Trends in NYC Education Finance: Same Victims New Predator Part 1
In this post from last year, I provided a historical overview of the Campaign for Fiscal Equity lawsuit, and referenced some long-term data without providing it in spreadsheets or describing it in detail. Then I provided data for FY 2002 to FY 2008, the latest available at the time, to examine what had changed during the Bloomberg/Mayoral Control era. To change things up, this time I’ll provide the long term data and describe it, and compare the FY 2009 revenue and expenditures per student data in my previous post with the same data for FY 1996. Finally, I’ll use NYC budget documents to compare FY 2009 to the present and the budget proposal for FY 2012.
What emerges in the data is the following story.
The New York City public schools were de-funded in the 1970s to pay for the massive debts and pension enrichments of the administration of Mayor Lindsay, with the damage compounded by a state aid formula that robbed the city’s children and the relative shrinkage of he city’s tax base as the middle class moved to the suburbs and businesses left the Northeast.
Gradually, the city’s economy recovered, its debts were paid, and the rich Lindsay pensions were paid off, with more affordable pensions promised to those hired later. But in the mid-1990s, as the city faced another devastating recession (much worse here that the following two) the city’s schools were hit even harder by state aid formulas, to spare higher spending districts in the rest of the state. That is the point when the Campaign for Fiscal Equity lawsuit was launched.
In the 2000s, the school aid formulas were made more equitable, and the city’s economy recovered further. But rising debts and a series of pension deals – with the Lindsay pensions re-created for teachers – once gain drained money out of the classroom. The city’s children have not yet begun to pay for this, and will be paying for decades. Over and over again, it seems, whenever more resources have promised for the city’s children, the money has been seized before it arrived.
To start the discussion, open the spreadsheet titled “Census NYC Debts and Pensions,” which is a distillation of the data in the spreadsheet attached to this post, and print it. The data, going back as far as I could get it, showed that New York City’s debts had soared to 37.6% of city residents’ personal income in FY 1977, far above the U.S. average, as a result of the city deferring costs and advancing revenues in the Lindsay and Beame administrations. As a result the city had to stop maintaining its infrastructure and cut its maintenance, which among other things left virtually all its school buildings (and subways, bridges, roads, etc.) in disrepair. It also prevented the city’s infrastructure from being improved and expanded even as capital spending subsequently recovered, so great was the repair backlog.
Also note that in the U.S. as a whole, over the decades taxpayers have typically contributed to public employee pension funds at 8.0% to 12.0% of payroll, with the employees themselves contributing at 4.0% to 5.0%. In FY 1967 (for which I don’t have U.S. data) New York City’s taxpayer pension contributions were at 15.5% of payroll, and the employees themselves contributed 4.5%. As a result of the rich “Tier I “ pension deals passed in 1968, however, the pension contributions by New York City’s public employees plunged (except in years when they kicked in extra in exchange for being allowed to retire years earlier as part of “pension incentives”) and the employees were allowed to retire much earlier and collect much longer.
After a period of not funding the pensions adequately, presumably because the pension deal retroactively handed out in 1968 was described as costing nothing, New York City taxpayer pension contributions soared to a peak of 28.6% of payroll in 1982. With more money going to the retired, the city could afford fewer workers on the job, including fewer and lower paid teachers.
Note that in his recent report, NYC Comptroller Liu claims that after several years of even higher pension costs, the city’s pension contribution levels will drop to the “normal” level of the early 1980s. But at that “normal” level, the NYC public schools were awful, its class sizes were huge, and its newly hired teachers were the lowest paid in the metro area – to offset the enrichment of those who had left the suburbs where they lived and moved on to Florida. And compared with the national average, and most years for NYC, let alone the 401K matches private sector workers receive if they are lucky, the level of NYC taxpayer pension contributions in the early 1980s is not “normal.”
That wasn’t all. Open and print the spreadsheet titled “NYC School Aid Long Term V4.” Prior to the 1970s, New York City had always been a relatively well off part of New York State. For example in the 1970 census, which was the first time Census Bureau measured poverty (based on 1969 income), the city’s poverty rate was barely higher than the national average. After the 1970s and through today the city’s poverty rate is much higher. But back then, as a relatively well off area of New York State, the city received less than its pro-rate shara of state school aid. With young families moving to the suburbs in the post-WWII period, the city accounted for just 32.9% of the state’s public school students in FY 1970, and it received just 27.3% of New York State school aid. But the city still accounted for over 40% of state personal income tax collections. In today’s dollars, based on what city residents were kicking in and its school children were getting out, the city contributed a net $2.1 billion to schools elsewhere in FY 1971.
