Just because it is the national average doesn’t make it right, and it is possible that differences in local needs and conditions allow lower spending in some categories while requiring higher expenditures in others. But any deviation, in either direction, should be explained and justified. In New York, on the other hand, the winners tend to take money off the top, with (generally) state legislation guaranteeing them the first bite of the apple, with the bite adjusted upward each year. So when money becomes scarce, it is the losers who are sacrificed, including the one we have already discussed — taxpayers — who saw a big increase in their state and local tax burden as a share of income in New York City, and a smaller increase in the rest of the state, in the last recession. I once described the Campaign for Fiscal Equity lawsuit as the “battle of the losers,” pitting New York’s city and state taxpayers against the city’s children, with the winners laughing up the stands. In FY 2005 they were laughing still. In the most recent state budget battle one of the winners roared and snarled, because its bite didn’t increase as much as it felt entitled to. That is the state of play in “feudal” New York.
With more detailed public education data having been recently released by the Census Bureau, and having gotten some direction to more detailed data than I have used in the past, I’ll discuss education spending in detail in future posts. In summary, however, New York City’s public education spending equaled 4.3% of the personal income of New York City residents in FY 2005, below the national average of 4.6% and far below the average of 5.5% of income in New Jersey and 6.5% of income in the rest of New York State. In fiscal 2002, with personal income pushed down by the recession and 9/11 and the city’s budget having yet to be cut, New York City’s education spending almost equaled the national average as a share of personal income, which would have been a first according to this data. Subsequently income recovered and a fiscal crisis forced New York City — but less so the rest of the state — to restrain its spending. More on that later.
In addition to taxpayers, another New York City loser is the future, which could end up being future taxpayers, future service recipients, or both. In FY 2005 the city’s local government debts (including the (falling) share of MTA debts attributed to NYC transit rather than the MTA as a whole and most Port Authority debt (since NYC operations are net money makers and will thus pay that debt back) equaled 26.4% of the personal income of city residents, more than double the national average of 12.4%, and far more than the 9.4% in the rest of the state and 8.0% in New Jersey. State debts averaged 10.8% of personal income in New York, 9.4% in New Jersey, and 7.3% nationally. Putting these together, and assuming the burden of repaying state debts will fall on different parts of New York State in proportion to 2005 personal income, the total debt burden was 37.2% of income for New York City, approximately double the 20.3%, 18.9%, and 19.7% for the rest of New York State, New Jersey, and the nation as a whole, respectively. Unfunded pension and retiree health care liabilities are an enormous off-the-books debt on top of that.
At the same time, however, New York City and related agencies such as the MTA have been investing substantial sums in the city’s infrastructure in recent years. I’m going to shift my measure here from spending as a percent of personal income to spending per $1,000 of personal income (which is what you see in the spreadsheet linked from my last post), to keep the numbers from getting too small. Local government expenditures on capital construction in transportation and utility (water, sewer, etc.) categories equaled $12.39 for every $1,000 of personal income of city residents in FY 2005, more than double the national average of $5.98 and far more than in the rest of New York State ($3.40) or New Jersey ($3.78). In addition, New York City’s relatively high expenditures on non-construction capital investment reflects, in large part, its purchase of ferries, subway cars and buses. Unfortunately, however, for long-lived assets like these it isn’t what is spent in one year that matters — it is what is spent over many years. And New York City is still recovering from lack of investment in the 1960s and 1970s.
Take the signal system on the subways, for example. Signals systems are held by some to have 50-year lives, by others to have 75-year lives if you push it. Once the subway system was essentially completed in the mid-1950s, New York City Transit began replacing the signal systems of existing lines in sequence, beginning with the oldest — the original IRT — at a rate that would replace all of them in 60 years. Then, in the 1970s fiscal crisis, work stopped for several years. Subsequently, signal replacement work has resumed at the 60-year rate, but although we aren’t falling farther behind we aren’t catching up either. And now the signal systems on the IND (much of the A through G lines), the last part of the system to be built in the late 1920s and early 1930s, are passing 75 years old while remaining, in some cases, years from replacement. Given that in a recent poll city residents identified the transit system as the most important public service, that has to be a concern — as the debt-ridden MTA approaches yet another 1970s-like fiscal crisis.
During the 1980s New York City’s debts fell and pension obligations as a share of personal income while the city embarked on extensive capital repairs. The future was being recovered from the 1970s, in other words. And, when I first started compiling this data, I was pleased. Beginning with the early 1990s recession and continuing through boom and bust alike, however, one form of future harm — a lack of capital investment — has at best been traded for another — higher debts and enhanced and deferred retiree obligations. In good years the future may break even, but in bad years it falls farther behind.
Also behind, and to a greater extent than the subways, is the capital stock of New York City’s public schools. Extensive borrowing has reduced the horrendous extent of disrepair found a decade ago, but the city’s school still face problems of obsolescence (having been sized with the assumption of large class sizes and extensive dropouts) and mis-location (excess seats in some areas, not enough in others). In FY 2005 local government spending on the capital construction of educational facilities (including those of community colleges) equaled $2.77 per $1,000 of New York City residents’ personal income, compared with $4.38 nationally, $4.36 in the rest of New York State, and $5.22 in New Jersey. Capital construction, therefore, accounted for a substantial share of the difference between New York City’s public school spending and the national average.
