Larry Littlefield's blog
Suddenly newly elected Wisconsin Governor Scott Walker, someone few Americans had heard of two months ago, is the most controversial politician in the United States. The reason is that Governor Walker, in addition to demanding public employee givebacks to help solve a budget crisis, has also proposed limiting collective bargaining with unions to wages (New York State eliminated collective bargaining on pensions in the 1970s after soaring pension costs wrecked New York City), giving state residents the right to a referendum on wage increases if they exceed the inflation rate (a referendum is already required for any pension changes in San Francisco), no longer forcing public employees to pay union dues, and giving public employees the ability to de-unionize in an annual vote. The resulting controversy has been nationalized by the national press and politicians from both parties. Outside Wisconsin, the proposals are seen as an attempt to destroy public employee unions, and thus the Democratic Party those unions fund, leaving the wealthy the only remaining source of campaign funding in the country. So who is this right wing maniac, and why did Wisconsin vote for him?
Until the recent controversy, I hadn’t really heard of Scott Walker either. But in my job, I have written a quarterly report on economic, demographic and real estate trends in the Milwaukee Metropolitan Area, the state’s largest at 27.8% of total state population and its economic engine, for the past six years. And since Milwaukee County accounts for 60.3% of the Milwaukee MSA, I had heard of the Milwaukee County pension scandal – the scandal that made Scott Walker’s career and probably shaped his attitudes. Here is the backstory the mainstream media has failed to deliver.
I normally write about issues that are not being addressed in my view, but today I find that having already taken the time to download data, the Bloomberg Administration is already proposing what I was about to suggest. Ah well, might as well write the post anyway because my justifications are in addition to the Mayor’s.
Residents of the Northeast might think they have a reason to be smug about rising oil prices, since a relatively large share of them use mass transit or walk to work, and those who drive tend to do so for shorter distances. But the Northeast leads the nation in another form of oil dependence – on heating oil. As shown in the attached spreadsheet, the states where the highest share of homes use heating oil are along the Atlantic Coast, with the percentage falling from 75.6% in Maine to 7.1% in North Carolina as one travels from north to south. New York City and the rest of New York State are in the middle of this pack at 35.2% and 30.4%. The U.S. average is just 7.3%. Therefore, Northeastern homes share with U.S. drivers elsewhere the economic and national security vulnerabilities of dependence on foreign oil.
The rants keep rolling in, but I know what they are really about: Say on Pay. "Washington, D.C., Jan. 25, 2011 — The Securities and Exchange Commission today adopted rules concerning shareholder approval of executive compensation and 'golden parachute' compensation arrangements as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act."
The entitlement of these executives sounds very much like the public employee union leaders with their retroactive pension enhancements. The stock market bubble ended more than a decade ago, but some people still expect their pay -- or pensions -- to be based on an assumption of soaring stock prices. But don't dare question it. When will we reach the statute of limitations on executive claims that their excess pay packages are based on the creation of "shareholder value," and retroactive pension enhancements are "free" because stocks will go up more than 8.0% per year from the inflated levels of 2000?
At the risk of endlessly repeating myself, let me say again that politics in New York is dominated by two groups. Producers of public services, primarily the public employee unions but also representatives of contractors and the non-profiteers, who are always looking to charge more to provide less. And wealthy people and business interests that do not rely on public services and benefits themselves, and want to pay as little as possible for others to have them. Both sides will claim to speak for the beneficiaries of public services, and each will sometimes criticize and try to work against the interests of the other. But neither cares about public services, or has any sense of community with the people who use them. So no one is going to point out the sort of inconvenient truths noted in my series of posts on the proposed FY 2012 budget.
I speak not only of the so called “Public Advocate,” whose only job is to go around demanding something for nothing, and then imply that they could deliver it when they run for Mayor in a few years. I speak also of every member of the New York City Council. When the leaders of the public employees unions, or the New York Building Congress, or Local 1199 and the Greater New York Hospital Association, show up and at City Council budget hearings and demand more funding (without saying from where it should come), will anyone ask about the fairness of what they are providing and what they are charging for it? Will anyone bring up all the retroactive pension deals, the soaring cost of capital construction, the level of staffing here compared with elsewhere, etc.? The answer is no. Public services and benefits are what made a good life for the mass middle class possible. And they are being destroyed from the inside. Don’t let anyone’s propaganda tell you otherwise.
