For the past 25 years, there has been a bi-partisan consensus in favor of unlimited spending of later-born generations’ future income to meet the ever-escalating perceived needs of those who perceive themselves to be needy.
Executive pay had soared during the late-1990s stock market bubble, as executives had claimed to have personally created “shareholder value.” Since then every time stock prices have gone down toward something like fair value, the federal government has intervened to keep them inflated, so huge bonuses based on “shareholder value” could continue, even as the overall economy rotted away. Because that’s what rich and older asset holders needed and deserved.
Unionized public employees had already been promised retirement benefits far in excess of what other Americans were going to receive. But in many locations, such as New York, these were repeatedly enriched, because such employees need to do less for other people and for a shorter period of time. While retirement benefits for others were cut, because unionized public employees and retirees need lower prices for better goods and services, and that requires other workers to be lower paid.
The richest generations in U.S. history, those now over age 62, needed to be able to sell their houses to poorer later-born Americans for high prices in order to live in the style to which they had become accustomed. So every time the cost of housing threatened to fall to a level that reflected the lower incomes of later-born generations, the government intervened to keep prices high.
And since those over 62 and the rich expect to get benefits out of society but don’t want to pay for them, their taxes have been repeatedly cut, with lots of special deals for capital and retirement income and property taxes for seniors. Even as spending on everything other than seniors, retired public employees, and bailouts for the rich and big businesses have gone down, both at the federal level and in states where seniors are a higher share of the voting population.
It has been an era of unlimited generosity for those who have enormous perceived needs, the cost to everyone else and the future and those who live in it be damned. Massive income redistribution upward to the already better off that isn’t even allowed to be called what it is, so the entitled beneficiaries don’t have to feel bad about it. But what about state and local government spending on people who are objectively worse off, those who were once thought of as the needy? Well, that’s another thing entirely!
This is another post based on a tabulation of state and local government finances data based on the 2017 Census of Governments, similar data for prior years, and related sources. The first post in the series, explaining where the data comes from and how it was tabulated, is once again here.
The prior post, on health care, is here.
https://larrylittlefield.wordpress.com/2020/05/14/health-care-2017-census-of-governments-data/
In Census of Governments data, state and local government Health Care spending is mixed up with “Aid to the Needy,” because much of it is financed by the joint federal-state Medicaid program, which is supposed to be means tested and limited to the poor. On the revenue side, therefore, federal Medicaid funding is included with “public welfare” aid to state and local governments in one big category.
A huge share of Americans, however, are now in the former middle class, without health insurance (or with bad insurance) and without savings that can be used for health care. And the cost of health care and, in particular, custodial care for seniors, is now so high that almost anyone who suffers a serious injury or illness, or requires nursing home or home health care, will end up as qualifying “medically needy” under Medicaid, and be funded by the program.
Medicaid is actually the problem with Obamacare. Why pay for insurance, even at subsidized rates, when you are always one paycheck from poverty anyway, and if you are sick you lose your paycheck, become poor, and qualify for care under Medicaid? Until you need health care, paying for Obamacare means responsibly sacrificing to benefit other people, something few Americans of the generations who have been in charge for the past 25 years have been willing to do.
The other big outlet for state and local government health care expenditures isn’t identified as health care spending at all – health insurance purchased on behalf of state and local government workers and retirees. This is generally so much richer than that provided to private sector and non-profit workers that any member of a household with a public employee in it will usually have their health care paid for by state and local taxpayers.
The rich benefits they already receive are the reason that public employee unions fought against Hillarycare, Obamacare, and Medicare for all, and have been against the candidacies of Democratic Presidential candidates from New Jersey Senator Bill Bradley in 2000 to Massachusetts Senator Elizabeth Warren. The public sector unions prefer a multi-tier system with different levels of health care based on how much you matter, paid for in large part by those who don’t matter. In alliance with the rich and corporate interests and the health care industry itself.
But let’s talk about the actual poor, because places with more poor people in theory will require more spending on Aid to the Needy.
According to Small Area Income and Poverty Estimates data from the U.S. Census Bureau, New York State’s poverty rate was 13.4% in 2017, only moderately above the 12.3% U.S. average. A second estimate was released for that year, which shows much lower poverty for New York, below the U.S. average, and much higher poverty in states that voted for Trump. Let’s leave it aside for now. With their large populations of new immigrants and young adults stating out with nothing, New York and California have tended to have above average poverty rates.
