In FY 1972, when a large number of Baby Boomers were still in school, U.S. elementary and secondary school expenditures equaled 4.59% of U.S. residents’ personal income. That fell to a low of 3.69% of income in FY 1984, after the Boomers exited and enrollment shrunk. The figure increased to a non-recession (recessions depress income) high of 4.51% of income in FY 2004, when a large share of the Millennials were in school, before falling to around 3.9% of income each year from FY 2014 to FY 2017, after they exited.
New York State, however, has diverged from the pattern. In New York City elementary and secondary school expenditures were around 5.0% of personal income each year from FY 2013 to FY 2017, actually higher than the 4.3% of personal income in 2004. The rest of NY State averaged 6.4% of income in FY 2004, but was only modestly lower at just under 6.0% of personal income from FY 2015 to FY 2017. New York’s elementary and secondary school expenditures were already high, compared with the rest of the country, in FY 2004, but the gap has increased since – despite an economy that has favored NY State in general, and New York City in particular, increasing the personal income that spending is being divided by.
New York’s public school expenditures are now at an extreme, even as the city and state face recession. Rising pension and retiree health care expenditures, as a result of a long series of retroactive pension increases for teachers, are one key reason. A high level of public school employment, despite falling enrollment, with the schools used as a job program and source of dues revenues, is another.
This is the first in a series of analyses of individual state and local government functions based on government finances data from the FY 2017 Census of Governments, along with similar data from prior years. The preceding posts have provided an overview of expenditures overall…
Along with taxes
And other revenues.
The irrevocable deals for, and accumulated privileges of, those working in public education in New York are now so great, compared with ordinary New Yorkers, that a return to the devastating reduction in quality to the level of the 1970s appears likely – even at the nation’s highest tax burden. In some other places, however, low education service quality is better explained by low current spending, and low past taxpayer contributions to teacher pension funds leading to more and more money diverted from current teachers. Local government education revenue and expenditure data by state, per $1,000 of each state’s residents’ personal income, are shown in the following table.
As noted in the first post in this series, which provided background on where the data comes from and how it was tabulated…
I measure state and local government revenues and expenditures on a “per $1,000 of personal income” basis (or percent of personal income basis) because that adjusts for both the cost of living in different states and areas, and the ability of local taxpayers to pay. The cost of living is higher on the Northeast Corridor, for example, but so are average incomes. The per $1,000 of personal income measure adjusts for both these factors.
In FY 2017, New York State’s public elementary and secondary schools spent $53.58 per $1,000 of state residents’ personal income, or 5.36% of everyone’s income. The U.S. average was $39.13, or 3.91% of income. The figures were $49.15 for New York City and $57.66 for the rest of NY State, compared with $47.25 for New Jersey, $36.26 for Connecticut, $34.68 for Massachusetts, and $43.45 for Pennsylvania. Along with $37.57 for Maryland, $37.63 for Virginia, $38.55 for Illinois, $42.53 for Minnesota, $35.18 for California, $37.80 for Oregon and $36.22 for Washington State. None anywhere close to New York.
In fact all of these states were within 12.0% below the U.S. average and 21.0% higher. New York State was 46.9% higher. The portion of the state outside NYC was 47.4% higher. An order of magnitude higher.
New York State ranked 3rdin elementary and secondary school spending per $1,000 of state residents’ personal income, behind Wyoming ($58.49) and Alaska ($55.86), two states with high government spending relative to the income of the small number of state residents, funded by oil and gas extraction tax revenues. Vermont ($50.86) and the District of Columbia ($50.64) were the only other states that were close to New York.
Texas, despite its “Red State” anti-tax reputation, was slightly above the U.S. average at $41.61 spent per $1,000 of state residents’ personal income. Much of the Midwest was also around the average, with the exception of Indiana at just $33.93, ranked 42nd. Other low spending states, relative to total personal income, include Oklahoma ($33.60), Colorado ($32.02), Florida ($28.33), North Carolina ($32.23), and Arizona ($27.51). None of these states are as low, compared with the U.S. average, as New York State is high. Florida comes closest, at 27.9% below average.
