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.
This is yet another post based on my tabulation of FY 2004 and FY 2014 state and local government finances data from the U.S. Census Bureau. The first post, describing where the data comes from and how it was tabulated, is here.
It includes a spreadsheet with data for all data items for all 50 states. A reorganized spreadsheet with a table of public hospital, public welfare, and housing and community development expenditures, and all the charts included in this post, is here.
I left in a tab with the prior table of expenditures by county from FY 2012, a Census of Governments year, when more detailed data was available.
Both state governments and local governments administrate health care and social programs, with the division of responsibility between the two varying from state to state. In smaller states, where the state capital is never far away, primary responsibility often lies with the state government, but in large states social services and public hospitals are often managed by counties. In either case, however, much of the money originates with the federal government, and most of the rest comes from the state government. Only in New York State are local governments required to contribute significantly to federal programs such as Medicaid and Temporary Assistance to Needy Families.
Taking state and local government expenditures together, in FY 2014 New York spent $67.52 per $1,000 of state residents’ personal income (6.75% of income) on public hospitals, payments to private medical vendors, social services (both directly provided and payments to private vendors, generally non-profits), cash welfare, and housing and community development. The U.S. average was just $50.61 spent per $1,000 of personal income. Among nearby states Pennsylvania and Massachusetts were close to the average, at $51.61 and $47.91 per $1,000 of personal income, with New Jersey and Connecticut much lower at $36.37 and $38.32.
Over the decades, however, state and local government social expenditures have come to mean primarily one thing – health care. Public Hospitals and Medical Vendor Payments combined, generally funded via the Medicaid program but also, in the case of some Public Hospitals, by Medicare payments and charges for services, accounted for 78.4% of social expenditures in New York City and 79.3% in the nation as a whole.
Excluding these two functions, and just including Social Services, Cash Welfare, and Housing and Community Development, New York State spent $14.61 per $1,000 of personal income (1.46% of state residents’ income), compared with $10.50 for the U.S., (1.05%), $8.65 for New Jersey, $9.73 for Connecticut, $10.89 for Massachusetts, and $13.32 for Pennsylvania. New York still spends more on the poor, but as a percent of state residents’ personal income the excess expenditures only amounted to 0.41% of state residents’ personal income. New York’s state and local taxes were higher than the national average by 5.8% of city residents’ personal income in New York City, and 3.5% in the Rest of New York State.
New York State in general, and New York City in particular, long had a very high poverty rate relative to the U.S. average, but that gap has closed. In FY 2014 New York State’s poverty rate, at 15.9%, was barely higher than the U.S. average, at 15.5%. Unfortunately the gap closed because of rising poverty across the nation, not falling poverty in New York. While New York is a high poverty state thanks to a large, high poverty city, in general poverty is higher in the South and West and lower in the Northeast, with rates of 11.1% in New Jersey, 10.8% in Connecticut, 11.6% in Massachusetts, and 13.6% in Pennsylvania. High taxpayer income and low poverty explains the average spending on aid to the needy in the rest of the Northeast, despite high spending per beneficiary.
Many of the states with high expenditures on aid to the needy when measured per $1,000 of state residents’ personal income are high poverty states with low taxpayer incomes, low taxes, but high federal aid. Mississippi, South Carolina, New Mexico and the like. But the relationship doesn’t always hold. Minnesota has high state and local government social spending per $1,000 of state residents’ personal income despite a low poverty rate of just 11.5%. And Texas has very low spending in these categories despite a high poverty rate of 17.2%.
Each of the individual government functions in the aid to needy categories will now be discussed in turn.
Today most U.S. government health care expenditures are Medicare-financed services to extend the lives of old people despite multiple accumulating diseases and disabilities, and Medicaid-financed expenditure on chronic diseases that either will or will not kill people in late middle age and the early senior years, such as heart disease, cancer, and diabetes. And health care politics revolves around increasing Medicare services for today’s seniors while taking them away from future generations, so older generations’ debts can be paid back, and resentment by the better off of the Medicaid expenditures that extend the lives of poor and working people. In low-tax states those lives tend to be shorter.
