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.

This is the fourth in a series of posts on state and local government finances using data collected by the Governments Division of the U.S. Census Bureau. A description of where the data comes from and how it was tabulated, and a link to a spreadsheet with all data for all 50 states, DC and (for local government) New York City and the Rest of New York State separately, is here.

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

The following two posts, which can be reached from links at the bottom of the one before, were on taxes and other revenues. This is an overview of expenditures.

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The data show that when measured per $1,000 of area residents’ personal income, direct state and local government expenditures fell just about everywhere from FY 2004 to FY 2014. Despite rising health care expenditures, associated with the federal Medicaid program, in the wake of Obamacare. This data excludes taxpayer pension contributions, where are counted as pension revenues by the Census Bureau, and pension benefit payments. It allocates state government expenditures in New York State between New York City and the Rest of New York State in proportion to area residents’ personal income. The chart shows direct expenditures, those on actual public services and benefits, and avoids double counting by excluding “intergovernmental” payments to other governments (such as federal and state aid).

The decrease in state and local government direct expenditures per $1,000 of personal income from FY 2004 to FY 2014 was 3.5% for the U.S. as a whole, 3.8% for New York City, and 7.0% for the Rest of New York State. Expenditures did not fall relative to the total income of state residents in New Jersey and Connecticut, but income growth was notably weak in those states, and services were squeezed even so. Minnesota’s state and local government expenditures also did not decrease as percent of its residents’ income, but that state has relatively well-funded public employee pensions, and increased its state and local tax burden over the decade to keep up services. Spending fell just about everywhere else.

While direct expenditures fell relative to personal income in New York from FY 2004 to FY 2014, they were still very high compared with the national average in FY 2014. The direct state and local government expenditure total was $198.12 per $1,000 of personal income in the U.S. Which means that 19.8% of all Americans’ personal income, on average, was spent by state and local governments that year. About one-fifth of everyone’s income. The figure for New York City was 36.0% higher at $269.54 per $1,000 of personal income, with $221.54 for the Rest of New York State 11.8% above average. Most other states in the Northeast have below average state and local expenditures per $1,000 of their residents’ personal income, including just $182.53 for New Jersey and just $156.46 for Connecticut.

So where else is state and local government spending higher than the U.S. average when measured per $1,000 of personal income? In states that are not in the chart, because I don’t think of them as relevant in a New York-focused discussion. In low-income, high federal aid as a percent of income, Republican “anti-government” “Red States” such as Mississippi ($248.02 per $1,000 of state residents’ personal income), South Carolina ($227.19), and Utah ($211.51).   Not what you would have expected based on what you hear in the media, eh? Around the Northeast spending is also relatively high in Vermont ($238.75) and Maine ($214.54), two mostly rural states with lower incomes.

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At the state level, most government spending is for aid to local governments, mostly for elementary and secondary education, at 28.8% of total expenditures. And for health care, mostly associated with and more than half-funded by the federal Medicaid program, at 31.3%. That is 60.0% of state spending in these two categories, spending on services that are, for the most part, not carried out by state workers. Actual state operations are generally smaller as a share of the economy than local government operations but that does not mean state governments are not important. Local governments and private health care organizations provide services with substantial funding from, and under rules set at the margin by, governors and state legislatures.

For some services, the division of direct service provision varies from state to state with regard to which level of government carries it out. In small states, where the state capital is never far away, the state government might provide services that in larger states (such as New York and California) are provided by county governments using state aid. Public welfare and social services fall into that category. Added to social insurance (unemployment, worker compensation), nationwide, these functions accounted for 7.1% of state spending in FY 2014.

The two services that are nearly always provided by state workers are state colleges and universities, at 15.1% of state spending, and state prisons, at 2.8%. State highway departments accounted for 5.7% of state spending. Adding it up, nationwide aid to local government, mostly for schools, spending on health care, mostly funded by Medicaid, and state colleges and universities accounted for three-quarters of state expenditures in FY 2014.

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Although New York State has the nation’s highest state and local government tax burden, small population states where most of those taxes are on oil and gas production aside, and high state and local spending overall, its state government expenditures are only modestly above the U.S. average as a percent of personal income. The FY 2014 state expenditure total was $115.31 per $1,000 of personal income (11.5% of personal income) for all U.S states combined, $133.53 for the State of New York. $99.44 for the State of New Jersey, $97.72 for the State of Connecticut, and $116.20 for the State of Massachusetts, and $119.98 for the State of Pennsylvania. The high spending state government adjacent to New York is Vermont, at $194.92.

