Author: Larry Littlefield

If New Jersey Governor Chris Christie thinks the City or State of New York, which have higher taxes as a share of personal income than New Jersey, will pay for ARC, forget it. Andrew Cuomo evidently said that ARC project is important to New York. It is in fact important to New Jersey, and New York is already paying for part of it via the Port Authority. Without ARC, those working at high wage jobs in Manhattan might be more likely to live in New York City or suburbs on the New York side of the river. With ARC, those workers are more likely to live in New Jersey. That is the difference.

If Governor Christie and other parties can come up with a less expensive alternative, more power to them. Were it up to me, the new tunnel would have hooked into Penn Station to start with, perhaps continuing on to the Sunnyside Yards so NJT trains could relay there. But otherwise, New York’s elected officials should work to get that money diverted to projects such as East Side Access and the Second Avenue Subway that New York is struggling to fund. Give Christie $1 billion of the Port Authority money to get through next year’s budget, and use $2 billion for New York’s long term needs.

As noted in the spreadsheet attached to this post, direct expenditures by the City of New York fell from $210.97 per $1,000 of city residents’ personal income in FY 1972 to $164.77 per $1,000 of income in FY 1987, a decrease explained by having the Medicaid program shifted to the state’s books and the end of massive public school expenditures on the Baby Boom generation. A similar decrease was recorded for local governments in the rest of New York State. Since then, total direct expenditures by the City of New York have been essentially unchanged as a share of residents’ personal income in peak economic years, based on FY2000 and FY 2007 data, while local government expenditures increased in the rest of New York State, the United States and New Jersey.

The total salaries and wages paid to employees of the City of New York, however, fell as a share of the income of all New York City residents from FY1987 to FY 2000 and from FY 2000 to FY 2007. So did the city’s direct expenditures on Libraries, Corrections, the Fire Department, the Department of Sanitation, and Judicial and Legal. Police Department expenditures increased as a share of city residents’ income from FY 1987 to FY 2000 and fell from that year to FY 2007, while Parks, Recreation and Culture and Housing and Community Development expenditures fell and then rose, but all were lower as a share of city residents’ income in FY 2007 than they had been 20 years earlier in FY 1987. Mass transit operating expenditures plunged as a share of city residents’ personal income over the period. Where is all the money going? Download the spreadsheet attached to the post linked above, print out the worksheet marked “output,” and read on.

That is one of several possible explanations for a data anomaly I have discovered in the state and local finance data from the U.S. Census Bureau. The State of New York has a pension system that covers both state employees and the employees of local governments outside New York City. New York City has its own pension system. State taxpayers, including New York City taxpayers, contribute to the state pension system, presumably in an amount sufficient to provide for state workers. Local governments outside New York City, using taxes collected outside New York City, also contribute to the state pension system, presumably in amounts sufficient to provide for their own workers. New York City taxpayers have to pay into the New York City pension system to cover the pensions of local government employees in New York City.

The Census Bureau provides pension data for pension systems, not the state and local governments that contribute to them. So I only had one number for all pension benefits paid by the state system, both to former employees of the state and former employees of local governments outside of New York City. To provide a separate number for each, I decided to make an assumption that the share of the total benefit payments that went to the former state workers must be in proportion to the share of the total pension contributions made by the State of New York. But the results were bizarre – the presumed state pension benefits soared from FY 2000 to FY2007 as a proportion of state residents’ personal income, while the presumed local government pension benefits fell. So I decided to look more carefully at the state versus local taxpayer contributions to the New York State pension fund. What the hell is going on up there?

If the people of Western New York don't understand the issues with New York's Medicaid program they can't blame the press, as this article is one of the fairest and most factually accurate accounts I have read. It doesn't contain a lot of numbers, but it is consistent with the numbers I have reported, so if one wants an overview written by an actual journalist, they could do worse than to follow the link and read the article.

The spreadsheet attached below presents data similar to the local government finance data presented in this post and also written about in two others. But whereas the former spreadsheet contained local government finance data for fiscal year 2007 alone, this spreadsheet presents local government finance data for the years 1972, 1987, 2000 and 2007. These were all up years for the economy, beginning with the administrations of New York City Mayor John Lindsey and Governor Nelson Rockefeller, through the most prosperous year of the administrations of Mayor Ed Koch and Governor Mario Cuomo, the peak economic year for Mayor Rudi Giuliani and Governor George Pataki, and the peak economic year of Mayor Michael Bloomberg with Governor Pataki’s last budget.

The years were chosen to be fairly comparable with each other, to separate changes in local government finance due to long run policy changes from those related to economic booms and busts. Economic crashes and fiscal crises followed each of them, with the worst for New York City following 1972. The quality of life was substantially lower for nearly 25 years after that; in some cases the quality of public services in New York City has never fully recovered. Is New York heading into another era like that one? And did that era every fully end?

