Author: Larry Littlefield

Since I’m not from the political world, for me the questions are about what, not who. I generally discuss policy issues and trends in government and society at large, and seldom mention individual politicians. This keeps me out of the various flame wars, and away from the personal enmity, that characterizes both the political tribe and the internet. And I haven’t called for retribution against any individuals, with the possible exception of not voting for them.

Until now.

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%).

The following post analyzes changes in local government revenues per $1,000 of personal income for FY 2002 and FY 2009, comparing New York City, the rest of New York State, and New Jersey to the U.S. average, using data linked from this post. My general take on this data over the years is that everything is locked in in New York and nothing ever changes, but in this case some things definitely did.

The upshot on revenues? In FY 2009 New York City’s state and local tax burden, as a percent of its residents’ personal income, was 53.2% higher than the national average, up from 34.4% above average in FY 2002. This despite the fact that the U.S. average increased as well, from just under 10.2% of personal income to just over 10.4% of personal income. New York City, based on long term Census Bureau data attached to this post, had not been that far above the U.S. average since 1987 – it had been more than 50.0% above average from 1977 to that year. The combined state and local tax burden for the rest of New York State, taken together, increased from 22.2% higher than the U.S. average to 34.4% higher. The rest of the state had never been that high above average according to the data I have available, for 1972 and all years from 1977 to 2009 (except a couple when the Bureau did not collect it). The tax burden of New Jersey had been about average in FY 2002, as it had been for some time before, but was 12.2% above average in FY 2009.

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.

Back in January 2007, five years ago. And here comes The Economist with the results. "There is no doubt that hedge-fund managers have been good at making money for themselves. Many of America’s recently minted billionaires grew rich from hedge clippings. But as a new book by Simon Lack, who spent many years studying hedge funds at JPMorgan, points out, it is hard to think of any clients that have become rich by investing in hedge funds" with an average return since 1998 of 2.1% a year, "half the return they could have achieved by investing in boring old Treasury bills."

"Mr Lack’s book suggests the blind faith displayed by many institutional investors in hedge funds needs to be reconsidered…Investing in hedge funds will enable some lucky managers to enjoy an early retirement on their yachts. It will not enable pension funds to eliminate their deficits." It wasn't blind faith. It was just coming up with an excuse to project future returns to be higher than they would turn out to be, to back a false estimate of the cost of pension enrichments for the pension rich while providing more public money to the one percent.

In the January 4 Financial Times, Alan Greenspan implies tomorrow’s senior citizens are the new welfare queens. “The welfare state in the United States has run up against a brick wall of economic reality and fiscal bookkeeping,” he wrote, because Congress “has enacted increases in entitlements without visible means of funding them.” He isn’t talking about Black people and Immigrants in older central city ghettos. He is talking about benefits for seniors. “The only viable long term solution appears to be a shift in federal entitlements programs to defined contribution status.” So he is asserting that his generation, and the ones immediately after, should only get back what they put in? Almost certainly not. After all, the baby boomers were “the most productive” in U.S. history according to Greenspan, whereas those who will replace them in retirement are those “who in 1995 shocked us by scoring so poorly on maths and in international science competitions.” Let’s give them the poverty and early death they deserve, says Generation Greed’s Greenspan.

What is particularly outrageous about this is not so much what is said but the man who said it. This is Alan Greenspan we are talking about. Remember 1982? Remember 2001? Remember 2007? The best that may be said of Greenspan is that his mistakes enabled those now 55 and over to benefit at the expense of those coming after, and those getting rich as their companies, particularly financial companies, were pillaged to benefit at the expense of the rest. It may be more accurate to claim that these were not mistakes.

Common Cause has recently released its own “non-partisan” redistricting maps for Congress, State Senate, and State Assembly. Although I liked the idea of possible turnover because some districts would have more than one incumbent while others would have an open seat, the Common Cause maps were not the improvement I hoped they would be otherwise. When I look at Brooklyn, the Common Cause lines are a mess for Congress and to a lesser extent for State Senate. Not surprisingly, perhaps, the Assembly districts seem to be better, because they are smaller.