When I first started compiling this data Tennessee ranked last, and was the only state where elementary and secondary expenditures were lower, per $1,000 of state residents’ personal income, than in New York City. Today Tennessee, at $32.46, ranks 45th despite spending less per $1,000 of personal income than it had in the mid-1990s. Spending has fallen far more elsewhere. Hawaii is currently last at $27.33.
Looking around New York State, one finds that elementary and secondary school expenditures are higher than the U.S. average, measured per $1,000 of personal income, everywhere. Even though New York is a slow-growth state with relatively few children, and above average income. The U.S. average of $39.13 compares with $49.15 for New York City, $51.65 for the Downstate Suburbs, $55.80 for the Upstate Urban Counties, and $72.75 for the rural and small city counties in the Rest of New York State.
By county, spending per $1,000 of personal income is lowest in those where high average incomes reduce the burden of high expenditures, including Westchester ($40.04), Nassau ($49.47), Albany ($44.40) and Saratoga ($42.41). And highest in the low-income areas where high state aid, and in come cases property taxes paid by second homeowners, allow school districts to keep up with that high spending. For example in Franklin County, in the Adirondacks, Elementary and Secondary Education expenditures equaled $101.26 per $1,000 of personal income, or more than 10.0% of the income of all full time residents. State education aid equaled $80.65 per $1,000 of the personal incomes of the small number of people who live there, and 17.7% of its housing units are second homes.
New York City’s merely moderately high spending per $1,000 of its residents’ personal income disguises just how high spending is per student, for two reasons. First, NYC has historically had relative few school age children as a percent of its population, as many married couples live in the city during young adulthood but then move to the suburbs, for more space and better schools, after becoming parents.
The situation in 2017 shows a surprising reversal, with children ages 5 to 9 accounting for 6.4% of NYC residents, compared with 6.2% for the U.S. as a whole, 5.6% for the Downstate Suburbs, 5.4% for the Upstate Urban areas, and 5.4% for Connecticut. The Upstate Rural Counties, at 6.1%, and New Jersey, at 5.9%, were close to the U.S. average.
The more historically typical pattern re-asserts itself at higher ages. Traditionally, even some of the married parents who remain in the city during their children’s early childhood years get out for middle school and high school. Children ages 10 to 14 accounted for just 5.5% of NYC residents, compared with 6.5% of U.S. residents. An those ages 15 to 17 accounted for just 2.6% of NYC residents, compared with 3.9% of U.S. residents.
It is notable that Sam Zell, the legendary “Grave Dancer” real estate investor, believes that despite the coronavirus talented young adults will continue to choose to live in large dense cities, as the had in the wake of the Great Recession. But families with children may become even less likely to do so.
Even among those children who do stay in NYC, moreover, a higher than average share attend private schools rather than public schools. In the U.S, 10.9% of children ages 5 to 17 who are enrolled in school are enrolled in private school. The share is 17.5% for New York City, and 13.3% for the Downstate Suburbs. The Upstate Urban Counties are about average at 11.0%, with the Upstate Rural Counties below average at 8.5%. Within New York City, private school attendance is particularly high in Manhattan and Brooklyn.
Unlike most other state and local government functions, there is a second, more detailed and timely source of data education finance data from the U.S. Census Bureau for schools – the Annual Survey of School System Finances.
I tabulated this data for FY 2017 and published it in this post last June.
And analyzed that data and provided charts in this post.
This data allows a calculation of expenditures per student, by category. In FY 2017, New York City spent $28,495 per student on its public schools, more than the average for the mostly affluent, high-spending Downstate New York Suburbs ($27,196), more than the average for New Jersey ($21,003), more than the average for Connecticut ($21,095), more than the average for Massachusetts ($18,047). And within Connecticut, more than the average for Darien ($22,201), Westport ($24,432) and Greenwich, home of the hedge fund managers ($25,304).
On “instructional” (ie. teachers) wages and benefits alone, New York City spent $16,998 per student, which is $339,967 per 20 students, and $203,980 per 12 students. This is the average – some, particularly those with less seniority and in lower pension tiers – get less, but others get more. It would be much higher today.