New York’s Medicaid program is the nation’s most expensive, and so are its public schools, and this inflates its expenditures in the Aid to Local Government and Medical Vendor Payments and Hospitals categories. But a relatively small share of its higher education students attend public universities and colleges, reducing expenditures on them as a share of state residents’ personal income. And much of New York’s the non-Medicaid public welfare expenditure also shows up at the local government level, and thus as state aid to local government rather than state spending.

Excluding Aid to Local Government and Medical Vendor Payments and Hospitals, the State of New York’s expenditures per $1,000 of state residents’ personal income totaled $35.39 per $1,000 of its residents’ personal income in FY 2014, below the $46.09 average for all states in the U.S., the $46.37 for New Jersey, the $45.79 for Connecticut, the $54.53 for Massachusetts, and the $50.43 for Pennsylvania, let alone the $87.66 for Vermont. As a reminder, this data excludes pension payments. It also excludes state run elementary and secondary schools (as in Hawaii) and state-run mass transit systems (as in New Jersey and the portion of New York State outside NYC. These expenditures are re-assigned to local government in this tabulation to make spending comparable across states.

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Looking at states across the country, the State of New York’s total expenditures are relatively high per $1,000 of state residents’ personal income, but not its direct expenditures – even with that expensive Medicaid program. Its local government aid expenditures are relatively high, because of expensive public schools and many social services provided directly at the local government level, rather than by the state.

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When adding state and local government expenditures together, the focus needs to be on direct expenditures, to avoid counting the same expenditures twice. The data shows that while direct state government expenditures increased per $1,000 of state residents’ personal income in New Jersey, Connecticut, many other states, and for all states in the U.S. combined from FY 2004 to FY 2014, direct expenditures by the State of New York decreased by 8.0%.

Remember, however, there is both a numerator and a denominator to the expenditures per $1,000 of personal income calculation. The State of New York’s expenditures may be falling per $1,000 of personal income due to stronger than average income growth, rather than slower than average state spending growth, reducing the burden on taxpayers. The state is divided into Downstate New York, where income growth has been greater, and Upstate New York, where it has been weak, and where most state operations are located. This means the State of New York can spend less $1,000 of the personal income of all state residents even though state workers become better off relative to the stagnant income of their Upstate neighbors.

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If the number one direct spending category at the state level is health care, the number one category at the local level is public schools, at 36.5% of the total in FY 2014. Police and corrections accounts for 7.6%. The extent of local government services varies from place to place, but even unincorporated rural areas have schools, police and jails. Where public welfare and public hospitals services are provided directly by local governments, rather than by state governments, they are generally provided by counties. These categories of expenditures accounted for 11.8% of total local government expenditures in FY 2014.

The City of New York functions as the county government, as well as the school district, within its boundaries. While the vast majority of local government employees, indeed the vast majority of public employees in general, are teachers and other workers in public schools, the largest occupation for most municipalities is police officer.   In some places, including New York City, municipalities also provide extensive infrastructure such as public water, public sewer, mass transit, airports, seaports, and extensive bridges and ferries. And other services such as solid waste collection, parks and recreation, and libraries. In other places these services are absent, or provided by special districts.  For this reason, one can only compare local government across places by adding it together into a total.

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Adding it up, New York City’s direct local government expenditures equaled $175.18 per $1,000 of city residents’ personal income in FY 2014 (17.5% of all of our incomes), compared with $132.19 for the Rest of New York State, $104.68 for New Jersey, and $108.42 for all local governments in the U.S. combined. Connecticut, at $73.33, Massachusetts, at $82.44, and Vermont, at $88.99, are relatively low, because these states have more services provided directly by state government.

New York City’s elementary and secondary school expenditures are much higher, relative to most places, than the chart implies, because school-age children are a relatively small share of its population, and a higher than average share of its children attend private school. Measured per student NYC’s school spending is among the highest in the country, by far the highest among the nation’s 100 largest school systems by enrollment. Per student spending is as high as New York City and even higher in the rest of New York State, even in Upstate New York where the income of non-public employees is much lower. The more detailed data available in Census of Governments years showed that in FY 2012 the public schools accounted for more than 7.0% of the income of county residents, on average, for rural counties in New York State, with a few counties over 9.0%.

New York’s local government police and corrections expenditures are also higher than they appear compared with other places, because a relatively high share of the city’s police and correction cost is pensions, not counted in this chart, and other benefits, which for most city employees gets lumped together under “Other and Unallocable.” Which is why New York City’s spending on “Other and Unallocable” is so large in the chart. Police and corrections spending is not that high in the Rest of New York State combined.