It was not that long ago, however, that the greatest health care concern, one that stalked rich and poor alike, was infectious diseases that led to severe disability and early death. Back then health care wasn’t just something the wealthy willingly provided to the rest, as a way to protect themselves from infection or insulate themselves from the mentally ill. It was something often imposed on the less well off whether they wanted it or not. The result was public hospitals.
Public hospital expenditures tend to be highest, per $1,000 of personal income, in the so-called “Red States” of the South, despite low taxes there. They are paid for Medicaid, for which the federal government pays a higher share of expenditures in these states than in the Northeast. The example here is North Carolina, where a public hospital system is the leading health care provider in metro Charlotte. As was the case for higher education, public hospitals are much less prominent in the Northeast, where private, non-profit hospitals were well established before public hospitals began to be built.
In New York State, New Jersey, Connecticut and Pennsylvania, expenditure on state hospitals are about average per $1,000 of state residents’ personal income. State hospitals have traditionally provided services for the mentally ill, while local public hospitals have served more general health problems. State teaching hospitals associated with state universities are an exception. New York State has two, one in Brooklyn and one in Syracuse.
New York State’s local government spending on public hospitals is also about average, compared with low spending in the rest of the Northeast, but public hospital spending is not evenly distributed around the state. New York City, Nassau County, Westchester County, Rockland County, and Erie County have public hospital expenditures near or above the U.S. average per $1,000 of are residents’ personal income. Along with rural Lewis County, St. Lawrence County, and Wyoming County. Public hospital expenditures are low or zero elsewhere in the state.
Over the long term, the trend in state government public hospital expenditures per $1,000 of personal income had been down, as the fear of infectious disease fell, tuberculosis wards closed, and the mentally ill were discharged to be treated (or not) in other settings. That trend continued from FY 2004 to FY 2014 in New York State, Connecticut, and Massachusetts, but barely. And in the U.S. as a whole, state public hospital expenditures actually increased per $1,000 of personal income. There were large expenditure increases, per $1,000 of state residents’ personal income, in Pennsylvania and California. This could be the result of rising expenditures or lower incomes, but the data certainly implies that the mentally ill who can be cared for outside state hospitals were already there in FY 2014. It could be some of those affected by the opiod epidemic have ended up in state hospitals. As for all trends identified by this data, the reasons for these increases would be a good subject for journalists, if there are any still out there.
At the local government level, New York City’s public hospital expenditures increased per $1,000 of personal income in the U.S., New York City, and the Rest of New York State. The U.S. average increased 14.3% to $6.44 per $1,000 of U.S. residents’ personal income, while expenditures in New York City’s Health and Hospitals Corporation rose 11.1% to $14.92 per $1,000 of personal income. The average for the Rest of New York State increased just 1.9% to $3.52 per $1,000 of personal income.
Medical vendor payments are mostly comprised of Medicaid payments to private hospitals, physicians and clinics, along with nursing homes and home health care services. For the most part all of these expenditures are recorded at the state government level, although in Upstate New York there are some local government medical vendor payments as well despite Medicaid being a state program there. The U.S. average for state government medical vendor payments in FY 2014 was $28.53 per $1,000 of U.S. residents’ personal income in FY 2014. The New York State average was much higher at $39.57 per $1,000 of state residents’ personal income. And we know from other data that the state’s Medicaid-financed services in this category are concentrated in New York City. Unlike New York, other states with above average private medical vendor payments, such as Massachusetts and Pennsylvania, have below average public hospital expenditure to offset this.
The gap between New York State and the rest of the country, however, closed between FY 2004 and FY 2014. U.S. state government medical vendor payment expenditures increased from $23.70 per $1,000 of personal income to $28.53, an increase of 19.9%. New York States expenditures in this category rose from $39.30 to $39.57 per $1,000 of state residents’ personal income, an increase of just 0.7%. Spending in New Jersey increased just 7.1% to just $22.69 per $1,000 of personal income, with a much larger gain of 30.9% in Connecticut, but to just to $23.11, and an increase of 19.7% in Massachusetts, to $33.81.
