Public Safety: 2017 Census of Governments Data

The need for different public services rises and falls over time, as demographic and social conditions change.  As this is being written, there is a great need for public Health and Hospital services.   When the Baby Boomers were school age, and when their children, the Millennials were at the same age, the demand was greatest for Elementary and Secondary Education.  The shift from rural America to the cities and then from the cities to the suburbs was associated with high spending on infrastructure.  The different lifestyle preferences and diminished income and wealth of Millennials, and global warming, ought to induce another infrastructure wave.  During World War II, military spending dominated government budgets.

The Baby Boomers drove another shift in public spending priorities, in addition to education.  As perhaps the most criminal generation in U.S. history their young adult years, from the 1960s to the early 1990s, saw a massive violent crime wave that led to a huge increase in spending on Police Protection and Corrections.  As they got older, a white collar crime wave followed.  Subsequent generations have been less likely to commit street crimes as young adults, less likely to be teenage or single parents, less likely to become divorced, less likely to drop out of school.  One might expect that spending on Police Protection and Corrections would have fallen sharply in the years since, per $1,000 of the personal income of those paying for it.

For many elected officials, public union leaders, and contractors, however, the purpose of government spending is to provide money for interest groups in exchange for political support, not to meet the needs of the people.  So spending on a particular function doesn’t always decline with need, let alone due to productivity gains. It fact it usually doesn’t.  That was the case for military spending after World War II, when President and former General Eisenhower warned of the military-industrial complex.   That was the case for public schools in New York City, where spending didn’t increase as the Millennials entered school age in the 1990s, and didn’t decrease as they exited in the 2010s.  How about spending on Police Protection and Correction?

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Aid to the Needy: 2017 Census of Governments Data

For the past 25 years, there has been a bi-partisan consensus in favor of unlimited spending of later-born generations’ future income to meet the ever-escalating perceived needs of those who perceive themselves to be needy.

Executive pay had soared during the late-1990s stock market bubble, as executives had claimed to have personally created “shareholder value.” Since then every time stock prices have gone down toward something like fair value, the federal government has intervened to keep them inflated, so huge bonuses based on “shareholder value” could continue, even as the overall economy rotted away.   Because that’s what rich and older asset holders needed and deserved.

Unionized public employees had already been promised retirement benefits far in excess of what other Americans were going to receive.  But in many locations, such as New York, these were repeatedly enriched, because such employees need to do less for other people and for a shorter period of time.  While retirement benefits for others were cut, because unionized public employees and retirees need lower prices for better goods and services, and that requires other workers to be lower paid.

The richest generations in U.S. history, those now over age 62, needed to be able to sell their houses to poorer later-born Americans for high prices in order to live in the style to which they had become accustomed. So every time the cost of housing threatened to fall to a level that reflected the lower incomes of later-born generations, the government intervened to keep prices high.

And since those over 62 and the rich expect to get benefits out of society but don’t want to pay for them, their taxes have been repeatedly cut, with lots of special deals for capital and retirement income and property taxes for seniors.  Even as spending on everything other than seniors, retired public employees, and bailouts for the rich and big businesses have gone down, both at the federal level and in states where seniors are a higher share of the voting population.

It has been an era of unlimited generosity for those who have enormous perceived needs, the cost to everyone else and the future and those who live in it be damned.   Massive income redistribution upward to the already better off that isn’t even allowed to be called what it is, so the entitled beneficiaries don’t have to feel bad about it.  But what about state and local government spending on people who are objectively worse off, those who were once thought of as the needy?  Well, that’s another thing entirely!

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Health Care: 2017 Census of Governments Data

Many New Yorkers were stunned when Mayor Bill DeBlasio announced that the New York City Health and Hospitals Corporation, which runs public hospitals in the city, rather than the legendary New York City Health Department, would take the lead on testing and contact tracing as the city attempts to emerge from the COVID-19 pandemic.

“It makes absolutely no sense to move a function that has been done well by a great health department for decades to an organization that does not have the legal, epidemiologic, administrative or technical experience to manage it,” said Dr. Tom Frieden, a former city health commissioner and former director of the Centers for Disease Control and Prevention.

Perhaps Mayor DeBlasio knows something that the Times and Dr. Frieden do not.  That when measured per $1,000 of the personal income of all city residents, the Department of Health doesn’t have as much funding as it did back when former Mayor Bloomberg was nagging us about our health. That is one of the findings of an analysis of state and local government Health, Hospitals and Medicaid Vendor Payment expenditures, and the jointly funded federal and state (and in NY local) government Medicaid program that is used to pay for most of them.