Perhaps the idea of “community of interest,” specifically based on race, is what is causing the problem. That certainly is what is causing massive gerrymanders in the proposed Common Cause map for Congress. What seems to be happening, in a country with a Black President and a city where there is no “majority” racial group, is integration, particularly among the young. Common Cause finds non-Whites moving in traditionally “White” areas and “Whites” moving into traditionally “Black” areas. And that is a problem for the way districts are thought of, through the eyes of tribalist bigotry. Thus Common Cause ends up with a mandate to create two "Black" districts, each one with a barely a majority for "Blacks," neither of which may still have a majority a few years from now. By dividing the “Black” neighborhoods into two, in fact, there may be no traditional “Black” seat by 2014. So I have another suggestion.

Things sure seem to have changed at the New York Times. After a couple of decades of being the veritable mouthpiece of the non-profiteers, the Times has recently been raising questions about how much New York City and State pay them, much of it under the Medicaid program, and how little is received in return. In the latest article, the Times examined at-home services for the disabled, for which the city state and federal governments pay $45 to $67 per hour to non-profit organizations that dispatch aides paid $9 to $15 per hour. The huge profit margin allows the non-profits to pay big salaries to those who run them.

This is just one example of what has happened in the city’s “non-profit” “charities” over the years. They have become a big part of the reason that New Yorkers pay so much in taxes, and receive so little in return. What is particularly disturbing is that this problem has infected a type of organization that was thought of as the solution 40 to 50 years ago, due the failures and ripoffs of public employee unions, government bureaucracies, and government contractors.

It’s happening, just as I predicted in this post after the 25/55 pension deal passed for New York City teachers. The New York Times reports that desperate middle class parents are responding to the financial degradation of the public schools by forming underground education co-ops. Providing for themselves, outside the formal structure and at risk of persecution from it, the education they pay taxes for after those taxes were diverted to the early retired. According to the article, the underground is in pre-K, which was supposed to become “universal” but never has been. “For parents like us, options are limited. Private pre-K can run more than $30,000 a year at the fanciest schools. Depending on the neighborhood, spaces with community-based organizations — private preschools that partner with the state and accept state subsidies but handle their own applications — can be as elusive as public pre-K spots. If home schooling is daunting, and if not schooling feels wrong, the only other choice, it seems, is to join the legions of parents who have taken matters into their own hands and formed co-ops.”

Today pre-K, tomorrow grade school and more. Not because it is better or even good, not because teachers aren’t needed or wanted, but because that is what will be left in the aftermath of Generation Greed. With the benefit of information technology and unemployed would-be teachers with no choice but to help out and work for peanuts, it might work for children with educated parents. For the rest, forget it, and kiss equal opportunity goodbye.

Confirming its prior analysis, and the analysis of independent actuary John Bury, the Center for Retirement Research at Boston College has once again found New York City’s pension plans to be among the most dangerously underfunded in the United States, this time in light of the new rules proposed by the Government Accounting Standards Board (GASB). The New York State pension plans, which also cover local government workers in the portion of the state outside New York City, are once again found to be among the best funded.

Noted actuary Girard Miller who writes for Governing Magazine, for those plans scheduled to run out of money in less than 25 years “without causing a panic, it's clear that the time has come for stakeholders, trustees and plan sponsors in these systems to ask penetrating questions and get to work on solutions — pronto. That includes the unions whose members must contribute to the solutions and stop playing the ‘not me’ entitlement game.” He lists 28 plans among those in desperate shape, including the New York City Teachers and New York City Employees, but the Boston College report only included larger plans. Other analyses have shown the NYC Police and Fire pension plans to be worse off than the NYC Employees retirement plan, though not as bad off as the Teachers. “This abyss,” said Miller, “is the result of a decade or more of benign neglect by all parties at the table.” Actually in New York, there have been additional retroactive pension enhancements in the past decade, and deals to borrow money from the pension plans to pay pension contributions, which is much worse than benign neglect.