In FY 2002, thanks to 2.5% inflation-adjusted decline in the personal income of New York City residents according to the latest estimates from the Bureau of Economic Analysis, New York City’s elementary and secondary public school spending rose to 4.57% of that personal income, within rounding error of the U.S. average of 4.63%. I thought, and not for the first time, that the city’s public school spending might actually exceed the national average as a share of income in some subsequent year. But it was not to be. As in the early 1990s, government budget reductions lagged the reduction in the tax base, but once they kicked in and personal income began to recover, the city’s public school spending fell as a share of personal income. As I showed earlier based on another data source, the city’s share of state education funding (direct and back-door funding under programs like STAR) was also cut. Meanwhile, spending in the rest of the state stayed at sky-high levels relative to personal income. In fiscal 2005, New York City’s elementary and secondary public school spending had fallen to 4.28% of city residents’ personal income, 7.5% below the national average and 33.7% below the average for the rest of New York State.
The attached graph, which shows spending public elementary and secondary school spending as a share of personal income from 1972 to 2005 (in years available) for the United States, New York State, New York City and the Rest of New York State is politically incorrect regardless of one’s politics. All political perspectives here prefer a chart with only two lines.
For readers of the New York Post or New York Sun, those lines are the U.S. average and the average for New York State. Comparing the two, fiscal conservatives point out that in any given year New York State is much higher. In fact, it has always been higher, although spending as a share of personal income fell with enrollment everywhere in the 1970s as the baby boomers left school, and rose with enrollment everywhere in the late 1980s and early 1990s as their children entered. Since New York State is much higher, and because average statewide educational performance does not justify the higher spending, fiscal conservatives have for years argued that New York City’s public education spending should not go up. Evidently enough money is being spent outside the city to make the city’s schools adequately funded.
The Campaign for Fiscal Equity, on the other hand, seems to prefer a chart with just New York City and the Rest of New York State. Its assumption is that spending in New York City should rise to the level of the rest of the state. But this organization has also accepted, as part of an alliance with the New York State United Teachers and New York State Association of School Boards, that if New York City’s education spending goes up, education spending should go up in the rest of the state as well. But that means the gap between the two remains, which means the city continues to be at a disadvantage both in attracting students who are easier to teach, and teachers who are better at teaching them. And, as I showed in prior posts, some of the state tax dollars used to fund the high level of public school spending elsewhere in the state is redistributed out of New York City. The rest is the main cause of complaint about high taxes beyond the city’s borders.
What the four-line chart shows is that relative to the national average New York City’s public school spending is below the national average as a share of income, and always has been, while that of the rest of the state is much higher than the national average and always has been. How high?
The second attachment is a table that shows elementary and secondary school spending as a share of income in FY 1997, 2002 and 2005, along with taxes as a share of income in those years, for the United States, New York City, the rest of New York State, and all the states plus the District of Columbia. The data show that in FY 1997 public school spending equaled 5.90% of personal income in the portion of New York State outside New York City, and 3.56% of income in New York City. If it were a separate state, the rest of New York State would have ranked 3rd behind Alaska, where teachers have to be flown in to instruct individual children in the bush, and Wyoming, the least populated U.S. state. New York City would have ranked 49th in public school spending of 50 states plus the District of Columbia, but its state and local tax burden would have ranked second behind Alaska, where oil tax revenues, not residents or businesses, foot much of the bill.
If the rest of New York State had merely remained at 5.9% of income for public school spending, it would have ranked 2nd among states if it had been a separate state in FY 2002, and 3rd once again in FY 2005. In other words, if an attempt had been made to restrain the growth of public school spending in the rest of the state by limiting it to the growth of personal income, it still would have been sky-high. As it is, thanks to STAR revenues transferred from New York City, spending soared as a share of income to 6.51% in FY 2002, and stayed high at 6.46% of personal income in FY 2005. New York City, meanwhile, would have ranked 31th in public school spending as a share of personal income in FY 2002 if it had been a separate state, despite ranking first in state and local taxes as a share of personal income. And it would have ranked 35th in public school spending as a share of income in FY 2005, with its taxes the highest by an even larger margin.
There are some interesting stories among the other states.
Some low tax states such as Texas, South Carolina and Georgia may be found near the top of the table in public school spending as a share of income. Education, evidently, is one thing those states choose to spend on, and while their per student spending may be low, the average wage and cost of living in those states is also low, meaning that employment in public education is a fairly attractive proposition there, relative to New York City. Adjusted for the average wage and the cost of living, public school spending in these states is thus higher than is generally described.
