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

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

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

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

 

This is another post based on a tabulation of data from the 2017 Census of Governments.  The prior two posts, on taxes and other revenues, are here.

https://larrylittlefield.wordpress.com/2020/04/24/state-local-taxes-2017-census-of-governments-finance-data/

https://larrylittlefield.wordpress.com/2020/04/30/state-and-local-government-revenues-other-than-taxes-2017-census-of-governments-data/

The purpose of this post is to show the share of total state and local government expenditures, as described above, that different functions account for, to provide an idea of what they cost relative to each other.

For the United States as a whole the two biggest budget items in FY 2017 at the State Government level were Medical Vendor Payments and State Hospitals, at 31.5% of total expenditures, and aid payments to local governments, at 27.5%.  Medical Vendor Payments alone accounted for 27.2% of the total.  A substantial share of Medical Vendor Payments and Public Hospital costs are funded by aid from the federal government, via the Medicaid program.  Meanwhile, nearly 70 percent of state aid to local government is for elementary and secondary school education.    The perception many people have is correct:  the majority of state government spending is on health care and public schools.  Higher Education, state colleges and universities, was another 12.8% of total spending.

State Highways at 5.5% was the next largest government function. Taken together state elected officials, administrative and regulatory agencies, the judiciary, and state health departments accounted for 6.6% of state spending.  These activities I group together as the Bureaucracy – the sort of activity one finds in state capitals, and county seats, city and town halls, processing cases, reviewing applications, and enforcing regulations. Corrections, state prisons, accounted for 2.5% of state government spending.  Every state has operations in these categories.

Public welfare and social services accounted for just 3.8% of state government expenditures in FY 2017 but in some states, including New York and California, these activities are undertaken primarily by local governments.  Additional state expenditures in this category, in large part paid for with federal money, are in the state aid to local government category.

“Other Expenditures,” at 9.8% of total state expenditures, includes some small functions, such as state parks and libraries.  But is primarily composed of Other And Unallocable, which by itself accounted for 7.3% of state government expenditures in FY 2017.

Click to access 2006_classification_manual.pdf

That function, according to the Census Bureau’s governments manual, includes lump-sum contributions for employee benefits (retirement, unemployment and workers’ compensation, health and life insurances, etc.) other than transfers to own insurance trusts; premiums for government-wide fire, auto, liability, and other such insurances. In other words, the health insurance of state government workers, which often (but not always) ends up here instead of being included with expenditures on each function.

State government contributions to state pension systems would be another 3.1% of total state government expenditures – if they were included in the data.  The Census Bureau classifies such contributions as “internal transfers,” and does not consider them to be “expenditures,” Let alone expenditures allocated to individual government functions.  They are “revenues” of the pension system, and the benefit payments are “expenditures.”

This is a big, big problem with the data.  It as if state and local budgets counted the money paid to health insurance companies for employees’ health insurance as “revenues,” and the actual payments by those health insurance companies to health care providers as “expenditures.”  Suffice it to say that whatever figure is reported for an individual government function undertaken primarily by public employees, actual expenditures are in fact higher due to the high cost of pensions and other employee benefits.

The wages & salaries of state government workers in all functions, meanwhile, totaled just 13.8% of state government expenditures in FY 2017.

 

Local government functions can be divided into those that are present just about everywhere, and those that are only located in some municipalities.   In New York State, in fact, local government is divided into townships, which provide only basic services, and incorporated municipalities such as cities and villages, which provide additional services in some areas.  Special districts are another example of separate governments that provide additional services.

Every place in the country has public Elementary and Secondary Schools, which accounted for 35.3% of total U.S. local government direct expenditures in FY 2017, Police and Corrections (local jails), at 6.9%, Highways and Streets, at 4.0%, and local elected officials, administrative and regulatory agencies, the judiciary, and state health departments, grouped together as Bureaucracy, at 7.8% of local government spending.  These activities totaled 53.9% of local government expenditures nationwide, and presumably close to 100.0% of local expenditures in some rural areas.