Adding state and local government public hospitals and medical vendor payments together, and thus getting complete picture of the vast majority of state and local government expenditures on aid the needy, one sees the gap between the New York State and the rest of the country shrank considerably from FY 2004 to FY 2014, with New York standing pat and the rest of the country catching up. New York’s expenditures in these categories edged up from $52.03 per $1,000 of state residents’ personal income in FY 2004 to $52.91 per $1,000 of personal income in FY 2014, an increase of just 1.7%. That is still 31.9% higher than the U.S. average of $40.11 spent per $1,000 of U.S. residents’ personal income in FY 2014, but that gap had been larger, as nationwide expenditures increased 19.5% when measured per $1,000 of personal income.
In FY 2014 New York’s $52.91 in state and local government public hospital plus medical vendor payments expenditures, per $1,000 of state residents’ personal income, ranked 12th among states. Higher than the $37.03 in Massachusetts and $42.83 in Vermont, two states with universal health care. But lower than the $82.78 spent per $1,000 of state residents’ personal income in Mississippi, the $66.07 in New Mexico, the $64.89 in South Carolina, the $60.12 in Alabama, the $58.31 in Iowa, the $57.62 in Louisiana, and the $55.96 in Arkansas. State and local expenditures are high in these states despite their low state and local tax burdens as a percent of personal income, and anti-government images. One state where spending in these categories, and Medicaid expenditures according to data on the program, has always been lower than one might expect is California. It spent $39.45 on these categories per $1,000 of state residents’ personal income in FY 2014, about average but up 42.6% over a decade from a level well below the U.S. average in FY 2004.
The reasons for the closing gap between New York State and the rest of the country include increased cost control and reduced fraud in New York, and Obamacare elsewhere.
New York State’s Medicaid program was already very generous in FY 2004, including virtually every service for which the federal government was willing to provide matching funds, as many beneficiaries as the law allowed, and with some exceptions (such as actual doctors) high payment levels. For example, the state created its own Family Health Plus program for those whose incomes were too high to qualify for traditional Medicaid. Most of the beneficiaries of that program are outside New York City.
In addition, poor people in less generous states often traveled to New York City, or were sent here, to have a cup of coffee, qualify as a state resident, and receive expensive health care on New York State and New York City taxpayers’ dimes. For New York City’s private hospitals this was nothing more than a way to increase revenues and market share, and they had staffs to fill out the paperwork to get those waiting for surgery qualified as state residents. Retired New Yorkers often moved to lower-tax states so they wouldn’t have to pay for other New Yorkers, but then returned when their money ran out and they required expensive nursing home or home health care, so other New Yorkers would have to pay for them.
New York State was also the national capital of Medicaid fraud, the way Florida is the national capital of Medicare fraud. And finally, at some point Medicaid spending may have been seen as something as a jobs program, with high reimbursement levels keeping otherwise unneeded facilities open Upstate, and providing home health care employment for services people arguably could get along without in New York City.
Some of that may still go on. New York State’s employment in the Home Health Care industry doubled from 44,800 in 1990 to 87,700 in 2006, according to the New York State Department of Labor, and then redoubled to 185,000 in 2016. New York City’s employment in this industry increased from 15,600 in 1990, 34.8% of the state total, to 54,900 in 2006, 62.6% of the state total, to 134,200 in 2016, or 72.5% of the state total. Some of the profitable non-profit organizations that provide these services are owned by state legislators, their families, and associates.
In general, however, there has been something of an attempt to wring excess costs out of the state’s health care system since 2006, when Medicaid costs and their burden on local governments became an issue in the election for New York State Governor. Many hospitals have closed, and nursing home expansion has stopped, as a result, with employment in those industries flat in New York over the past decade.
Meanwhile, one big impact of Obamacare has been the expansion of Medicaid in previously ungenerous states. Most of those newly eligible elsewhere in the country would have been already receiving benefits in New York State.
Now eligible for Medicaid in their home states, fewer poor people from elsewhere may be traveling to New York State for services. State government spending on public hospitals and medical vendor payments thus increased in those other states, nearly all of it paid for by the federal government. Something Republicans in Congress, many from those other states, want to reverse, and have their states revert to less expensive (for them, as federal taxpayers) bus ticket health care.