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State Government Higher Education Expenditures: 2017 Census of Governments Data

In FY 1977, U.S. state and local government institutions of higher education covered just 20.8% of their expenditures on education with tuition and fees.  That figure peaked at 39.2% in FY 2011, and was 35.0% in FY 2017.   On the other hand, fees and charges at auxiliary enterprises at public colleges and universities, including dormitories, food services, book stores, stadiums, camps and conferences, covered more than 100.0% of their costs more often then not up until FY 2004, interest on debts aside. Such enterprises still covered 92.1% of their costs in FY 2011, but covered just 77.0% of their costs in FY 2017.   And that was before the coronavirus ended the presence of students in on-campus housing, and admission revenues at sporting events.

That is just one of the findings from a tabulation of state and local government finances from the 2017 Census of Governments, along with similar data for prior years.  As noted in the prior post on elementary and secondary schools, local governments also operate community colleges in some states, including New York.  For the most part, however, higher education is a state government function.  While Medicaid, mostly paid to private sector health care providers, and elementary and secondary education, consisting of aid to local government schools, are a larger part of state budgets, public colleges and universities employ more actual state workers than any other government function.  A table, charts and a further discussion about public higher education follow.

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Local Government Education Expenditures: 2017 Census of Governments Data

In FY 1972, when a large number of Baby Boomers were still in school, U.S. elementary and secondary school expenditures equaled 4.59% of U.S. residents’ personal income.  That fell to a low of 3.69% of income in FY 1984, after the Boomers exited and enrollment shrunk.  The figure increased to a non-recession (recessions depress income) high of 4.51% of income in FY 2004, when a large share of the Millennials were in school, before falling to around 3.9% of income each year from FY 2014 to FY 2017, after they exited.

New York State, however, has diverged from the pattern.  In New York City elementary and secondary school expenditures were around 5.0% of personal income each year from FY 2013 to FY 2017, actually higher than the 4.3% of personal income in 2004.  The rest of NY State averaged 6.4% of income in FY 2004, but was only modestly lower at just under 6.0% of personal income from FY 2015 to FY 2017.  New York’s elementary and secondary school expenditures were already high, compared with the rest of the country, in FY 2004, but the gap has increased since – despite an economy that has favored NY State in general, and New York City in particular, increasing the personal income that spending is being divided by.

New York’s public school expenditures are now at an extreme, even as the city and state face recession.  Rising pension and retiree health care expenditures, as a result of a long series of retroactive pension increases for teachers, are one key reason.  A high level of public school employment, despite falling enrollment, with the schools used as a job program and source of dues revenues, is another.

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Overview of State and Local Government Expenditures: 2017 Census of Governments Data

In FY 2017, according to data from the Census of Governments, U.S. states directly spent, on average, $85.41 per $1,000 of the personal income of all U.S. residents, or $87.76 if unemployment insurance and worker compensation payments are included.   Spending by local governments equaled $110.85 per $1,000 of personal income.  This spending was funded by state and local taxes, charges for services, aid from the federal government, as described in the prior two posts, and money borrowed.  Taken together, state and local government spending equaled $198.71 per $1,000 of personal income, or 19.9% of the income (including fringe benefit income) of everyone living in the United States. That is about one dollar in five to/from the government, not including money the federal government directly spends rather than passes on to the states.

The State of New York directly spent $86.36 per $1,000 of the personal income of New York State residents’ personal income, or $89.28 including unemployment insurance and worker compensation payments.   Local governments in New York City spent $181.24 per $1,000 of city residents’ personal income, and local governments in the rest of New York State spent $129.20 per $1,000 or the income of people living there.   Assuming the burden of State of New York expenditures was distributed between the two areas in proportion to personal income, that is $270.52 per $1,000 of personal income spent for New York City, and $218.48 per $1,000 of personal income for the rest of the state.  Or 27.1% and 21.8% of personal income, respectively.

The rest of this post will summarize the government functions this money was spent on.   Posts on individual government functions, with comparisons over time and across the country, will follow.

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State and Local Government Revenues Other Than Taxes: 2017 Census of Governments Data

When many people think of government, the first thing they think of is taxes, the subject of the previous post in this series.  Taxes, however, account for only 47.3% of U.S. state government revenues, and 38.0% of local government revenues.

One reason is the role of the federal government.  Of the three levels of government, it collects the most in taxes, but it pays most of that money right back out again to individuals (Social Security), businesses and other organizations (Medicare), and as aid to states, and actually does very little directly other than national defense and the post office.  Some of the money paid to states is then passed on to local governments, along with substantial state aid.

In addition, both state and local governments organize some of their operations as enterprises that are funded, at least in part, by charges for services.  The utilities that run on or under public streets, in fact, are a mix of public and private-but-regulated enterprises, with the mix varying around the country.   So are higher education and hospitals. Finally, the Census Bureau collects data on various “miscellaneous revenues” — special assessments, the sale of excess property, interest earnings, fines and forfeits, rents, royalties, donations to the government, net lottery revenues, and the largest miscellaneous category of all, “not elsewhere classified.”  Most of these may be thought of as “enterprise revenues” as well.

It is these state and local government revenues other than taxes that are the subject of this post.

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