This post will for the most part complete my overview of Fiscal 2009 local government finance data from the U.S. Census Bureau, for New York City compared with elsewhere, that started with this post. The data is located here, and prints on two pages. The data shows that from FY 2002, the lousy economic budget year before now-Mayor Bloomberg took office, and FY 2009, another lousy economic year with the most recently available data, direct spending by the City of New York (not including its soaring spending on pensions and money sent to New York State for Medicaid), increased from 19.7% of the total personal income of New York City residents to 20.97%. The national increase was from 12.4% to 13.3% of income. New York City pension contributions totaled another 1.7% of city’s residents’ income in FY 2009, up from 0.5% of income in FY 2002, while New York City’s payments to New York State totaled an additional 1.7% of income, up from 1.3%.
Both the numerator and denominator, spending and income, are moving in these percentages. Total private sector wages earned in the city plunged 12.2% from 2008 to 2009 before rising 6.9% from 2009 to 2010, when the city’s employment turned around and Wall Street sparked outrage by resuming large bonuses after having been bailed out. There are growing indications, however, that the amount Wall Street will get to pillage, which New York City and State then get to tax, may be falling back permanently to something like what it was before, say, 1995. Thus, the 2009 situation is likely a “new normal.” Meanwhile the really huge increases in spending as a share of income from FY 2002 to FY 2009 were in the Rest of New York State (from 13.5% to 15.5%) and New Jersey (from 9.3% to 11.7%).
I’ve described the data I’m about to describe, and the differences between New York City and other places, over and over again for more than 20 years, to little effect as best as I can tell. On the one hand it seems pointless to do so again. At the same time, given that hundreds of people in New York State choose NOT to do so, even though they are PAID to do so as part of their jobs in financial and budget agencies, there seems to be a need. In particular, the Independent Budget Office and the Office of the NYC and NY State Comptrollers have made a non-decision to avoid providing objective data on how NYC compares with other places, perhaps because the answer does not fit their worldview.
When the IBO was created, I immediately assumed that it would begin compiling and publishing all the comparative data from the Governments Division of the U.S. Census Bureau, the Centers for Medicare and Medicaid, the National Transit Database, etc, and presenting that information to the City Council and the general public every year. I have even made an effort to call the attention of that agency and the City and State Comptroller’s Offices from time to time over the years (though not for a long time, I’ve sort of given up), offering to show them where to get it and how to use it on my own time. I guess the facts get in the way of a good story, so it’s best to dispense with them if you are inside the political world.
Anyhow, not even including the huge increase in pension spending and retiree health insurance spending, which is where (based on subsequent budgets) the United Federation of Teachers maneuvered more than 100% of the big increase in “public school” expenditures that New Yorkers have sacrificed to finance during the Bloomberg years, NYC public school spending did rise above the U.S. average from FY 2002 to FY 2009. This is a fairly momentous shift. Rising from 4.53% to 4.97% of income, the city’s spending as a share of its residents’ personal income exceeded the 4.75% national average in the latter year. Moreover, this increase took place during the backdrop of falling enrollment, as the relatively large “baby boom echo” generation exited school having by and large been uneducated in New York City.
In the Rest of New York State, where public school spending has always been sky high, and in the past paid for in part by an unfairly low share of state school aid for NYC, it is never enough. Spending here jumped from 6.4% of the personal income of residents of the rest of the state in FY 2002 to 6.7% of income in FY 2009, as school superintendents worked to get everyone and their brother-in-law on the payroll. The shift in New Jersey is even more spectacular. There spending had always been about average as a percentage of personal income, if one ignores the fact (as tabulated in another data line) that New Jersey wasn’t funding its teacher pensions, with the higher than average school spending in that state evenly matched to its higher than average income. But from FY 2002 to FY 2009 public school spending in New Jersey increased from the typical 4.7% of income to 5.7% of income, a huge move.
To shorten the discussion, I’m going to group other government functions together. One such group is those described in New York City as the “Uniformed” agencies – Police, Fire, Corrections, Sanitation. New York City’s spending on the Uniformed agencies, not including their very expensive pensions and retiree health insurance, fell from 2.53% of city residents’ income in FY 2002, when it was inflated by 9/11-related overtime, to 2.25% of income in FY 2009. That was far higher than the FY 2009 U.S. average at 1.39% of income, the Rest of the State at 1.44% of income, or New Jersey at 1.24% of income.
The city’s spending has always been far, far higher in these categories, but it isn’t directly comparable, because not every community has a professional fire department, local government-funded garbage pick-up, or is required to hold as many prisoners as New York City. But everyone has a police force. New York City’s spending on police, at 1.11% of income, is nearly double the U.S. average of 0.66% of income. Not because the city’s cops are so well paid while on the job (it is the amount they are paid when they are NOT working in retirement that is bankrupting New York) but because there are so many of them compared with just about anyplace else.
For the sake of simplicity, I’ve grouped Housing and Community Development, Public Hospitals, Cash Welfare and Other Social Services into a “social spending” group for purposes of this post (not the spreadsheet, but you can download it and add them up ourself). New York City’s spending in these categories fell from 4.4% of its residents’ personal income in FY 2002 to 4.0% of income in FY 2009, still far above the U.S. average of 1.57%, the Rest of New York State at 1.28%, and New Jersey at 0.6%. This does not even include Medicaid payments to private, non-profit health care providers, which is recorded at the state level; in many states other social spending other than for housing is a state-level expenditure as well.
Note how miniscule Cash Welfare is, compared with spending on various paid services vendors, many of which are non-profits in New York. Recall, as well, that in FY 2009 only about 20.0% of the spending in these categories came from local taxes, with federal and state aid and charges for services (ie. rent at public housing projects) covering the rest. That is still leavings city residents’ paying 0.8% of their incomes in local taxes for these services, plus 1.3% of city residents’ income collected in local taxes and sent to New York State for Medicaid.