Now that most state and local government “public welfare” spending has been spoken for, lets move on to other, smaller government functions in the category.
State and local government expenditures on social services, including public welfare departments, social service agencies, and services for children and the homeless, totaled $7.87 per $1,000 of New York State residents’ personal income in FY 2015, above the U.S. average of $6.15. New Jersey, at $5.37, Connecticut, at $5.15, and Massachusetts, at $6.12 were below average, reflecting their below average poverty rates.
In California, whose state and local government health care expenditures had been far below average and are now about average, social services expenditures were relatively high at $7.69 per $1,000 of state’s residents’ personal income. Most California social services expenditures, and nearly all New York State social services expenditures, are at the state level. In New Jersey, Connecticut, Massachusetts and Illinois, most of the spending is at the state level. I’m surprised the social services expenditure level in Illinois, at $8.89 per $1,000 of that states’ residents’ personal income, was that high in FY 2014, given that at some point that state, operating in de facto bankruptcy, stopped paying its non-profit social services providers on time. Despite a low poverty rate social services spending is even higher, at $9.33 per $1,000 of state residents’ personal income, in Minnesota.
State government social services expenditures increased per $1,000 of state residents’ personal income from FY 2004 to FY 2014 in Illinois, Minnesota and New Jersey, but those are exceptions. Nationally spending fell from $4.14 per $1,000 of personal income to $3.70. Despite the increase in social problems in the suburbs and rural areas, notably those associated with the opiod epidemic.
The same is true for places where social services programs are administered locally. Total U.S. local government expenditures in these categories fell from $3.03 per $1,000 of personal income in FY 2004 to $2.45 in FY 2014. For New York State, these types of expenditures are concentrated in New York City, and because of the local matching share of them imposed by the State of New York, so are the non-federal costs. New York City’s local government expenditures fell from $14.39 per $1,000 of city residents’ personal income in FY 2004 to $9.90 per $1,000 of personal income in FY 2014, a decrease of 31.2%. In the Rest of New York State expenditures fell from $6.17 per $1,000 of personal income to $4.90, a decrease of 20.6%. For state and local government social services combined, the U.S. average fell from $7.16 in FY 2004 to $6.15 in FY 2014, a decrease of 14.1%. Assuming that the cost of state government social services expenditures is distributed around New York State in proportion to personal income, the comparable New York City figure would be $10.55 per $1,000 of city residents’ personal income, down 32.8%.
State and local government social services expenditures are falling despite rising poverty. As a result in many parts of the United States, according to the media, there is no one to call when someone is experiencing depression, engaging in self-harming and family member-harming social pathologies, or suffering an episode of mental illness. Other than the police, as the jails fill up with the mentally ill and substance abusers.
And some of those from elsewhere with problems end up, once again, in New York City and the cities of California. A few years ago, in response to increased attention on homelessness, the website Gothamist went out and interviewed the young homeless people it found on the streets. All of those in the article were from elsewhere – the Midwest, the South, Upstate. All this harkens back to an earlier time. In the 1800s, one New York City social service was allowing homeless adults to sleep in police precinct basements. According to the book Gotham:
In 1896, (Teddy) Roosevelt ordered an investigation of the decades-old practice of police stations offering shelter to the homeless, urged on by (Jacob) Riis, who had unpleasant memories of his experiences while still a penniless immigrant. The filthy conditions of the lodgings were apparent. And his chief of police swore that 98 percent of the more than 60,000 homeless people who had resorted to them during the past year were the “lazy, dissipated, filthy, vermin-covered, disease breeding and disease-scattering scum of the city’s population.”
The police basements were shut down, and the homeless pitched into the street in the middle of a depression. Other adults were exiled to Welfare Island (now Roosevelt Island) in the East River, places like the Farm Colony on Staten Island, and homeless camps Upstate. As for children, back when New York City was an exporter of the poor rather than an importer, it sent its poor children away on orphan trains.
