Tag: Albany

Some people have wondered about my indifference to the new schools chancellor. Perhaps because I’m not an educator myself, I don’t see any of the educational controversies being debated as being nearly as good or bad (depending on your point of view) as the financial disaster that is coming:

1) The end of federal stimulus money for education, this year.

2) The state budget crisis.

3) Past pension underfunding in the good years, based on an excessively optimistic (bubble level) rate of return assumption.

4) Fifteen years of retroactive pension enhancements, with a massively costly unfunded one for NYC teachers just two-plus years ago.

Other places are facing the same problems. But with lower tax burdens and lower debt levels than NYC. And our bills acre coming due right on schedule.

A recent article in The Economist magazine contained data that was so alarming I had to look into it further. According to the article, U.S. median household income adjusted for inflation fell 7.1% from 1999 to 2009. In several states, including Rustbelt Michigan, Indiana and Ohio and previously booming Sunbelt North Carolina and Georgia, the decrease was 12.9% to 21.3%. This, of course, was not a fair comparison, since 1999 was a near peak economic year and 2009 was a severe recession year. So I downloaded recent Census Bureau data – the readily available data was for the average of 2008 and 2009 – and compared it with data from another weak economic year, 2003 data from the Statistical Abstract of the United States. This is still not the right comparison, because the median household income in 2009 is apparently lower than the 2008 to 2009 average. But it does make for another interesting comparison. From 2003 to 2008/09, median household income in the U.S. was basically unchanged. But in New York State, it fell about 5 percent.

If you followed my compilation of 2007 Census of Governments data, you know I try to come up with reasonable comparisons by adjusting for the varying level of population and income in different places (by measuring government revenues and expenditures as a percent of personal income), and the differing structure of local government in different places (by aggregating data at the county level). Even so, comparisons aren’t perfect because some places have more government services than others. There are some places that have professional fire departments, while others rely on volunteers. There are some places with free municipal solid waste collection, some with contracted out solid waste collection, and some where people have to hire and pay for their own collection services. Some places have public water, sewer and transit, and others do not.

What every place in the United States has, however, is police and public education. This post uses data from the Governments Division of the U.S. Census Bureau to examine the relative level of spending on these services as a percent of personal income, with some discussion of Medicaid from other data sources mixed in.

I've often complained that everyone just talks about the state pension plans, while New York City pension plans, which cover local government employees working for the City of New York and New York City Transit, are ignored. Well NJ actuary and pension commentator has done all of us a favor, and calculated the bankruptcy data for major city pension plans on the same basis as his calculations for state plans. He finds the New York City pension system goes bust in 2023. Much to my surprise, that isn’t much different than the New York State plans. Which means that since existing workers can’t have their pensions cut (constitutionally) or their pension and health care contributions increased (politically), public services will be completely wiped out throughout the state with the nation’s highest tax burden at about the same time, in order to pay pensions without pension funds. (We may get a downpayment next fiscal year). And it doesn’t matter how much they cut the pensions, pay and benefits of future public employees, because they won’t be able to afford to hire any.

Is something that I know nothing about, and makes no sense to me. So I can’t help but imagine scenarios based on what I do know.

If there is one group of people who should be pleased with New Jersey Governor Christie's cancellation of the ARC Tunnel, it is Long Island homeowners and businesses. New Jersey Transit's ridership to Manhattan has been soaring and now, according to the Wall Street Journal, more people are riding MetroNorth in the Northern Suburbs than are riding the Long Island Railroad, as LIRR ridership falls. The article implies that poor LIRR service is to blame, and Long Islanders are choosing other ways to commute to Manhattan, while reverse ridership has boosted MetroNorth. But based on anecdotal evidence I suggest something different: those who hold high-wage jobs in Manhattan, which has the largest concentration of high wage jobs in the country, and want to live in the suburbs, are not choosing to live on Long Island. In fact, they are not even considering living on Long Island, unless they are from there. And the importance of this can be explained with a question: do people on Long Island want to sell their homes to those who are about as well off as they were at the same point in their life, someone better off, or someone worse off who can’t afford someplace better?

