Author: Larry Littlefield

What the Campaign for Fiscal Equity Accomplished

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If you read my prior post you know that the school finance situation was grossly inequitable in FY 1996, as the Campaign for Fiscal Equity lawsuit got underway. The personal background of many of New York City’s children would have made education challenging enough, but the under-funding was at least a major contributing cause to the city’s unconstitutionally bad schools. So were the contract provisions the teachers’ union had obtained, allowing a lower level of effort by the teachers in exchange for lower pay (which obviously did nothing for teachers who made a real effort despite that pay). If you look at the change from FY 1996 to FY 2006, however, one thing the CFE lawsuit achieved was an increase in education spending. The New York City schools already had enough money three years ago as a result, it seems to me, and have since received more.

But education spending increased in places where it was already high, not just in places where it was low. New York City residents, which had been cheated out of a fair share of school aid for decades, ended up paying local taxes for much of the increase in spending inside the city and state taxes for much of the increase outside the city. And while the gap between the city’s education resources and that of other parts of the state did decline, it remained large. The Campaign for Fiscal Equity achieved higher spending but not fiscal equity, so it is not unreasonable to expect that now that its lawsuit is over New York City’s schools will fare even worse in the next fiscal crisis, and some of the gains will be lost.

Education Finance Before the Campaign for Fiscal Equity Lawsuit

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If you read my last post and downloaded the data, you might be wondering why the Campaign for Fiscal Equity sued New York State on school spending, and why the courts ever ruled in its favor. To find the answer one cannot look at New York’s school spending in FY 2005-2006. One has to look back a decade earlier to the FY 1995 to FY 1996 school year. In June 2005, the New York State Court of Appeals ruled that the Campaign for Fiscal Equity lawsuit was legitimate, and could go forward. The context was a state and city budget crisis that came to a head several years after a recession had begun, when costs could no longer be deferred to the future and revenues no longer stolen from it, at least to the same extent. The resulting sacrifice would be targeted at those who mattered least. The following post will show what the city’s school finance situation was that year, the year the Campaign for Fiscal Equity lawsuit was launched; the next will review what the CFE got for its effort, and how much it cost.

Before Voting on the School Budget, Download This

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The U.S. Census Bureau has released its education finance data for the 2005-2006 school year, with information available on revenues by source and expenditures by type for every school district in the United States. I’ve summed this information to create totals for the United States, New Jersey, New York State, the Downstate Suburbs, Upstate New York, and New York City, divided the totals by the number of students to get per student figures, adjusted the per student figures for the cost of living for the higher cost Downstate and New Jersey areas, and adjusted 2002 data for inflation for a comparison with 2006. The data is in two attached spreadsheet, one a summary by broad areas with a comparison with FY 2002, and the other with data for every school district in New York State in 2006. I suggest that New York State residents outside New York City download these spreadsheets, look them over, and think about them before voting on their school budgets.

When I first started compiling public finance data many years ago, what stood out was how low New York City’s elementary and secondary school spending was, as a share of the income of its residents, despite very high local taxes. As will be described briefly below and in more detail in the next post, however, New York City was already spending plenty of money in FY 2006 based on the national average, even before the “historic” (in ex-Governor Spitzer’s words) increases in state school aid over the past two years. High by national standards, the city’s spending remains far lower than in other parts of the state. That, however, is not because the city’s school spending is low, but because spending elsewhere in New York State — already high a decade ago — is now unreasonably high. So high, in fact, that one wonders what share of the money is actually going to education. Unreasonably high spending elsewhere in the state, rather than low spending in New York City, is now the biggest education finance problem for New York.

What’s Your Trade Gap?

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I generally try to stick to my knitting here on Room 8, and write about things that I have at least some level of knowledge and expertise that the reader does not. And I am not an expert in trade economics. Yet with the Republican Presidential Primary over and the amount of immigration nonsense therefore reduced, I couldn’t help but notice the amount of foreign trade nonsense emerging from the Democratic side. It’s yet another variation of the early 1990s anti-welfare crusade — if things aren’t going well, find someone black or brown to blame. Well I have a message for all those worried about the effect of foreign trade on their economic well being. Trade cannot hurt this country, only help it, if the amount we export equals the amount we import. And how much is exported and how much is imported is not decided in a trade negotiation. It is decided in every American family. Lots of Americans have chosen to spend more than they earn, going deeper into debt to do it, and when you add them all up the United States as a whole is consuming more than it is producing. Before pointing the finger at NAFTA or the Chinese, ask yourself “what’s my trade gap?” If you have one, trade agreements aren’t the problem, your personal financial choices are.

I Want My Fair Share of the Street

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So the State Assembly has non-voted down congestion pricing. Although I was in favor for reasons I explained here last year, so be it. My chief concern was that the state legislature would enact congestion pricing, claim that it had done its fair share for transportation, be believed, and thus escape blame for the onrushing consequences of all the debt dumped on the MTA from 1992 (or so) to 2009. I hope, now that CP is off the table, that blame will accrue where it is deserved: the MTA Capital Plan hasn’t been sensibly funded since Richard Ravitch was in charge, and the funding for roads has been no better. But I’ve said my piece on that problem, and will otherwise leave it to the congestion pricing opponents to solve.