New York City’s local government expenditures on public welfare, public hospitals and public housing are high as a share of city residents’ personal income for three reasons. Most such services are provided directly at the local level in New York, albeit mostly with federal and state funds. The city has a large low-income population, with a poverty rate of 20.0% for New York City in 2015 compared with 14.7% for the U.S. And the City of New York provides extensive services, including the many public hospitals of the Health and Hospitals Corporation, the many housing projects of the New York City Housing Authority, and extensive social services. With fewer poor people as a percent of the total population, and fewer services, the Rest of New York spends less than the U.S. average on these services per $1,000 of area residents’ personal income.

As a major city, the City of New York provides far more infrastructure than the U.S. average, and spends far more on it per $1,000 of city residents’ personal income. How much of that is financed by general local taxes, and how much by charges for services and federal state aid, will be discussed in the specific post on infrastructure. Rather than spending by function, the subject of subsequent posts, the rest of this post will review local government spending by “character” across all functions.

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Virtually all local government expenditures are direct expenditures, rather than transfers to other levels of government. As discussed previously under revenues New York State, where Medicaid spending counts as state government spending but local governments (counties and the City of New York) are forced to pay for a share of it, is an exception.

The City of New York’s high social services expenditures, and mandated local to state aid for Medicaid, mean pension cost comparisons with other places based on pension costs as a share of the total city budget are misleading. That budget includes a host of services with city taxpayer funding that is mixed with federal and state aid and cannot be used for other things.   The Center for Retirement Research improved its comparison by measuring pension costs as a share of “own source” revenues, not including federal and state aid, to exclude money that is merely passing through city government budgets. That still does not make the comparison with the City of New York correct, however, some of NYC’s “own source” revenues are mandated to match federal and state expenditures on Medicaid and public welfare.

With relatively fewer poor people, and less extensive social spending, local to state aid expenditures are much lower in the Rest of New York State than in New York City. In the past, when most of the state’s social problems and expenditures were concentrated in the declining city, the shift of some of the related tax burden to the local level worked to the advantage of taxpayers elsewhere in the state. With New York City booming, social problems increasing outside the city, particularly those associated with aging, and with income becoming relatively weaker Upstate, that advantage may shift in the other direction. And so might state policy.

The local to state aid in Texas is the way that state equalizes school spending, despite the lack of a state income tax. Relatively wealthy places such as the City of Austin have their property tax revenues “taxed” for redistribution to less well off school districts elsewhere. Local governments in Massachusetts pay the state for a state-run water and sewer system (s), a share of cash welfare payments, and general purposes.

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With far more actual public employees providing public services directly, local governments have been hit much harder than state governments by soaring pension costs, as the Governor of California recently acknowledged.

https://www.bloombergquint.com/markets/2017/03/02/calpers-may-cut-return-target-again-california-s-brown-says

I use examples from other states because pension costs, and their effect on public services, are under apparently Omerta in New York when it comes to public discussion. The effect, however, is that direct local government expenditures are falling per $1,000 of area residents’ personal income when pensions are excluded – in New York City, the Rest of New York State, the U.S. as a whole, and most states. In states that have also cut taxes the decreases are severe.

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Regardless of how much local governments pay for public employees that are already retired, their ability to provide services depends mostly on cash pay. Total cash pay drives how many public employees may be hired, and how much they may be paid, which might affect how productive and motivated they are, particularly as it pertains to entry level pay levels.   The total cash wages and salaries of New York City’s local government workers were above the U.S. average per $1,000 of all city residents’ personal income in FY 2014. But where NYC really stood out compared with other places was high spending on state and local government pensions, and on “other and unallocable” expenditures, which include the other benefits of most NYC public employees. NYC residents are paying extra taxes in exchange for this higher spending, but not getting extra public services.

I lump state and local pension data together because in many places, including the Rest of New York State, local government employee pensions are paid by state pension systems rather than by separate local pension systems for each area. That is particularly the case for teachers. In some cases the local governments send money to the state for their workers’ pensions, but in others state taxes are used to fund the pension system. Notably for Pennsylvania teachers outside of Philadelphia, Connecticut teachers, New Jersey Teachers, California teachers, and Illinois teachers outside of the city of Chicago. Or at least state tax revenues were supposed to be paid into the pension funds. I can separate the cost of state and local pensions for New York City and the Rest of New York State, where I know in detail what is going on, but lump it all together elsewhere.

