The U.S. Census Bureau released state and local government and payroll data for March 2016 last fall, and I compiled it over the past few weeks to see how things changed between March 2006 and that year. It appears that in New York City some of the reduction in local government employment relative to population was reversed from March 2014 to March 2016. And it appears than New York City’s local government workers became better off in cash pay relative to private sector workers from 2006 to 2016. Benefit costs, particularly those for the retired, were soaring at the same time. I didn’t find the reduction in NYC mass transit employment I expected, based on cuts in service and maintenance. Meanwhile, the number of students per instructional employee fell to 8.4 in New York City and 7.4 in the rest of New York State.
Those are just some tidbits. As is my custom, however, while the spreadsheet with the tables and charts may be downloaded from this post, my analysis and understanding of what it means will be presented in later posts. What I’d like is for people to read the background information presented below, download the spreadsheet, look at the tables, and make up their own minds before reading what I have to say about it.
Coming into office eight years ago, New Jersey Governor Chris Christie faced a fiscal disaster, following decades of shortsighted but popular policies that robbed the future. He talked like a problem solver, and could have made difficult choices to raise taxes and tolls, and reduce public services for everyone, not just for transit riders. But since the majority of New Jersey residents don’t follow state and local government closely, this would have meant Christie received all the blame for all that had gone before. So he punted, and shifted costs from the past further into the future, to the extent that this was possible. As a result he won a second term. But the future continues to become the present, and the bills continue to come due. He is leaving office as one of the most despised politicians in the country.
Coming into office today, therefore, New Jersey Governor-elect Phil Murphy also faces a fiscal disaster, this time at the peak of an economic cycle rather than in a deep recession. A fiscal disaster that is certain to get even worse when the next recession hits and the stock market corrects to something like fair value. And he faces those same two options. Raise taxes, cut services, and perhaps tell his public employee union supporters that they have to give up more to get back in solidarity with their fellow state residents. And be blamed for all of the above. Or hope that state residents have gotten used to how bad things are under Christie, kick the can a little further, and try to sneak into a second term before the additional bills come due. And then leave office as despised as Christie and outgoing Connecticut Governor Malloy.
Across the country taxpayer pension costs for public schools are soaring, and state and local taxes are being increased while money actually spent on education is being cut to pay for it. You see it in California, where a huge tax increase “for education” went exclusively to pensions, and in Illinois, where the City of Chicago’s schools are on the brink of bankruptcy. You see it in Kansas and Oklahoma. In some cases soaring pension costs are the result of past taxpayers’ unwillingness to fund the pensions teachers had been promised, promised for some in lieu of Social Security, which those teachers will not be eligible to receive. In other cases pension costs are soaring because politically powerful teachers’ unions cut deals with the politicians they controlled to drastically increase pension benefits, beyond what had been promised and funded. In many cases there is a mix of both factors.
New York City happens to be the place where the teachers’ union, the United Federation of Teachers (UFT), is perhaps the most guilty, and taxpayers are the least guilty, with regard to the pension crisis. And it the place where the burden of teacher retirement is the greatest. The result is large class sizes despite extremely high public school spending, and a host of services that New York City children do not receive. With virtually all New York politicians in on the deals that have left the New York City Teachers’ Retirement System (NYC TRS) among the most underfunded in the country, however, there has been a desperate attempt to cover up the damage. So the consequences of retroactive pension increases for NYC teachers (and police officers and firefighters) have shown up not so much in education (and policing and firefighting), but in every other public service in New York. And all of this is under Omerta.
If you live in New York State, there is a lawsuit that claims you have it too good. Your taxes are too low, despite being the highest in the country at the state and local level combined, and too much money is being spent on public services other than public schools, such as mass transit, social services, housing, parks, libraries, everything else. The lawsuit has been filed by the Alliance for Quality Education (AQE), funded in part by the United Federation of Teachers (UFT), New York City’s teachers’ union, and the NYSUT, the New York State teacher’s union. It claims that New York State residents have stolen $billions for people working in New York’s schools each and every year for more than a decade. And that as a result we are getting what we deserve: schools that are so bad that at least in New York City and Syracuse, they violate the state constitution.
