Larry Littlefield's blog
One of the big issues in the current Mayoral race is how high the raises will be for New York City’s unionized public employees. They have not agreed with the Bloomberg Administration on a contract for years, and despite the fact that most city residents have also faced falling wages relative to inflation, the income gains of those at the top had been strong enough that the wages and salaries of New York City’s local government employees fell from 7.1% of the total personal income of all city residents in FY 2004 to 6.6% of that income in FY 2011. In addition to the wage freeze, there are also fewer city workers producing fewer services, and more work contracted out to businesses rather than being done by public employees.
There is, of course, another side to this. Local government taxpayer pension contributions increased from about 0.8% of the personal income of city residents in FY 2004 to 2.0% of city residents’ income in FY 2011. Many city residents are probably now putting aside more for the retirement of public employees, in taxes, than they are putting aside for their own retirements. Taking salaries and wages and pension contributions combined, city residents were already paying more of their incomes for public employees in FY 2011 than they had been in FY 2004, and other benefits such as employer-funded health insurance – generally tabulated separately under “other” in this dataset – presumably shifted from those providing services to those no longer expected to do so as well. As a result, the city’s “direct” spending on most public services, not including pensions and debt service, fell somewhat as a share of NYC residents’ personal incomes from FY 2004 to F2011, despite a higher state and local tax burden. So did aid to the poor. These trends and others are examined in more detail here on “Saying the Unsaid in New York.”
The big job in tracking state and local government using data from the U.S. Census Bureau is making adjustments so that the comparisons between places and with the U.S. average are meaningful. One should to adjust, to the extent possible, for the varying structure of local government in different places, the division between state and local responsibilities, the amount of services contracted out, and the differences in the local cost of living and the ability of taxpayers to pay. One should also try to use comparable years, so the effects of booms and busts on the local tax base and social service costs can be excluded from the comparison. For a reasonable comparison with FY 2011, a year when most of the country was struggling to exit a recession but Wall Street and the rich were helped by cheap money and a related stock market –re-bubble, I have chosen the similar year of FY 2004.
Once all these adjustments are made, however, what is surprising is how slowly, and how little, things change. The big change in New York City is higher taxes, and higher taxpayer pension contributions. A spreadsheet with the data, and a discussion of what it shows on the revenue side, is here on “Saying the Unsaid in New York.” A subsequent post will cover expenditures.
I received an e-mail from the Census Bureau, and found that its tabulation of state and local government finance data for FY 2011 has been released sooner than I had expected. This will provide one more look before the Mayoral/City Council election at how New York City’s taxes and other revenues by type, spending by type and function, debts and pensions compare with the rest of New York State, New Jersey, and the national average, and how this has changed since the last pre-Bloomberg budget in FY 2002. All normalized, as best as possible, for the differences between state and local responsibilities in different places, and the relative cost of living and ability of taxpayers to pay. Just to get to the point where I have a spreadsheet, and can begin thinking about what it means and what to say about it, took me seven hours work this weekend. It would be nice of someone actually on the public payroll were to do this sort of work instead.
Before moving on to the main spreadsheet, I’ve done a quick compilation of the state and local government tax burden for the U.S, every state, New York City and the rest of New York State (by subtraction). The tax burden is measured as a share of the total personal income of all the residents of each state/area, which adjusts for both the relative cost of living and relative ability to pay. The spreadsheet and a discussion of what it shows are here on “Saying the Unsaid in New York.”
Politicians thrive on the combination of hypocrisy and amnesia, but some of us remember what was going on 20 years ago. Back than America’s economic problems, its social problems, its government fiscal problems, were being blamed exclusively on the dependent poor, particularly Blacks, Latinos, immigrants, and other poor people living in America’s older cities. That’s where all the money was going, we were told, in a decade-long propaganda campaign. And in a massive anti-welfare crusade, the programs and benefits for such people were cut across the country, and spending on them fell dramatically.
