Tag: Albany

So it turns out that “unexpectedly,” the city and state budgets are not balanced and we will have to accept some combination of paying more, getting less — or having the problem swept under the rug and paying more and getting less later with interest. Word came out after Election Day, and after I guess the folks in charge thought was a decent interlude.

Just remember this next year. Compared with what’s coming next year at this time, this is nothing.

Some Vampire (not Empire) State apologists are crowing about a ranking of state fiscal distress by the Pew Charitable Trust that purports to show that there are states in worse shape than New York, based on the size of their budget gaps and cuts. What that organization failed to consider, however, is that New York has the highest state and local taxes in the country, as a share of its residents’ personal income, save for (in some years) Alaska and Wyoming, where most of those taxes are on oil extractions not residents or businesses. You can see this for FY 2006 in the spreadsheet attached to this post. (New York does not have the worst financial reporting – other states are holding up detailed data from the 2007 Census of Governments). Those states in more trouble than New York could get out of it simply by raising their tax burden to New York’s levels. In FY 2006, New York’s state and local taxes absorbed 15.9% of the personal income of NYC residents, and 13.4% of the residents of the rest of the state, compared with 11.4% in California, 11.7% in New Jersey, 10.1% in Arizona, and a national average of 10.9%. Those states have budget crises because they have resisted tax increases; New York has already imposed them from already high levels.

With the State of New York approaching bankruptcy, members of the state legislature are calling for “innovative ideas” to prevent the interests that have backed them over the years from having to give anything up. By innovation, they mean deferring costs to the future, spending future revenues today, and making sure that when their generation walks out of there laughing all the way, there will be nothing left for anyone that follows them. Since Governor Paterson was a member of that legislature and participated in all those deals and favors over the years, the legislature believes he will be once again easy to roll. What choice does he have?

There are any number of ways that Generation Greed has financed its lifestyle demands by sucking resources out of the future and away from those who will live in it, with many listed and described here.  (If you haven’t read that post, please do so). The generational inequity most likely to lead to an institutional collapse at the state and local level is the practice of assuming an unjustifiably high rate of return for public employee pension fund assets, using that assumption to hand out permanently vested pension enhancements to those cashing in and moving out, and then raising taxes, slashing services, and cutting the pay and benefits of future public employees when those mythical returns fail to materialize. In New York State, since the disastrous pension deal of June 13, 2000, the assumed rate of return – from the peak of the stock market bubble – has been 8.0% or more.

High returns are used not only to hand out pension deals to public employee unions in exchange for perpetual incumbency, but also to justify lower than necessary government contributions to the funds, allowing the cost to be deferred and hidden. Since the union members are guaranteed ever-sweetened pensions, not paying for it now just means more must be paid for it later. I challenged the candidates for City Comptroller to announce what they thought a fair assumption for the rate of return on pension assets is. None did so, implying that they want to continue or enhance the fraud — at the expense of younger generations they don’t care about, with the possible exception of their own children. But in case likely Comptroller Liu has other plans, I’ll answer my own question for his benefit.

Any honest actuary, any honest observer, will say the same thing — public services are about to be destroyed by the many years of work-free living older generations have promised themselves but decided younger generations, who will be much poorer, will have to pay for. And the debts older generations are leaving behind. On the public employee pension front, you can read about it in Governing magazine, a leading observer of public service, where a pension analyst proposes an alternative to complete collapse. One that might be implemented in places other than New York State. Here, the state legislature is determined to take every bit of our future before passing or leaving.

Data on non-employers is out from the 2007 Economic Censuses, conducted by the U.S. Census Bureau. I’ve briefly summarized a few findings for New York City as compared with the United States in the attached spreadsheet; one can download the spreadsheet if interested in particular industries. The data shows that (as expected based on other data) New Yorkers are more likely than other Americans to work for themselves while not employing anyone else. New York City accounted for 2.75% of U.S. private sector employment in 2007 according to Current Employment Survey data, but it accounted for 3.5% of non-employer establishments according to the Economic Censuses, some 765,857 that year.