This might have been considered fair at the time. But in the 1970s, as the city’s economy collapsed and its debt and pension costs soared, the city continued to receive a smaller share of New York State school aid than its share of the state’s public school students. Although city residents’ share of state income tax payments fell as the middle class moved away, moreover, it was still high enough relative to its share of state school aid that the city still net contributed $hundreds of millions in today’s money to school districts elsewhere in the state each year, despite having a concentration of disadvantaged students. Even as New York City’s own education system featured increasingly underpaid teachers with large class sizes and without teaching materials in decrepit buildings.
The low point would come in the mid- to late-1990s, in the first budget of ex-Governor George Pataki, Speaker Sheldon Silver, and State Senate Majority Leader Joe Bruno. In FY 1996, the city accounted for 37.2% of New York State’s public school students, and city residents accounted for 37.4% of state income tax payments. But the state slashed the city’s share of state school aid to just 29.6% -- cutting school aid to the city while increasing it to the rest of the state. As part of the deal, and presumably to appease the United Federation of Teachers, a pension incentive was passed allowing teachers to retire years earlier without contributing any additional money. That deal was claimed to save money, but in reality it just deferred costs, because no additional pension contributions were made to offset the higher costs. We are paying for it to this day.
Although teachers weren’t laid off, the number of teachers actually working fell as more retired and class sizes soared, and teaching supplies were absent. As the quality teachers hired back when the city’s wages were competitive retired, far less motivated and capable teachers took their place. This policy was implemented just as the “baby boom echo” generation was flooding into the nation’s schools and as school enrollments were rising. Any progress the city’s schools had made in recovering from the 1970s was reversed. It was a great deal for those cashing in and moving away, and for school districts elsewhere in the state, which got more state aid even as total state aid was cut. It was a lousy deal for the city’s education system.
Now let’s look at per student spending by category in FY 1996 in the spreadsheet titled “Census Education Finance FY96 and FY09 NYC Etc.” New York City’s state aid per student, adjusted for the higher cost of living here, was not only much lower at $3,507 than in Upstate New York at $6,082 (or New Jersey at $4,055), but also just slightly higher than the in affluent Downstate Suburbs at $3,000. Even with 1 million people on welfare, sky high unemployment, and the loss of 300,000 private sector jobs at the time. Back then, as a result of the STAR program I had expected the city’s school aid per student to fall below the Downstate Suburban average, but a turnaround the next year – after enough damage to the NYC schools had been done and a downward spiral set off – prevented this. Still, the city receive just slightly more state aid per student than the average for the Downstate Suburbs for several years.
In FY 1996, adjusted for the cost of living (and for inflation into $2009), the city’s total revenues per student at $8,330 were far below the Downstate Suburb, Upstate New York and New Jersey averages – and below the U.S. average at $9,135. But the city’s total education expenditures per student at $9,275 were slightly above the U.S. average at $9,145. Essentially, to make up for the diversion of tax dollars, including some of those collected in NYC, to the rest of the state, the state told the city, or the city decided, to borrow. That trick would be repeated in each subsequent recession, and between recessions the debts were never paid off. Meanwhile, with an increase in state school aid rather than a decrease that year, per student public school spending in the Downstate Suburbs and Upstate New York was really high at $12,464 (adjusted for the higher downstate cost of living) and $12,319.
That pattern – per student spending in Upstate New York and the Downstate Suburbs at about the same level and far above NYC – would continue for years. In FY 1996, total expenditures per student – with a cost of living adjustment for NYC and the Downstate Suburbs – was 1.4% above the U.S. average in NYC, 36.3% above average in the Downstate Suburbs, 34.7% above average in Upstate New York, and 18.7% above average in New Jersey. The comparable figures for FY 2009 are 36.5% above the U.S. average in NYC, 35.3% above average in the Downstate Suburbs, 44.3% above average in Upstate New York, and 23.0% above average in New Jersey.
Note that in the school aid table and chart NYC’s share of state school aid (including STAR but not including the now-defunct Son of STAR check program) slightly exceeded the city’s share of public school students starting in FY 2006. Which is what one would expect given the city’s concentration of poor children. That is a big turnaround from FY 1996. Even so, New York City would still have been better off in the late 2000s if there had been no state school aid at all, and everyone paid for their own schools. Because the city had become richer relative to the rest of the state, and its residents’ share of state income taxes paid had soared.