The latest Current Employment Survey release from the New York State Department of Labor shows that local elementary and secondary school employment in the portion of New York State outside New York City increased by 11,400 future pension recipients from September 2009 to September 2010. Public school spending, staffing and pay has been off the charts in the rest of the state for decades.

In the past that has been at the expense of New York City, where local elementary and secondary school employment fell by 100 in the most recent September to September period. But now NYC school funding is higher, if lower than in the rest of the state — but with most of the added funding going to the retired. So local government employment in the rest of the state excluding the public schools is being slashed instead, by 32,600 in the most recent September to September period. In New York City, it fell by 5,800. State agencies are being gutted too. So what else happened in New York City?

If anyone under 55 thinks the election changes anything for their future, they are pretty much wrong. The details may have changed. They may face even more reductions in their old age benefits, rather than even greater tax increases. They and their children may be living with a deteriorating, third world infrastructure rather than groaning under the weight of more debt. If they choose to work for the government, they may have their pay and benefits cut to fund the enriched retirement benefits of those who went before, while those who went before do less and less work because they are “underpaid.” But one thing has not changed.

Generation Greed will not be asked to give back anything. Neither will producers of public services, who have become richer and richer in total compensation compared with everyone else not on Wall Street. Governor-elect Cuomo proposes scaling back retirement benefits, but only for future public employees, while the public employee unions are allowed to provide worse services. The retired will continue to pay vastly lower taxes on the same income than workers, workers who will later face poverty without retirement in their own old age. Republicans in Congress say entitlements must be “reformed,” but those reforms cannot affect anyone age 55 or over – cannot affect the best paid generations in U.S. history. In fact, they owe their electoral success in part to promising to eliminate the modest restrictions on Medicare spending the Democrats put in place. Will anyone talk about this? Will anyone at least force them to admit it? Will those under age 55 finally wake up, or will Generation Greed be allowed to keep taking and taking – without paying?

When compiling data on Medicaid each year, there was one thing I couldn't explain. Why was New York's spending on the mentally ill and disabled so high? Unlike the seniors, they aren't a particularly powerful group. Is New York that generous, or are other states so unfeeling?

Evidently some journalists and the Feds were asking the same questions. And it appears to be a high cost jobs program. A sinecure. White welfare. The big bucks are going to former state institutions left over from de-institutionalization, where lots of politically powerful workers tend to few needy people. It's about the producer of public services interest, not public services or the needy. Again.

The two spreadsheets attached to this post have data on state and local taxes, as provided by the Governments Division of the U.S. Census Bureau. The “all state and county” spreadsheet has FY 2007 data for the U.S., each state, every county in New York State, and different areas of the state aggregated together. State taxes and local taxes, and major tax types, are identified separately. It prints as a four-page table. The “all years” spreadsheet has data on the total state and local tax burden for the U.S., New York City, the rest of New York State, New Jersey, Connecticut, Massachusetts, Illinois, California, Texas and North Carolina. The data is for FY 1972, and FY 1977 to FY 2008 excluding years when Census Bureau budget cuts meant no data was collected (FY 2001 and FY2003).

Per capita state and local tax data is sometimes used to identify Massachusetts, New Jersey and California as “high tax” states. But this ignores the higher average incomes in those states, and thus the higher cost of living, the greater ability to pay taxes, and the need to pay public employees more if they are to be paid as much as their neighbors doing similar work. This data presents taxes as a share of the personal income of U.S., state and area residents (as provided by the U.S. Bureau of Economic Analysis), and thus adjusts for the ability to pay and the cost of living. When the data is presented this way, two facts stand out. In reality New York is the only true “high tax” state. And deferring taxes, by running up debts, not funding pensions, and not maintaining infrastructure, is not the same as cutting them.