Sold Out Futures by State: The Sold Out Future Ranking For 2019

Over the past three posts I’ve documented how today’s and tomorrow’s Americans have had their future sold out and cashed in with regard to state and local government debts, inadequate past infrastructure capital construction, and retroactively increased and underfunded public employee pensions.  Over and above the generational inequities at the federal level in government, in the private sector, and even in many families.  Plus climate change, which some have claimed will be so bad I should stop worrying about other aspects of generational inequity.

These aren’t technical issues to be discussed one at a time, as if they were independent of each other.  They are a single ethical issue to be discussed and understood as a whole.  Look at any issue, any institutional decision in government, business and the professions, any social trend of the past 40 years, and examine how it has affected those in different generations – who benefitted, and at whose expense.  And you will find the same thing.  

That is why our society is in decline, something all those crazed about the tribalist cultural issues that consume out geriocratic politics apparently understand, and are desperate to find someone else to blame for.  The Sold Out Futures by state ranking, based on the state and local government part of it, is my contribution to the bigger story, one that remains under Omerta.  

Adding it up, on average today’s and tomorrow’s Americans have inherited a Sold Out Future due to past state and local government deals and non-decisions equal to 47.0% of their personal income in FY 2019.  That is virtually unchanged from the 47.1% I found when I did the same analysis for FY 2012, despite a much stronger economy and another asset price bubble.   

Unlike the other generational inequities in our society in the wake of Generation Greed (and more like the differences between families), the state and local government burden is not the same everywhere in the U.S.   It is greater or smaller depending on where you live.  It attaches to the people there now, unless they move away from it, and may eventually attach to each place’s real estate, since real estate cannot pick up and move.  This final post in the series will rank states, and New York City and the Rest of New York State separately, based on how sold out their futures are.

Sold Out Futures By State: Public Employee Pensions from FY 1972 to FY 2019

Even another stock market bubble, in fact an everything bubble that has temporarily inflated the price of every asset to historically high levels relative to income, has not been enough to get the average U.S. public employee pension fund out of the hole.  But it has been enough to knock the public employee pension crisis out of the news, and give politicians an excuse to shift even more of the cost to the future.  As I showed here…

https://larrylittlefield.wordpress.com/2013/11/29/pensions-the-nature-of-the-lie/

When asset prices bubble up, future investment returns are going to be lower.  If the bubble is big enough, future returns could be negative for decades, as they have been in aging countries like Japan, and countries that try to inflate away their debts like Argentina, two (hopefully but not necessarily extreme) versions of our own future.  Predicted future return returns should be reduced as asset prices rise, as ERISA requires private pension funds to do by tying future returns to current interest rates.  But in the public sector, which was exempted from ERISA, when asset prices bubble up public unions cut deals with the politicians they control to increase benefits in Blue States, and while anti-tax politicians slash pension contributions to cut taxes in Red States.  (Actually, they do both things in both types of state).  Then, when asset prices correct to normal, somehow it’s nobody’s fault.  Wall Street stole the money!, PBS Frontline claimed in an investigation of the problem.  That’s why nobody is talking about pensions now – that lie temporarily unavailable.  

Thus far the federal government, at great cost to ordinary people in disadvantaged later-born generations, has managed to keep paper asset prices – and housing prices – inflated, to benefit the rich and seniors.  Even so in FY 2019, despite sky-high asset prices and the passage of more than a decade since the problem was acknowledged (by some), my back-of-the-envelope estimate is that U.S. state and local government pension funds were $3.65 trillion in the hole, more than ever before.  A more sophisticated analysis by the Bureau of Economic Analysis, using the assumptions private pension funds are required to use, put the hole at $4.54 trillion in 2018.  But in which states is the problem the greatest?  Read on and find out.

Sold Out Futures: A State-By-State Comparison of State and Local Government Debts, Past Infrastructure Investment, and Unfunded Pension Liabilities Through FY 2019

In two years of the COVID-19 pandemic, with society under stress, we have seen increasingly strident political fights over whose cultural attitudes and preferences should be imposed on others, who should get to contribute less to the community, and who should get to take out more.  In the shadows, however, is a bipartisan consensus as to who should be made worse off and be sacrificed the rest of their lives to pay for it all.  Ordinary people in later born generations, those who will be living in the United States in the future.   The pandemic has given politicians of all alleged views, and the interest groups that back them, an excuse to do, to an even greater extent, what they have done for 40 years.  Cash in the common future to address the perpetual “emergency” of the present.

