Infrastructure: Census Bureau State and Local Government Finance Data for FY 2004 and FY 2014

If there is one thing that virtually every public policy commentator and politician seems to believe, it is that more should be spent on infrastructure. And yet the direction of public policy has been in the exact opposite direction, with maintenance often unfunded or funded by debts that now soak up a large share of revenues dedicated to roads, bridges, airports, and transit, water and sewer systems. The trend has been at its worst in the Northeast. And as costs from the past, including pension funding and debt service, increased between FY 2004 and FY 2014, expenditures on the future – on the infrastructure – decreased when measured per $1,000 of personal income. It’s a trend that, according to anecdotal evidence, continues to this day, with consequences that continue to appear over time as the sold out future becomes the present.

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Uniformed Services: Census Bureau State and Local Government Finance Data for FY 2004 and FY 2014

The big revelation when former Mayor Bloomberg put all the costs for most big New York City agencies, including pensions and fringe benefits, on one page, and deducted federal and state aid to show city-funded expenditures, was how expensive the so-called uniformed services – police, fire, correction and sanitation –are for city taxpayers. While health and welfare and education cost as much and more overall, there is substantial federal and state funding for those services. In FY 2014, according to New York City’s February 2014 Financial Plan Budget Summary, the uniformed services cost $17.4 billion, 23.5% of the $73.8 billion in total spending by the City of New York. As for city funds, however, these services cost $16.5 billion, 31.5% of the $52.25 billion in total city costs.

Many other city services, moreover, are provided by private, often non-profit organizations, or other agencies such as the Metropolitan Transportation Authority. What is spent on these services in a given year is what they cost that year. The uniformed services and the public schools, on the other hand, have retirement benefits that are much richer than those of other city workers, let along private sector workers, and these benefits that can be gamed or suddenly increased by the state legislature. Thus we are actually still paying more today, and will pay still more tomorrow, for work provided by the uniformed services in FY 2014, as a result of pension spiking and retroactive pension increases. But how much did they cost at the time, how did that compare with FY 2004, and how does this compare with the national average, the rest of New York State, and other states? That is the subject of this post.

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Health Care and Aid to the Needy: Census Bureau State and Local Government Finance Data for FY 2004 and FY 2014

New York City was long known as America’s welfare capital, with a large dependent poor population and extensive services for them. But one doesn’t hear much about that anymore. New York State has also had the highest Medicaid spending in the United States, but one doesn’t hear much about that anymore either. The data shows New York still spends more on aid to the needy than most other states, as a share of its residents’ personal income, but the gap between New York and the rest of the country closed between FY 2004 and FY 2014. As the gap closed, aid from the federal government to New York shifted to other places. Today, moreover, most of this “social” spending is on health care, and thus on older people, not on those with lower incomes.   A discussion of these trends, with tables and charts, follows.

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Education: Census Bureau Government Finances Data for FY 2004 and FY 2014

For the United States and most parts of it, the decade from FY 2004 to FY 2014 saw soaring public employee retirement costs, and weak growth for taxpayer income. In response to these trends state government assistance for public elementary and secondary schools fell relative to the income of all state residents, and total spending on public schools fell as a share of everyone’s income as well. But there was an offsetting factor. School enrollment fell as a share of the total population, and in many cases in absolute numbers, as the very large “Baby Boom Echo (Gen Y, Millennials) Generation exited school with smaller generations behind them.

At the same time, and perhaps driven by the same demographic shifts, state and local government spending on public higher education increased when measured per $1,000 of everyone’s personal income. But how did different states compare, and how was per-student elementary and secondary school spending affected? That is the subject of this post.