One of the arguments was fairness. What about the working poor? And sure enough, as many of the welfare dependent found jobs, money was shifted to the other American welfare system, the one for people who work. This includes the Earned Income Tax Credit (EITC), unemployment when you lose your job, food stamps if it doesn’t pay enough to get by, and disability insurance if your health or other problems mean (given the state of the labor market) no one wants to hire you. At one time this was thought of as a good thing. But now, as the country goes bankrupt as a result of the debts run up by Generation Greed and the promises it has made to itself but was unwilling to pay for, there is a new war on the working poor. An attempt to blame American’s economic, social and fiscal problems on, and find solutions that shift the sacrifices to, the sorts of people that bought into resentment of the dependent poor 20 years ago. Suckers.
I don’t allow myself the indulgence of saying I told you so. And frankly, showing that you were ignored as something you cared about was sold down the river is hardly satisfying, as the damage rolls on and on. But I am concerned that people won’t follow the link in my prior post. And with Eliot Spitzer back in the public’s eye (in our face?) I’m repeating the post from February 17th, 2008 on the decision that defined Eliot Spitzer as a public chief executive. Spitzer, the man who (like the rest of them) screwed the powerless young. This was written just before it happened. Last line: Make a stand here, and it will define you. Join the deal, and it will as well. The post follows.
It is here. For 50 years, powerful organized interests in collusion with New York’s elected officials have, in backroom deals without public discussion, without public disclosure, without any consideration of anyone else, walked off with large chunks of New York’s subsequently diminished future. The cost of these deals has generally been hidden for a year or two, and then described as the inevitable consequence of circumstances beyond anyone’s control. Or “uncontrollable expenses.” For example, at a time when most Americans, and most New Yorkers, have no retirement plan at all other than Social Security, public employee unions, again and again, have cut deals with elected officials for earlier retirement with richer pensions. The result, when the bills come due, has been higher taxes, diminished public services, diminished public benefits, and lower pay and benefits for future public employees. That is one of the reason we pay so much in taxes for police, yet starting police officers get $25,000 per year. The most recent deal would allow New York City’s teachers to work five fewer years, retire, and thus get paid to do nothing for five additional years. It has been sent to Governor Spitzer for his signature, after passing the legislature virtually overnight with virtually no dissent, just as everything like it passes. This, and not Joe Bruno’s helicopter rides, is the real moral issue, and the measure of Governor Eliot Spitzer’s values.
Although it is repetitive, let me set the stage again. Two groups of people have been getting richer: the executives who sit on each other’s boards and vote each other a rising share of private sector income, and retired public employees whose unions have cut political deals for retroactive pension increases. Everyone else is getting poorer. There is, in other words, the executive/financial class, the political/union class, and the serfs, with just about everyone in younger generations being left to be serfs as Generation Greed sells off the common future. This is not the result of anything like a free market, but rather is the result of political power and manipulation. The public employee unions and executives negotiate their pay and benefits in secret with their cronies, and then pass the bill on to powerless others who are made worse off, taxpayers/public service recipients and shareholders, with the cost generally deferred to a common future they don’t’ care about. Here in the U.S. they continue to take more and more, and express outrage at anyone who dares to question their entitlement, even in the wake of a Great Recession that made everyone else much worse off.
Might Eliot Spitzer be the man to put the spotlight on this? To ask questions, provide truthful information, call for fairness in allocating the losses in the future based on who has taken the lion’s share of the benefits in the sordid past? To let the serfs, younger generations, and younger and future public employees know exactly what has been done to them, and by (collectively) whom, and to demand fairness for ordinary people? The powerful interests seem to think so. Their passionate backing of Scott Stringer for Comptroller seems to have convinced Gatemouth they are right. Spitzer as the champion of the common person just living their lives, against those inside the room sucking the life out of our common institutions and common future? When you look back at Spitzer’s tenure as Governor, you see a different reality. A man whose primary concern is the greater glory of Eliot Spitzer.
