Tag: Albany

With the cynicism that has been beaten into me over 25 years of observing New York public policy, I find myself agreeing with the New York Post as to what our state government probably wants the next MTA head to do: cover up the problems, run up the debts, cut back on maintenance and reinvestment, protect vested interests in the present while destroying the common future, and take the blame. In other words, more of the same. I might add there is one thing no one in Albany wants the next MTA head to do: make a fair accounting of how we got into this mess and who benefitted, since those in power are and represent the beneficiaries.

The MTA, however, is something I happen to know a lot about. So for interest’s sake if nothing else, I have decided to write down a series of exercises and analyses the next MTA head should undertake and publish — to help improve, or at least raise real understanding of, the agency. These are briefly listed below; I’ve decided to pass on writing multiple posts on the details of who each analysis ought to be conducted.

You may be wondering why Staten Island wants to secede from New York City, Rockland, Orange and Duchess counties want to secede from the MTA region, Long Island wants to secede from New York State, and Texas wants to secede from the United States. It is because they want to secede from the consequences of past decisions, and stick those consequences on those left behind. For the past 25 years virtually every public decision, non-decision and deal has benefited the narrow interests that have seized control of our public institutions, particularly the State of New York and its associated agencies. These interests disguised the cost from others, and thus avoided opposition, by shifting that cost to the future — in the form of vast public debts, unfunded pension and other retiree obligations, inadequately maintained infrastructure, and unaddressed environmental issues. Now that the past costs are coming due, those seeking secession are looking at what they will pay and get in the future, and deciding they will be ripped off. So they no longer want to be part of the common future.

Well guess what. As a result of those costs from the past, all of us will be ripped off in the future. Every part of the state, country and, if the scientists are right about global warming, world. Those who got the benefits in the past, and those that didn’t, alike.

“Key lawmakers from both parties (but one generation) have held tentative talks about overhauling the Social Security system,” the Washington Post reported. A likely plan would “include lower benefits for wealthy Americans, a higher retirement age and additional revenues.” Action is needed because “projections show that the system, which has brought in more money than it pays out, will begin to need at least small infusions of cash from the rest of the government.” And those in power presumably want Social Security to continue to bring in more that it pays out, so the money can be used to cut other taxes and increase spending elsewhere, as it has been since the last deal to “Save Social Security” in 1983.

Now I’m a realist about this. I know that no matter what the numbers are in the Social Security “trust fund” all the additional dollars collected in the past have been spent in the past, that older generations have made out on the deal (some more than others), and that younger generations are screwed, and something must be done. The details are summarized here.  But the attitude of those planning to repeat the 1983 generational betrayal is galling nonetheless. Americans, Senator Lindsay Graham said, “are ready to make some hard decisions for the benefit of future generations." For the benefit of future generations! Almost makes it sound like current generations, older generations, are going to the ones making the sacrifices, doesn’t it?

The most telling chart in the Mayor’s budget presentation does not concern public policy or government finance. It is the chart on page nine that shows the U.S. personal savings rate. And it shows that the generations recently retired and now in their peak earning years, unlike the “Greatest Generation” that went before them, have been unwilling to save for their own personal futures. The majority wanted what they wanted when they wanted it, and didn’t concern themselves with the consequences. Is it any surprise, then, that in their collective choices they also were unwilling to make any of the changes needed to free the United States from energy dependency? That they raised the payroll tax on the less well off to “save Social Security” for the next generation in 1983, and then spent all the extra money on themselves in the years since? That they awarded themselves richer public employee pensions, deferred the cost, and when money got tight cut wages and benefits for future hires? That they ran up massive public debts, and allowed the infrastructure to degrade? And getting back to their personal lives, that so many were unwilling to put up with the obligations of permanent family relationships for the benefit of the children? And that those who could drained public corporations of their futures by extracting undeserved money in the present in excess executive compensation?

Guess what sort of people are in the New York State legislature, from which our current Governor and former Governor Pataki emerged? For two decades, since I didn’t share the values implied that chart, I looked at the actions of politicians such as Pataki, Silver, Bruno — not to mention George Bush and the Republican Congress — with growing outrage. And since no one bothers to vote in elections that (aside from a few higher offices) in reality don’t take place, I assumed “the people” weren’t making those choices would also be outraged that their future was being destroyed if only they knew. Perhaps I was wrong.

No sooner had Mayor Bloomberg released his budget than objections were raised by those who, like Bloomberg, cannot bring themselves to challenge the most privileged of the privileged interests. Reported The Daily Politics, Comptroller Bill Thompson, released a statement opposing a proposed sales tax increase as “regressive,” which is to say falling harder on the less well off, and proposing an additional local income tax increase (on top of the state tax increase) on higher earners instead. “Amid this recession, no one should be immune, and we must ensure that any financial burdens are spread more equitably.” No one should be immune? Spread equitably? Well, the New York state and local income tax on public employee retirement income is zero, and for others over age 65 Social Security income and other retirement income up to $20,000 is also exempt from both state and local income taxes, no matter how high the household’s total income is. Bloomberg himself qualifies for tax-free retirement income. Why won’t Thompson, Bloomberg, Quinn, anyone talk about that?

