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.

Just a reminder, this is one of a series of posts on state and local government finances as revealed by data collected by the Governments Division of the U.S. Census Bureau. The first post, with a discussion of where the data comes from and how I tabulated it, and a spreadsheet with data in all categories for all 50 states plus DC, is here.

https://larrylittlefield.wordpress.com/2017/02/20/state-and-local-government-finance-census-bureau-data-for-fy2014-compared-with-fy-2004/

This is the second post on government revenues, while future posts will focus on expenditures. A spreadsheet with a table of data for “Other Revenues” for all 50 states in FY 2014, with New York City and the Rest of New York separately for local government, the charts used in this post, and some other data, is here.

other-revenues-all-state

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In FY 2014 tax revenues accounted for only 36.9% of U.S. local government revenues, with property taxes alone accounting for 27.2% of the revenue total. Charges for services, at 24.9% of total revenues, were nearly as important a revenue source as property taxes, and state aid, at 29.2% of total revenues, were more important. Most of those state aid revenues were for public schools. Miscellaneous revenues include rents and royalties, interest on public financial assets, special assessments on property taxes, and donations from private sources, and accounted for 4.3% of total local government revenues, with fines and forfeits at 0.5%.

Federal aid actually accounted for a higher share of local government revenues than is shown in this chart. But most of those federal revenues pass through the state governments first, and are thus counted first as federal to state aid and then state to local aid in Census Bureau data.

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New York City’s local government revenues are more heavily weighted toward taxes in general, at 46.6% of the total in FY 2014, and taxes other than property taxes in particular, at 20.4%. NYC also received more non-school aid from the state government, as a percent of its total revenues, than the average local government in the U.S., though state aid in general accounted for just 26.1% of total revenues. New York City’s federal revenues were about average as a share of the total, but with more for housing and community development and less for other things. Charges for services are a lower share of NYC’s local government expenditures than the U.S. local government average.

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Taxes accounted for more than half of all revenues for local governments in the Rest of New York State in FY 2014, with property taxes alone accounting for 39.0%.   State aid also accounted for an above average 30.3% of local government revenues in the rest of the state, with most of that for education. As in New York City, charges for services were a below-average share of local government revenues there. And with housing and community development accounting for a high share of direct federal government to local government aid, the rest of the state got little of it.

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State aid for schools and charges for services were a relatively low share of New York City’s total revenues, but not because its amount of revenue in these categories was low, but rather because the NYC total local government revenues were so high. Not including insurance trust revenues, such as the revenues of its pension funds, New York City’s local government revenues equaled $190.82 per $1,000 of its residents’ personal income (or 19.1% of its residents’ income), far above the U.S. average of $112.22 (or 11.2%). Excluding tax revenues, New York City’s local government revenues equaled $101.87 per $1,000 of city residents’ personal income (10.2% of income), well below the U.S. average of $70.84 (7.1%).

New York City’s state aid for education equaled $20.55 per $1,000 of its residents’ personal income in FY 2014. That is not much less than the national average of $22.15, even though New York City’s public school enrollment is relatively low compared with its population and its residents’ income, because so many people live in the city as young adults but move to the suburbs as parents of school-aged children.

The city’s state aid revenues in the health, hospitals, welfare and housing categories equaled $16.11 per $1,000 of personal income, more than three times the U.S. average of $4.62. In many states the state government administers social programs directly, rather than pass on state and federal government money for those purposes to cities and counties. But in New York State, welfare and social services programs are administered by the City of New York and by county governments, some of which also have local government-run public hospitals. The federal and state governments still provide much of the money, thus accounting for the higher aid revenues.

New York City’s state aid in other categories equaled $13.07 per $1,000 of its residents’ personal income, more than double the U.S. average of $5.99. But that includes MTA dedicated tax revenues passed on to New York City Transit, part of the MTA. Those dedicated tax revenues are counted as state aid even though they are raised locally.

New York City’s total charges for services equaled $33.28 per $1,000 of its residents’ personal income, above the U.S. average of $27.99. Its miscellaneous revenues equaled $7.06, above the U.S. average of $4.81. Its fine and forfeit revenues totaled $1.74, nearly triple the U.S. average of $0.60. And its direct from the federal government aid revenues totaled $10.07, double the U.S. average of $4.68.   Measured per $1,000 of personal income, there is no type of local government revenue for which New York City was not relatively high as a percent of its residents’ income in FY 2014.