So it was in Washington in 2020 when The Donald and the Republicans, having already sent the federal debt soaring to cut taxes for the rich and then ran a federal deficit equal to one-quarter of the U.S. economy.

https://larrylittlefield.wordpress.com/2021/03/15/federal-reserve-z1-data-for-2020-the-king-of-debt-went-out-with-a-bang-and-our-children-and-grandchildren-will-be-poorer-for-the-rest-of-their-lives-to-pay-for-it/

And so it is in Washington today, where Biden in the Democrats claim their plans will be “paid for” – meaning the burden shifted to the future would only be as great as it was under Trump and the Republicans.

It is in this context that for the fifth time, I have reprised an analysis of state and local government finance data from the U.S. Census Bureau, for all states and for New York City and the Rest of New York State separately, with data over 49 years, to determine the extent to which each state’s future had been sold out due to state and local government debts, inadequate past infrastructure investment, and underfunded and retroactively enriched public employee pensions.   You’d think that the extent of disadvantage for the later-born, and who benefitted from creating it, would be the number one issue in every state election, and the number one topic of debate in the media.  Instead, it remains under Omerta, especially here in New York.  Shouted down under the comforting culture war issues that Generation Greed prefers.  So, although standing up for the later born and common future may amount to nothing more than standing on the beach shouting into a hurricane as a social tsunami heads for shore, over the past month I have updated the “Sold Out Future” analysis with data through FY 2019.  This post, a national summary and explanation of where the data comes from and how it was used, and the next three, will show what I found.

The Economist Notices the NYC Department of Corrections

Word of the meltdown of New York City’s jail system has crossed the Atlantic, and apparently somebody has given The Economist magazine the kind of information that, in general, no one is allowed to talk about here in “progressive” New York.

https://www.economist.com/united-states/2021/10/02/the-jail-on-rikers-island-is-both-appalling-and-generously-funded

The title?  

Aggravated robbery

The jail on Rikers Island is both appalling and generously funded

It costs $438,000 to jail one person for one year there

Gee, I thought everyone was obliged to say the people of New York deserve nothing because they don’t pay enough money in taxes, and cheat public employees and contractors out of $billions?  And because New York doesn’t tax the rich.  Didn’t the city just agree to increase the Department of Correction budget and staffing levels in response to a crisis that department and its union created?

The misery at Rikers is not for lack of resources. The jail’s population fell by half between 2012 and 2020, yet its budget grew by 24%. It costs $438,000 to jail one person there for one year. Of this $379,216 goes to personnel costs; less than 5% goes to services like substance-abuse treatment. The average salary for guards, after five and half years on the job, is $92,073. In 2012, the ratio of inmates to officers in the city was 7:5. In 2020 it was 1.6 officers per inmate.

And yet, the island’s chief medical officer said he is seeing “a collapse in basic jail operations.”  On September 29th a federal judge issued an emergency order to safeguard inmates’ wellbeing.

To hear local politicians talk about it, the problem is the buildings located on Rikers Island are attacking people, and it’s the buildings that must be replaced.  At a cost of $8 billion, more 10 times as much per square foot at the cost of luxury condominiums, to benefit the construction unions and contractors.  The problem couldn’t be the inmates, or the guards and its union, or other parts of the public sector, could it? 

So why was someone willing to make a comparison between New York’s local corrections spending today and the past, and with other places?  Did the corrections officers’ union not give enough money to the right politicians?  Because here is what The Economist didn’t say:  the same excess of funding and staffing compared with other places, even adjusted for the cost of living here, may be found in just about every state and local government service in New York City.  Even those that are merely, intentionally, inadequate, or getting worse, not “appalling,” so the inadequacy could serve as the basis for a demand for more money.   Nowhere else in the U.S. is close:  not New Jersey, not Connecticut, not California, not Illinois, nowhere.  And unlike the Department of Corrections, at least for the moment, no politician or media source will talk about it.