Poverty tends to be high in small southern and western states, not shown in the chart. It is below 10.0% in New Hampshire (6.6%), Colorado (7.7%), New Jersey (8.6%), Maryland (7.8%), and Washington State (9.9%). North Carolina was high at 14.5%. Among the other large states, however, the range is much narrower.
Within New York State, poverty has long been concentrated in New York City, point of entry for immigrants and in-migrants from other states. The 18.0% recorded for 2017 is low compared with the city’s recent history. Since its 1970s collapse NYC’s poverty rate has generally been close to 20.0%, and never below 19.0% until recently. I haven’t heard many advocates for the poor celebrating this achievement, however. While a high poverty rate was decried as indicative of neglect of the poor, a falling poverty rate is decried as evidence of gentrification. Thus the continual confusion – advocates for the poor want more and more poor people in New York City, not fewer, but also don’t want them to be poor.
The other big news is the nearly average poverty rate of 13.3% for Rockland County, long considered one of the “affluent suburbs,” and the 17.5% rate for Broome County (Binghamton) on the Southern Tier, nearly as high as New York City. As I showed in another post some time ago, in 2016 the mean work earnings per private sector worker in Upstate New York, according to the Bureau of Economic Analysis, was lower than it had been in 1969. Many Upstate Urban Counties are poorer than they once were, with the Southern Tier worst off of all.
Statewide, New York’s poverty rate had long been above the U.S. average, especially in the deep early 1990s recession, which hit the Northeast and California particularly hard – harder than any since. The image of California in general, and Los Angeles in particular, shifted from the Beach Boys to Blade Runner at the time. During the years since the Great Recession, however, economic trends favored New York City and coastal California to an extreme degree – the reverse of the early l990s.
Other states went in the opposite direction. Connecticut, with its strict single-family housing zoning in much of the state, had virtually zoned out poverty in the mid-1980s. But by 2017, its poverty rate was approaching the national average. North Carolina was once part of the poor, pre-Sunbelt South. In the early 1980s, during the “de-industrialization” recession when many of its textile mills closed, its poverty rate briefly exceeded 20.0%. North Carolina boomed through the 1980s and 1990s, however, with banking in Charlotte and high technology in the Raleigh-Durham-Chapel Hill triangle. But the Great Recession hit North Carolina hard, lifting its poverty rate to 18.6% in 2013, the highest in 30 years. Michigan had once been an affluent state with above average per capita income and below average poverty, but it had the equivalent of a Great Depression from 2000 to 2010. Its poverty rate was 15.7% in the latter year, more than the U.S. average, and it was still above average in 2017.
A spreadsheet with the poverty data I collected for this analysis is here.
PovertyByStateCountyYear1980 to 2018
So what are Americans willing to do for the poor? One thing they didn’t want to do until a few weeks ago is give them cash.
In FY 2017 cash welfare, of the sort that was once available under the Aid for Families with Dependent Children (AFDC) program before 1996, and the Temporary Assistance to Needy Families (TANF) program since, accounted for just 2.6% of state and local government spending on Aid to the Needy. Public Hospitals and Medical Vendor Payments, discussed in the prior post, accounted for 81.1%. Social Services, such as those provided by the Department of Homeless Services and Administration for Children’s Services in New York City, accounted for 11.6%, and Housing and Community Development, including public housing and federal Section 8 rent subsidies for private housing, accounted for another 4.8%.
The other big destination for social spending is SNAP, which was once known as Food Stamps. It is not shown because it is strictly federal. But like Medicaid-funded services, Social Services, and housing assistance, SNAP Food Assistance is a voucher the poor can only use for a designated purpose, not for whatever they please – like cash.
The federal government provides most of the funding for Aid to the Needy, and sets most of the rules. So New York State’s distribution of expenditures is little different than that of the nation as a whole, with a somewhat higher share spent on Housing and Community Development and a somewhat lower share spent on Social Services. Cash welfare accounted for 2.8% of the total in New York.
The spreadsheet with most of the tables and charts used in this post is here.
A table of spending on Cash Welfare and Social Services by state is here.