Local government revenues were also relatively high in the Rest of New York State, at $132.21 per $1,000 of personal income in FY 2014 compared with $112.22 for the U.S. But only because of high taxes. For all other revenue types combined, local governments in the Rest of New York State collected $65.70 per $1,000 of area residents’ personal income, below the U.S. average of $70.84. Other adjacent states were also below the U.S. average in non-tax revenue categories taken together. The only non-tax revenue sources for which local governments in the Rest of New York State were above average were state aid for education, because public school spending is so high in New York; and state aid for health, hospitals, welfare and housing, because social services are administered by counties in New York.

Overall, New York State’s non-tax local government revenues ranked 8th among states in FY 2014 measure per $1,000 of personal income, behind states such as Nebraska, California, Mississippi and Tennessee. If New York City were a separate state its local government non-tax revenues per $1,000 of personal income would have ranked third behind the District of Columbia, which has no state government, and Wyoming.

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For state governments in the U.S. as a whole, state taxes only accounted for 49.2% of total revenues in FY 2014, while aid revenues from the federal government accounted for 30.4%. As I noted in my review of federal finances, the federal government may have the most total revenue of the three levels of government, but it pays most of that right back out again in payments to or on behalf of individuals (Social Security, Medicare), interest on the national debt, and aid to state governments for particular purposes. It actually does relatively little directly, other than national defense and the post office. Medicaid and social services account for the majority of federal to state aid, at $24.68 per $1,000 of personal income, with education and transportation coming next at $5.60 and $3.11 respectively. Charges for services accounted for 12.1% of total U.S. state government revenues in FY 2014, with miscellaneous revenues at 6.1%, net lottery revenue at 1.4%, and local aid payments to state governments at just 0.9%. That is actually zero in most states.

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Not in New York State, however, where local aid payments to state government accounted for fully 6.8% of the revenues of the State of New York. Most of that was the local matching share of the state’s Medicaid program, something that basically exists nowhere else. New York State’s local governments accounted for $11.25 billion of the $15.6 billion in U.S. local government to state government aid revenues in FY 2014, with New York City alone paying $8.8 billion. That’s based on what the local governments reported. Suddenly this year New York State stopped reported to the Census Bureau that it was receiving what its local governments reported they were sending.

New York’s state tax revenues only accounted for 46.5% of total state revenues, below the state average, and its federal aid revenues only accounted for 29.1% of the total, also below average. Besides local to state aid, the only category that was a larger share of total state revenues in New York than the national average was net lottery revenues, at 2.1%.

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As is the case for local government revenues, however, New York’s state government revenues are higher than the U.S. average in every category when measured per $1,000 of personal income. Total New York State revenues equaled $148.04 per $1,000 of state residents’ personal income for 2014 (14.8% of income), well above the U.S. average of $119.04 (11.9%). Massachusetts was slightly above the U.S. average by this measure, with New Jersey, Connecticut and Pennsylvania slightly below average. Excluding state taxes, state non-tax revenues equaled $60.45 per $1,000 of personal income for the U.S, a similar amount in Massachusetts and Pennsylvania, less in New Jersey and Connecticut, and $79.27 per $1,000 of personal income for New York State. That was 17th among U.S. states, mostly behind low-income, high-poverty states with high federal aid as a percent of their residents’ personal income.

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With regard to state aid, when comparing New York City with the Rest of New York State one might argue that its state aid for welfare, hospital and housing purposes shouldn’t even count. After all, in most states social services and welfare are state-administered, and pose no particular burden for people in cities where the poor are concentrated, such as NYC.

New York City local government taxpayers are burdened by the local share of social services. But even excluding state aid for those purposes, the city’s state aid revenues as a percent of city residents’ personal income approximately matched those of the Rest of New York state, and were well above the average for local governments nationwide.

On the other hand, New York City’s payments to New York State for state spending under the Medicaid program were a particular and unfair burden for the city. One might argue that these should be deducted from state aid the city has received to present a fair picture of how well each part of the state is treated.