Sales tax opponents “argue low-income people spend a higher proportion of their disposable income on necessities they can't do without, and so get hurt more than the rich when sales taxes are hiked.” Actually, low income people spend a higher share of their income of food and rent, neither of which is subject to the sales tax. Rental property, however, is subject to the property tax, at a far higher rate than one-family homes people like myself are well off enough to own. Perhaps the real problem is that senior citizens, poor or not, might end up paying those higher sales taxes.

Yes I’m disgusted with Mr. Smith and the rest of the State Senate. But remember, HE JUST GOT THERE, and is trying to convince people to vote and act like grown ups and allocate pain after 15 years in which others handed out benefits and shifted the cost to a future they didn’t care about. I’m far more disgusted with those others, some of whom have conveniently left the scene, and our culture of pacifier sucking two-year-olds, which has yet to “change” in New York. Smith deserves blame, but he’s far too convenient a fall guy for others who deserve to be blamed more.

The Bureau of Economic Analysis has released Local Area Personal Income data for 2007. I might look into it more deeply once it is available in disk form, allowing more detailed information for more places to be downloaded in one shot. But the most important finding hasn’t changed — New York State’s economic base and tax base are concentrated overwhelmingly in Manhattan. A place that is what it is, and attracts economic activity despite high taxes, wages and real estate costs, only because it sits at the center of a mass transit system that allows two million workers from a metropolitan area of 18 million to concentrate in one place. Without it, Manhattan is Milwaukee and New York State is Michigan or worse. And because of the seeming compulsion of those in charge of our public and private institutions, particularly the state of New York, to extract every ounce of vitality from the future of those institutions and leave them in ruins, that is where we are heading. As this information is not new, if you have been reading posts and downloading the associated spreadsheets I’ve put up here for three years, there is no need to read further. For those who want more details, a summary follows.

Here's an interesting take on the looting of New Jersey's pension funds, and who is to blame. Despite all the past beneficiaries of current costs, the author blames the pension fund trustees — which is the equivalent of blaming the MTA's board for the MTA’s current financial problems. I'm not sure I agree. After all, who appoints the boards, trustees and actuaries, and what sort of people get the job? And what happened to the MTA when it tried to invest some money in the future? It was accused by all and sundry of having “hidden billions” that never existed, with every interest seeking to grab surpluses that also didn’t exist – the agency was going deeper into debt every year. I blame the Governors, particularly Pataki, and the legislators, particularly the leadership, for similar problems of past benefits and current and future pain in New York. And the interests that backed them and benefited from their deals and non-decisions. Appointing boards, trustees and actuaries doesn’t insulate government decision making from politics, it helps to insulate politics from accountability. Something to think about as alternatives to Mayoral control of the schools are debated.

According to an article in Newsday, the current MTA funding crisis is the result of decisions made nine years ago, when the state legislature passed the 2000 to 2004 MTA Capital Plan. “Nine years ago, in collaboration with state officials, the mighty investment company Bear Stearns played a special role in shaping the course on which the region's transit system now finds itself” according to this source. “Not only did this financial titan advise the Metropolitan Transportation Authority on a five-year, $17-billion capital program, but more notably its executives personally sold the plan to state lawmakers – helping generate commissions for the firm while temporarily funding mass transit. From today's perspective, of course, the deal represents fiscal risk and folly. Bear's collapse a year ago signaled other global financial failures to come, and the debts carried by the state-run MTA drive its latest threat of massive fare hikes and sharp service cuts.” That’s true as far as it goes, but a highly incomplete picture. In fact, that capital plan was one of a series of similar decisions and deals that sold out the future that has now arrived. Every decision has been like that, for closer to 25 years than nine. And not just at the MTA.

As Albany goes around and around, looking for a way to seize more from the future to offset the damage they did to the present in the past, you may ask “what should they do” about the MTA meltdown. Take a time machine back and undo what they have done is the most reasonable answer. But back in early 2008 I did write a series of posts describing the problem with the MTA Capital Plan and stating what should be done about it. Things the state legislature would never do. Here was my review of the MTA Capital plan proposed along with congestion pricing who says there is no plan?), the MTA’s capital plan costs, and the way the plan should be financed. In the latter case, the words “tolls” could be substituted for “congestion pricing.”

On a related subject, my proposal for what the state ought to do about the pension disaster can generally be found at the end of rants about the pension issue overall. For those who don’t read to the end, however, here it is: the state should mandate by legislation that the employer’s contribution to such pensions should, in all years regardless of returns, be 8 percent for most employees, 12 percent for those who lift heavy loads or work outside in all weather, and 15 percent for public safety jobs such as police and fire. (Except that New York’s governments should also pay back all the years in the past 15 when their contributions were below this level, and thus too low). The employees should be required to pay the rest, whatever is required based on investment returns and other factors, each year. Thus, they would also pay for any pension enhancements, not just in theory based on an excessive “presumed” rate of return, but in reality based on the actual rate of return.