Just for comparison, the median New York City resident with a college degree alone earned $60,656 in cash wages, salaries and/or self-employment income in 2017, according to the Census Bureau’s American Community Survey, down 0.8% from a decade earlier after adjustment for inflation. The median worker with a graduate degree earned $77,184, down 3.5% over a decade – and a teaching degree is the easiest graduate degree to get. New York City teachers start at $59,000 per year, I have read, and NYC teacher benefit costs equal a stunning 63.2% of their wages and salaries. New York City’s instructional wages and benefits at $16,998 per student compares with an average of $15,888 for New York’s Downstate Suburbs, $9,179 in New Jersey, $9,982 in Connecticut, and $8,579 in Massachusetts – little more than half the level of New York City.
While the Annual Survey of Public School Finances allows a calculation of expenditures per student, it doesn’t automatically adjust for the higher cost of living, and greater ability of taxpayers to pay, in the high-income Northeast Corridor. Unlike expenditures per $1,000 of area residents’ personal income. To get around that, I adjusted per-student spending based on the average private sector earnings for these high-income areas, compared with the U.S. average.
With the adjustment, total NYC school expenditures fall to $22,386 per student and the average for the Downstate suburbs falls to $21,366. That compares with a national average of $14,202 per student. NYC remains 57.6% higher. But NYC is about the same level as the averages for not only the Downstate Suburbs but also the Upstate Urban Counties ($21,646) and the Rest of New York State ($22,957). The finding is the same as for other recent years. When an adjustment for the cost of living is applied, all broad areas of New York State have about the same per student school spending – at a level that is far higher than any other state in the country. Although there is wide variation among school districts within other parts of the state.
On instructional (teacher) wages and benefits alone, New York City spent $13,354 per student after downward adjustment. That is higher than the $12,482 for the Downstate Suburbs, the $11,709 for the Upstate Urban Counties, and the $12,179 for the Rest of New York State. And it is 107.7% higher (more than double) the U.S. average of $6,430 per student on teachers. More than double the U.S. average – after a large downward adjustment for the higher cost of living here.
One reason is the cost of retroactively enriched pensions, with as many or more years retired for each year worked for those NYC teachers who remain until their full retirement age. Another is a high level of staffing, with a large amount of time spent outside the classroom, and many out of classroom assignments, even among active workers. As I showed in the local government education post for the employment phase of the Census of Governments last fall…
In March 2017, New York City had just 8.0 students per full time equivalent instructional employee, despite an average class size north of 26. The U.S. average was 10.2, compared with 7.7 for the Downstate Suburbs, 7.0 for the Upstate Urban Counties, 6.5 for the Upstate Rural Counties, 7.9 for New Jersey, 7.7 for Fairfield County, and 6.7 for the Rest of Connecticut.
To me these costs, these staffing levels relative to class sizes, call the entire structure of public education as it has been into question. Why not a class size of 12, with younger children educated in teachers’ homes right there in the neighorhood, with a student to instructional employee ratio of 10, let alone 8?
Getting back to the finance phase of the 2017 Census of Governments…
In FY 2017 New York City’s $49.15 in elementary and secondary school expenditures per $1,000 of city residents’ personal income was much higher than the level of spending in the other counties containing the nation’s largest cities, other older cities at the center of large metro areas, and booming cities that some might chose as a location in competition with New York.
Only Washington DC was higher, at $50.64 per $1,000 of city residents’ personal income, followed by Baltimore City at $45.18 and Harris County Texas (Houston) at $40.10. Cook County (Chicago) was at $37.05, Los Angeles County at $34.75, and Philadelphia at $35.89. Meanwhile, spending per $1,000 of personal income was less than half the NYC average in Denver County at $24.26, Mecklenburg County (Charlotte) at $24.19, Travis County (Austin) at $23.18 and King County (Seattle) at $23.97.
Suffolk County (Boston) was nearly at as low at $26.73, but only because there is so much money and so few children there: according to the Annual Survey of School System Finances the City of Boston’s schools were the only ones among the 100 largest U.S. school systems with per student spending levels even close to NYC. The City of San Francisco is another small, rich city with relatively few children, and its elementary and secondary school spending was just $9.07 per $1,000 of personal income. These two cities are the equivalent of Manhattan alone, not all of NYC.