The self-employed were not particularly well paid here, averaging just over $44,000 in receipts here, slightly less than the national average. For private sector wage and salary employees, in contrast, those working in Downstate New York typically earn about one-third more than the national average, and far more in Manhattan. Despite the discussion of “mom and pop” stores in New York, the city only accounts for 2.6% of all Retail Trade establishments without employees. By sector, non-employer establishments are particularly common in New York City in Wholesale Trade, Transportation, Information, Health Care and Social Assistance, Arts & Entertainment, and Accommodation & Food Services. However the Professional, Scientific and Technical Services sector account for most non-employers both in NYC and the U.S. as a whole. Although most of the city’s wage and salary jobs are located in Manhattan, moreover, the self-employed are as likely to be located in Brooklyn or Queens. More detailed background and discussion of these industries follows.

Not much as Governor or Lieutenant Governor, as far as I am concerned. There his alleged sins and errors have been mostly within the political world, which doesn’t matter much to me at all. And it is within the political world that he is being sinned against.

Getting back to Government, however, recall the Governor had been a member of the state legislature (as had Governor Pataki). And that legislature has repeatedly voted, generally with no debate and no dissent, to enact deals, favors, and privileges for some and defer the cost to the future, so no one would be he wiser and no one would complain. And now it is the future, and a difficult future at that. It isn’t just Governor Paterson who deserves to be haunted by the Ghost of Politics Past, and it is no wonder the legislature keeps putting off a meeting with the Ghost of Politics Future, because what he has to show is really scary.

The current city elections have brought the usual tales of candidates who wanted to run for office, but were kept off the ballot by New York State’s ballot access laws. As someone who once became fed up enough to run against my state legislator myself, I can tell you that those laws are designed to prevent elections, and make it exceedingly difficult to get on the ballot and speak your piece. The number of signatures required to get on the ballot for a primary against a major party opponent is large, and the time in which one is allowed to collect them is short, particularly for someone who has a job. Independent candidates, seeking to run in the general election when everyone shows up, require three times as many, collected in even less time. Minor party candidates, including Republicans in most of New York City, require fewer signatures, but must get the signatures of five percent of all party members in a district. I can tell you from experience that the election rolls include many former voters who have either died or moved, meaning one must in fact get the signatures of ten or 15 percent of those who are actually there, and it takes half an hour to get each signature. And then, after all that effort, candidates are routinely thrown off the ballot for formatting errors.

Yet some pretend that all the requirements designed to prevent contested elections are not unfair, because incumbents have to meet the same requirements. Or do they?

As a shorthand, when describing why data on local governments has to be aggregated at the county level to be comparable, I generally note that whereas in other locations a single county may have a county government, municipalities and townships, school districts, and other special districts, New York City only has two local governments: the City of New York and the Port Authority of New York and New Jersey. But Census Bureau data actually includes a third local government for New York City: the Waterfront Commission of New York Harbor. I generally don’t bother to mention it, or include it within my tabulations, on the grounds that it is too tiny and meaningless to bother with. I never knew what it was, but I figured that it was just some backwater with no useful function where sinecures were provided for political hacks.

A new report alleges pretty much what I had assumed, but also alleges the Waterfront Commission has an actual function. According to the New York Times it “portrayed the agency as a patronage-laden favor bank where staff members took cars for personal use, a boat that was bought with federal money to fend off a ‘waterborne attack’ was used primarily to ferry V.I.P.’s during Fleet Week, and friends got friends jobs with high salaries and little work.” But it also asserted its corruption and incompetence left us vulnerable to terrorism. That I’m not so sure of. I’ll bet anything worth doing is actually done by someone else.

As I wrote previously, there is a dispute among Generation Greed as to how to diminish the quality of life and standard of living of younger generations, and the future of the state, to pay for rich and long retirements they have promised themselves. Some want cut the pay and benefits of new workers relative to those who came before, while presumably allowing all public employees, including those with sweeter deals, to do a less good job in exchange. Others want to defer the cost of all those special pension deals and favors to the future, forcing future taxpayers to pay for them, preferably at a time when Generation Greed is drawing retirement income, which is exempt from state and local income taxes in New York. Simply not paying the cost of the pensions until later is the choice advanced by Comptroller DiNapoli, and it was evidently passed by the New York State Assembly without any public debate about its fairness some time ago. But yesterday there was a surprise.