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The “Rest of New York State” is a diverse place, however. With the more geographically detailed data available for FY 2012, a Census of Governments year, it becomes apparent that the real net beneficiary of state aid is not the Downstate Suburbs but rather Upstate New York, a relatively poor area that is getting relatively poorer all the time.

Local to state aid sucks up a smaller share of Upstate residents’ personal income, compared with New York City residents, because of the way the Medicaid local matching share varies. For categories of expenditure for which New York City accounts for a disproportionately large share of the state’s Medicaid spending, such as hospitals, home health care, and personal care, the local government (New York City and county) share is 25 percent of total spending, with 25 percent for the state and 50 percent for the federal government. For categories in which the city’s share of total Medicaid New York State spending is low, such as nursing home care and family health plus, the local share of spending is just 10 percent, with 40 percent for the state and 50 percent for the federal government.

Back when I first noticed this in the 1990s, the share of total Medicaid expenditures financed by each level of government for each county and New York City was published each year in the New York State Statistical Yearbook. I asked around to find out why this was. The city must have an “adverse expenditures distribution,” a state official said. I replied that I’m sure that whatever the city spent more on relative to the rest of the state, it would have turned out to be adverse. In any event the table disappeared, never to return.

New York City, as noted, also pays “state aid” to the MTA, which then pays it back to New York City transit. And some of the city’s local matching share of Medicaid, local to state aid, then returns to the city as state to local aid – Medicaid payments to the city’s Health and Hospitals Corporation.

So how did federal and state aid change between FY 2004 and FY 2014?

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Overall federal payments to U.S. state governments were down only slightly from FY 2004 to FY 2014, as measured per $1,000 of U.S. residents’ personal income. I might have expected a steeper drop given all the government shutdowns and other drama. But federal aid to the State of New York did fall steeply relative to the personal income of New York State residents. It had been unusually high, and remained above average in FY 2014. Federal aid to state government increased per $1,000 of personal income for the other states around the Northeast, where it nonetheless remained lower than for New York State.

Back when Senator Moynihan was alive and on the case, you might have heard that New York State paid far more into the federal government than it got out. That was true, but only because New York’s wealthy pay so much in federal taxes, New York gets just a typical amount from Social Security and Medicare, and New York gets very little from federal defense spending and contracts. Federal to state aid payments was the one category of federal revenues and expenditures for which New York came out ahead. New York State is coming out ahead less in that category today.

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New York’s relatively high federal to state aid is due almost entirely to New York’s uniquely expensive Medicaid program, with New York’s federal to state aid revenues almost exactly average per $1,000 of personal income for the other categories combined. New York’s federal to state aid in the other categories equaled $11.91 per $1,000 of state residents’ personal income in FY 2014, about the same as the U.S. average of $12.01. But is federal to state aid in the health, hospitals and public welfare categories equaled $31.12 per $1,000 of personal income, significantly higher than the U.S. average of $24.18.

New York’s Medicaid program was uniquely generous, providing a fuller range of services to a larger share of the population than any other state. And uniquely wasteful and special interest-driven, serving as a jobs program and patronage system, with New York State politicians making the decisions and getting the credit, and all three levels of government sharing the bill.

Governor Spitzer did a whole lot of damage to this state in a very brief period of time, but he did do one positive thing. Call out New York’s non-profit health care sector, previously assumed to be saintly, for the selfish self-interest group it had become. Ever since then there has been pressure to wring excess costs out of New York’s health care system and Medicaid program. And the State of New York’s spending on Medical Vendor Payments, Public Health, and Public Hospitals, much of which is Medicaid-financed, only edged up $45.85 per $1,000 of state residents’ personal income in FY 2004 to $46.22 in FY 2014, after having rocketed up for two decades prior. This saved the federal government some money. But it also saved New York City and New York State some money. Mayor DeBlasio assumes no increase in the city’s payments to New York State for Medicaid for the next four years.

With Obamacare, meanwhile, other states started covering some of the people and some of the services that New York had been providing all along. Nationwide state government spending in the Medical Vendor Payments, Public Health, and Public Hospitals categories combined increased from $30.60 per $1,000 of U.S. residents’ personal income in FY 2004 to $36.04 in FY 2014, closing the gap with New York. That might also mean that other states were sending fewer sick people to New York to be provided with care half-financed by New York’s state and local taxpayers.