Of course the AQE is claiming it is suing “the state,” not the people who live in it. But where would “the state” get the additional $billions that those working in education demand be spent on schools? From higher taxes and lower spending on other things, that’s where. The same place that the additional spending on schools that has happened in the past came from. And note that while the claim is that the schools are bad, there is no admission that perhaps that New Yorkers are being cheated by those who work for the public schools. Instead the assertion is the other way around – that those who work in the schools are being cheated by New Yorkers, because they aren’t being given the money they deserve. But how much are the schools getting getting? Let’s go to the Census Bureau’s public education finance data and find out.
Wait until next year! When the U.S. Census Bureau released its 2015 data on public education finance last month, I thought that instructional (ie. teacher) wages and benefits per 20 students in the New York City public schools might exceed $300,000 for that year. But instead it came it came up just short at $297,482. Moreover, total spending per student in the NYC schools also came up just short of Greenwich, Connecticut, at $25,068 compared with $25,737. Thought NYC did spend more per student than Westport ($23,798) or Darien ($20,805).
Those are among the tidbits that can be gleaned from my compilation of this data, for 2015 and (with an adjustment for inflation) 2005. As is my custom, I’m going to provide the spreadsheets now, think about them for a while, and then provide my analysis and express my opinion. The data presented includes revenues and expenditures per student, by category, for the U.S., New York City and other regions of New York State, selected other states, and every school district in New York and New Jersey. In some cases with and without an adjustment for the higher cost of living on the Northeast corridor, which reduces the value of school spending here compared with the U.S. average. A discussion of where the data comes from and how it was tabulated (mostly copied from last year) and links to the new spreadsheets, follow.
In 2016, according to data reported to the U.S. Census Bureau, the New York City Employees Retirement System (NYCERS) had 263,235 active members who were working, and 149,940 beneficiaries receiving periodic benefit payments, a ratio that implies just 1.75 years worked for each year in retirement. And it is much less than that if workers who depart early in their careers and don’t receive pension benefits are excluded. That year, the New York City Police Pension Fund Article 2 and the New York City Fire Department Article 1B Pension fund combined had just 45,047 active members working and yet had 66,374 beneficiaries receiving active pension benefit payments, a ratio that implies a little over two-thirds of a year work for each year in retirement.
In 2016, New York City taxpayers contributed $3.4 billion to NYCERS. NYC taxpayers also contributed $3.4 billion to the police and fire pension funds, the same amount even though NYCERS covered nearly six times as many city workers. According to City of New York budget documents, in FY 2018 taxpayer pension contributions equaled 52.5% of wages and salaries for the NYC Police Department, where most workers are covered by the New York City Police Pension Fund Article 2, and 71.8% of wages and salaries for the New York City Fire Department, with most workers covered by the Fire Department Article 1B Pension Fund. But just 13.0% to 17.0% for the most of the non-uniformed city agencies, with workers covered by NYCERS. What is more, and what is worse, is that the current level of NYC taxpayer pension contributions to the police and fire pension plans are not enough.
New York City and New Jersey, like most places, have separate pension plans for teachers, police officers, and firefighters, and large general pension plans for all other public employees combined. This post is about updated Census Bureau data, for the years 1957 to 2016, for the general pension plans: the New York City Employees Retirement System (NYCERS), which also covers New York City transit workers, the New York (state) Public Employees Pension and Retirement System, which also covers local government workers (including police officers and firefighters) in the rest of New York State, and the New Jersey Public Employees Retirement System, which covers most public employees in New Jersey. In general the findings are the same as they were the last time I analyzed this data.
It has been a few years, however, so I have decided to repeat the analysis and update the charts below, and add a further discussion on hedge funds and the rate of return at the end. The data shows a pension disaster not only for New Jersey, where taxpayers have contributed very little over the years, but also for New York City, where taxes are high and taxpayers have contributed massively. The New York State system is in somewhat better shape – but in much worse shape than a decade ago.