Now that it has been established that crossing into the Manhattan Central Business district will be free, driving on the congested streets will be free, and parking there will be free for many, however, I believe it’s time to re-think how that scarce space on the street is allocated. With all the taxes I and other non-drivers pay for that street space, I don’t think we’re getting our fair share, and want more of it. Specifically, I want more street space taken away from motor vehicles and allocated to pedestrians, who live in an area or arrive by transit, and bicyclists. I am both. And, I want more street space allocated to those who use private automobiles on weekends, for pleasure travel and visiting, rather than on weekdays to commute, by ending the practice of paying extra (a lot extra) to avoid road construction during rush hours.

Stock Prices and Public Employee Pensions: A History

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Many Americans are feeling outrage over top executives who made risky assumptions, looked good in the short run, paid each other massive amounts, and walked out the door with enormous golden parachutes when their bets went sour. Shareholders — and perhaps in some cases taxpayers — are left with the bill. For the past 40 years, however, elected officials and the public employee unions that support them have done the same thing. Whenever the stock market has been on a tear, they have upped the assumption of future rates of return and handed out “free” pension enhancements, claiming the stock market would pay for it all. And later, when the stock market turned down and pension contributions soared, the resulting tax increases, service cuts, and diminished wages and benefits for newly hired public employees have been described as the “inevitable” result of “circumstances beyond our control.” The prior pension enrichments are never given back, just like those executive bonuses. There have been two such cycles in a general sense, as the attached chart shows. In recent years, however, the state legislature has been even more irresponsible – handing out more pension benefits even when the stock market is down, taxes are rising, and services are being cut.

Does the Times Want Elections?

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I was surprised to see the Times venting about the need for elections in an editorial.  “Any New Yorker who is not furious at the mention of their state capital, Albany, has not been paying attention,” according to the newspaper. So we should write letters and ask them nicely to do better, and give them credit for the slightest improvement? Perhaps not. “The place needs a thorough cleaning — a giant broom to sweep out the rascals, starting with the State Legislature. We are not in favor of term limits, but the idea gains currency when most people who get elected in New York State keep their seats until they retire, die or go to jail.” That does seem to be the two options doesn’t it — term limits or perpetual incumbency? Except at the state and federal level, where there is only one option, because they aren’t going to put term limits on themselves. “So, here is how to change Albany: find and support somebody daring and thick-skinned enough to run against the local legislator.” Well, from their lips to God’s ears. But I can’t help but contrast this editorial with the response of the newspaper when I took the trouble to run myself (as I wrote about here)– ignore what I was saying despite repeated requests, and then publish an editorial just before Election Day that said I was one of only two or three people running for election that no one should listen to.

State Budget A Joke

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The state budget has passed, but to judge by news reports the Governor and State Comptroller have already said mid-year emergency budget cuts will be required. And we can only assume the victims will be the same as always — New York City schools, which will be diverting hundreds of millions of dollars out of the classroom to the retired as a result of the recent pension deal in any event, infrastructure and the poor. Money will be borrowed, and taxes will be increased — but not on the retired, who pay no state taxes. And all this will happen after the election. It’s one thing for me to say it. It’s another for them to say it. I guess they figure they don’t even have to pretend anymore.

The Bicycle: Low Public Capital Cost, No Public Operating Cost

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Some time in the very near future, the cost of the Medicare program will exceed Medicare tax revenues by enough that general revenues cover more than 45 percent of the program. Social Security will start running a deficit, to be made up by money diverted from elsewhere, within a decade. Generous early retirement for state and local employees, combined with increasing lifespans, mean that in any community without significant population growth the number of ex-government workers receiving pay and benefits for nothing will approach or even exceed the number actually still providing public services. The massive infrastructure built after WWII is aging, the previous urban infrastructure is still not at a state of good repair, little new infrastructure has been added since 1973, and the cost of building and repairing the infrastructure has soared. And on top of this, there are the enormous debts bequeathed by the generations now in charge to those who will follow. Whereas today’s elected officials stay in office by handing out favors to interest groups, tomorrow’s may face the ongoing task of handing out sacrifices, disappointments and losses to an increasingly stressed public. In an attempt to do something else, they’ll be looking for initiatives that can be sold as public benefits that have one critical characteristic – little or no public cost.

Old Dog New Trick: Biking To Work

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As I wrote earlier, beginning about eight months ago I’ve been riding a bicycle to and from work three or four days per week, something I wish I had done 20 years ago. It was something I had long been interested in, but which had seemed impractical without a host of unavailable services — indoor bicycle parking, showers, a place at work to store business attire, etc. But after a little research and given “business casual” clothes that can be carried in a bag, I have found that it is doable after all, even though my commute is nine miles in each direction. I haven’t been riding to save the earth or save money — the subway, my other transportation mode, does a very good job of both, particularly with TransitChek. What bicycling to work has done has allowed me to improve my health by getting lots of exercise without using very much of my most scarce resource — time. I’m a little late to the party, but riding to work given me a new perspective on certain health, personal finance, transportation, and city planning issues. This post on the bicycle and personal lifestyle and the one following on the bicycle and public policy are based on this new perspective, and the upcoming institutional collapse I wrote about previously.