So the past is a winner, and the future a loser, in New York City. That is increasingly true for the United States as a whole, as it is for millions of individual Americans with extensive credit card and exploding mortgage debt, and children from broken homes. I see a common set of values behind all of this and a common issue, generational equity, though people seem increasingly uninterested in their own future as well as that of other people.
New York City continues to spend less than the national average on parks, culture, and libraries as a share of its residents’ personal income. In FY 2005 the city spent $0.85 per $1,000 of its residents’ personal income on libraries, compared with $1.44 in the rest of New York State, $1.00 in New Jersey, and $0.92 in for the nation as a whole. Yet New York City also supports major research libraries that provide services for the whole region, if not the whole world. These absorbed 6.7% share of the city’s library spending in FY 2005, according to the Comprehensive Annual Report of the NYC Comptroller.
Similarly, in FY 2005 the city spent $1.94 per $1,000 of its residents’ personal income on parks, culture, and natural resources, compared with $2.63 in the rest of New York State and $3.41 in for the nation as a whole. But the city also provides funding for major cultural and other institutions of regional, national, or even international importance. Although these institutions raise much of their money from fees and donations, and city residents benefit massively from having them here, the funding provided to them by the city does detract from its already limited spending on park and recreation facilities closer to people’s homes. Given that most New Yorkers don’t have their own private yards and pools, shared places for recreation, family picnics and similar activities are all the more important. And while a substantial expansion of parks and recreation facilities has been proposed as part of PLAN2030, such promises have been made before when the economy has been up and the money has rolled in, only to recede with tax revenues in a recession
Another loser, some New Yorkers may be surprised to hear, are certain categories of New York City public and publicly funded employees, particularly the newly hired. By now, New Yorkers have heard accounts of local police officers, day care workers, home care workers, child welfare workers, judges and some others being paid less than similar workers elsewhere, particularly when the cost of living is accounted for. In some cases this is an exaggeration, since comparisons are often made with New York City’s suburbs, where one could make a case (based on the national average adjusted for the cost of living) that some categories of public employee are overpaid. Even so, the national average and a reasonable adjustment for the cost of living show that many of New York City’s government and government funded-workers are underpaid, and have been for some time. You can see this in the data attached to this post: http://www.r8ny.com/blog/larry_littlefield/new_public_employment_and_payroll_data_shows_spitzer_s_budget_the_best_of_the_three.html, which is the 2005 public employment data from the Census Bureau, and this post http://www.r8ny.com/blog/larry_littlefield/should_new_york_s_nurses_be_crying.html, based on Occupational Employment Statistics. How does this square with New York City’s high state and local taxes, and with local government wages and salaries that absorbed $72.26 per $1,000 earned by city residents in FY 2005, compared with a national average of $48.73?
One factor is that a large and growing share of the city’s personnel spending goes to those who aren’t working rather than those who are, with pensions and retiree health care two of the “winners” in the city’s fiscal priorities. The public employee unions have always tried to get more for those cashing in and moving out, and higher wages for those about to retire – which becomes a permanent raise when those wages become the basis for pension benefits. In exchange, they always agree to lower wages and benefits for new hires.
A second factor is the sheer number of workers in some categories. In fact, look at almost any category of public or publicly-financed worker where the pay is low, and you’ll find that the number of such workers relative to the city’s population is high by national standards. Why that combination?
Outside city government, low pay and large numbers may be a function of the city’s high immigration, low educational attainment over many years, and the resulting surplus of low-skill workers, who can then be paid less. Just as many better-off New Yorkers no longer feel a need to clean their own homes, given the low cost of domestic servants, so many no longer have the need to care for their own parents in old age, if they can get them on Medicaid. So we end up with massive Medicaid spending on a huge number of low-paid home health care and personal care aides, as earlier posts here showed.
In city government, where most work requires greater knowledge and training, something else is going on. How do union officials and those with more seniority justify contracts and practices that disadvantage younger and future members? Here is how they justified it to me. Those new and younger members knew what the pay and benefits were when they took the job, I was told, and wouldn’t have taken it if someone else had been willing to hire them. So they are fortunate to have a job no matter how much more those with seniority received.
Moreover, public employee unions generally prefer more workers to more pay because, given that union dues paid do not increase in proportion to earnings, more workers mean more union revenue for a given level of total payroll. The New York City police are the most extreme example of these factors at work, with low pay, rich pensions, a huge number of officers relative to population, and spending nearly double the national average as a share of income.
Hiring larger numbers of less qualified, less motivated workers at lower pay also matches the prime objective of public spending for a large part of our political culture – providing sinecures to the politically loyal. That such people are not as willing or capable of providing services is not their problem. And as the idea of public service fades, that may be who will be left for New York City’s public agencies – trust fund recipients who can afford to work for very little, and unmotivated and unqualified employees who do not contribute very much, and who commute in from the suburbs. Since employment is voluntary, newly hired public employees can only remain losers for so long. Eventually service recipients lose. Me? If I ever work for the public sector again, I would prefer that it be as a consultant.