Additional local government functions, present in some areas but not in others, are Other Infrastructure (public water, sewer, transit, electric and gas), at 17.0% of total local government expenditures in FY 2017, Solid Waste Management, at 1.3%, Fire Protection, at 2.7%, and Parks and Libraries, at 3.3%.  Together these services accounted for 27.0% of total U.S. local government expenditures that year.

Public Welfare, local government-run Hospitals, and public Housing and Community Development accounted for another 11.2% of local expenditures.  State and federal aid and charges for public housing and hospital services fund a large share of these expenditures, reducing their impact on the level of local government taxes.

Finally, Other and Unallocable, including a few small functions but mostly consisting of employee benefits for workers in the full range of government functions, accounted for 10.6% of local government expenditures.  Most of that is employee benefit payments not allocated between the various government functions.

For an idea of how much of this is “other” government activities rather that “unallocable” benefit payments, this category only accounted for 2.2% of local government employment according to the employment phase of the 2017 Census of Governments.  And since extensive local government spending is on private contractors (health, social service, construction) the share of all supported workers actually doing “other” things is much lower.  In New York City, this probably includes the Board of Elections and the Economic Development Corporation.

The division between state and local government varies from state to state, with smaller states often administering more services directly at the state level, and larger states often delegating additional services to county government.  The State of Massachusetts, for example, is taking over county jails. County governments have been eliminated entirely in Connecticut.  In New York State, on the other hand, spending on cash welfare programs and social services is located primarily at the county level.  That is also true in California.  The City of New York, formed by the merge of five counties in 1898, also performs county functions on behalf of the state.

Excluding insurance trust expenditures, New York’s direct state expenditures, at $86.35 per $1,000 of state residents’ personal income in FY 2017, were close to the U.S. average of $85.41.  New Jersey, at $80.38, and Connecticut, at $63.70, were below average while Massachusetts, at $94.06, and Pennsylvania, at $98.69, were above average.  Among the states with notably low direct state expenditures per $1,000 of state residents’ personal income are the largest in the Southeast, Texas and Colorado, and Illinois.

On the other hand New York’s direct local government expenditures, at $181.74 per $1,000 of personal income in New York City and $129.20 per $1,000 in the rest of the state, were far above the U.S. average of $110.85.  The statewide average was $154.40 in direct local government expenditures per $1,000 of personal income.  California, at $130.95 in local government spending per $1,000 of state residents’ personal income, was close to New York.

The State of New York only accounted for 35.9% of direct state & local government expenditures, excluding insurance trust, in New York State, compared with state government shares at with 44.5% for New Jersey, 45.7% for Connecticut, 53.6% for Massachusetts, and 49.9% for Pennsylvania.   The U.S. average was 43.5% state government direct expenditures, as percent of the state and local government total.  The state share was high elsewhere in the Northeast at 61.9% in Vermont, 52.9% in New Hampshire, 53.8% in Maine, and 55.3% in Rhode Island.  It is low in Georgia (39.4%), Florida (37.4%), Illinois 39.3%, Colorado (39.9%) and California (38.1%), though not as low as in New York.

Adding it up, in FY 2017 New York State’s direct state and local government expenditures per $1,000 of state residents’ personal income, excluding pensions and other insurance trust expenditures, were 36.6% higher than the U.S. average in New York City, 9.8% above average in the rest of the state, and 22.7% above average overall.   That explains some of New York’s higher tax burden, but not all of it.  New York’s overall state and local government tax burden was 55.1% above the U.S. average in New York City, 28.7% above average in the rest of the state, and 41.4% above average overall.  Higher pension costs, and lower federal aid, must account for the difference between taxes and expenditures.

