Author: Larry Littlefield

Frequent readers of my posts may recall this http://www.r8ny.com/blog/larry_littlefield/taxes_generational_equity_state_and_local_taxes.html portion of this http://www.r8ny.com/blog/larry_littlefield/taxes_generational_equity_part_one.html analysis last February. By preparing a tax return for a hypothetical Brooklyn retired couple with an income of $75,000, and a hypothetical working couple with a child who also had the exact same income of $75,000, I found that the older couple would have paid just $2,570 in state and local income and property taxes, or 3.4% of their income, in 2006. The young couple, despite having the cost of caring for a child, despite working rather than relaxing at home, despite having the same income, despite not having health insurance while paying Medicaid taxes so the older couple could have health insurance, despite having little wealth rather than a paid up home, would have paid $7,857 in state and local taxes, or 10.5% of their income, in 2006. The state legislature is now prepared to act to correct this obvious unfairness. By providing an additional $200 million in property tax breaks to – senior citizens.

Mayor Bloomberg to the Times in August 2006: “If we enhance the pension system, then we can’t afford to pay as much in salaries…if we enhance the pension system and salaries, we can’t afford to have as many employees or to provide as many services. And that’s what everybody is unwilling to face.” Mayor Bloomberg reported by the Times last week, after he agreed to allow teachers to retire at age 55 with just 25 years working: "Mr. Bloomberg said the changes would be 'cost neutral' to the city for the first five years and would save 'in the tens of millions of dollars' in following years.

There is a fence in Howard Beach Queens that separates the inside of JFK Airport from the outside. On one side of the fence is the Howard Beach Airtrain station. There, a subway rider can board the Airtrain to ride to the airport and freight terminals, to work or to travel. The cost is $5.00. On the other side of the fence, a driver parked in a parking lot can board the Airtrain to ride to the airport and freight terminals, to work or to travel. The cost is zero. Before the Airtrain existed, there was a shuttle bus for both the parking lots and the subway station; it was free to both. They eliminated the free bus when the opened the Airtrain. JFK is a big airport, so the Airtrain transports people two miles from the central terminal area to the subway for that $5.00. New York City Transit then transports them 10 miles to Manhattan, for a $2.00 base fare, but far less with discounts.

Mayor Bloomberg and the UFT have agreed to allow teachers to retire with full pension and health benefits at age 55, pending approval by the state legislature (which has already passed the deal unanimously before, with Pataki’s veto). You find out about that, and not in detail, at the end of articles today in the Times, Post and Sun. The part of the deal that led those articles, and led the city’s press release that was used to quickly and easily create those articles, is that there will be “merit pay,” something that may allow Bloomberg to make a political point. The teachers would receive bonuses if they worked in low-performing schools and those schools improved. But that may be a pilot program, which can be terminated after Bloomberg leaves, and is funded only with private donations, whose future is at best uncertain. The real order of significance can be found in on the UFT website and in the Daily News story, where this part of the agreement is given its proper insignificance. Or more significance than it deserves.

Opponents of congestion pricing, based in Queens, released a report with an alternative to the proposal last week. Proponents of congestion pricing, who would probably otherwise support many the alternative’s ideas, immediately blasted it for being what it probably is – a red herring designed to ensure that nothing happens, existing privileges are maintained, and problems are not solved, but the public is confused about who is to blame and thus just shrugs its shoulders. The typical Albany win over the public, in other words. Still, there is enough of interest in the proposal that it deserves a thoughtful review, and such a review finds that it is essentially an extension of current policies, and has the same hole as those policies. The opponents’ proposal, more over, gores even more oxen that congestion pricing, and may thus be designed to stir up even more opposition. Still, it is worth considering as the basis for a more complete alternative, if only to test the opponent’s sincerity. Filling that hole, however, could make the proposal as viable as congestion pricing, if not as flexible.

As part of the latest round of fare increases, the MTA is introducing two new, and good, ideas: peak period pricing with off-peak discounts, and small regular fare increases instead of years of “save the fare” grandstanding with deferred maintenance followed by a whopper. Those who have read my prior posts here know that I am in favor of both, but would go further, as described below. I had considered writing in with my comments to the MTA website, even actually showing up at a public hearing. But I decided instead to put my comments here, so others can respond as well.

The U.S. Census Bureau released state and local government public employee pension data for 2006 last month. I’ll discuss this information next May, when more detailed information is released along with all public finance data for the year. Nonetheless, the data provides a few interesting tidbits. Benefit payments equaled 6.6% of the assets of New York City’s public employee pension systems in 2006, more than for the New York State pension systems, which include New York State government and local governments outside the city, at 4.5%, or the national average for state and local pension systems, at 5.2%. Employees accounted for just 7.3% of all contributions to New York City’s pension systems, even though in most titles new NYC employees are required to kick in 5.85% of their pay, because those hired in prior generations (and those in certain titles such as police and fire) are not paying in at all. The national average is 20.6% and the figure for the New York State pension systems is 4.5%. And New York City’s pension fund earnings equaled just 7.5% of its investment holdings in 2006, compared with a national average of 10.3% and 12.0% for the New York State systems. Despite last year’s return, however, New York City’s investment choices, if they didn’t change and if the city isn’t taxed to make up for losses by the rest of the state, may leave us better off in 2007.

From the late 1960s to the early 1990s, New York City could be characterized as the “city that doesn’t work.” Reversing a historic pattern that had prevailed until that time, the share of NYC adults employed, or even in the labor force (working or looking for work), was well below the national average. A high share of the city’s population was on public assistance. And, New York City reputedly had a large share of its workforce employed by the government. The latter point was always an exaggeration – if New York’s tax dollars went anywhere to a greater extent that elsewhere, they went to those retired from public service not those actively providing public services, and to the large, government-funded “non-profit” health and social service sector. Recent data from the 2006 American Community Survey (ACS – see attached spreadsheets), however, show that New York’s status as a city of non-workers may be disappearing as a “welfare generation” passes on. And dependence on government and government-funded employment is, in fact, a characteristic of the suburbs and Upstate New York, not New York City.

Bloomberg (the company not the Mayor) reports that under the new agreement between General Motors and the United Auto Workers, costs will be cut primarily through lower pay and benefits for newly hired workers. General Motors is going down the tubes because the union successfully demanded too much compensation for too little work — retirees vastly outnumber workers — while the "who you know not what you know" managers that followed those who built the company paid themselves royally while failing to innovate and running the company into the ground. So sacrifices had to be made. But they were not made equally. Like our elected officials and public employee unions, GM and the UAW decided to preserve existing perks and privileges for those who have them, while ensuring the next generation will be worse off even as they must do a better job.

I saw a surprising piece of data in a New York Sun article on rising health insurance costs recently http://www.nysun.com/article/63341. It seems the cost of health insurance in the city will be rising 8.7% this year, according to well known employee compensation firm Hewitt Associates, to $8,719 per employee. The national average is also rising 8.7%, to $8,676. That means that privately financed health insurance costs less than one percent more in New York City than the national average, despite the fact that health care is a labor-intensive industry and, as readers of my prior posts are aware, the average worker in Downstate New York (excluding the high-paid financial sector) earned one-third more than the national average. And, in fact, when I contacted Hewitt Associates years ago to get comparable information for this report http://urban.nyu.edu/research/littlefield/index.html, I found that in 1997 private health insurance in fact cost one-third more than the national average here, what I would have expected. And relying on the same wage data I use, federal Medicare also pays about one-third more in New York City than the national average (which is why by act of Congress for Medicare payment purposes Ulster County is now a part of New York City). So is private health insurance in New York City a bargain? Or are New Yorkers paying for it in some other way?