In affluent suburban counties, despite generally elevated school spending per student, elementary and secondary school expenditures tend to be below the U.S. average when measured per $1,000 of county residents’ personal income, due to high average incomes. Neither Fairfield County in Connecticut nor any of the counties of Northern New Jersey, therefore, are higher than the average for New York’s Downstate Suburbs ($51.65). Union County NJ, which also includes the poor older industrial city of Elizabeth, comes closest at $49.80. Urban Hudson County is at just $25.62 thanks to an influx of young professionals that has increased personal income, but not added many public school children.
The same may be said for the other affluent suburban counties on the coasts. Moving down the East Coast, the $51.65 for the Downstate Suburbs compares with $29.65 in Middlesex County, MA, $36.81 in Montgomery County, PA, $35.53 in Baltimore County, MD, $30.25 in Montgomery County, MD, $32.25 in Fairfax County, VA, $28.80 in Wake County, NC (Raleigh) and just $17.96 in Palm Beach County, FL. And in California, it is just $20.51 in Santa Clara County (Silicon Valley), $29.02 in Orange County, and $33.08 in San Diego County. None even close to the average for New York’s Downstate Suburbs.
Similarly, the average level of elementary and secondary school expenditures per $1,000 of county residents’ personal income in the Upstate Urban Counties, at $55.80, is higher than the portion of Connecticut outside Fairfield County, at $44.57, and other “Rustbelt” Counties containing older manufacturing cities. Cuyahoga County (Cleveland) is at $44.47, Franklin County (Columbus) is at $44.27, Alleghany County (Pittsburgh) is at $40.22, and Milwaukee County is at $42.47. The City of St. Louis at just $24.78, with adjacent St. Louis County at $31.89. Wayne County (Detroit) is at $36.72, with adjacent Oakland County at just $27.82. The most prosperous among these counties, Hennepin County (Minneapolis), is well below the U.S. average at $29.03. That compares with $63.86 in Monroe County NY (Rochester), an area that has a similar precision manufacturing heritage, but less success in retaining it.
Rounding out the four regions of New York State, the average for the Upstate Rural Counties, at $72.75 in elementary and secondary school expenditures per $1,000 of personal income, is much higher than Maine ($41.19), New Hampshire ($37.70), and Vermont ($50.86). Or even Alaska and Wyoming, which are also cold and have even lower population densities.
I use the same scale (a maximum of $70 per $1,000 of personal income) to show that local government Higher Education expenditures are low compared with Elementary and Secondary Education expenditures. In many states there are no Higher Education expenditures at the local government level, while in others, including New York, local governments in administer community colleges. New York State averaged just $2.72 in local government Higher Education expenditures per $1,000 of personal income in FY 2017, compared with $53.58 in Elementary and Secondary School expenditures.
The $2.24 in local government Higher Education spending per $1,000 of personal income in New York City and $3.16 for the rest of New York State compare with an average of $2.57 for the U.S. (including states where state governments run community colleges and there are no local government expenditures), $2.25 for New Jersey, and $1.70 for Pennsylvania. California is high in this category at $5.03. Spending on higher education “Auxiliary Enterprises” (stadiums, dormitories, food services, etc) tend to be low at community colleges, since relatively few of their students reside at the schools.
Things are different over in Europe, where most children complete elementary and secondary school by age 15 or 16. The equivalent of community college or vocational training then follows, with children selected for one or another based on exams.
Given how much elementary and secondary schools cost in New York, and the fact that many children either drop out or start taking college advanced placement courses in their last two years of high school, and given the fiscal crisis New York will be facing, one wonders if the European model would be a more fair and efficient deal for children and taxpayers here too. After school activities could also be moved out of the schools, since in New York City teachers are paid for these, and this added income has counted for and inflated their pensions since the 2008 retroactive pension increase.
In FY 2017 local government Higher Education expenditures were below the U.S. average of $2.57 per $1,000 of personal income, in the Downstate Suburbs, at $2.26, as well as in New York City, at $2.24. The Upstate Urban Counties averaged $3.38, and the rural counties in the Rest of New York State averaged $4.47. Not every New York county has a community college. Columbia-Greene community college, for example, serves those two counties on two sides of the Hudson River.
Local government Higher Education expenditures totaled $6.18 per $1,000 of personal income of Columbia County residents but just $1.07 per $1,000 of the personal income of Greene County residents – presumably a contribution to the college across the river.