New York State, particularly New York City, and California were once known as America’s welfare capitals, and their spending on cash welfare per $1,000 of state residents’ personal income is still in the top ten among states. The U.S. average was $1.38 per $1,000 of personal income, compared with $2.70 for California and $2.03 for New York. The leading state for spending on cash welfare in FY 2017, however, was once again Utah at $4.34. In that state, where most people have similar backgrounds, the solution to people in need is to trust them and give them money. When it comes to Social Services, Utah spent just $3.17 per $1,000 of state residents’ personal income, about half the U.S. average of $6.24
Both New York City and the Rest of New York State were above the U.S. average in Cash Welfare spending in FY 2017, at $2.37 and $1.72 per $1,000 of personal income respectively. Minnesota was nearly as high as New York City, however, and Pennsylvania, California and Maryland were higher. None of these states have poverty rates as high as New York City. In fact their rates were all lower than New York State. Florida, Georgia and Colorado, on the other hand, spent next to nothing on Cash Welfare per $1,000 of state residents’ personal income. The same may be said of Illinois, at just $0.19 per $1,000 of personal income, and Michigan at $0.54. Illinois is not going broke because it helped the poor or, as shown in the prior post, spent very much on Health Care.
Even within New York State, New York City is no longer the welfare capital. Its $2.37 per $1,000 of city residents’ personal income spent on Cash Welfare in FY 2017 compared with $2.48 in Niagara County, $2.69 in Monroe County (Rochester), $2.90 in Schenectady County, $3.30 in Erie County (Buffalo), and $9.82 in Broome County (Binghamton). None of the counties had a poverty rate as high as New York City. But none had the kind of growth in low-wage service jobs as an alternative to Cash Welfare New York City had, at least until the coronavirus shutdown, and none has had the growth in high wage employment to help cover the welfare bill either.
In the early 1990s recession, when New York City had 1 million people on welfare, many people Upstate and elsewhere bought into the narrative that city residents, particularly racial minorities and immigrants, were freeloaders who didn’t want to work. Some still believe this. But many of New York’s “progressives” have also believed that poor people should just be maintained in poverty, and not expected to work in exchange for benefits, because they can’t be expected to make a contribution to other people. Actual work is for others.
The shift in Cash Welfare expenditures between areas of the state belies both these ideologies. So did the long lines of people in Harlem, waiting for a chance at a minimum wage jobs at a new McDonalds in the early 1990s. Most people want work as a way to be connected with and useful to other people. Even among the small share who actually think they would rather live off others with nothing in exchange, doing so doesn’t actually make them happy.
During the Presidential campaign, candidate Andrew Yang asserted that artificial intelligence and robots would make most people redundant, and the best we could do for them is to give them $1,000 per month to go off somewhere, presumably somewhere removed from necessary and productive people, and live out their days – with no work requirement.
https://ballotpedia.org/Andrew_Yang
He failed to perceive that meaningful work is not only a human obligation, but also a human need, and a human right. If we end up with the world Yang envisions, which I don’t expect, we will have failed as an economy and society. If they can’t get it on their own, work will need to be provided to people, even if that costs more.
The big shift in Cash Welfare, however, is down. Federal welfare, AFDC and then TANF, has traditionally gone to women who didn’t have men to support them. It was conceived, in the 1930s, as money to help widows and children, and decried after the 1960s as an incentive to break up poor families to get on the dole. States, or at least some of them, had their own additional cash assistance programs for other destitute people, paid for solely with state taxes. In New York, that program was known as Home Relief before the 1996 “welfare reform” act, and Safety Net Assistance afterward.
The data shows that state and local government spending on federal Cash Welfare equaled $9.64 per $1,000 of personal income in 1972. By 1989 that had fallen to just $3.69, not due to changes in legislation, but due to frozen benefit levels, which caused their value to fall relative to inflation. After an increase to $4.32 in FY 1993, during the deep early 1990s recession, federal Cash Welfare expenditures plunged to just $1.04 in per $1,000 of personal income in 2008. The 1996 welfare reform bill put a five-year time limit on eligibility for federal welfare, and as the “Welfare Generation” aged out of the program, spending plunged. So did federal support for poor children, even as spending on seniors soared.
The money spent on the Troubled Asset Relief Program to bail out Wall Street in 2008 exceeded all the money that had been spent on federal welfare from the early 1960s to that point. While that doesn’t include an upward adjustment for inflation for Cash Welfare benefits, TARP was just one tiny part of the actual bailout, most of which was then (and is today) in the form of cut-rate financing from the Federal Reserve to prop up asset prices. All that acrimony over “welfare queens” that drove politics for decades was over a relatively small amount of money. Meanwhile fro some work requirements were seen not as a way to get people working, but rather as a way to make them go away.