Since the documents I am using as the basis of this analysis of the New York City budget are in the “Budget Summary” documents, a large number of agencies have ended up lumped together as “Other,” and that is how they are listed in the spreadsheet attached to the first post in this series. The largest among the included agencies are the Department of Environmental Protection, which manages water and sewer infrastructure, the Department of Transportation, which manages the city’s streets, Parks, Libraries, Cultural Affairs, and Housing Preservation and Development. A host of smaller agencies that could best be described as the bureaucracy. The budget proposal for these agencies, and the city-funded portion of the City University, are discussed in this post.
One might expect that when times are tough in the private sector, and more and more people have more and more needs, New York City’s health and social services spending would increase. But in fact that often isn’t the case. In particular, the Administration for Children’s Services has a recurring cycle. It is usually cut first and deepest (vying with parks and infrastructure) in recession until, after a lag of a few years, a notorious case of child torture and death that the agency was too overwhelmed to stop hits the media. Then there is a “reform” and increase in funding. But one type of spending in this general category increases relentlessly – Medicaid spending on senior citizens. That spending, however, is by the State of New York, not the City of New York, a fact that affects how it is presented in the city budget.
One New York City service where arguments over the quality of work and the effect of the budget have involved real, rather than threatened, changes is the Department of Sanitation. In the fall, Sanitation Workers’ Union head Harry Nespoli warned that as a result of budget cuts, his members would not be able to clear the snow in a snowstorm. And sure enough, when New York City was hit by a major snowstorm the day after Christmas 2010, the snow was not cleared. So how much was the Department of Sanitation budget cut from FY 2008, before the onset of the recession, to FY 2011, the current fiscal year? Anyone want to guess?
While the initial conflict over the New York City budget has been about teacher layoffs, the Mayor has said that the one agency that must be protected is the Police Department, and one can expect the City Council to propose additional spending cuts on other things to prevent the firehouse closings in the proposed budget. As it is, the head of the Police Benevolent Association and the Unformed Firefighters Association have let it be known that since New Yorkers are cutting their budget, they can expect to be left to be victimized by criminals and die in fires more often. So how much less will we citizens be spending in exchange for this lower level of protection? The spreadsheet attached to this post gives an indication.
This post is an overview of spending on New York City’s Department of Education, based on New York City budget documents, with a spreadsheet provided as an attachment to this post. Residents of New York City and their parents are going to hear a great deal about budget cuts in the next few months, with the teacher layoffs and early point of controversy in the budget. But in fact total spending on the Department of Education increased 14.8% from FY 2008, before the start of the recession, to FY 2011, and its personal services spending increased 9.7%, while the consumer price index increased 4.3%. In exchange the number of teachers was reduced by 5,000. According to the FY 2012 budget proposal, total spending will once again increase by 4.5% and personal services spending will increase 2.2%. Still the number of teachers is proposed to be reduced by another 6,000. For a total teacher reduction of 13.8% -- in exchange for an increase of spending on personal services of 12.1% over the four years. So what happened?
The city budget has been released, and no doubt we are going to spend the next few months hearing about all the things the government is no longer going to do for us. Leaders of public employee unions, in particular, may be expected to talk about all the services the people of New York City no longer deserve because they aren’t paying enough. They will demand that we pay more. So you might expect, particularly given the devastation of the financial crisis, that New Yorkers are paying less. But it isn’t so.
The best way to see this is to look at the NYC “Budget Summary” documents from January 2008, with an estimate of FY 2008 spending on page 48, and the just released “Budget Summary” from February 2011, with an estimate of spending for this fiscal year (FY 2011) on page 49 and a proposal for FY 2012 on page 50. To his credit, since Mayor Bloomberg has taken office he has provided a summary of what each agency actually costs, including not only wages but also fringe benefits, contracts, pensions, debt service, and judgments and claims. Most of the pension and fringe benefit data had previously just been lumped together for all agencies combined. With the FY 2008 data, we can look back to Census Bureau data for FY2008, comparing NYC with staffing and pay by function with local governments elsewhere, and public school spending in more detail, to provide background for what has changed since. A discussion follows.