Overall, therefore, New York State’s local government education expenditures are stunningly high no matter how measured. Not only in comparison with anti-government “Red States” with lower tax burdens, but also in comparison with other states with allegedly similar political preferences. As in most cases regarding the cost of government, New York is off the charts. And yet New York’s education advocates and unions continue to claim that New York’s schools are inadequate, and services have had to be cut, because they have been cheated out of $billions – by the state government. And no elected official hoping to remain in office dares to publicly contradict them.
The data shows otherwise. In FY 2017 New York State had $25.96 in federal and state aid to Local Government Education per $1,000 of state residents’ personal income, well above the U.S. average of $22.17 and the averages of $15.15 for New Jersey, $13.92 for Connecticut, $13.64 for Massachusetts, and $21.18 for Connecticut. The only states where state and federal funding for Local Government Education were higher than New York, per $1,000 of personal income, were states where local government funding was very limited. States such as California ($26.35), Michigan ($28.22), Minnesota ($28.55), Wisconsin ($27.76) and Vermont ($50.56).
Within New York State, state and federal aid to Local Government Education per $1,000 of personal income is lowest in the counties with the highest personal income. Compared with the U.S. average of $22.17, the Downstate Suburbs averaged nearly as much at $18.24, despite much lower levels in Nassau at $14.66 and Westchester at $12.88. New York City was right at the U.S. average, with the Upstate Urban Counties well above at $28.86. Albany County at $19.58 and Saratoga County at $19.56 were below average. The rural counties in the Rest of New York State got $49.56 in federal and state school aid per $1,000 of state residents’ personal income. That is almost enough to match the high spending level of Vermont — without any local taxpayer contribution.
State and federal aid to Local Government Education increased, per $1,000 of personal income, from FY 1997 to FY 2007 and then decreased from FY 2007 to FY 2017, in the U.S. as a whole, and all around the New York area. The U.S. average ended up 6.3% lower in FY 2017 than it had been in FY 1997, with Connecticut 3.2% lower and New Jersey just 3.1% higher. This compares with 12.6% higher for New York City, 35.8% for the Downstate Suburbs, and 29.3% higher for the Upstate Urban Counties, but just 6.1% higher for the rural counties in the Rest of New York State.
New York State’s STAR program (school tax reform) started in the mid-1990s, and sends additional state money to the suburban school districts that spend the most, and have the highest single-family, owner-occupied home property tax bases, as “property tax relief.” It presumably accounts for the large increase in state and federal school aid to the Downstate Suburbs and Upstate Urban Counties. On the other hand New York City has a large stock of rental housing and a local income tax. The Rest of NY State has its schools funded mostly by aid revenues. These areas have benefitted less from STAR.
The federal No Child Left Behind act, followed by federal budget cuts in the wake of the Great Recession, were also factor in the rise and fall of state and federal education aid. The biggest factor, however, was enrollment, with the large Millennial generation entering and then leaving school.
Because the U.S. population is aging in general, with more seniors, school-age children made up a higher share of the U.S. population when the Baby Boomers were in school than they did when the equally large Millennial generation was in school. But there still was a bump up in school-age children as a percent of the population from 1990 to 2000, and Elementary and Secondary Education expenditures per $1,000 of personal income bumped up with it.
Those expenditures continued to rise until 2010, despite a decrease in school age children as a percent of the population. Through both cycles the political clout of teachers and parents peaked just as the enrollment wave crested, leading to the construction of soon-to-be empty school buildings and the hiring of soon-to-be-redundant teachers. This was followed by a steep drop in Elementary and Secondary Education expenditures per $1,000 of personal income from 2010 to 2017, as children continued to diminish as a share of the population.
In the U.S. as a whole, and in New Jersey and Connecticut, local government funding for education followed the up and then down pattern of federal and state aid.
But in New York State things have been different. Enrollment in rural New York has been plunging for some time, as has personal income, and the result has been consistent reduction in local education funding – from $36.61 per $1,000 of area residents’ personal income in FY 2002, the peak among Census of Governments years, to just $27.66 in FY 2017. The Downstate Suburbs and Upstate Urban Counties took advantage of an increase in state and federal aid to education from FY 1997 to FY 2007 to reduce local contributions, and those local contributions fell further from FY 2007 to FY 2017. Governor Andrew Cuomo’s property tax cap, which requires approval by referendum to increase local property taxes by more than inflation, may be one of the factors in this restraint.