Next consider the sort of “general local government” functions including Financial Administration (ie. the agencies that should be compiling comparative public finance data but are not), Judicial and Legal, Central Staff and Public Buildings, Inspection and Regulation (ie. the Buildings Department, etc.) and Public Health (which also involves inspections). These are the sort of general local government functions for which New York City’s spending has always been about average as a percentage of its residents’ personal income. It is still about average, little changed, and not a lot of money compared with the agencies that provide services direct to New Yorkers. That was in FY 2009. My guess is spending on these agencies has fallen since, which could be a problem for anyone who requires an inspection.
I also added up Mass Transit, Other Transportation (including the Port Authority) and Water and Sewer utilities as the “infrastructure” functions. Primarily because of its large transit system, New York City’s spending on infrastructure is well above average as a percentage of its residents’ personal income. Of course New Yorkers can choose to pay less for their own cars as a result – if someone wants to live with two or more cars for their household, I can’t imagine whey they would also choose to live in the New York area in general and in most of New York City in particular, rather than in a place with little mass transit where everyone drives to everything. Those people tend to want to turn New York City into Houston rather than, say, moving to Houston.
While total spending in the infrastructure categories increased from 4.66% of income in FY 2002 to 4.96% of income in FY 2009, the big gain was in the Water and Sewer function. The increase was funded by a surge of borrowing, not taxes or fees, but that borrowing will have to be paid back by even higher taxes or fees later or the infrastructure will collapse. A little of both is going on at the MTA. Much of the increased water and sewer spending is for federal environmental mandates, including holding tanks for combined sewer overflows (to allow the city’s storm runoff to be treated even as suburban systems continue to discharge non-point pollution from their separate storm sewers directly into the waterways), and a filtration plant for Croton Reservoir water. The construction of the third water tunnel in the city also continues, and the failure of an aqueduct Upstate will now require the construction of a replacement.
Switching from spending by function to spending by character, note that NYC capital construction expenditures increased from 2.3% of city residents’ personal income in FY 2002 to 3.6% of personal income in FY 2009, but spending on transportation and utility (including water and sewer) construction fell from 1.83% of income to 1.61% of income. Other construction spending has increased substantially. So what else besides infrastructure does the government construct? Buildings, such as the World Trade Center site (remember the Port Authority is included with NYC data in this dataset) and schools, and parks.
Other, non-construction capital expenditures also increased, from 0.58% of city residents’ personal income in FY 2002 to 1.38% of income in FY 2009. Non-construction capital expenditures include land acquisition and the purchase of vehicles and equipment. This figure tends to be high in NYC because of the transit system: mass transit non-construction capital expenditures totaled $3 billion for NYC in FY 2009. In general, that spending is for the purchase of railcars and buses, and substitutes for the private purchase of additional automobiles elsewhere.
Capital expenditures tend to be below average as a percentage of income in the Rest of New York State and New Jersey, where the suburban infrastructure may be reaching the same age of deterioration that the urban infrastructure reached in the 1960s and 1970s. Much of the suburban infrastructure of the 1950s, 1960s and 1970s was paid for by state and federal taxes on established urban areas, even as the infrastructure of those urban areas declined. The suburbs may seek to repeat the trick in the next few years, because the one thing both political parties agree on is that the collective future is to be sacrificed, via higher debts and lower spending on infrastructure and R&D, to pay for either tax cuts or higher spending on seniors and public employee pensions (or both). So there will be less infrastructure investment to go around.
Community colleges, public libraries, and public parks and culture are low cost services for which New York City’s spending, as a share of its residents’ personal income, has traditionally been well below the U.S. average. Even though as a dense urban environment, the city is a place where space is at a premium and people have to give up personal amenities for shared ones. From FY 2002 to FY 2009 there was a significant jump in spending as a share NYC residents’ personal income in each of these categories, though to levels that remained lower than the U.S. average. Mayor Bloomberg had made parks, and Council Speaker Quinn had made libraries, a higher priority than in the Giuliani/Vallone or Dinkins/Vallone administrations. That was as of FY 2009, however. As the costs of the past have to be paid for, expect these services to be re-devastated. With the added cost of Governors’ Island on the city’s books, I expect library service to be cut back to the minimum number of hours/days possible for the city to continue to pretend it has library service, and for most parks not funded by influential donors or corporations to end up looking like the wall on the handball courts on the Greenwood Playground in Brooklyn.
Finally, New York City’s spending on “Other Expenditures,” including economic development, judgments and claims, and, most crucially, employee and retiree benefits not assigned to individual functions, fell slightly from FY 2002 to FY 2009, from 2.05% to 1.91% of income. The biggest portion of this is employee and retiree benefits, and I cannot imagine that going down, because health care costs keep going up more than inflation. So I took a look at my long-term data spreadsheet for “General Expenditures Not Elsewhere Classified” for New York City, and found a huge increase from FY 2000 to FY 2002 in the dollar value of spending, from $4.2 billion to $6.1 billion, a 44.0% increase in spending in just two years. Since then, spending increases in this category have been more moderate, with just a 28.7% increase in spending to $7.8 billion over the next seven years. The Consumer Price index went up 19% during that time. Why this is I don’t know, and as mentioned the public Financial Administration agencies that should know have made a non-decision to keep New Yorkers in the dark about how much they pay, and how much they spend in different categories, compared with other places.
That leaves two major categories of spending, debt service and pensions. I want to write about them separately, perhaps when I can calm down enough not to slightly exaggerate by using the word “evil” and not to say that City Actuary Robert North should be in jail (not that he shouldn’t, but it isn’t fair to single him out).