There was an interesting article in the Wall Street Journal this morning. Residents of affluent school districts in Kansas have sued to overturn state rules that limit their ability to raise taxes and increase school spending. “Kansas is one of a handful of states that limit how much money local school districts can raise from property taxes—a restriction to ensure a rough parity in spending across the state,” according to this source. “Lawyers for Kansas Republican Gov. Sam Brownback noted that parents can spend as much as they want on their children's education through private tutors. But courts in Kansas and across the U.S. have repeatedly held that states have an obligation to ensure equity—or at least, get as close as possible—at public schools…The state's position has drawn strong support from parents and school administrators in poor districts across Kansas.”
While only a handful of states have the same limitations as Kansas, most states have much more equal school financing than New York. In many southern states, in fact, school districts cover entire counties while in the Midwest states cover a much larger part of the school bill. Tabulations of school spending inequality that I have read, ironically, always have the true Blue States of the Northeast and West coasts with the most unequal school funding, and the Red States with the least. Perhaps that explains “liberal guilt.” The liberals are guilty, and in the past used to feel that way.
At this point, I almost feel that everyone who might ever take a look at Room Eight either knows what I would think about things, or is willfully not dealing with the issues I raise. But in case someone is merely dense, here once again is what I think of Mayor Bloomberg's pension proposals. Any difference in total compensation, the sum of wages, pensions and other benefits, between older and younger generations of public employees represents a social injustice – and/or a reduction in the future quality of public services. The only question is the nature of that injustice, who benefitted from it, who will lose (or has lost), and how. Therefore, any change in pension benefits for future employees should be offset, dollar for dollar, by higher cash pay for those employees, or higher pension contributions for existing employees.
That is not what is being proposed. What we have is yet another cycle of screw the newbie, flee to Florida, with older generations passing retroactive pension enhancements for themselves on their way out the door, and then hitting younger generations of public employees with lower wages and benefits and the New Yorkers who remain here with diminished public services at higher tax rates. Mayor Bloomberg claimed he was different. But he has exactly replicated the policies of New York’s machine pols, to the detriment of the city’s future, because that was and is the path of least resistance in the era of Generation Greed.
Amtrak is estimating it will take 10 years and $13.5 billion dollars to complete the New Jersey to New York tunnel it has just proposed, along with improvements between Newark and the tunnel entrance. This project would replace ARC, another tunnel originally expected to cost around $9 billion but with escalating costs due to expected overruns.
But according to Wikipedia, the Pennsylvania Railroad built the existing two track tunnel under the Hudson from New Jersey to New York City, plus the four tracks under the East River from the Sunnyside Yard to New York City, electrified the whole system, and built the original Penn Station from 1903 to 1910 for a fraction of the cost. "The total project cost to the Pennsylvania Railroad for the station and associated tunnels was $114 million (approximately $2.5 billion in 2007 dollars), according to an Interstate Commerce Commission report. (John A. Droege, Passenger Terminals and Trains. New York: McGraw-Hill, 1916) Without tunnel boring machines or any of the construction equipment that has been developed in the past 100 years. THAT IS THE PROBLEM. And by the way, I checked the inflation adjustment, and it is correct. Just $2.5 billion.
Why are municipalities that have higher median incomes, lower poverty rates or both proposed to get AIM aid from the State of New York, while the City of New York gets none? No, the excuse in the Cuomo budget presentation, that New York City doesn't need AIM because it has lots of taxes, doesn't cut it. Other places could have personal income taxes too. Yonkers, for one, has had such taxes. Is it because local governments in the rest of the state have added employees over 20 years, while New York City has reduced employees?
And given that the State of New York is broke, why can't Mayor Bloomberg ask that municipalities that do not have median incomes that are lower than New York City, or poverty rates that are higher, have their AIM aid eliminated too, to save money and reduce other cuts? Wouldn't that also be equitable, and not make the state's budget problems worse?
I try not to just cite articles, but here's one people in NY really ought to read. It is a commentary by Hawaii Governor Neil Abercrombie in a local newspaper. "Together we must face a fiscal deficit of $844 million over the next two years. Every possible solution is on the table for consideration. This includes improving our current tax system so that everyone pays their fair share."
To see who isn't paying their fair share according to the Governor, read the article.