Federal welfare plunged to just $0.39 per $1,000 of personal income in FY 2017. At that time the $0.99 the states were spending on their own programs was greater. Some of those on state programs had hit their five-year time limit for federal welfare. Since the Great Recession, Cash Welfare financed by states has been no lower than it was since before Welfare Reform.
Back in the early 1980s, President Reagan made the states an offer: if the states would take full responsibility for paying for Cash Welfare, the federal government would take full responsibility to paying for Medicaid. The Democrats turned it down as in sufficient – the federal government should pay for everything. They perceived that stance to be in their political interest, just like the Republicans say screwing up health care reform as in their political interest. Since the early 1980s Cash Welfare spending has plunged and Medicaid spending has soared, burdening states in general and Democratic leaning states – where the federal government covers a lower share of the cost – most of all.
New York State has followed the national trend, except that its spending on Safety Net Assistance was lower in the mid-2010s, per $1,000 of state residents’ personal income, than it had been before Welfare Reform.
A spreadsheet with total Cash Welfare spending over the years by state, with NYC and the Rest of the State separately, is here.
With overall Cash Welfare payments per $1,000 of state residents’ personal income now so low everywhere, it is hard to tell the states apart. Back in FY 1972, New York City’s Cash Welfare expenditures equaled $25.38 per $1,000 of city residents’ personal income, a significant burden. It was down to $2.37 per $1,000 of personal income in FY 2017, or one-tenth as much.
California continues to stand out as being significantly above average, but even there Cash Welfare expenditures per $1,000 of personal income are much lower than in the past, and were continuing to decrease through FY 2017.
Aid to the poorest under Cash Welfare was above the U.S. average in Illinois through the 1980s and in Michigan through the early 1990s. It is below the U.S. average now. And not because the economies of these states have been booming. Rather, it seems as if the worse off other people become, the more they are able to be turned against each other.
Cash welfare expenditures were never high in Florida and Georgia, but since the Great Recession, as these states became relatively poorer, such expenditures have virtually disappeared.
With economic distress shifting elsewhere in the wake of the Great Recession, the sort of anti-freeloading hostility directed at Blacks and Latinos receiving Cash Welfare in New York City in the 1960s and 1960s had shifted to anyone receiving unemployment benefits in the 2010s. Unemployment and disability benefits had previously been thought of as “earned benefits” for working people, even middle class people. With Cash Welfare mostly already gone, however, those seeking to pander to the better off have turned their hostility to unemployment.
A table of spending by state on unemployment insurance benefits and Housing and Community Development is here.
I tried to use data from the 2017 Census of Governments and prior years to capture the trend in unemployment insurance spending, but cyclical changes obscure the long term trend – even when only regular state unemployment benefit payments, not also federal “extended” benefits that are made available in recessions, are included. Unemployment insurance benefit payments soared per $1,000 of personal income during recessions, to peaks of $8.14 in 1983, $6.27 in 1992, $5.44 in 2003, and $10.79 in 2010, before plunging.
It stands to reason, however, that the long-term trend in payments per unemployed worker is down. Because the average wage on which unemployment benefits is based has fallen. And because more and more unemployed workers have been forced to work as freelancers and contractors in the “gig economy,” and until the past two months were not eligible for unemployment benefit payments. But unemployment payments per unemployed worker is also apparently cyclical, perhaps because workers stay unemployed for more months during recessions, and collect more benefits.
What I can say is the unemployment insurance benefits per unemployed worker have plunged in North Carolina and Michigan. These states reacted to the economic troubles they faced in the 2000s and 2010s by turning on unemployed workers. Cutting the weeks of unemployment insurance payments from the 26 that had been in place since the start of unemployment insurance in the 1930s, to just 12 weeks.
Michigan might have increased it to 20 weeks at some point. But Georgia and Florida, in addition to North Carolina, now only provide 12 weeks of unemployment benefits, with many other states now at or below 20. In FY 2017, North Carolina’s unemployment benefit payments per unemployed worker were far below the U.S. average, after having been slightly lower prior to the Great Recession. And Michigan’s benefit payments per employed worker were lower than average, after having been higher before the Great Recession.
In NY 2017, New York’s unemployment insurance benefit payments totaled $1.77 per $1,000 of state residents’ personal income, below the U.S. average of $1.83 and far below the $3.48 for New Jersey, the $2.80 for Connecticut, the $3.24 for Massachusetts, and the $3.03 for Pennsylvania.