Politics in New York is driven by two groups of people. Producers of public services, the public employee unions and contractors, who are always looking to provide less in exchange for more. And wealthy people and interests who do not require public services themselves, and do not want to pay for others to have them. The wealthy dominate the federal government, using it to profit at the expense of the rest of us, but the public employee unions and contractors dominate New York State government, using the power of the state legislature to cheat the less well off and the common future. That’s why we have the highest state and local tax burden in the country, but also have declining public services.
The state’s politicians don’t want to admit, to us or even themselves, that they are cheating less powerful ordinary people to benefit the interests that back them. So they seek to separate in time the sacrifices they impose from the deals they do, postponing the pain to a future they don’t care about, when they can lie and claim that it is “due to circumstances beyond our control.” And they seek with rage and desperation to ensure that the consequences of their deals and favors, for the ordinary people and the future, are kept quiet. That is why the special interests try so hard to keep control of the Office of the Comptroller, city and state. Because it is the purported job of those offices to tell the truth, loudly and passionately, and defend the future in order to force elected officials to admit, or at least consider, the consequences of their actions. Neither of the current candidates for New York City Comptroller is likely to do. Based on what Scott Stringer has done and more importantly has not done, and Eliot Spitzer has done and has not done, I fear the former is just another Albany legislator sent to the Comptroller’s office to cover things up, and the latter is a megalomaniac.
High local spending on health and welfare functions has long differentiated New York City from local governments in the suburbs and elsewhere in the United States. Much of that money is not paid for by city taxpayers, but merely passes through the city’s after being collected by the federal and state governments, which also set the rules. There are huge issues and possibly huge changes in health care finance, but most of these involve the federal and state governments, not the city and not the Mayor.
Even leaving aside required local contributions to New York State’s Medicaid program and the Health and Hospitals Corporation, which I discussed in the initial post in this series, New York City’s health and social services infrastructure is huge. As proposed for FY 2014, the city’s Administration for Children’s Services, Department of Homeless Services, Department of Health and Mental Hygene, and Department of Social Services (excluding welfare and Medicaid payments) combined are expected to spend $7.9 billion. Of this amount, less than one-third is to be spent on city personnel, with the rest going to health and social service contractors, generally in the non-profit sectors. Given that we have just been through a national economic calamity, and given that the City of New York is facing an ongoing fiscal crisis, one might expect that spending on programs for the poor would have increased strongly. But did it?
This post previously appeared on "Saying the Unsaid In New York." The data referenced is in a spreadsheet attached to this post.
New York City relies on its infrastructure for its prosperity and quality of life, and the deterioration of that infrastructure in the 1970s is one of the factors in the city’s near-death experience. The city borrowed so much money, in the Lindsay and Beame Administrations and before, for infrastructure and for other things, that by the time the fiscal crisis came around debt service was soaking up all the money, leaving no room for maintenance. It was a terrible legacy for that generation of city leaders to leave to those who followed, and the city has yet to fully recover from it. But this generation of city leaders, including the current Mayor and those running to replace him, may have repeated it. The state legislature, with regard to the MTA, almost certainly has. And while painful sacrifices would be needed to avoid a repeat of New York’s 1970s fate, that is not what any of the candidates running in New York’s rare actual elections (the one for Mayor) is suggesting. They are suggesting lots of goodies will follow if they are elected, almost none of which involve city infrastructure.
This post appeared previously on "Saying the Unsaid in New York." While the public schools account for the highest total amount of New York City spending overall, with health and social services coming in second, a substantial share of the funding for those services comes from the federal and state governments, not city taxes and fees. Of the $50.7 billion in “city funds” in the proposed FY 2014 budget, according to the “Budget Summary” document, the four so-called uniformed agencies – police, fire, corrections, and sanitation, account for $16.8 billion. The Department of Education accounts for $13.9 billion, with $10.6 billion for the health and welfare agencies and $9.4 billion for everything else put together.