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Overview of State and Local Government Expenditures: FY 2014 vs. FY 2004, Census Bureau Data

State and local government public services and benefits are getting squeezed. There is less money available for them because of rising costs from the past, notably under-funded and retroactively enhanced pensions for public employees who are already retired or soon to retire. In some places, as noted in the prior post on taxes, this squeeze has been exacerbated by falling taxes as a percent of personal income. The total wages and salaries of those public employees who are still working are falling as a percent of taxpayer personal income just about everywhere, as is spending on services for the needy (other than those associated with health care). And the anecdotal evidence suggests that since FY 2014, the latest year for which data is available, the squeeze has gotten worse. Despite the third biggest stock bubble in history by one measure,

https://www.bloomberg.com/view/articles/2017-03-03/what-to-make-of-these-twice-in-history-s-p-500-valuations

which makes public employee pensions seem better funded than the really are, years of zero percent interest rates, which reduce state and local government interest costs, and a long-running economic upcycle, which has boosted tax revenues.

http://www.eastbaytimes.com/2017/03/03/borenstein-despite-booming-economy-oakland-finances-deteriorate/

Whatever this data shows, things have gotten worse since in most of the U.S.

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State and Local Government Revenues Other Than Taxes: Census Bureau Data for FY 2004 and FY 2014

As noted in my prior post on tax revenues New York State has more of them, at both the state and local level, as a percentage of its residents’ personal income than just about anyplace else. With a particularly high local tax burden in New York City. And New York’s state and local government tax revenues increased as a percent of its residents’ personal income from FY 2004 to FY 2014.

https://larrylittlefield.wordpress.com/2017/02/26/state-and-local-taxes-in-fy-2004-and-2014-census-bureau-data/

In this post, the data shows that New York’s state and local government revenues other than taxes are also higher than the U.S. average, albeit not to the same extent. New York City’s local government charges for services, and its miscellaneous revenues, increased as a share of its residents’ from FY 2004 to FY 2014, while falling in the rest of the state. The State of New York’s federal aid revenues fell as a percent of state residents’ income during those years, and New York City’s state aid revenues fell as a share of city residents’ income as well. Demographic trends, with school enrollment falling, New York City becoming better off relative to the rest of the state, and New York State becoming better off relative to the rest of the country, may explain this.

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State and Local Taxes in FY 2004 and 2014: Census Bureau Data

When measured as a percent of state residents’ personal income, the combined state and local government tax burden of New York State and, in particular, New York City is uniquely high compared with other states. Reputedly high-tax states such as Massachusetts, New Jersey, Connecticut and California aren’t even close. The only states where the tax burden is higher than, or even close to, New York are large, low-population states with extensive tax revenues from oil, gas, or other mineral production: Alaska, Wyoming, and more recently North Dakota, where a “fracking” boom has given way to bust. In these states residents and other businesses pay little in taxes – in Alaska they actually get checks. The Census Bureau data for FY 2004 to FY 2014 shows New York’s tax burden rising further, even as the average U.S. state and local tax burden remained close to 10 percent of personal income, about where it has been for decades. And yet all one hears in New York’s media is demands for still higher funding, and higher taxes, and higher staffing, and higher pay, and richer pensions made by New York’s public employee unions and the politicians they control, particularly in those in the New York State Legislature.

While the U.S. average is stable, the data shows a divergence among states. In many other states with above average state and local tax burdens in FY 2004, those burdens also increased further by FY 2014. And in many states where the tax burden was already below average in FY 2004 it fell even further, even in the face of soaring pension costs that have pressured state and local government budgets throughout the country. In several Midwestern states – Wisconsin, Ohio, and Michigan – the tax burden fell from somewhat above average as a percent of income to average or somewhat below, despite weak per capita income growth. In these aging states, public spending on seniors is rising, not only through federal programs that our current President has promised to protect (and his party has promised to protect for current beneficiaries but not younger generations), but also for the pensions and benefits of retired public employees. So the shrinking tax burden just adds to the downward pressure on other state and local government services, which benefit other age groups.   What do those three states, plus Pennsylvania which has a below average tax burden despite soaring pension costs, have in common? A spreadsheets, further commentary and charts follow.

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