Cash welfare payments, those made prior to 1996 under the federal Aid for Families with Dependent Children program and, for those not eligible for AFDC, the New York State Home Relief program, and since “welfare reform” under the federal Temporary Assistance for Needy Families program and New York State Safety Net program, have plunged to almost nothing. Given how low expenditures now are, it is almost hard to believe the huge role resentment of such expenditures played in national politics and, to a lesser extent, New York State and New York City politics, in the three decades from the mid-1960s to the mid-1990s.
New York State’s cash welfare expenditures totaled just $2.23 per $1,000 of state residents’ personal income in FY 2014, still above the U.S. average of $1.58 but not much. Even California, once a leader in cash welfare payments to the poor though a laggard in Medicaid spending on the poor, is down to $3.25. In Illinois, cash welfare payments equaled just 37 cents per $1,000 of state residents’ personal income. In that state, with a soaring murder rate in its leading city of Chicago, it would appear that the only source of cash income for those who are both unemployable and deemed ineligible for the federal disability income program is membership in a gang and a “job” dealing drugs.
For state cash welfare payments, however, most of the decrease was before FY 2004. From $0.56 per $1,000 of personal income that year state cash welfare payments increased to $0.87 in FY 2014. The increase corresponded with the spread of economic distress to suburban and rural areas. Illinois and Massachusetts bucked the trend, with a decrease over the decade.
Those states where cash welfare programs are mostly or exclusive locally administered, such as New York and California, saw cash welfare payments continue to fall relative to personal income from FY 2004 to FY 2014. In New York City the decrease was from $3.64 per $1,000 of city residents’ personal income to $2.57, while in the Rest of New York State the decrease was from $2.14 to $1.94. In California the decrease was from $3.94 to $3.25.
Part of the decrease may have been generational. Generations that arrived in New York City only to find the economy in collapse ended up on welfare, and stayed there. When these “welfare generations” reached age 65 they became eligible to “retire” to the federal SSI program. Meanwhile, the imposition of “workfare” requirements in the mid-1990s corresponded with at two-decade boom in New York City relative to the rest of the country. Those forced to work when reaching adulthood by workfare requirements were able to keep doing so in regular jobs. An economic boom in Boston associated with a generational shift may explain the plunge in state cash welfare expenditures in Massachusetts as well.
The U.S. long had two distinct welfare systems – one for “workers” and one for “the poor.” Unemployment insurance payments are the cash portion of the welfare system for workers, one generally thought of as an insurance program rather than a handout.
The unemployment insurance program has two components. States pay for unemployment up to a given point, traditionally 26 weeks (half a year). But in recessions the federal government has the option to “extend” unemployment payments for longer due to high unemployment. During the Great Recession unemployment insurance was extended from June 2008 to January 2014, so for most places a large part of fiscal 2014 took place during a time when federal unemployment insurance was extended. The same may be said for FY 2004, given that unemployment insurance payments were extended by the federal government from January 2002 to January 2004.
The data shows that state unemployment payments were lower, per $1,000 of state residents’ personal income, in FY 2014 than they had been in FY 2004, an economically similar year. The decrease was from $3.58 per $1,000 of personal income in FY 2004 to $2.58 for the U.S. as a whole, from $3.40 to $2.68 for New York State, from $5.22 to $4.64 for New Jersey, from $3.68 to $3.30 for Connecticut, and from $5.64 to $4.18 for Massachusetts.
And individual’s unemployment benefit is based on what their wages and salaries had been, with higher benefits for the higher paid, but New York State has a relatively low maximum payment, meaning the benefit for a laid off investment banker isn’t necessarily that much higher than the benefit for a laid off electrician. That is the reason why New York State’s unemployment benefits are lower than those of surrounding states, measured per $1,000 of state residents’ personal income. New York benefits are lower for those at the top.
Other states have slashed benefits for those at the bottom. From the 1930s to the Great Recession every state offered the same 26 weeks of regular unemployment benefits to those who could prove they were looking for work. But since then many states have slashed the duration of benefits.