While the Department of Education has been favored at the expense of other public services in this fiscal/pension/debt crisis, the uniformed agencies have been favored in virtually every crisis – the latest being no exception. While inflation will have increased 11.9% from FY 2008 to FY 2014 (and most people’s wages going up by far less), total city spending will have gone up 20.7% under the FY 2014 budget proposal. Spending on the four uniformed agencies combined will have gone up even more – by 26.9%, with much of that increase having already happened. Total New York City personal services spending is projected to have increased 11.8% from FY 2008 to FY 2014, or about the rate of inflation. The projected increase for the four uniformed agencies combined is 22.3%, or about double, including 26.0% for the NYPD. And yet the head of the Patrolmen’s Benevolent Association, the Uniformed Firefighters’ Association, and the Uniformed Sanitationmen’s Association show up at City Council hearings each year to tell New Yorkers they deserve less protection, less clean and passable streets, less work overall unless they get even more money. Why do they make such claims? Unless you are reading my posts for the first time, you know why.
This post appeared previously on "Saying the Unsaid in New York." During the Bloomberg Administration, no public service has received a greater increase in funding, received more attention, and been the source of more conflict than the New York City public schools. As I noted in this post with spreadsheet attached, funding for the schools increased enormously from FY 2002, the last pre-Bloomberg budget, to FY 2008, just before the recession fully hit. That funding had also increased enormously from FY 1997, when the city’s share of state aid was at a low, to FY 2002 thanks to pressure from the Campaign for Fiscal Equity Lawsuit. As a result the city’s schools, which had historically been underfunded, were highly funded on a per-student basis in FY2008 – and very highly funded if one looked at spending on instructional employees alone.
Since the start of the recession city spending has continued to grow faster than inflation, as discussed in the prior post. Total spending by the Department of Education increased more than overall city spending during the FY 2008 to FY 2011 period, and less from FY 2011 to FY 2014, due mostly to the influence of the federal stimulus package and its expiration. For the entire FY 2008 to FY 2014 period, if the Mayor’s budget proposal were adopted, overall city spending will have increased 20.7%, and inflation will have gone up 11.9%, but Department of Education spending will have grown by 23.6%. More than average. Personal Services spending, which excludes the fast growing Medicaid and debt service categories, will have gone up 11.8% overall, slightly less than inflation, and 12.1% for the Department of Education, slightly more. But wages and salaries at the Department of Education, which affects how many teachers and other workers may be hired and how much they may be paid, would have actually fallen 2.5% from FY 2008 to FY 2014. So why is that?
I wrote a series of posts on the New York City budget last February, at a time when Room Eight was not working. Only one could be posted on this site at all. With the new budget set to take effect, and with candidates for Mayor publicly promising us all the extras we are going to get for nothing, while quietly negotiating how much less we are going to get for how much more, I am going to repeat them.
Since the financial crisis morphed into the Great Recession in 2008, Americans have been told to pay more for government, accept less, or both. That has been true in New York City as well, with ongoing service cuts in every budget despite a 7.0% property tax increase, a state income tax increase, and a new MTA tax on all workers (but not the retired or investment income). Along with fare increases, toll increases, and other increases. The recession, as officially measured, is long over, and New York City’s private employment is not only higher than it had been before the recession started, but also probably reached a historic high in 2012, finally surpassing the level of 1969. And yet New Yorkers are still being told to accept less and/or pay more to the government. This post and those after are about the reasons why.
The Bonus Rich and The Years in Retirement Rich: The Arrogance of Power is Unchallenged Here, But Challenged Elsewhere
Two groups of people have been getting richer: the executives who sit on each other’s boards and vote each other a rising share of private sector income, and retired public employees whose unions have cut political deals for retroactive pension increases. Everyone else is getting poorer. There is, in other words, the executive/financial class, the political/union class, and the serfs.