In New York City, which is exempt from the property tax cap and where STAR provided limited benefit, there has been no such restraint. Local government funding for Elementary and Secondary School education increased from $20.04 per $1,000 of personal income in FY 1997 to $21.48 in FY 2007 to $29.21 in FY 2017.
Like revenues, Elementary and Secondary Education expenditures per $1,000 of personal income increased from FY 1997 to FY 2007 and then decreased from FY 2007 to FY 2017 — in the United States, the Downstate Suburbs, the Upstate Urban Counties, the Upstate Rural Counties, New Jersey and Connecticut.
In New York City those expenditures increased from a less than adequate level in FY 1997 to a more than adequate level in FY 2007 – and then kept on rising. In FY 2017 such expenditures were 5.9% lower than they had been in FY 1997 in the U.S., 8.8% higher in the Downstate Suburbs, 7.7% higher in the Upstate Urban Counties, 4.0% lower in the Upstate Rural Counties, 7.1% higher in New Jersey, and 0.1% higher in Connecticut. In most of New York State, Elementary and Secondary Education expenditures are sky-high because they always have been. In New York City, where such expenditures were 30.3% higher in FY 2017 than they had been in FY 1997, such off the chart school spending is something new.
With enrollment falling, per student spending levels from the Annual Survey of Public School Finances shows an even more stunning increase for NYC.
New York City’s inflation-adjusted expenditures per student doubled from FY 1997 to FY 2017, from $14,312 (in $2017) to $28,495. This was at time when the compensation of most workers was falling behind overall inflation in NYC (and workers in much of the U.S. fared even worse). In fact, recent reports show that nationwide, adjusted for inflation, Millennials are being paid about 25.0% less, on average, than Baby Boomers were at the same age, despite higher average educational attainment.
New York City’s per student expenditures increased 54.9%, adjusted for inflation, from FY 1997 to FY 2007, during the so-called “school reform” era. And another 28.6% from that higher base in FY 2007 to FY 2017, leading to the doubling. By category of expenditure, the biggest increase was in instructional employee benefits, including taxpayer contributions to teacher pensions and retiree health insurance. In $2017, New York City’s instructional employee benefits cost $1,745 per student ($34,900 per 20 students) in FY 1997. That nearly quadrupled to $6,585 per student ($131,700 per 20 students) in FY 2017.
There were large increases in school expenditures per student in other parts of New York State during the FY 1997 to FY 2017 period, though not quite so huge as in New York City. While NYC public school spending per student doubled from FY 1997 to FY 2017, it increased 46.4% in the Downstate Suburbs, 62.8% in the Upstate Urban Counties, 64.2% in the Rest of New York State, 46.3% in New Jersey, 72.5% in Connecticut, and 41.1% in Massachusetts. The increase was 48.2% over 20 years for Vermont school districts with 500 or more students, 43.1% in Pennsylvania, and 35.5% for the United States.
U.S. school spending per student, adjusted for inflation, increased 30.3% from FY 1997 to FY 2007, during the “school reform” era, but then just 3.8% from FY 2007 to FY 2017. In some states and areas public school funding per student fell from FY 2007 to FY 2017, after adjustment for inflation, in some cases sharply. The school spending decrease was 22.6% for Florida, the state with the lowest state and local tax burden as a percent of residents’ income in the country.
Some of the decreases in spending elsewhere in the country were in capital construction expenditures. That makes sense, because there is less need to build new schools when enrollment has leveled off nationally and is falling in many locations. In the United States, Education Capital Construction Expenditures increased from $3.36 per $1,000 of personal income in FY 1997 to $4.58 in FY 2007, before falling back to $3.17 in FY 2017. Expenditure levels have remained high in New York City, at $4.57 per $1,000 of personal income in FY 2017, and the rural counties in the Rest of New York State, at $5.39.