New York’s spending was low compared with the total income of all its residents’ because its maximum monthly unemployment benefit is relatively low. Benefits are based on what you were paid, up to a maximum. If New York were to raise its maximum benefit, the added unemployment insurance benefits would go to highest-wage workers. Limiting the maximum unemployment payment, while having generous benefit rules otherwise, is one of the few New York policies that actually shifts resources to the less well off.
Meanwhile, unemployment benefits payments equaled just $0.47 per $1,000 of state residents’ personal income in North Carolina, $0.73 in Georgia, and $0.39 in Florida. In these states, workers who lost their jobs might as well be “welfare queens.”
One reason for reductions in benefits – reductions in unemployment insurance taxes. States have been in a race to the bottom, trying to outbid each other for corporate locations by providing the least assistance to workers possible. New York State’s unemployment insurance taxes, per $1,000 of sate residents’ personal income, were about average in FY 2017, though low for the Northeast. North Carolina and Michigan unemployment insurance taxes per $1,000 of state residents’ personal income in FY 2017. Perhaps with more people in economic distress, those states decided to do less for each.
According to the Census of Governments, however, unemployment insurance taxes aren’t really taxes. They are trust fund contributions. The difference depends on how much you trust the government.
The U.S. Department of Labor has standards as to how much of a trust fund states ought to build up, in order to pay benefits in a recession. New York State has never followed those guidelines, and has always ended up short in each recession, instead borrowing $billions from the federal government to pay benefits. New York had just $1.57 in unemployment insurance trust fund assets at the U.S. Treasury per $1,000 of state residents’ personal income in FY 2017, about half the U.S. average of $1.57. That was the least in the Northeast by far. California, however, had no unemployment insurance trust fund at all.
California was one of 36 states that had to borrow from the federal fund during the last recession. The state then ended up borrowing $10.7 billion, which it only finished paying back in 2018. The principal borrowed was paid back with higher taxes on employers, on behalf of each worker on payroll. More than $1.4 billion in interest was paid back from state general funds from 2011 through 2018.
The higher taxes levied to pay the debt are a concern for businesses that will already face a huge financial burden of lost revenue during the shutdown.
Perhaps you think there is no difference between having businesses pay taxes for unemployment up front before a recession, and having them pay those taxes, plus a little interest, after a recession. After all, interest rates are low.
What this ignores, however, is that you don’t have the same businesses in a state at the two points in time. Any business that relocates jobs and taxable payroll out of New York and California to a lower tax state, as many are surely considering now given the success of working from home, will be off the hook for the unemployment insurance taxes needed to pay benefits to their own laid off workers. Any new business that locates in New York and California in the future would be stuck with those huge bills for other businesses instead.
Pandering to large existing campaign contributing companies by letting them not pay, while using new businesses as cash cows, is consistent with the policies of majority Democratic Party in these states over the past for 40 years. So are deals with Red State Republicans to bail out Wall Street, large existing corporations and the already rich.
Want to analyze this further? A spreadsheet with data on the number of unemployed people from the Bureau of Labor Statistics, and unemployment insurance benefit payments from the U.S. Census Bureau (both total including federal and regular state payments also), for all 50 states by year from 1976 to 2017, is here.
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When I read the book Greater Gotham, I found that the same arguments about helping the poor with money, versus helping them by seeking to change or at least control their behavior, that I have heard since the 1970s, actually go back 100 years before that. All in a circle, with no direction and not much success. One might ask the question “after 150 years of social work, why are some people still poor?” Unless one accepts that the purpose of social services is to ameliorate the worst effects of poverty, at least the effects on the non-poor, rather than change anything.
Since the failure of the Great Society in the 1960s, the main anti-poverty program has been zoning – limiting housing options in the suburbs to single-family owner-occupancy, to keep the poor out. Including poorer later-born generations of adults who grew up in the suburbs, unless and until older generations are forced to pay for less and allow accessory units to be added.
As of FY 2017, New York State’s state and local government spending on Social Services, at $8.11 per $1,000 of state residents personal income, was higher than the U.S. average of $6.24 by 30.0%. New York’s poverty rate exceeded the national average by 8.9%. So New York’s Social Services expenditures were not low, but New York was hardly the social work capital. Massachusetts ($8.54), Pennsylvania ($9.22), Vermont ($20.78), Maine ($14.21), Minnesota ($9.47), Ohio ($8.18), Wisconsin ($10.66), and Oregon ($19.58) spent more.