New Jersey once had somewhat above average public school spending as a share of personal income, with average taxes. That state’s public school spending soared as a share of income from FY 1997 to FY 2005, but taxes did not rise nearly as much, as popular Governors Whitman and McGreevey ran up debts and deferred pension obligations, with the former primarily selling out the future to cut taxes, and the latter to increase spending on schools. The result is today’s catastrophic fiscal situation.
After having one of the best, and best-funded, public education systems in the 1960s and 1970s, California’s public schools were de-funded in subsequent decades, and thanks to Proposition 13 the de-funding was not limited to older urban areas as in New York City, but rather was more equitably spread across the state. The quality of the schools diminished considerably, although some point to changing educational policies at the time as an alternative, or additional, explanation. The state subsequently changed course. California’s public school spending as a share of personal income was 45th among states in 1997, but an increase brought the state up to the national average in FY 2002. California’s state and local taxes, however, which both were and are about average as a share of personal income, did not rise sufficiently to cover the additional spending. California also ended up borrowing to bridge budget gaps, leading to a fiscal crisis there as well.
Let’s put some things together. States that increased state funding for public education without raising taxes as a share of income subsequently faced devastating fiscal crises, with New Jersey’s coming despite a strong economy. And every time New York State has fiscal problems, New York City’s share of state education funding is cut to maintain the high level of spending in the rest of the state. There are your possible signposts to the future.
At the bottom of the standings for 2005 public school spending as a share of income one finds senior citizen-oriented Florida and Arizona, possible signposts to the future of national priorities as the generation that coined the phrase “what about my needs?” in its thirtysomething years moves into retirement.
But one also finds Massachusetts, not because per student spending, even if adjusted for the cost of living, is low in that state, but because the number of students is. In 2005, according to the Census Bureau, only 12.5% of the residents of that state were age 5 to 14, compared with a national average of 13.6%. The District of Columbia, also low in public spending as a share of income, was at the bottom in its share residents age 5 to 14 at just 10.5% population.
In most of the country, where local governments aren’t required to cover a share of health care and social services expenditures, it is the number of public school children that is the chief determinant of the level of local property taxes. And Massachusetts is divided into 50 cities and 301 towns, just about all of which have played the “fiscal zoning” game with a vengeance by zoning in land uses that provide tax revenues with very little in expenditures – like office buildings – and zoning out land uses that might attract costly children – like modestly-priced, family-sized housing. With empty nesters occupying the existing family-sized housing, the result has been a housing shortage for young families throughout most of the state. Unable to afford housing, young families have been leaving the state in droves.
And while businesses are no doubt pleased with the low taxes, enabled by low public school spending as a share of income, they are panicked about a statewide labor shortage due to the shrinking number of young workers. As a result, the Massachusetts business community has backed extensive state legislation to bribe, or force, the state’s localities to accept family-sized housing at higher densities. Clearly what business would like is to have the parents as workers, but not the children as recipients of tax-funded public education. Qualified workers could be imported from elsewhere.
Is this New York’s secret? By keeping its schools so bad for so long, New York City has driven middle class families out of the city and affluent families into the private schools. In 2005, the city accounted for 42.5% of the state’s population but only 37.3% of its public school students according to the U.S. Census Bureau (and less according to the New York State Department of Education). In 2000, according to the Census of Population, New York City accounted for 37.5% of New York State’s children in married couple families when those children were under age three, but only 34.9% of such children as five-year-olds, kindergarten age, and only 32.5% of its 12 and 13 year olds, middle school age. The city accounted for a larger share of the state’s children in single parent families, but such families presumably cannot afford the suburbs. Given the state’s determination to keep the city’s public education spending low, and its schools poor, relative to the rest of the state and New Jersey, one might hold that driving middle income families out of New York City to save money is state policy.
There is another way to adjust education spending for the cost of living, in addition to expressing it as a share of personal income. In high cost areas, the value of per student spending may be reduced to make those areas comparable using the difference in average earnings per worker. Excluding the high-paid Finance and Insurance sector, average earnings per worker are about one-third higher than the national average both in Downstate New York and in New Jersey – fairly consistently, year after year. Meaning that multiplying per-student spending there by 0.75 makes it comparable with the national average, and with Upstate New York. I have done so, not only for total revenues and expenditures per student but for revenues and expenditures in detailed subcategories, using individual unit education finance data downloaded from the Census Bureau here http://www.census.gov/govs/www/school05.html . This tabulation raises all kinds of issues, and will be the subject of subject of subsequent posts.