Local Government Education operating expenditures, however, also increased from FY 1997 to FY 2007 before falling from FY 2007 to FY 2017. For the United States, the change was from $40.42 per $1,000 of personal income in FY 1997 to $42.82 in FY 2007, and $38.53 in FY 2017. In New York City, however, Local Government Education operating expenditures increased from $34.69 per $1,000 of city residents’ personal income in FY 1997 to $39.97 in FY 2007 and $46.82 in FY 2017.
You’d never know it from the media, but the big issue in New York City public education, the one that ended “school reform” and will drive service cuts, tax increases, and demands for more money in the future as well, is the long series of retroactive pension increases for NYC teachers. The coronavirus will only cause the cost of those deals, relative to the income of city residents, to soar even sooner than it otherwise would have, perhaps to record levels. And this is all under Omerta.
I last showed this history in this post, one that used state and local government pension data collected by the U.S. Census Bureau over the decades to compare the New York City teacher pension fund, the New York State teacher fund, and the New Jersey teacher pension fund.
The first big retroactive pension increase for NYC teachers was all the way back in 1970, during the administration of former NYC Mayor John V. Lindsay. Teachers, who had been promised a pension in their 60s after a long career, were instead allowed to retire at age 55 after just 25 years of work. Additional money went flying out of the pension fund at a financially devastating rate, but no additional taxpayer money was put aside to pay for this at first, probably as part of the same deal. Lindsay wanted to run for President, and was willing to cash in the future of the schools in exchange for support from United Federation of Teachers retirees in the Florida primary. Despite that pension increase, NY taxpayers were paying just 0.05% of their incomes in taxes to pay for teacher pensions in FY 1972, less than the 0.33% of their income taxpayers in the rest of New York State were paying in taxes for teacher retirement there.
The resulting devastation was deferred until after Lindsay left office. By 1981, NYC taxpayers were paying 0.80% of their incomes in taxes for teacher pensions, or one out of every 125 dollars they got. This despite high 1970s inflation, which reduced the value, and cost, of the enriched pensions the UFT had grabbed. The NYC schools, which had a positive reputation prior to the Lindsay Administration, have never fully recovered.
NYC teachers hired after FY 1976 were required to work for 30 years until age 62, similar to the deal prior to the Lindsay pension increase. And gradually, as the pension fund recovered, the burden on taxpayers began to diminish. But as soon as those later-hired teachers began to approach 25 years worked, the UFT ordered its representatives in the state legislature to enact a series of early retirement incentives to allow them to retire as early as previously hired teachers had, with no penalty after all. A big early retirement incentive in 1991 was offset by a special extra contribution to the pension fund using borrowed money, but subsequent early retirement incentives were not paid for at all.
In a huge pension deal in 2000, teacher contributions to their own pensions were eliminated for those with at least 10 years seniority, reducing employee contributions by 75.0%. And an inflation adjustment was added, not only for the future, but also for all the years of the past for already retired teachers. Payouts by the pension fund soared. Mayor Giuliani wanted to run for Senator, and Governor Pataki wanted to run for President, without opposition from the UFT, so they cut that deal. But did not pay for it. NYC taxpayer pension contributions to NYC teacher pensions actually fell to a low of 0.06% of personal income in FY 2001, and stayed low until after 2004.
After Mayor Mike Bloomberg refused to agree to as many early retirement incentives, the UFT sued the City of New York (sued the people who live in it in reality) for age discrimination, and ordered its representatives in the state legislature to provide a chance to retire at 55 after 25 years worked even for teachers nowhere near that age. A permanent incentive. It passed the state legislature easily multiple times, but was not signed until Governor Eliot Spitzer and Mayor Mike Bloomberg, both of whom wanted to be President, agreed to it in 2008.
By then, NYC taxpayer contributions had already soared to 0.47% of city residents’ personal income. They would soar further to a peak of 0.76% of personal income in FY 2011, before being reduced by the city’s economic boom. But additional increases in pension costs are inevitable. As part of the deals, the cost of past pension increases continue to be lied about and deferred to the future. Rising pension costs are likely to once again coincide with falling incomes for city residents with devastating effects.
In FY 2012 the pension benefits of new teachers were once again changed to once again require them to work 30 years until their early 60s before receiving a full pension. And that is all that money is currently being set aside for. We know from history, however, that no UFT teachers will be required to work more than 25 years, no matter what the consequences are for the city and the schools. So this is another example of inadequate pension funding – the failure to fund future retroactive pension increases that are certain to occur. The very silence about the consequences of past deals makes future deals, irrevocable backroom deals with no public discussion passed at 3 am as part of other bills, inevitable.