In my previous post, I showed that extremely high public school expenditures drive the high taxes, generally high property taxes, in the portion of the state outside New York City. But what about New York City? Its public education spending, according to the U.S. Census Bureau, is and recent decades always has been below average as a share of its residents’ personal income. Spending on community colleges, parks, recreation, natural resources and libraries is and almost always has been low. So where does the money go?

New York City’s spending, as a share of its residents’ income, is far above average in means tested social benefits, in spending on housing and community development, public housing, social services, and cash welfare – although cash welfare expenditures are now a pittance compared with the other categories. Spending on police and corrections, as well, is and has been high. Another group of spending categories where New York has always been high, however, accounts for a growing share of the city’s tax burden, and a growing cause of spending cuts in other categories: debts, pensions, and employee health care, for retirees in particular. After a brief respite, and as in the terrible decade after the fiscal crisis, city residents are facing rising taxes due to the past, with less and less in public services return in the present, as those who benefitted walk away with a bundle of loot.

As shown the spreadsheet attached to my previous post on local government revenues, New York’s state and local tax revenues were 47.0% above the U.S. average in New York City as a share of its residents’ personal income, 26.8% higher in the Downstate Suburbs, 17.5% higher in Upstate urban counties, and 24.0% higher in Upstate rural counties. The next few posts are about expenditures, and seek to identify the higher spending associated with those higher taxes. If the reader has not done so already, they can follow the link above, download the spreadsheet attached to it, print out the “Print Tables” worksheet (it will print on six pages) and follow along.

The data show that compared with local governments in other places, New York City spends more on housing and community development, public hospitals, social services, and aid to the state for Medicaid, along with police and correction. Mass transit and solid waste spending are also high in the city, but then many places do not have municipal solid waste collection and few have a transit system as extensive as New York. City residents are also burdened by huge pension and debt costs, cost shifted from the past with no current public services in exchange. In the rest of New York State, meanwhile, public school spending is sky-high relative the income of those who reside there. The specifics follow.

We are in a situation in which wages and prices may be stagnant for some time to come. So a property tax cap that merely limits increases to 2.0% per year would mean higher and higher property taxes compared with the incomes of the people who were paying them. Worse, because of the pension enhancements of recent years, pension spending is set to soar. A property tax cap that exempts pension spending and debts, like the one in New Jersey, is no cap at all. It is a fraud.

What the leaders of the state legislature are going to want, I would imply from recent comments in the press as quoted below, is to defuse the issue while having taxes continue to soar, as the pay and benefits of those who keep the in office continue to rise, and the standard of living of everyone else who isn't a senior citizen continues to fall. What will be offered is symbolic change, a "victory" for the new Governor. But it won't take long for people to see that nothing has changed, and to become even more confused, angry, and open to demagoguery.

Local government is where the rubber meets the road in the public sector, the level of government were most public services are directly provided. This post compares local government revenues for the United States, New York State, different parts of New York State, and selected other states in Fiscal 2007, the year of the most recent Census of Governments conducted by the U.S Census Bureau. The attached spreadsheet contains data for revenues, and for expenditures and debts — which will be discussed separately to keep post lengths reasonable. The data is for all local governments in a given area added together, to adjust for varying local government organization in different places. The measure of revenues, expenditures and debts, for the most part, is the amount per $1,000 of the income of area residents. This adjusts for the level of per person income, and the level of population, in different places. It may be understood this way: New York City spent $9.18 for every $1,000 city residents earned on its police force. So for every $1,000 earned by city residents, they may have spent $250 on housing, $120 on food, $30 on utilities…and $9.18 on the police as part of their taxes. Other adjustments have been made to make the comparison between places as fair as possible. If the reader hasn’t already, he or she should read this post with background data and data on state governments.

The data show in FY 2007 (as in past years) local government revenues absorbed a much higher share of area residents’ income in all areas of New York State, compared with the U.S. average, the average for New Jersey, and selected other states: Connecticut, Massachusetts, California, Illinois, North Carolina and Texas. The difference in revenues was accounted for by relatively high local taxes –sales taxes, individual income, corporate income, and other non-property taxes (such as real estate transfer taxes) in New York City, and high sales and property taxes in the rest of the state. Although state taxes are only modestly above average in New York, in part because local governments receive majority of sales tax revenues here, the combined state and local tax burden as a share of personal income was 47.0% above the U.S. average in New York City, 26.8% above average in the Downstate Suburbs, 17.5% above average in Upstate Urban counties, and 24.0% above average in Upstate Rural counties.

Ever since my teenagers talked me into buying a new I-Mac when the old Dell died, I’ve run into compatibility issues. Today, I had trouble downloading the spreadsheets from my prior post at work to save a copy there. So I have re-saved them in an older version of Excel, and re-attached them here. Hope it works.