Rising personal income in New York, relative to the rest of the country, also reduces federal aid as a percent of that income. From 2004 to 2014 New York’s per capita income increased 14.2% after adjustment for inflation, compared with just a 7.9% gain for the U.S. as a whole, just 4.9% for New Jersey, and 11.6% for Connecticut. New York’s per capita income was 22.1% above the U.S. average in FY 2014. As a result of high per capita income, New York has for years been one of the states for which the basic federal matching share of expenditures is only 50.0%, compared for nearly 76.0% for Mississippi in the latest year.

https://www.federalregister.gov/documents/2016/11/15/2016-27424/federal-financial-participation-in-state-assistance-expenditures-federal-matching-shares-for

The federal matching share formula works to the disadvantage of New York because it was based exclusively on per capita income and not on poverty.  New York State unusual in that it has both above average income and above average poverty, a situation shared with California and Texas.  In these states, those working in a very wealthy industry — Wall Street in New York, information technology in California, and oil in Texas — pull up per capita income, even as many poor people also live in the state.

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To see how New York City and the Rest of New York State compare with the U.S. with regard to state aid to local government, I ignore state aid for public welfare, health and hospitals, which is only sent because the State of New York does not administer these services itself, and subtract the mandated local government to state government aid New York’s local governments have been forced to provide. With these adjustments the data shows that state aid to local government fell just about everywhere from FY 2004 to FY 2014, when measured per $1,000 of area residents’ personal income. The hit to New York City and New Jersey localities was about average, with a below average hit to the Rest of New York State. Oklahoma localities got clobbered after a big state income tax cut, but even blue state Minnesota, with its tradition of high state taxes, high state aid, and low local taxes, cut state to local aid as a percent of its residents’ personal income.

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The main function for which states provide aid to local governments is also the main source of the decrease in that aid: education. Measured per $1,000 of area residents’ personal income, state aid for education fell from FY 2004 to FY 2014 in all but a handful of states: Indiana, Maryland, Alaska, North Dakota, Arkansas, Delaware, Nevada, Tennessee, and Vermont. In many cases the drop was severe. Some of that decrease was due to falling federal to state aid per $1,000 of personal income. Nationally, federal aid to states for education fell by $0.81 per $1,000 of U.S. residents’ personal income from FY 2004 to FY 2014. State aid passed on to local governments fell by $3.11 per $1,000 of personal income nationally, $3.53 for New York City, $2.61 for the Rest of New York State and $2.10 for New Jersey.

Demographics explain some of this decrease. With the large “Baby Boom echo” generation exiting school and the smaller “Baby Bust echo” generation entering, U.S. public school enrollment increased by just 0.9% from FY 2004 to FY 2014 while the overall population rose 8.9%. That means a smaller need for services for school children, relative to resources available, and a greater need for services for others. In slow-growth and economically depressed places the decreases in school enrollment were large. Enrollment fell by 5.1% in New York City, 8.6% in the Rest of New York State – and 22.3% in Michigan.

Moreover, New York City has become much better off relative to the Rest of New York State, with virtually all the state’s private job growth and much of its work earnings growth, as I noted here.

https://larrylittlefield.wordpress.com/2016/12/18/local-area-personal-income-data-the-unsaid/

Schools in the Rest of New York State have historically been massively overstaffed, compared with the U.S. average and New York City. With enrollment falling, but with fewer high-pay high-benefit alternative jobs available Upstate, there may be pressure at the state level to tilt school aid away from NYC as a way to provide Upstate jobs, regardless of educational need. Education spending, and its funding sources, will be discussed in more detail in a later post.

How about other revenue sources?

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New York City collects a lot of money in charges for services, as a percent of its residents’ personal income, but not because it charges a lot for public services. Compared with most of the country it has a lot of public services to charge for. Notably very large public transit, public hospital, and public housing systems.  New York City also has a lot of tolled bridges and tunnels, and the Port Authority of New York and New Jersey also collects a lot of airport revenues in the city (as well as in New Jersey). The city’s charges for services revenues are very high in these categories as a percent of its residents’ personal income, relative to the U.S. average.

