, and how much of its social services spending is paid for by federal and state aid. Local government to state government aid, generally not reported in summary tables because New York State is the only state with very much of it, can also be analyzed.

Another quirk of the data concerns pensions, which the Census Bureau records from the point of view of the pension plans. Thus what are “expenditures” from the point of view of New York City’s budget, contributions to its pension plans, are tabulated as pension plan “revenues” in this data. The pension plan “expenditures” are actual benefits payments, according to the Census Bureau. In general, local government workers are covered by pension plans administered by states. The New York State plan covers all the local government workers outside New York City, while New York City has its own plans. It is possible to tabulate the contribution of local governments outside the city to the state plan, but not the benefit payments to former local government workers in the rest of the state, because that is mixed with the benefits paid to former New York State workers. For a detailed comparative analysis of state and local pensions over time, see this post.

One key point about pensions for the data presented here is that the data on expenditures by function excludes them. Thus, New York City’s police and education spending, in this dataset, does not include the money the city has to pay into the pension plans for its retired teachers and police. That is tabulated as a single number, for all city employees, down at the bottom of the expenditures table. Other data, for example another Census Bureau data series specifically on public schools, shows that in general New York City’s pension and other benefits spending is far higher than just about anywhere else, one factor keeping its funding for workers on the job lower than it would otherwise be.  That data was analyzed in this post.

Speaking of benefits, if local governments do not provide the Census Bureau with sufficient detail on, for example, employee and retiree health insurance by function, the health insurance for all employees and retirees ends up lumped together under “other.” That is the case for New York City, one reason its “other” spending is so high. In other places, with multiple local governments each doing perhaps one function, that health insurance spending may be included with the individual spending by function. So New York City’s spending for a given function compared to the average may be higher than it seems. Health Insurance and Judgments and Claims are not tabulated separately by the Census Bureau’s Government Finance series because that series was designed in the 1950s, when those categories of costs were less significant. The series have not been updated to include them because the work of the Governments Division has been gradually de-funded, with data items lost but not added.

In a couple of cases, for total taxes and for debts, I elected to produce a combined state and local government figure. So how does one produce a state tax and state debt figure for New York City compared with the rest of the state? I assume that the burden of state taxes is distributed in proportion to personal income, and thus the burden of repaying state debts will be as well. But that isn’t quite true, as MTA taxes are only collected in Downstate New York, but are tabulated as New York State taxes in this data. With some of those “dedicated” taxes having been spent in Upstate New York in recent years, it may be fair to say that there are two different levels of state taxes in the state.

Finally, anyone viewing the data should bear in mind the effects of 9/11. Police, Fire, and to a lesser extent Sanitation spending was inflated in FY 2002 by massive overtime in the wake of the attack. The spending by character shows that capital spending in New York City was vastly higher in FY 2009 than in FY 2002, but capital construction spending on infrastructure was not. Where did the money go? One other possibility is buildings, and one such building site is the World Trade Center site.

A post or two with my interpretation of the data will follow, but if you read this much you are in a position to print out the tables and make up your own mind