Of the states not providing the standard 26-week maximum, “Arkansas, Michigan, and South Carolina provide up to 20 weeks of UI; and Missouri provides up to 13 weeks of UI. The remaining five states periodically update their maximum weeks of UI available based on changes in the state’s unemployment rate: Idaho currently provides up to 21 weeks of UI; Kansas currently provides up to 16 weeks of UI; Florida provides up to 12 weeks of UI for new claimants in 2016; Georgia currently provides up to 14 weeks of UI; and North Carolina provides up to 13 weeks of UI for new claimants in 2016.”
North Carolina’s state government unemployment benefit payments equaled $3.46 per $1,000 of state residents’ personal income in FY 2004, but fell by about half to $1.80 in FY 2014. That state, as shown in the prior post, also slashed its public school and higher education expenditures over decade. Florida’s state government unemployment benefit payments equaled $1.75 per $1,000 of state residents’ personal income in FY 2004, but fell by about half to $1.08 in FY 2014. In Georgia, the decrease was from $2.34 to $1.55.
In many states, payments for Worker Compensation were also slashed, with the national average falling from $1.25 per $1,000 of personal income in FY 2004 to $0.67 in FY 2014. And spending on state Veteran’s Benefits slipped as well, from $0.19 to $0.07. Basically, in many Republican states the attitude toward the working poor, many of them the former middle class and many of them non-Hispanic Whites in suburban and rural areas, became identical to the attitude toward cash welfare beneficiaries two decades ago, many of whom were Black. The attitude was they were lazy, and needed to get off the dole. Then the 2016 Republican primary happened…
And suddenly the Republican Congress isn’t interested in cutting funding for the poor based on what their situation is, but rather just based on where they live, with Democratic voting states as the targets. A prime target, as it has been since the early 1980s, is federal spending on Housing and Community development, which is concentrated in older central cities.
Federal expenditures on housing assistance, including subsidies for public housing and Section 8 assistance, totaled $47.6 billion in FY 2014. Tax breaks for owner-occupied housing totaled $194 billion, including $58.9 billion for the mortgage interest deduction, which benefits those rich enough to itemize rather than taking the standard deduction. The federal contingent liabilities for FHA, Fannie Mae and Freddie Mac loans, made real by the housing bust, are on top of that. But these subsidies benefit those in rural and suburban areas. The federal government could, and perhaps should, get out of housing altogether, but that’s not what is likely to happen.
Local government housing and community development expenditures averaged just $2.77 per $1,000 of U.S. residents’ personal income in FY 2014, down 15.2% from FY 2004 and down almost continuously since the era when most U.S. housing projects and other subsidized housing were built. New York City’s expenditures were $9.12 per $1,000 of personal income in FY 2014, more than triple the national average but down 11.6% from FY 2004. Expenditures in this category in the Rest of New York State fell by half as a share of income from FY 2004 to FY 2014, to just 51 cents per $1,000 of personal income.
The New York State total was $4.51 per $1,000 of personal income. Leaving aside the District of Columbia and Alaska, which are special situations, local governments in no state spent more in this category than New York. California was closet at $4.01 per $1,000 in state residents’ personal income. One wouldn’t think that housing and community development expenditures would be top of the list for cuts for a real estate developer for New York like President Trump, but the Republican Congress is another matter. They can demand cuts to spending in New York knowing that New York’s members of congress will still support spending that benefits Republican voting states, because that spending benefits Democratic interest groups.
While federal funding has been cut over the years, the New York City Housing Authority is still subject to federal rules. Since the early 1980s, those rules have given priority in public housing to the sort of people the suburbs didn’t want – the disabled, the homeless, the unemployed – the sort of people who will be unlikely to pay enough in rent to cover the operating and rehabilitation costs of public housing. Once the federal government covered that gap. Now it no longer does. Originally Section 8 was used to assist low-income renters in private housing. But in New York City most of it now goes to those in public housing projects, doubling up the subsidy but reducing the number of beneficiaries, freezing younger generations out of housing assistance. Even so the condition of public housing continues to deteriorate.
Even before the current administration, however, the share of New York State’s social expenditures covered by federal and public hospital charges for services had been falling. Adding charges for services at state hospitals, federal health and hospital aid to state governments, federal public welfare aid to state hospitals. And dividing this by state expenditures on, and aid to local governments for, health, hospitals, medical vendor payments, cash welfare and social services. One finds that federal aid and charges covered 61.5% of U.S. expenditures in these categories in FY 2004, and 61.2% in FY 2014. Leaving the rest to be funded by state taxes.
