Tag: Albany

How does this sound for an economic development slogan:  “Upstate New York, we’re just like everyplace else, except we’re older, we’re colder, we have lots of toxic contamination left over from the industrial era, we have high taxes not for services but to pay for the debts and pensions of the past, and we are highly unionized and expect higher pay and more restrictive work rules than other parts of the country.”  Well, that’s the truth isn’t it?  It isn’t the whole truth, not by a long shot.  But if Upstate New York continues position itself in the economy based on being “just like everyplace else,” it is the only truth that matters.

What would the change in fiscal structures and priorities I have outlined thus far mean for the economy of the one part of the state whose economy people talk about:  Upstate New York?   It would mean the ability to have a much lower cost structure, provided Upstate was willing to live with lower public expenditures, by localizing decisions about revenues and expenditures on the margin.  Upstate could choose to go on spending more if it wanted, but without draining Downstate to pay for it.

Consider the school aid formula I suggested.  It would allow Upstate New York – everyone in every part of it – to have a national average level of public school expenditures per student with little or no local tax burden.  Zip.  Nothing.  And, since incomes and spending are higher Downstate (whether that buys a higher quality of life is an open question), a substantial share of the state income and sales taxes used to fund that education Upstate would be collected outside the region, in Downstate New York.  Meaning an average level of spending would cost Upstate a below-average level of state and local taxes.  Even if spending were increased to 25% more than the national average, state taxes would still cover 80% the total, keeping local property taxes low.

The September Current Employment Survey data from the New York State Department of Labor is out, and with the kids back in school and the schools staffed up we can now look back on the Pataki era in public employment in full.  And here is something you won’t read in the New York Post or the New York Sun, that won’t be analyzed by the Manhattan Institute, and that won’t be brought up by Republican candidate for Governor John Faso.  Nor will it be mentioned by the New York Times, analyzed by the Fiscal Policy Institute, or pointed to by Democratic candidate for Governor Eliot Spitzer.  From September 1994 to September 2006, local government employment in the portion of New York State outside New York City rose by 93,600.  This in the face of a much-discussed stagnation in population and private employment there.  This includes a below-average gain of 2,300 from September 2005 to September 2006.

Economically efficient taxation includes a low tax rate spread over a wide tax base. In New York State, on the other hand, politically efficient taxation includes high tax rates spread over a tax base narrowed by exemptions, privileges, deductions, and tolerated tax evasion. Preferential treatment, tax and otherwise, was clearly on the minds of New York State leaders at a more enlightened point in our state’s history. Consider Article 3, Section 17 of the New York State Constitution, which prohibits "granting to any person, association, firm or corporation an exemption of real or personal property." It also forbids "granting any person, association or individual any exclusive privilege, immunity, or franchise whatever." Then there is Article 16, Section 4 which states "there shall be no discrimination in the rates and method of taxation between such corporations and other corporations exercising substantially similar functions and engaged in substantially similar businesses within the state." But it doesn’t matter. Whenever the economy is good, more special tax deals are enacted as added revenues come in.  And whenever the economy is bad, rates are raised.  Sometimes they are rolled back, and sometimes not.

If you have been paying attention, you have read that I recommend changes to New York State’s Medicaid program to create incentives to reduce spending.  I propose similar changes in incentives to reduce spending in the state’s public schools outside New York City, partially balanced by increased spending in districts where spending is low, particularly New York City – but a smaller increase than proposed by the plaintiffs in the Campaign for Fiscal Equity case.   The tax surcharge-based disclosure of the cost of retiree health benefits, pensions, and debts I have suggested are intended to limit, in the long term, the hidden growth of employee compensation and the interest burden of excess debt.  One might conclude that my proposals would lead to lower taxes.  And in the long run, when state and local taxes are combined, that could be the case.  But not in the short run for state taxes alone.

New York State’s politicians have found a magic way to reward their supporters lavishly without everyone else noticing how much they are being hurt:  they borrow the money, and put off the cost to a future they don’t care about.  Every year the debt rises, and our future is diminished.  It may be that the state budget wouldn’t pass otherwise, because it is only by finding an unseen victim that everyone who matters can be more-or-less satisfied.  But New York’s debts have grown so large that at this point current New Yorkers aren’t much better off at the expense of the future, they are simply less worse off as a result of the past, as the result of borrowing more.  The bomb has been timed to go off during the next administration. 