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Local government spending on public employee wages and salaries has been falling per $1,000 of the personal income of area residents, meaning either public employees are becoming relatively poorly paid (in cash) and/or their numbers are falling. The FY 2004 to FY 2014 decrease was 11.8% for all local governments in the U.S. combined, 11.4% for New York City, and 15.8% for the Rest of New York State. Despite pension crises, New Jersey and Connecticut are among the limited number of states where local government employee wages and salaries spending edged up as a share of state residents’ personal income.   The key factor there, however, is the stagnant personal income of taxpayers rather than the rising pay of government workers.

It is possible for the number of public employees to fall relative to the overall population, and thus their total wages and salaries to fall per $1,000 of the personal income of the entire population, without services deteriorating. It may be, in some cases, that the need for those services is falling.   Because there are fewer school age children enrolled in school relative to the total population, or fewer poor and troubled people in need of assistance, for example. And it may be that productivity is rising, with better organization, training and equipment allowing fewer local government workers to do more work. My impression, however, is that government productivity is not rising much here in NYC. And to the extent that demographic shifts and social trends are reducing the need for some public services, such shifts and past inadequate investment are increasing the need for spending on other things.

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Meanwhile the burden of state and local government public employee pensions is soaring everywhere, due to past inadequate funding, retroactive pension increases scored by public employee unions, or both. But nowhere have they soared more than in New York City, a place where taxpayers had also paid more than those anywhere else all along, as I showed here.

https://larrylittlefield.wordpress.com/2015/06/30/sold-out-futures-public-employee-pensions-census-of-governments-data/

Don’t be fooled by that high pension contribution in Illinois in FY 2004. That was the proceeds of a bond issue, not money that Illinois taxpayers paid in at the time. Actual taxpayer pension contributions have soared there since. For New York City, local government employee wages and salaries decreased by $7.85 per $1,000 of all city residents’ personal income from FY 2004 to FY 2014, while state and local government taxpayer contributions increased by $12.47. In the Rest of New York State, there was a decrease of $9.31 in local government public employee wages and salaries, and an increase of $8.84 in taxpayer pension costs.

Even in FY 2014, moreover, state and local governments were still shifting pension costs to the future to avoid facing the harsh reality in the present.   Which means the crisis has become worse since.

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Measured as a percent of the total wages and salaries of public employees, taxpayer contributions to U.S. state and local pension funds increased from 9.2% in FY 2004 to 13.9% in FY 2014. Given how rich the retirement benefits of most public employees are (except for those left out of the Social Security system), it is the latter figure – 13.9% — that seems to me to be about what should have been contributed all along. Meaning the country as a whole was not really getting out of the hole created by past retroactive pension increases and underfunding in FY 2014. At best it was breaking even.

Costs have exploded since. Chicago just had a massive increase in property taxes, and its schools may shut down a month early.   Dallas is facing the collapse of its police and fire pension system. California’s pension costs have just started to soar. Oregon is facing soaring costs only starting now. New Jersey has not yet begun to get out of the hole. Connecticut is considering shifting pension costs from 20 years ago onto future residents 30 to 50 years from now. So those who benefitted from lower taxes in the past will be gone before much of the bill is paid.

For New York City public employees, including New York City transit, taxpayer pension contributions increased from 11.1% of public employee wages and salaries in FY 2004 to 30.5% in FY 2014. Compare that with your employer’s contribution to your 401K. And it is still not enough in my opinion. For the New York State pension system, which also covers public employees in the Rest of New York State, the increase was from 6.8% of payroll to 23.0%.   In New Jersey, incredibly, taxpayer pension contributions were just 2.8% of payroll in FY 2004, and were still just 7.6% of payroll in FY 2014.

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The City of New York’s expenditures on other public employee fringe benefits such as health insurance has also increased relative to the personal income of all city residents, the rising level of expenditures in the Census Bureau’s “Other and Unallocable” category would seem to imply, by $6.41 per $1,000 of city residents’ personal income from FY 2004 to FY 2014, or 31.8%. Although this may also include some pension contributions. Rising expenditures in this category seems to be less of an issue for local governments elsewhere.

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If cash wages and salaries, plus pension contributions, plus other employee benefits as measured by “other and unallocable” in NYC, constitute total public employee compensation, one can see how the tax burden for NYC taxpayers was pushed up from FY 2004 to FY 2014. With total local government expenditures for these categories combined rising from $97.26 per $1,000 of personal income ($9.7%) of taxpayer income) in FY 2004 to $108.29 in FY 2014. Even as NYC public employee motivation, the number of such public employees, and the public services they provided, were squeezed down by falling cash wages.