For New York State, the share of expenditures in these categories covered by non-state tax sources fell from an unusually high 66.3% in FY 2004, perhaps due to special assistance in the wake of 9/11, to 56.7% in FY 2014. The New York State figure had been 57.5% in FY 2007.
New York State taxpayers covered less of the state’s total expenditures in these categories than those in New Jersey, at just 49.9% covered by non-state-tax sources in FY 2014, Connecticut, at just 51.8%, and Massachusetts, at just 47.6%, and California, at 51.0%. New York State taxpayers, however, carried more of the burden of these social expenditures than the taxpayers of North Carolina, where federal aid and hospital charges covered 72.0% of it, Florida, where 60.3% was funded by non-state-tax sources, and Texas, where the non-state share was 72.1%. With the federal government covering less of New York State’s social expenditures, the state government forced local governments to cover more of it, something virtually unheard of anywhere else.
New York State has consistently, 2004 aside, received less health care and public welfare aid from the federal government as a share of its total spending in these categories, despite a poverty rate that was slightly above average in FY 2014, and far above average from the 1970s through the 1990s. The reason is that in federal aid formulae, the level of poverty is not a factor.
Neither is median household income, for which New York State was a mere 9.7% higher than the U.S. average in 2014, compared with 34.0% above average in New Jersey, 30.5% higher in Connecticut, and 28.9% higher in Massachusetts. The only factor that matters in the most important funding formula of all, the federal matching share for Medicaid, is per capita income.
New York State’s per capita income, pulled up by the rich of Manhattan and a few suburban counties, was 22.1% above the U.S. average in 2014, compared with 24.4% above average for New Jersey, 43.7% above average for Connecticut, and 28.4% above average for Massachusetts. For purposes of the federal matching share, however, all these states are alike with the minimum 50.0% federal share for regular Medicaid.
Despite a low federal share of New York State’s expenditures, New York State’s federal aid in total has traditionally been relatively high, because is spending has been so high. But, as noted, New York State’s expenditures in the public hospital and medical vendor payments categories have been level compared with its personal income, while the national total has increased.
Meanwhile, although social services and cash welfare expenditures are administered at the local government level in New York State, and New York City has a large public hospital system, the hit to the city’s budget is limited because 74.7% of the City of New York’s FY 2014 spending in these categories (plus public health) was funded by hospital charges and federal and state aid, down slightly from 76.7% in FY 2004. In the Rest of New York State, on the other hand, only 65.0% of local government expenditures on public health, public hospitals, cash welfare and social services is funded by charges and federal and state aid. Down from 73.9% in FY 2004.
The share of social expenditures covered by aid and charges has been consistently lower in the Rest of New York State than in New York City. And yet this is something of a surprise. State aid formulae don’t favor the city over the rest of the state. If anything, the reverse is true. Medicaid Family Health Plus and Nursing Home expenditures are concentrated in the part of the state outside New York City. The local share of these expenditures under state rules is just 10.0%. But Medicaid hospital and home health care expenditures are concentrated in the city. The local taxpayer share of those expenditures is 25.0%.
What must be happening, therefore, is that local governments in the Rest of New York State are providing health, medical vendor payment, cash welfare and/or social services assistance to people who are not enrolled in, and perhaps do not qualify for, the big federal-state programs, with their own money. One gets a glimpse of this in the medical vendor payment expenditures of counties outside New York City. Medicaid is a state program, and the City of New York has no medical vendor payment expenditures of its own. Just payments under the Medicaid program. Counties in the Rest of New York State spent $76.3 million in these categories in FY 2014, outside of Medicaid.
One sees the same pattern in Connecticut, where it seems as if all social expenditures under the big federal-state programs are counted at the state level. For the small amount of local government social spending in that state, local taxpayers paid for all but 25.0%.
This concludes the discussion of state and local finances for health care and aid to the needy. The next post will be on the uniformed services – police, fire, correction and sanitation.