One finds the same difference for New Jersey, Connecticut, and Illinois, states with above average state and local government tax burdens per $1,000 of personal income, but also state and local government expenditure levels that are 7.9%, 29.0%, and 9.2% respectively below the U.S. average, when measured the same way.  California’s state and local government expenditures per $1,000 of personal income were 7.8% above the U.S. average in FY 2017.  Such expenditures were 8.2% below average in Texas, 10.6% in Colorado, 8.8% in Maryland, 14.3% in Virginia, 5.2% in North Carolina, 14.4% in Georgia, and 16.4% in Florida.

The states that had the highest state and local government expenditures per $1,000 of state residents’ personal income in FY 2017 were small, low-income and/or sparsely populated states.  Alaska was 73.9% above average the U.S. average, with Wyoming at 46.6% above average, New Mexico at 37.6%, North Dakota at 29.5%, Mississippi at 28.0%, Oregon at 21.4%, Vermont at 19.4%, Hawaii at 18.7%, Kentucky at 17.6%, Nebraska at 15.3%, South Carolina at 14.1%, and Iowa at 12.0%.

New York’s direct state government expenditures are about average per $1,000 of state residents’ personal income overall, but not in most categories.  Instead, New York was far above average in Medical Vendor Payments and State Hospitals, at $49.16 compared with a U.S. average of $37.14.  And far below average in Higher Education, at $8.31 vs. $15.05, Public Welfare and Social Services at $0.60 vs. $4.48, and Highways at $3.62 vs. 6.47.

New York’s public welfare payments and social services are administered by local governments, not the state government.  The City of New York is responsible for maintaining state highways within the city’s boundaries, albeit with state funds. And New York State’s young adults are more likely to attend private colleges, rather than state colleges and universities, than the U.S. average.

Conversely, some of New York’s relatively high level of local government expenditures is explained by functions administered at the local level in New York State, but at the state level in some other states.  And some of it is explained by services that are provided in New York State, especially in New York City, that are not provided elsewhere.  Including professional fire protection, municipal garbage pick-up, extensive public infrastructure, public transit, public housing, and public hospitals.  In growing Sunbelt states, even in areas where such services are available to residents, they are often provided by businesses to private communities funded by homeowner association dues, and thus not counted here.

However, even for local government functions that one finds just about everywhere – Elementary and Secondary Education, Police, Correction (Jails), Highways and Streets, and Bureaucracy — both New York City and the rest of the state have higher than average local government expenditures.   The U.S. average for these services was $59.79 in local government expenditures per $1,000 of personal income, compared with $73.12 in New York City and $78.94 in the rest of the state taken together.  New Jersey and Pennsylvania were slightly above average at $61.79 and $64.09, with Connecticut and Massachusetts well below average at $46.02 and $44.31.

Just comparing states based on “standard” local government services some reputedly “small government” states are not that small, and some reputedly “big government” states are not that big.  Texas, at $60.42 in local government expenditures per $1,000 of state residents’ personal income, is about average for these “standard” local government services.  Illinois, at $59.15, is slightly below average, and California ($64.13) and Oregon ($61.25) only modestly above.  States with very low levels of expenditures in these categories include Florida ($48.16), Indiana ($47.86), Colorado ($52.73) and Oklahoma ($49.44).

North Dakota ($83.60) and Wyoming ($81.83) where the only states where local government expenditures were higher, per $1,000 of personal income, than in the portion of New York State outside New York City, with Alaska, at $76.98, also higher than New York City.  Vermont was also high at $66.41.  These are states with small populations and relatively low total resident incomes, but expensive government spending thanks to extensive federal aid and taxes on non-residents – oil and gas extraction in Alaska and Wyoming, second homeowners in Vermont.  Otherwise, the highest local government expenditures per $1,000 of personal income may be found in Ohio ($68.34), Nebraska ($67.83), Minnesota ($67.82), Wisconsin ($66.59), New Mexico ($66.18), and Iowa ($64.88).