Even low-tax New Hampshire, with half as much spending on Cash Welfare per $1,000 of personal income as the U.S. average, and the fourth lowest unemployment insurance benefit payments per $1,000 of personal income, spent nearly as much as New York on Social Services per $1,000 of state residents’ personal income, at $7.46. The Live Free or Die State thus embodies that idea that instead of giving poor people money, the government should pay middle class people to tell them what to do.
Of the $8.11 spent on Social Services per $1,000 of personal income in New York, the State of New York spent just $0.60. Local governments, and in particular county governments, are responsible for this function in New York. In contrast most of the spending is at the state level in most of the Northeast, with an even split in Pennsylvania.
For local government spending alone, within New York State, the $10.98 in Social Services expenditures per $1,000 of city residents’ personal income in New York City compares with $2.37 in the Downstate Suburbs, $4.82 in Upstate Urban Counties, and $7.38 in the Rest of New York State. There were just and handful of rural counties were Social Services spending levels per $1,000 of personal income exceeded New York City. In most of suburban and rural America the poor are distant from the better off, but in the city they are right in one’s face. This seems to induce higher levels of spending on Social Services – witness the big push to get the homeless of the subways going on as this is written. Social Services expenditures per $1,000 of county residents’ personal income were lowest in Westchester County at $1.49 and Saratoga County at $1.71.
Nationwide, state and local government Social Services expenditures fell slightly per $1,000 of personal income from FY 2007 to FY 2017, from $6.69 to $6.24. This may seem strange in the middle of an opioid addiction crisis.
New York City’s state & local government Social Services expenditures per $1,000 of personal income fell from $14.02 in FY 2007, about the same as the $14.06 in FY 1997, down to just $11.58 in FY 2017. For the Rest of New York State the decrease was from $7.15 to $4.91. Like public Health, in New York Social Services appear to have gotten squeezed between relentlessly rising public employee pension costs, the increasing demands of those lobbying for more spending on schools and Medicaid, and the state’s already high tax burden.
Rising public employee pension costs might also explain falling Social Services expenditures in Connecticut (from $5.72 per $1,000 of state residents’ personal income in FY 2007 to $4.58 in 2017), and California (from $8.21 to $7.04). In Illinois, which fell $billions behind in payments to social service non-profits for services already rendered, the decrease was from $8.12 to $7.16.
On the other hand, the overall tax burden fell in Pennsylvania, where Social Services expenditures dropped from $9.77 per $1,000 of state residents’ personal income in FY 2007 to $9.22 in FY 2017, in Michigan (from $8.54 to $7.71), in Oklahoma (from $6.18 to $5.93) and in Colorado (from $$5.18 to $4.32).
Massachusetts bucked the national trend, with rising expenditures.
As noted, state and local government Health Care and Aid to the Needy are mixed together on the revenue side in Census of Governments data. On the revenue side, adding federal aid to state governments for Health and Hospitals (code B42) and Public Welfare (code B79) – which includes federal Medicaid funding, and charges for services at public Hospitals (A36). And on the expenditure side, dividing this by state and local government spending on public Health, public Hospitals, Medical Vendor Payments, Cash Welfare, and Social Services. One finds that federal aid revenues and charges covered 73.2% of state and local government expenditures in these categories in FY 2017, leaving 26.8% of such expenditures to be paid for with state and local government taxes and other local revenues.
As one might expect the share covered by federal aid and charges was much higher in poor states such as Alabama (90.3%), Arkansas (80.8%), Mississippi (90.0%), New Mexico (87.9%), and South Carolina (81.3%).
It is no surprise that the share covered by federal aid and charges is lower than average in affluent states with below average poverty such as Connecticut (59.4%), New Jersey (62.4%), Massachusetts (48.1%), and Minnesota (61.0%).
The federal government extracts money from states such as New York, New Jersey, Connecticut, Massachusetts, and California, and sends it to states such as Alabama, Arkansas, Mississippi, New Mexico and South Carolina. Adding more detail, one might say it extracts excess money from the affluent of the former states, and sends it to the poor of the latter states. With little gratitude flowing in the other direction.