The squeeze on local government wages and salaries caused by soaring benefits costs also affects local governments in most other places, and the nation as a whole on average. But in many places it was exacerbated by a falling state and local tax burden was a percent of personal income. For all local governments in the U.S., spending in these three categories combined slipped from $62.17 per $1,000 of personal income to $59.27.

One effect of this trend is political. Though both Republicans and Democrats are responsible for past retroactive public employee pension increases and pension underfunding, the Democrats are associated with the public employee unions. So when the time comes to impose tax increases and/or service cuts, Democrats get the blame. And as a result they have been run out of statehouses around the country, including nearly all of the Northeast, a Democratic Party stronghold at the federal government level. People don’t want to pay higher taxes as a result of what was done by Generation Greed, and they don’t want service cuts either. But it appears that seniors prefer the service cuts, since services for themselves, mostly federally funded, are seldom included.

It should be noted that for all workers, public sector and private sector, the cost of employer-provided benefits has not risen as a percent of wages and salaries, as I showed using Local Area Personal Income data from the Bureau of Economic Analysis here.

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

Since such costs are rising relative to wages and salaries in the public sector, they must be falling in the private sector.

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State and local government debs are another cost from the past, and these increased per $1,000 of personal income from FY 2004 to FY 2014 in the U.S. as a whole, in New York City, in the Rest of New York State, in New Jersey, and in Connecticut. New Jersey and Connecticut’s state and local debts were not that high compared with the U.S. average, but debts were high in New York State, particularly in New York City. For New Jersey, moreover, while the total debt burden is not great, the debts for the state’s transportation systems are such that virtually all transportation-related revenues are now used for debt service, leaving very little for actual transportation.

Expressed as a percent, state and local government debts equaled 20.1% of the income of U.S. residents, compared with 19.2% for New Jersey, 22.7% for Massachusetts, 23.8% for Illinois, 22.5% for California – and 35.5% for New York City and 26.7% for the Rest of New York State. These are the debts associated with financial paper. Many local governments in the Rest of the State were also allowed to “borrow” from the New York State pension fund by not paying the full increase in taxpayer contributions right away, deferring it to the future, with interest. A future when more members of the best off generations in the suburbs and Upstate will be in Florida or gone.

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It isn’t just America’s state and local governments that are deep in debt. Its federal government, businesses and consumers are even worse off. To keep the economy from collapse the Federal Reserve printed money to hold down interest rates from 2008 to 2015. As a result the burden of state interest payments decreased per in most states when measured per $1,000 of state residents’ personal income from FY 2004 to FY 2014, significantly in the case of Connecticut and Massachusetts.

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The same was true of local governments in most states. But interest payments by New York City’s local governments (the City of New York and the Port Authority of New York and New Jersey) increased per $1,000 of city residents’ personal income, and they were essentially unchanged in the Rest of New York State despite zero percent interest rates. Significant interest rate increases would send the cost of state and local interest upward as bonds matured and needed to be refinanced, forcing tax increases and service cuts. Such increases would also cause the value of existing assets in state and local pension funds – stocks and bonds – to plunge. While helpful in reality – the rate of return on newly acquired assets would be higher – the effect of a collapse of the latest the asset price bubble would be to further expose just how underfunded public employee pensions are. Leading to a demand for even more taxpayer pension contributions.

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Inadequate infrastructure maintenance and re-investment is another cost from the past. Despite zero percent interest rates, and increases or at least limited decreases in state and local government debts, local government capital construction expenditures fell almost everywhere per $1,000 of personal income from FY 2004 to FY 2014. The exceptions include an increase for New York City, and flat investment for Connecticut and Massachusetts, where the level of infrastructure investment was rock bottom compared with other states to begin with.

Measured per $1,000 of personal income, local government capital construction expenditures fell 19.8% from FY 2004 to FY 2014 in the U.S., 35.8% in the portion of the U.S. outside New York City, 32.0% in New Jersey, 31.8% in Pennsylvania, 18.5% in Illinois, 19.4% in Minnesota, 20.2% in California, 26.3% in the state of Washington, 50.3% in Florida, 24.0% in North Carolina, and 19.8% in Texas. Such expenditures increased 10.9% in New York City, but that was under Mayor Bloomberg, who was notably favorable to capital investment. We’ll see years from now if that high level of investment is being maintained despite, for example, most of the MTA Capital Plan remaining unfunded.