Due to the failure to modernize this data set, and state and local government financial reporting in general, however, it is always an open question whether taxpayer pension contributions are being included in these expenditures. And whether those contributions, and other employee benefits, are being correctly assigned to each government functions, or lumped together in the “Other and Unallocable: category.

According to the manual, the Census Bureau is in theory not counting taxpayer pension contributions to pension funds run by the same level of government – local contributions to local government-run pension funds, and state contributions to state-run pension funds.  Most pension funds are run by states, and so local government taxpayer contributions that are sent to those state funds are being counted. But many large older cities, including New York, Chicago, and Philadelphia have their own pension funds for their own employees.  And in many states, including California, Illinois and Pennsylvania, although teachers throughout the state are included in one big state-run pension fund, taxpayer pension contributions for other workers, notably and most expensively police officers and firefighters, go to local pension systems.  And thus may not be counted as expenditures in the Census of Governments at all.

Taxpayer pension contributions are generally counted as local government expenditures for the portion of New York State outside New York City, because their employees are included in the New York State pension system, and local government contributions are therefore “spent” by sending them to the state. And since most Elementary and Secondary Education expenditures in the rest of the state are undertaken by independent school districts, it is likely that pension contributions on behalf of teachers are correctly assigned to that function.  Other pension contributions may be lumped into “Other and Unallocable.”

At one point, however, Census Bureau data started to show the State of New York deducting teacher pension contributions from state aid to local governments elsewhere in the state, and placing the money directly in the state teacher pension fund.  This may or may not have had the effect of having some of the spending by those schools disappear from the Census of Goverments.  The State of New York’s taxpayer contribution to its own pension system increased from 22.8% of total taxpayer contributions in FY 2002, reflecting only contributions on behalf of state workers only, to 61.1% of the total in FY 2003, almost certainly including some local government employees outside New York City.  It has been above 50.0%, for the most part, ever since.   In contrast, the state pension system gets three dollars in employee contributions from local government employees for every one dollar from state government employees.

New York City has its own pension system for its own employees, and as a result it is possible, if not likely, that most of its pension expenditures are not being counted as expenditures at all.  Just “internal transfers.”  Thus the City of New York’s expenditures are even higher, compared with the rest of the state, than the Census of Governments data makes it appear.   The Census of Governments has New York City Police Protection expenditures at just $5.4 billion. The “full agency costs” table in New York City budget documents shows that actual total NYPD expenditures were $9.6 billion, with the difference accounted for by NYPD pensions and fringe benefits.  The other fringe benefits are presumably included in the $10.8 billion in City of New York “Other and Unallocable” expenditures for FY 2017 in the Census of Governments.  The pension contributions – a cost of $2.6 billion in FY 2017 according to city budget documents – were presumably not counted as expenditures in the Census of Governments at all.

There are two exceptions.  A comparison between the $27.5 billion in current expenditures on Elementary and Secondary Schools as recorded by the Census of Governments, and the $27.3 billion as recorded by the Census Bureau’s more detailed annual Education Finances data, shows that pension contributions and other fringe benefits included are in fact included NYC’s public school spending in the Census of Governments. That is likely true all around the country, as most teacher pension funds are operated by state governments on behalf of all the teachers in the state.  It may even be true in the rest of the New York State, since more detailed data is available on school spending from that other source.

And, a comparison between the $9.1 billion for New York City Transit current expenditures in the Census of Governments and the $9.5 billion in operating expenses in the MTA budget implies that pensions and other fringe benefits are being counted as New York Mass Transit expenditures as well. That may also be true of transit agencies around the country.  Like the schools, there is a more detailed, annual source of data on mass transit expenditures – the National Transit database.  Both data sources will be analyzed in the individual posts on these two functions.

