Is the purpose of public spending, and the tax revenues we must pay to fund it, to provide public services and benefits? Or to provide a fortunate few with a steady job? In the progressive era it was the former, but today it seems to be the latter. Every time a public employee, or the employee of an organization that receives a large share of its funding from the government (such as the health care industry), decides to spend his or her money a slightly different way, they both create and destroy jobs, and force private sector workers to make adjustments to satisfy their needs. But in New York State, when the needs of the public have shifted, the tendency has been to keep people on staff where they were no longer required, either raising taxes further to cover needs elsewhere, or forcing public service recipients to do without. Thus in the 1990s school districts elsewhere in the state were at least “held harmless” or even given more money as their enrollment shrank, even as New York City’s share of state school aid remained low as its enrollment grew. Hospitals also had “hold harmless” formulas, to keep up their share of state health care funding up as health care shifted to clinics. As I said when I ran for state legislature, the political division has broken down into representatives of producers of public services, vs. representatives of those who did not require public services and do not want to pay for them in taxes, with no one speaking for the consumers of public services. Until now.
Governor Spitzer proposes a new (and one might say obvious) way of funding both health care and education. School aid would follow the child, with a simple “foundation” formula based on their numbers and needs. Medicaid funding would follow the Medicaid recipient to the health care providers that actually provide them with care. As the Governor pointed out in his budget address, in the private sector government commissions to “rightsize” various institutions and care types are unnecessary. Instead, the market determines where money goes as consumers make their choices. Thus, for health care Spitzer proposes to replace “subsidizing empty hospital and nursing home beds,” “state-subsidized labor deals,” GME phantom residents,” and “outdated reimbursement formulas” with “Medicaid dollars follow Medicaid patients” to “public health preventive and primary care initiatives” and “home and community based care” forcing “rightsizing of hospitals and nursing homes.” And the education system will be “fully funded.”
I applaud all of this. My only objection is that it doesn’t go far enough. And while I commented on this, and some other things, the day the budget was released, allow me to return to it once more.
The STAR program is a glaring exception to the new principles, and rather than cut it back, the Governor proposes to expand it. STAR aid is paid in proportion to the amount of tax a school district collects — the more you spend (and the less state aid you are due under the school aid formula) the more STAR you get. Except in New York City, where a large share of local tax revenues are on income, toward which STAR is less generous. Now in theory I have no problem with some places receiving school aid called school aid, and other places getting school aid called STAR, if the total is fair. And I have no problem with residents of affluent suburbs expecting some state money for their schools for the simple reason that they pay so much in state taxes to fund it. The problem is the incentive STAR produces — the more you spend, the more you get — and the level of school spending in the rest of the state, which is too high. No one is willing to talk about the latter.
When I say spending is too high, I don’t say so as a rock-ribbed conservative who believes public services should be minimal and everyone should be left to fend for themselves, especially those worse off than I am. I say that as a disappointed liberal. I’m in favor of universal pre-kindergarten, teachers paid at least as well per hour in total compensation as those in comparable professions in their labor market (preferably with the option of full time work or the typical teacher schedule), extra summer and after-school help for those who need it (which creates that option) and, with the exception of classes full of gifted students who can learn on their own, class sizes in the low 20s or upper teens. All funded by taxes all must pay, whether they have children or not. Even given all of that, the rest of the state is spending too much money, even after adjustment for everything.
For 30 years, the City of New York has been under constant pressure to cut costs. Some of the resulting policies have been good. Some, like deferred maintenance, a 40% pay cut for new police officers, and an attempt to save a few bucks on school buses, have not. The problem, however, is that while Governor Spitzer is prepared to bring some pressure to bear on the government-financed health care industry, which is also centered in New York City, neither he nor anyone else is prepared to say that school districts in the rest of the state should cut or even restrain spending. Even candidate Faso just wanted to cap growth at 4% in high spending districts — and in low spending districts, preserving a gap in funding forever. Under Spitzer’s plan, districts outside the city would be free to take the additional STAR funding, raise spending by that amount, say they are overtaxed, and demand more. Again.
Perhaps Governor Spitzer would say that people in the rest of the state need the 100,000 extra local government jobs that have been added in the past 16 years, given their weaker economies. But with 433,000 more New York City residents than average out of the labor force, Dennis Rivera could stop pretending that high Medicaid spending is for health care and claim that it, as well, is a jobs program for those would otherwise be on public assistance. Or, perhaps the Governor believes schools elsewhere in the state are too politically powerful to take on. Or, perhaps the issue is falling enrollment. School spending in the past should have been funded in the past, but in reality debts, pension and retiree health care obligations have been dumped on the present. So if state school aid falls with enrollment, or fails to rise as fast as those non-education costs, there is less money available to pay for burdens that were shifted to today and tomorrow.
Schools in the rest of the state, however, might get some political pushback if the locals knew what was being spent relative to other places, rather than having it disguised. As I wrote last fall, voter approval of school budgets should only be required, and some STAR aid should be forfeited, in districts where public school spending per child (adjusted for the cost of living) exceeded the national average by a certain percentage. And as for districts with declining enrollment, there is a procedure which forces all interests to make sacrifices when there isn’t enough money to go around, including vested interests. It’s called bankruptcy, and in exchange for extraordinary aid, the state ought to at least insist on restructuring. These proposals aren’t the same as having resources follow need, but they would let people know where resources were going, and prevent the rest of the state form playing the passive-aggressive card to trump the city. High property taxes in high-spending districts are only going to fall if they are pushed on both ends, with higher state aid balanced by reasonable spending.