On the other hand New York’s water and sewer system is a bargain by national standards, particularly since the U.S. average for local government water and sewer charges per $1,000 of U.S. residents’ personal income includes many areas that don’t even have public water in sewer. In those that actually have the service, its cost relative to people’s income is therefore even higher. In many places, moreover, charges for services cover much of the cost of municipal solid waste collection. The City of New York picks up the trash for free. New York City’s parks and recreation charges are also a low share of city residents’ personal income, compared with other places, although charges by franchisees may not be counted here.

The share of expenditures covered by charges for services, federal and state aid, rather than by local taxes, will be discussed in the individual post on different government functions.

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With some exceptions, including the Rest of New York State, the trend was for charges for services to absorb a higher share of area residents’ income in FY 2004 than in FY 2014. Local government charges absorbed a higher share of New York City residents’ personal income in the latter year than the former, by $2.54 per $1,000 of personal income. Or an increase of $152.40 in total, for a household earning $60,000 per year.

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The use of fines as a revenue source rather than as a way to discourage anti-social behavior has become an issue in some places. From FY 2004 to FY 2014, however, local government fine and forfeit revenues increased sharply per $1,000 of personal income in the U.S. as a whole, and in the Rest of New York State, while edging down in New York City. NYC was still significantly above average in FY 2014 at $1.74 per $1,000 of its residents’ personal income. That was 0.9% of total local government revenues in New York City, including New York City Transit and part of the Port Authority of New York and New Jersey. Rising local government fine and forfeit revenues, as a percent of state residents’ personal income, or at least improved reporting of such revenues, seemed to be common over the decade.

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The other Miscellaneous Revenues of local governments fell as a percent of personal income from FY 2004 and FY 2014, in the U.S. as a whole and in most states. Looking at the individual categories for a reason, it appears that falling interest revenues on local government financial assets are the key factor. Those interest revenues may have fallen not only due to the near zero percent interest rates imposed by the Federal Reserve in the wake of the Great Recession (which also reduced interest payments on state and local government debts), but also because local governments cashed in some of their financial assets during this period and no longer have them.

New York City bucked the trend with an increase in Miscellaneous Revenues per $1,000 of personal income from FY 2004 to FY 2014. The big factor appears to have been a sharp increase in “Miscellaneous – General Not Elsewhere Classified,” a category that accounts for well more than half of NYC’s revenues in the category. I don’t know what that is, but I know what it isn’t – Special Assessments, Sale of Property, Interest Earnings, Fines and Forfeits, Rents, Royalties, Donations from Private Sources, and Net Lottery Revenues, the other Miscellaneous revenue categories.

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While most services with charges, and most charges for services, are at the local government level, state governments do collect money for state colleges and universities and state hospitals. Tolls on state highways are the next largest category by state charges revenues per $1,000 of personal income, when looking at the states in total.

Compared with the average for all U.S. states, there are some significant differences for states in the Northeast. In many of these states higher education charges absorb a much lower share of state residents’ personal income than the U.S. average. Students in Northeastern states are more likely to attend private colleges and universities, which were well established before the federal “land grant” state colleges and universities were created in the rest of the country, and less likely to attend state colleges and universities. But the State of New York has also kept tuition lower at SUNY and CUNY than in most other states colleges and universities.

https://trends.collegeboard.org/college-pricing/figures-tables/2016-17-state-tuition-and-fees-public-four-year-institutions-state-and-five-year-percentage

I sincerely doubt there is another public service for which New York’s government workers charge less than those in most other states.

As the bar chart also shows, but residents of Downstate New York may not be aware, the New York State Power Authority is actually a pretty big deal. Only South Carolina has one or more state-run utilities whose charges equal a larger share of state residents’ personal income. It’s scary to think something that important and complicated is run by the State of New York.

Meanwhile toll revenues account for a large share of state charges for services in New Jersey and Massachusetts, thanks to the New Jersey Turnpike, Garden State Parkway, and Mass Pike. Unusually, Logan International airport and Massachusetts’ seaports are also state run, with their charges counting as state charges for services.

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State government charges for services increased per $1,000 of state residents’ personal income in most states from FY 2004 to FY 2014, and for all states in the U.S. combined. There was a particularly large increase in Pennsylvania. The State of New York’s charges for services, on the other hand, fell when measured per $1,000 of personal income. Greater income growth, rather than smaller increases in charges, may be the reason.

 

The next post will be an overview of state and local government expenditures from FY 2004 to FY 2014.

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