With those caveats in mind, the data shows that on “standard services” provided by local governments just about everywhere, the $73.12 per $1,000 of city residents’ personal income spent in New York City compared with $73.07 in the Downstate Suburb counties, $79.71 in the Upstate Urban counties, and $102.33 in the rural and small city counties in the rest of New York State.  The economies of those modest income rural counties are highly dependent on local government jobs funded by taxpayers elsewhere.  So are Broome County (Binghamton), at $108.61, along with Chemung County (Elmira), at $121.76.  The local economy had collapsed out from under local government on New York’s southern tier before the coronavirus even hit.

 

If this is the way things are, then how in a broad overview sense have things changed?  Spending on public employee pensions, public employee health benefits, and other health care via Medicaid have increased, and spending on everything else has been compressed, with the trends stronger in New York City than elsewhere.

Comparing three Census of Governments years, U.S. state government Medical Vendor Payments expenditures increased from $18.05 per $1,000 of personal income in FY 1997 to $22.71 in FY 2007 to $31.99 in FY 2017.  This in a country where many people are uninsured, and where the coronavirus has exposed a fundamental incapacity to ensure basic health – and how much of health care could be considered “non-essential.”  The increase was from $29.64 to $35.64 to $45.03 in New York State.

New York State’s state Medical Vendor Payments expenditures per $1,000 of state residents’ personal income were 64.2% above the U.S. average in FY 1997, 56.9% higher in FY 2007, and 40.7% higher in FY 2017.  During the late 1990s and early 2000s, when New York’s Medicaid expenditures were exploding everywhere, the Greater New York Hospital Association and Local 1199, the hospital workers’ union routinely ran television aids threatening to let our babies die unless those increases continued.  At some point that might have sparked a backlash, but a modest one –New York’s Medical Vendor Payment expenditures are still absorbing more and more of state residents’ income.

Back when the Centers for Medicare and Medicaid were making state-by-state data on Medicaid expenditures readily available, I was surprised at how low California’s Medicaid expenditures per beneficiary were across a host of age groups and services.  In contrast with New York.  That has apparently now changed, with California, at $37.47, now comparable with Massachusetts at $38.98 and Vermont at $34.68, two states that have something resembling universal health insurance.

Nationwide, state and local government taxpayer pension contributions fell from $6.31 per $1,000 of personal income in FY 1997 to just $3.46 per $1,000 of personal income in FY 2007, before rising to $8.57 per $1,000 of personal income in FY 2017.  It appears that some state and local politicians got credit for being saints, heroes and geniuses by shorting the pension funds and distributing the money as tax cuts and/or more spending on other things.

Notably in New Jersey, where taxpayer contributions fell from $12.40 per $1,000 of personal income in FY 1997 to just $0.12 per $1,000 of personal income in FY 2007, before rising to a still-low $6.45 per $1,000 of personal income in FY 2017.  Connecticut, where a decrease from $5.24 to $0.88 was followed by an increase to $12.05.  Illinois, from $5.03 to $3.13 and then back to $16.87.  Pennsylvania at $5.20 to $1.72 and then up to $10.76.  Oklahoma at $6.95 to $3.43 then back up to $7.57. Michigan, at $8.29 to $4.19 then up to $9.52.  North Carolina, from $4.06 to $0.78 then back up to $4.34.

All these states, and more, are facing more and more taxpayer dollars contributed to pension funds in the future, because of money that Generation Greed didn’t put in during the past, with worse and worse consequences. In most of them not enough money was being put in to get out of the hole even before the coronavirus. And now that virus will reduce the incomes of future taxpayers, who will be stuck with bills shifted from richer prior generations, even further.

New York and California taxpayers will also face soaring pension costs, but for a different reason – retroactive pension increases for politically powerful public employee unions, with massive costs that were lied about, and deferred, at the time as part of the deals.  With New York City residents the worst off of all, and nowhere else particularly close.