What has surprised me each time I do this calculation, however, is that New York State is at 74.1%, actually higher than the U.S. average. This despite the fact that the federal matching share for base Medicaid expenditures, the biggest program in this category, is at the minimum 50.0% for New York, a low as in those other affluent states. California, at 79.3%, also has a higher than average share of its Health Care and Aid to the Needy expenditures covered by federal aid and charges. The data could be wrong, but it has been wrong in each Census of Governments I have tabulated. Perhaps the reason is that when it comes to spending in these categories, if the federal government isn’t paying for part of it, California and New York aren’t doing it.
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One area New York State really stands out with regard to spending on Aid to the Needy is local government spending on Housing and Community Development.
This is a type of spending that takes place primarily in cities. And New York, home of the largest city, spent $4.76 spent per $1,000 of state residents’ personal income on local government Housing and Community Development expenditures in FY 2017, far above the U.S. average of $2.59 and second in the country behind the District of Columbia at $13.95. The only other states above $3.00 in spending per $1,000 of state residents’ personal income were Alaska ($4.16), California ($3.54), Maryland ($3.12), Massachusetts ($3.34), Oregon ($3.03), Rhode Island ($3.21), and Washington ($3.30). These states are on the two coasts, and many suffer from housing affordability problems.
Within New York State, New York City accounted for $5.825 billion out of $6.15 billion in total Housing and Community Development expenditures. These figures do not include interest payments or pension contribution and health benefit payments for agency staff.
New York City’s Housing and Community Development expenditures per $1,000 of city residents’ personal income, at $9.44 in FY 2017, are high even compared with most central cities. The city of Baltimore, at $14.08, and Washington DC, at $13.95 are higher. So is Franklin County (Columbus) at $12.02, where the Metropolitan Columbus Housing Authority is apparently large for a mid-sized city. Others counties where Housing and Community Development spending exceeded $6.00 per $1,000 of county residents personal income include Suffolk County (Boston) at $7.64, Multnomah County (Portland, Oregon) at $6.53, Philadelphia at $8.93, and St. Louis at $7.13.
A spreadsheet of data on housing and community development spending over the years for selected states is here.
The construction of most public housing mostly took place prior to 1972, following the Housing act of 1937. The federal government paid for the buildings, and subsidized their operation, but tenants could only be charged 25 percent of their income in rent, later raised to 30 percent during the Reagan Administration. By the early 1970s, however, concentrating poor people in large separate complexes where only they lived, and only in central cities, was considered a failure, and public housing construction stopped.
The Section 8 program, which provides poor tenants with subsidies to move into apartments of their own choosing, was enacted in 1974, and since the early 1980s U.S. local government Housing and Community Development expenditures have been stable per $1,000 of personal income, save for a big boost to repair public housing 2009 to 2012, as part of the Great Recession stimulus program. In FY 2016, however, national spending was $2.59 per $1,000 of personal income, the lowest since 1980.
New York City’s Housing and Community Development spending had a second peak from 1989 to 1994. New York City’s 1970s decline had left large numbers of vacant buildings and lots in the city’s possession, while 1970s inflation and 1980s recovery had reduced the burden of 1960s and early 1970s debts and pension increases for city taxpayers. As the city’s finances recovered, money was shifted to a large, locally funded affordable housing construction program. It ended when the city ran out of vacant lots and buildings, and the soaring debts and pension increases of the 1960s were repeated, ending its ability to fund new subsidized.
New York City’s Housing and Community Development spending has held up at a more modest level since, but it has been insufficient to cope with a public housing inventory that continues to age and deteriorate, and rising pension and employee benefit costs.
Section 8 vouchers were originally a way for additional households to benefit from federal housing assistance, and to do so in a way that did not tie them to housing projects. In New York City, however, Section 8 subsidies have increasingly been used to increase the depth of subsidy for those already in public housing, to offset rising costs. Meanwhile, a decline in average household size compared with decades past, with more empty nesters and fewer families with children, means the number of people actually resident in New York City public housing has fallen from about 600,000 to around 400,000. Therefore, fewer and fewer New Yorkers are benefitting from affordable housing programs – in the middle of an affordable housing crisis.
The counties containing many of the nation’s largest cities reduced spending on Housing and Community Development per $1,000 of county residents’ personal income from FY 1997 to FY 2017. Two that increased spending are Washington DC and Suffolk County (Boston).