New York State’s release of state income tax receipts by place of residents really, really lags, so the most recent data is not that recent. But we can say that the “Reverse Robin Hood” amount, the funds presumably redistributed from the city’s schools to the rest of the state, was higher in FY 2006 and 2007 than it had been since before the city’s massive economic decline in the 1970s. In recent years, one could argue that this transfer of well being represents the city is being fair to the rest of the state, rather than the rest of the state cheating New York City’s children, because of the city’s growing relative affluence. NYC’s children had been robbed of funding in the past, but lack of funding is not the problem anymore.
Returning to the FY 1996 revenues and expenditures per student table, one can see in that New York City’s instructional wages and salaries adjusted for the cost of living, at $3,963 per student, were above the national average of $3,563, though well below the Downstate Suburbs at $5,271, Upstate New York at $5,469, and New Jersey at $4,287. One might be surprised that NYC was above the U.S. average, if one remembers class sizes (35 in the kindergarten at the school down the street from me) and difficultly finding qualified applicants for teaching jobs in the city at the time.
The answer, in my opinion based on what I read, is that the United Federation of Teachers was not politically powerless during the era the city’s schools were de-funded. They were able to insist on a “you will pretend to work and we will pretend to pay you” deal from a series of Mayors, with fewer obligations in every contract. I recall reading at the time that NYC teachers spent less time with students than teachers in any other school district studied. And being told by a teacher that every teacher’s goal was to get out of the classroom, to a non-teaching seniority post. Forget the idea that in exchange for richer pensions, public employees do a great job for less pay. What you get generally corresponds with cash pay, and with NYC cash pay per student far lower than the rest of the metro area, the teachers at the time delivered large class sizes, less qualified applicants, and less work.
Surprisingly, New York City’s instructional employee benefits (adjusted downward for the cost of living) at $1,262 per student, while 52.2% higher than the U.S. average, was below the averages for Upstate New York and the Downstate Suburbs. My guess is that in response to the recession, the city had deferred the pension contributions it should have been making at the time. I know for a fact that the Giuliani Administration did so in FY 2000 and FY 2001. That would come back to haunt the city’s children later. As would the fact that money was being set aside for a pension at age 62 after 30 years of work with no inflation adjustment and a 3.0% employee contribution, but after later deals some teachers would later walk out the door at age 55 after 25 years of work with an inflation adjustment and a 3.0% contribution after just 10 years, with perhaps a 1.85% contribution for a few years after that. What wasn’t paid for will be paid dearly for going forward.
New York City’s instructional spending other than for personnel, at $309 per student, was far below the U.S. average of $501 in FY 1996. I can tell you firsthand that teachers were given little if anything in teaching supplies that year. If was in fact common from the 1970s fiscal crisis through the early 2000s for dedicated NYC teachers (ie. scabs) to have to purchase their own materials out of their own salaries, while the students of other teachers just did without. I was surprised to notice that instructional spending other than personnel was about as low in other parts of NY State in FY 1996. Of course in other school districts, that might have been a one-year, recession-related phenomenon, and the students in other districts may have had relatively up to date textbooks as a result.
Throughout the 1990s, I continued to read about how much the NYC schools wasted outside the classroom. Then I would look at the numbers, and see this was nonsense (not an usual situation). It turns out that accusation was just a political/media rationalization for cheating NYC children on overall funding. Adjusted for the cost of living, the city’s non-instructional spending was $2,169 per student in FY 1996, 28.1% below the U.S. average and a little more than half the average for the Downstate Suburbs.
In addition to not having teaching materials, NYC teachers received one-tenth the U.S. average in spending on instructional staff support. At the time, NYC spending on “Operation and Maintenance of Plant” was also slightly below the U.S. average, though well below the rest of the state. Although the custodians also had a “you will pretend to work” deal, based on expose’s I recall from the time. General Administration, as well, was below the U.S. average, despite complaints about a massive bureaucracy at 110 Livingston Street. Indeed, the only category of non-instructional expenditures per student for which the city was above the U.S. average after adjustment for the cost of living was school transportation – even though most NYC children walked to school. The school bus industry benefitted from automatically renewed, no-bid contracts (and made lots of campaign contributions) at the time (not sure about now).
I had intended for this to be the last post on this subject, but it is already long and I don’t have time to finish it. In a later post, I’ll use Census Bureau data to compare FY 1996 to FY 2009 (one can already see the result in the spreadsheet attached to this post) to see where the city added money when school funding increased, and use NYC budget documents to show what has changed from FY 2009 to FY 2011, and what is proposed to happen next year.
Post new comment