New York City’s taxpayer pension contributions were at $6.14 per $1,000 of personal income in FY 1997, $13.24 in FY 2007, and $20.45 in FY 2017. City officials are still lying about the cost of those pension increases, with pension contributions still far lower than would be needed to get out of the hole.  The increase was from $3.84 to $5.96 to $7.46 for the rest of New York State. The State of New York pension system is still far better funded than the City of New York pension system, despite lower taxpayer contributions over several decades, for reasons I don’t understand and no one is willing to talk about.  California’s contributions dipped from $6.80 per $1,000 of personal income in FY 1997 to $6.28 in FY 2007 before rising to $12.50 in FY 2017.

New York City taxpayers are being forced to pay more and more for public employee pensions, as a share of their personal incomes, even though past city taxpayers paid more for public employee pensions as a percent of public employee wages and salaries, than taxpayers anywhere else, as I showed in this long-term analysis of public employee pensions using Census Bureau data.

https://larrylittlefield.wordpress.com/2018/12/16/sold-out-futures-by-state-public-employee-pensions-in-fy-2016/

In FY 2017, NYC’s taxpayer pension contributions equaled 33.5% of the wages and salaries of the city’s public employees, compared for just 9.7% for the State of New York pension system and an average of 15.0% for all U.S. state and local government pension systems combined.  The comparable figures were 11.0% for New Jersey, 24.1% for Connecticut, 14.9% for Massachusetts, 21.9% for Pennsylvania, and 20.5% in California.   But still just 9.0% in Texas, 9.8% in Colorado, 9.6% Oklahoma, 9.4% in Washington, 7.0% in North Carolina, and 9.3% in Florida.  In these states, and many others, the full taxpayer contributions required to pay future promised pensions may not be being made.  In Texas, the cities of Dallas, Fort Worth and Houston area already practically broke.  And all public pension systems are contributing less that will ultimately be required on the assumption that the inflated asset prices of the 1996 to 2019 period are permanent.

At the national level, one can see that the increase in state and local government spending on Medical Vendor Payments, Public Hospitals (also mostly financed by Medicaid) and public employee pensions is long term. That leaves less of America’s personal income available for other things – either things Americans would purchase themselves individually, or other public services and benefits they might want to have collectively.

This increase in spending on old age and health benefits extends to the federal government, thanks to the choices of the majority Republican-voting, tax cutting, high consumption spending generations now over age 62, the richest in U.S. history.  As in the case of state and local government, they promised themselves things but refused to pay for them, leaving massive burdens to the poorer, less parented generations that followed them.  Federal spending on most things, shown as “all other” in the chart, has been ebbing away, as I discussed in the overview of federal revenues and expenditures I did for the Presidential election four years ago.

https://larrylittlefield.wordpress.com/2016/02/21/federal-expenditures-a-government-transformed/

I don’t have enough confidence in the honesty of any figures produced by the Trump Administration to repeat that analysis, although frankly some of the data (or lack thereof) coming out of the City of New York in the past six years has been just as bad.  And the New York State budget has always been published in a way that makes it incomprehensible.

What are the consequences?  It’s only money, right?  An economist will tell you is that the real cost of money shifted to a) is money that is no longer available for b), c) and d).  The real cost is “opportunity cost.”

One of those consequences is less money, per $1,000 of personal income, spent on the wages and salaries of local government employees still on the job and providing public services.  In New York City, that reduction was from $70.94 per $1,000 of personal income in FY 1997 to $65.08 in FY 2007 to just $52.83 in FY 2017.  Not because public employees have been paid less in cash, compared with private sector workers, to offset the falling cost of their benefits – the reverse is true.  But because there are fewer of them relative to the number of workers in the city and their aggregate income, meaning less in services is provided.

This might explain the continuous statements by NYC’s public union officials, and contractor union officials, that they owe the people of NYC nothing because they have been cheated of $billions.  Notably the United Federation of Teachers (UFT) and their Astroturf group the AQE, the Patrolmen’s Benevolent Association (PBA), and the Transit Workers’ Union (TWU).  Even as other city taxpayers and service recipients are continually forced to pay more, and services deteriorate.  Including benefit costs, public employees are now so rich other workers can’t afford them, something that is bound to get worse now that less in tax money will be flowing in from Wall Street, and other city workers will also be poorer.  The same squeeze was already happening elsewhere, even as unions cut deals for far less in pay and benefits for later-hired public workers.