As will be discussed later, at the national level a big share of the decrease in capital construction expenditures was for education. With school enrollment leveling off nationally and falling in many places (including New York), that might make sense. Less need to build new schools could have provided local governments with the room to invest more in infrastructure, or housing and community development. But for local governments in the U.S. as a whole, capital construction expenditures fell per $1,000 of personal income in those categories as well from FY 2004 to FY 2014. In New York City expenditures on transport and utility infrastructure fell, though expenditures on housing and community development and education increased, relative to personal income.

A rising tax burden, to go along with rising rents. More crowded and less reliable subways, and the failure of other public services to keep up with population growth. Rising homelessness, high poverty, and a substance abuse crisis. Despite these trends, until recently the loudest voices one heard in state and local government politics in New York City and State were the public employee unions. Demanding more and more for themselves, leaving everyone else with less and less. But in the last few months that has changed, with advocates for the poor and troubled stepping forward to press their own demands.

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Adding up cash welfare payments, social services, housing and community development, and corrections, New York City’s local government expenditures on its poor and troubled are much higher than most places. Corrections are included because many of the city’s poor and troubled end up spending time on Riker’s Island, a place where some believe more effort must be made to improve conditions. Elsewhere in the country, where services for the mentally ill have been slashed, jail has taken their place. The City of New York spent $24.73 per $1,000 of city residents’ personal income on these functions combined in FY 2014, compared with $7.75 for all local governments in the U.S., $9.75 for the Rest of New York State, and $5.21 in New Jersey.

Spending on services for the needy have been falling for decades, in NYC and elsewhere, with spending on housing and community development falling since the federal Reagan Administration in the early 1980s, cash welfare payments plunging after the federal welfare reform of 1996, and local corrections spending trending down since the end of the crime wave associated with Generation Greed’s youth abated starting in the mid-1990s. The decrease from FY 2004 to FY 2014, measured per $1,000 of personal income, was 14.9% for the U.S., 22.7% for New York City, and 18.1% for the Rest of New York State.

There has been more attention paid to these services in New York City in the past year. There was a documentary on conditions at Rikers Island. There was a demand for reduced fares for poor people on the transit system. The head of the Administration for Children’s Services resigned after a series of child abuse deaths, the umpteenth time this cycle of cutback, death and “reform” has repeated itself. And there have been protests against New York City housing the growing number of “homeless” people in new hotels, built in industrial areas often with the intention of serving that clientele, by residents of nearby houses. Including one in my neighborhood at the home of my neighbor, the commissioner of the city’s Human Resources Administration.

After the federal cutbacks in housing of the 1980s the City of New York embarked on a huge housing program using its own funds. So why can’t it do so now? First, the urban decline of the 1970s had left the city with ownership of a huge supply of abandoned lots and buildings, available to be redeveloped into subsidized housing. Those areas have been almost completely redeveloped, with others converted to “community gardens,” leaving nowhere to put additional projects.

And the city had far more money then, and no more money now, for the poor.

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The City of New York ran up huge debts, and huge pension costs through retroactive increases, during the 1960s and into the early 1970s, before nearly going bankrupt. But in a “real” sense it only ended up paying half of those debts and pensions, as the Consumer Price Index doubled from 1970 to 1980, cutting the inflation-adjusted cost (and value) of those bonds and retroactively increased pensions in half.   Eventually the city’s pension plans got somewhat out of the hole, and the city had the capacity to borrow again for things like infrastructure and housing. Thus the city’s huge housing program, which started under the Koch Administration and peaked in FY 1993 under the Dinkins Administration.

Since then the city has repeated the debts and retroactive pension increases. Interest costs haven’t soared only because interest rates have been so low. But pension costs have soared. There will apparently be no bailout from high inflation this time. And even if there was, New York’s state and local governments have been issuing adjustable rate bonds. And a partial inflation adjustment was added to New York City and New York State pensions in the retroactive pension increase of 2000. Thus there is not enough money, as well as not enough building sites, to repeat the huge housing program of 25 years ago, and expensive bad ideas like building a platform over the Sunnyside Yards will not change this.

 

Subsequent posts will briefly review state and local government revenue and expenditure differences between states, and changes from FY 2004 to FY 2014, function by function. The first will be about state and local government education. There will be tables associated with those posts, but there is no table for this one. But if you’d like a spreadsheet to get an electronic copy of the charts, you can download this.

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