Washington DC is like New York City was in the late 1980s and early 1990s. Thanks to former Mayor Marion Barry, who was caught smoking crack in a hotel room in the early 1990s, that city was put under a financial control board – right at the point where other cities and states started retroactively increasing and underfunding public employee pensions. Washington DC was responsibly run through that entire irresponsible era, and does not have soaring pension costs. It also has extensive vacant land, in once-industrial areas that had become abandoned by the 1980s and early 1990s, when Washington was one of the nation’s murder capitals. That land is in the city’s possession, and the city has been selling it to developers, and using some of the proceeds for affordable housing, stoking a massive development boom.
It may be that financial data for the Boston Redevelopment Authority is being included in the Housing and Community Development category. That agency also ended up with extensive land holdings from the urban decline era, that subsequently soared in value during the urban boom. So it has engaged in development projects on a large scale, with the focus of its efforts shifting to housing as that same boom led to an affordable housing crisis.
New York City had no such money for housing, even before the coronavirus. Despite aging buildings, reduced federal funding, and limits on rents, that federal funding and those rents covered 95.9% of NYC’s local government Housing and Community Development expenditures (not including employee pensions and benefits and interest) in FY 2017. The U.S. average was 82.4%. Once again, with the nation’s highest tax burden and more and more money going elsewhere, if the federal government wasn’t going to pay for it, New York was not going to do it.
Then a federal investigation found that many New York City Housing Authority buildings were in poor repair, and many children who live there had been exposed to lead. The federal government demanded that New York City spend more money to fix the buildings, but provided no more money itself.
While the problems of these buildings are serious, the reason lead exposure appeared to increase is because the standard for acceptable levels of lead has been repeatedly reduced. It was 20 parts per million in the early 1990s, but is now down to 5. NYCHA was caught reporting lead cases based on the prior standard of 10, to make the problem seem less bad. But based on where they lived and the age of the building they lived in, I suspect that if the new standard of 5 had been applied to Mayor DeBlasio’s own children when they were young, those children would have failed to meet it. Nonetheless the problems of these buildings are getting worse, and New York didn’t have enough money to repair them even before the latest fiscal crisis.
Even so, the tenants in NYCHA projects are better off than other poor people in private housing, who often pay half of their income in rent, and there is a waiting list to get in. The population in the projects is dropping because seniors paying low rents refuse to move from large apartments to smaller ones commensurate with their current needs, even as families with children are squeezed into less and less space. Just about every Mayor from Koch on has said that such older singles should be required to move to smaller apartments. It has been beaten back every time. Even among the poorest, those who already have more feel entitled to more still, while those with less are neglected – especially those in later-born generations.
One more thought.
Plenty of people study poverty, think about poverty, write about poverty, and have direct experience with the poor. I don’t have the sort of expertise required to propose solutions, but I do have an observation that I have not seen made elsewhere.
There have been many examples of poor and troubled families advancing, sometimes over multiple generations, by leaving their poor and troubled areas behind. Moving from poor rural areas and poor counties to U.S. cities, moving from ghettos in those cities (famously the Lower East Side in New York City) to middle class urban neighborhoods, and then moving from cities in general to the suburbs. How many of New York City’s former ethnic groups, once thought of hopelessly downtrodden and depraved, have trod that path? Today, rising Black and Latino families are moving to the suburbs, all over the country, as suburban housing ages and becomes more affordable, and racial barriers slowly fall. Is that bad?
There have been many examples of poor and troubled areas becoming less poor and less troubled because non-poor people moved in, invested, created new businesses and institutions, and turned things around. Sometimes these were immigrants from other countries, and sometimes these were the offspring of generations who had once lived in what later became poor areas, who have returned. In the latter case, if many of them are White, this is called gentrification. Is that bad? And would it still be bad if some of the offspring of rising Black and Latino families who left in the past 30 years now return to the city, after having grown up in the suburbs?
I cannot think, however, of any cases where poor and troubled people have remained in entirely poor and troubled areas, and both the people and the areas got better together. Can any of you? And what does that say about New York City’s public housing projects?
I doubt much money will be available to help the poor in the wake of Generation Greed. By running up debts, disinvesting in the infrastructure, and promising themselves rich old age benefits they refused to pay for, that generation has left the generations to follow much poorer in general. With whatever money is available, however, it might be useful to be clear about whether the goal of a particular kind of social spending is to improve the places or help the people, and plan accordingly.
The next post will be on public services that have been provided disproportionately to the poor. Police Protection, Fire Protection, and Corrections.
Saying the Unsaid in New York 