The pay and benefits of the serfs is determined in negotiations with people who have an interest in keeping them as low as possible, either to keep more money for themselves or to be in a better position to offer better value to their customers. Everyone wants to get more for less, whether they are shopping for labor or as consumers, but in the end these relationships are voluntary, so an equitable agreement has to be reached. But the public employee unions and executives negotiate their pay and benefits in secret with their cronies, and then pass the bill on to powerless others who are made worse off, taxpayers/public service recipients and shareholders. Here in the U.S. they continue to take more and more, and express outrage at anyone who dares to question their entitlement, even in the wake of a Great Recession that made everyone else much worse off. But things are different elsewhere. And that may be instructive.
The U.S. Census Bureau has released its public education finance data for FY 2011, and I have once again downloaded and compiled it. That year New York City spent $22,517 per student, somewhat lower than the average of $23,382 for the Downstate Suburbs but far more than the $17,440 for New Jersey, $18,945 for Upstate New York, and $12,367 for the U.S. as a whole. As usual I have adjusted some of these figures for the higher average private sector wage and cost of living in some locations, notably Downstate New York and New Jersey. This reduces the NYC figure to $17,548 per child, still 41.9% higher than the U.S. average but below the average for Upstate New York.
New York City’s “non-instructional” spending has always been very low compared with other areas. In FY 2011 the city’s “instructional” spending was $11,791 per student with adjustment, above the adjusted averages of $11,258 for the Downstate Suburbs and $7,895 for New Jersey, above the average of $10,726 for Upstate New York, and 82.5% higher than the U.S. average of just $6,461. Examining instructional wages and benefits alone, New York City’s adjusted figure of $10,326 per student was 81.5% above the U.S. average – nearly double -- but slightly below the average for the Downstate Suburbs at $10,645. The city’s instructional wages and benefits per student had been above the average for the Downstate Suburbs the year before. The city remained well above the average for Upstate New York and New Jersey by this measure. Moreover, on an unadjusted, straight dollar basis the city spent $13,250 per student on instructional wages and benefits in FY 2011. That is $265,000 for every 20 students, or $159,000 for every twelve. Based on city budget documents, this figure has gone up considerably since. Additional commentary, and the spreadsheets, may be found on “Saying the Unsaid in New York.”
The Federal Reserve credit market debt data (Z1) was released for 2012, and I checked to see how the deleveraging was going. Back in 1952 the total of America’s debts, business and personal, federal, state and local, and financial was the equivalent of 135% of U.S. GDP. Despite the blandishments of the growing credit card industry and the “guns and butter” policies of the Great Society in the 1960s, that figure was just 168% of GDP in 1981, the year Ronald Reagan took over and the great national party began. The torch was passed to a new generation, as the “Greatest Generation” that had faced the depression and World War II was gradually replaced by the richest generations, those born between 1930 and 1955 or so, in control of our institutions. By 2009, as Barack Obama took office, total U.S. credit market debt had soared to 381% of GDP.
All the economic pain of the Great Recession, all the mortgage and credit card defaults, all the bankruptcies, all the diminished lives and expectations, only reduced total U.S. credit market debt to 359% of GDP in 2012, still more than double what it had been back in 1981. At that pace, it will take 38 more years for America’s debts to get back to where they were in 1981. But believe it or not, that’s the good news. If one were to exclude financial debt, the debt financial companies owe each other through instruments such as swaps and derivatives, the deleveraging has not yet begun. Total non-financial debts, public and private, were 253.9% of GDP in 2009 and 253.8% of GDP in 2011. In 2012, debt by this figure rose to 255.7% of GDP, which is perhaps the only reason our so-called economy more or less improved. An economy of people and governments spending money they don’t have, because businesses aren’t paying people as much as they want to sell to them. The spreadsheet and more commentary can be found on “Saying the Unsaid in New York.”