Infrastructure investment remains inadequate, and if the chart makes it perceive that the City of New York has done pretty well in that regard, consider that we get less actual investment in exchange for far higher prices here than in the past, and compared with anywhere else in the country.  In part to pay for the retroactively enriched pension benefits of New York’s construction union workers, with most of those who got far more than they were promised now already retired.

https://larrylittlefield.wordpress.com/2018/08/15/an-open-secret-mta-capital-costs-have-soared-to-pay-for-underfunded-metro-new-york-construction-union-pensions/

Soaring Medicaid and public employee pension costs have made it impossible for New York City to address its housing crisis.

Unlike most of the country, New York City had been pillaged by retroactive pension increases for politically powerful public employee unions (and soaring debts) once before, during the 1966 to 1972 administration of Mayor John V. Lindsay.  The result was soaring taxes, collapsing public services, and near bankruptcy in the 1970s. Most NYC public services stillhad not recovered from the Lindsay and (at the state level Governor) Rockefeller Administrations, and now things are going to get worse.  Meanwhile, as discussed in the previous post, federal support for urban Housing and Community Development expenditures started to get slashed during the 1980s, in the Reagan Administration.

Because the burden of Lindsay’s debts and pension deals eased during the 1980s, as they were paid off and partially wiped out by high 1970s inflation, however, New York City was able to use some of the savings to embark on the largest subsidized housing program ever financed by a local government. This took place during the last term of former Mayor Koch, with work carrying over through the Dinkins Administration.

In His Own Words: Ed Koch on Housing and Homelessness

Building and rehabilitating subsidized housing was obviously easier at a time when the city owned many vacant and abandoned lots and buildings, taken for unpaid property taxes during its 1960s and 1970s decline.  But even if the coronavirus were to lead to future property abandonment in NYC, making property available, the re-Lindsaying of the pensions and the soaring cost of Medicaid for today’s seniors means the money to build and rehabilitate housing will not be available.

Since the personal income of city residents recovered in the 1980s, the percent of that income going to city employee compensation – in wages and salaries, in pension contributions, and in other benefits, as indicated by “Other and Unallocated” spending, has moved up and down with the economy and the level of taxpayer personal income, but otherwise remained about the same. The share of that compensation going to wages and salaries, however, has shrunk.

As another fiscal crisis is faced due to the deflation of an unsustainable, debt-driven U.S. economy, something that started in 2019 and then was accelerated by the coronavirus, the personal income of city residents is set to plunge.  But public employee pension and health care costs are going to soar further.  And wages and salaries of individual public employees are also going to rise, as they continue to receive guaranteed wage increases, and lower-paid recently-hired workers – the ones who do most of the work – are laid off.   Since productivity gains – doing more as much or work with fewer hours work – are essentially illegal in New York City, the result will be more service reductions of all kinds.  Service cuts we will be told we deserve unless, or even if, New York’s already-high tax burden rises further.

You can find a table of local government expenditures in the first post in this series, here.

https://larrylittlefield.wordpress.com/2020/04/19/background-and-databases-2017-census-of-governments-finance-data/

If you want a table with most of the charts used in this post, it is here.

Total Spending Census of Gov Charts

 

Public employee pension benefits were supposed to be pre-funded, with those workers paid as they did the work, and other retiree benefits should have been. Otherwise, however, some might argue that having more seniors and fewer children as a percent of the population should have led to a shift in public spending from local government wages and salaries, of which more go to teachers than anyone else, to Medicaid, for which much of the spending is on seniors.  But is that reasonable, and it that what happened?

That is the overview.   A series of posts on specific government functions, starting with local government education, will follow.

 

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