From Wikipedia, the free encyclopedia:  a statistical artifact…where studies on the remaining population are fallaciously compared with the historic average despite the survivors having unusual properties.  Mostly, the unusual property in question is a track record of success.

It is a mantra among conservative commentators, when pushing privatization and other business provision of public services, that private businesses are more efficient than government agencies.  Let’s leave aside the fact that, based on my experience with the matter, one of the things private businesses do efficiently is rip off the taxpayer.  The presumption of private sector superiority is based on survivorship bias.  Certainly Enron, and the hundreds of thousands of other private companies that go out of business each year, are not more efficient and competent than the typical public agency.  While some such companies can do a lot of damage prior to bankruptcy, however, eventually that damage ends, leaving more efficient and competent businesses as the predominant type operating at any one time.  Private sector efficiency, therefore, is not a result of inherent competence, but of trial and error.  In the public sector, and in certain private industries that rely on public funds, on the other hand, organizations and their employees are presumed to have a right to their current situation, regardless of the value they produce for others.  Since most of the services and benefits produced by the public sector are necessities, rather than mere wants, the least competent and efficient organizations grow, using more resources over time, in an attempt to get the necessary work done.

As I wrote here whether the government is hiring public employees or companies, it faces what I call the “dilemma of discretion.” Allow public sector managers to hire and fire whoever they please, and the government runs the risk of having their brother-in-law – or the brother-in-law of a politico who is in a position to threaten them – hired, and good employees fired.  But bind those managers with all kinds of rules, to hire those who score highest on a civil service test and only fire an employee after a complicated series of steps, and you create a legalistic playground for those who seek to get paid to do a job without actually doing it.   The civil service system and bidding rules, by making personnel and contractor arrangements non-voluntary, eliminate reciprocity in the employment and contracting relationship. Once a test is passed or a contract is won, the employee or contractor owes as little as he can get away with. Management often seeks to do as little as possible for the employees in turn. The result is ongoing, petty conflict over rules, a poisonous work atmosphere, and low productivity and quality – the government is a lousy place to work, and many firms refuse to do business with it.

The public employee retirement system contains a slew of inequities that benefit the politically powerful – public employees with seniority – at the expense of everyone else, including more recently hired public employees, and the future.  These inequities and negative future consequences grow year-by-year, contract-by-contract, one act of the state legislature after another.

Public employees aren’t grateful for their rich pensions, if their unions are to be believed.   Instead they resent the modest pay that often comes with a public sector career, sometimes using it as a rationalization for modest performance.  And low pay and limited respect, combined with rich pensions, affects the type of worker the government can attract.  Along with increasingly cynical and disappointed idealists that signed on out some idea of “public service,” public agencies tend to attract only those who, from their first day of work, look forward to not working. 

The Campaign for Fiscal Equity suit, if it is to ever come of anything, will not only include more equitable funding for New York City’s schools (or at least higher, though still inequitable funding) but also increased “accountability” for those schools.  That is what the court decisions call for, and that seems reasonable, given that the city’s schools have been so bad for so long that the legal system finds that they violate the state constitution.  The usual way to create “accountability” in the public sector is to have a board or boards of people who don’t run an agency second guess it.  Implied is an acknowledgement that for our legislative elected officials, quality public services efficiently provided are not generally a priority.  After all, the New York City Council and New York State legislature control the purse strings and, in the latter case, the structure of the New York City schools.  They therefore have ultimate control over them, and have the ability to hold them accountable.  The City and State Comptrollers may audit their finances, and the New York State Department of Education and Board of Regents audit their performance.  And Mayor Bloomberg claimed that by putting him in charge, the city would gain accountability because he could be voted out if the schools didn’t work well.  But none of this is enough.  And yet another oversight board, appointed by the same politicians who have failed the city’s schools for 30 years, will not be enough either.