Many U.S. state and local governments places passed retroactive pension increases during the giddy period around the dot.com bubble in 2000. Only in New York do deals for pension increases continue. The New York City pension funds are some of the worst funded in the country, a huge burden shifted to a poorer future. But the New York State pension funds, including the one that includes teachers in other parts of the state, are among the best-funded state pension funds, despite a much lower level of taxpayer pension contributions over the decades. The same New York State legislature sets the rules for both. No one has ever tried to explain that difference.
People talk about education funding in terms of social justice. But the long series of retroactive pension increases for NYC teachers are among the greatest social injustices in public education.
Lets conclude the analysis with a trip around the country, and series of line charts showing Elementary and Secondary Education expenditures per $1,000 of personal income for different large states over the decades.
The crescendo of retroactive pension increases have taken New York City from having inadequate schools in fiscal crisis due to low spending in the 1970s and 1980s, to inadequate schools in fiscal crisis despite sky-high spending since the 2008 deal, the last straw. To cover up the consequences of that deal, other public services have been de-funded in the years since. One wonders what level of catastrophe will be imposed on the city’s people and children to pay for pension deals a decade or more ago, during the next two or three decades.
Funding levels have been extremely high in the Rest of New York State all along, compared with states such as New Jersey, Connecticut, Massachusetts and Pennsylvania, where public education is widely believe to be excellent. Inadequate past contributions to teacher pension funds, however, are leading to rising taxpayer contributions there, and might make public education in these states far less excellent in the future.
The same may be said of Illinois, where low past taxpayer contributions to teacher pension funds – associated with the low tax burden discussed previously – were already leading to soaring pension costs, and public school layoffs and service cuts, even as the Chicago economy boomed. That is likely to get much worse during the deep recession that has now started. With the exception of Indiana, in FY 2017 Elementary and Secondary Education spending in the Midwestern states was even closer to the U.S. average than it had been in the past.
In Florida, such spending – always well below the U.S. average – has plunged to a new low. North Carolina was close to the U.S. average through FY 1990, but has been well below average most years since, hitting a record low recently. Georgia has gone in the other direction since 2000, with above average Elementary and Secondary Education expenditures per $1,000 of state residents’ personal income, something I was not aware of and had not heard discussed in the national media. The big surge from 2008 to 2010 was associated with a boom in school construction expenditures at a time when the Great Recession, which hit Georgia hard, prevented total personal income from rising. Tennessee remains near the back of the pack in the share of state residents’ personal income it is willing to devote to public education.
If most people were asked whether Elementary and Secondary Education expenditures were higher in Texas or California, they would probably say that Texas is below average and California is above average. If one measures that spending per $1,000 of personal income, and thus adjusts for both the cost of living for teachers and the ability of taxpayers to pay, however, the reverse is actually true – and has been since the early 1980s. That’s right, since the early 1980s. Actual low spending states include Oklahoma, Colorado and Washington, and spending in all these states has been trending down. Texas has made a successful effort to recruit the best teachers out of Oklahoma. The data implies it could probably recruit the best teachers out of California too, because their pay would go farther in Texas.
No matter how many times the New York State United Teachers and United Federation of Teachers push the narrative the New York’s schools don’t have enough money, no matter that none of their “elected” officials dare to contradict this and tell the truth, lest they face an actual election, and no matter how often that propaganda shows up in the media, don’t believe it. It has not been true in NYC for more than 15 years, and has never been true in the rest of the state. Instead resources have been shifted from everyone else, and everything else, to pay more for schools here than is spent just about anywhere else. Without even an acknowledgement and sense of obligation in return.
And now it’s going to get worse.
If facts matter, then there is no way that the media should be talking about public education funding in places such as Florida, Tennessee, Oklahoma and Colorado; and public education in New York State, the same way. And only talking about the former, and not the latter, is lying by what is unsaid.
The spreadsheet with the tables and most of the charts used in this post is here.
And a spreadsheet with the line charts is here.
A post on state government Higher Education, colleges and universities, with some additional discussion of community colleges, will follow.