Graphic Summary: 2017 Census of Governments, Employment and Payroll

Back in late 2019, I published a tabulation of data from the employment and payroll phase of the 2017 Census of Governments.  The data included full-time equivalent (full time workers plus part time workers converted into full time workers based on hours worked) state and local government employment, by function (police, parks, schools), per 100,000 residents of each area.  The population data was taken from Local Area Personal Income spreadsheets from the Bureau of Economic Analysis.  For the population of the rural areas of New York State as a whole, I subtracted New York City, the Downstate Suburbs, and the Upstate Urban Counties from the state total.  All this sort of data usually gets revised as new information becomes available.  But when the new population data was released, soon after I had completed the entire effort with spreadsheets, tables, charts and posts, what I found was a shock.

https://larrylittlefield.wordpress.com/2019/11/24/the-upstate-ny-rural-population-boom/

Somehow the population data for New York City had been altered – and inflated, thus reducing apparent NYC government employment per 100,000 residents. This wasn’t the usual correction. It turns out that in the old data, all the state’s counties combined didn’t add to the New York State total! Since I had gotten the population for the rural Rest of New York State by subtraction, the population of that region was underestimated by a significant percent, causing the region’s population losses, and its government employment per 100,000 residents, to be exaggerated.

I immediately published revised versions of the large spreadsheets with data for all government functions.  And now, I have gone back and altered the spreadsheets on individual government functions, the tables, the charts, and the posts on those functions, as well. The changes aren’t great enough to alter any conclusions.  I changed many numbers, in the tables, charts and text, but very few words.  Right is right, however, and the data linked here has now been fixed for that BEA error.

https://larrylittlefield.wordpress.com/the-latest-public-finance-spreadsheets/

Having made that effort, I have decided to publish a graphic summary of the employment and payroll phase of the 2017 Census of Governments, along with links back to the more detailed (and now corrected) posts.

Taxes & Generational Equity: New York State and New York City in 2020

With a deteriorating mass transit system, despite high and rising taxes and fares, and soaring rents (and property tax revenues from renters), young workers have been leaving New York City since 2015, a trend that has accelerated since the COVID-19 pandemic.  And there is talk that the wealthy will move away since they will now have to pay taxes, after not having to pay taxes in the past, according to various headlines over the past two years.  From “not taxing the rich,” according to those headlines, New York is suddenly taxing the rich more than any other state.  Even California.

In reality, of course, New York already taxed the rich, and everyone else, far more than any other state.  And it isn’t close.  As I showed here…

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

In FY 2017 New York State’s average state and local government tax burden was 13.8% of state residents’ personal income, compared with the U.S. average of 9.8% and 10.3% for California.  If New York City were a separate state, its burden would have been 15.1% of income, and rising, compared with 12.9% on average for the rest of the state.  And at that level, according to any elected officials who didn’t want to face a primary, and most of the local media, city residents deserved deteriorating public services, because they weren’t paying enough.

There is one group of people, however, who face a very different tax burden in New York, compared with other places.

https://www.businessinsider.com/personal-finance/new-york-state-affordable-retirement-social-security

Retiree David Fisher, 69, has lived in New York state since age 27.  He has found that while living there was expensive while he was working, New York is much more affordable in retirement.  This is primarily for three reasons: New York State doesn’t tax Social Security or retirement account distributions, the state has a program to reduce property taxes after age 65, and there’s a low cost of living in the Rochester, New York, area where he lives. 

Retired public employees, like the Senior Voters in our tax analysis of three prototypical Brooklyn couples, have it even better – none of their retirement income, paid for by poorer working serfs, is taxable.

The One-Way Check Valve of New York City’s Fiscal Relationships

The tax revenues from the wealth of New York City are not only for the benefit of people who live in New York City.

That’s what Governor Andrew Cuomo said in 2014 when New York City was booming, Upstate the Downstate suburbs were declining, and newly-elected Mayor Bill DeBlasio wanted to raise the New York City income tax to increase revenues specifically for the city budget.  Cuomo has made the “temporary” higher “millionaires” state income tax rates permanent instead, and sent the money to the rest of the state.  

Money is fungible.

That’s what the Governor said when the “dedicated” MTA tax revenues, collected only in Downstate New York, were transferred to the state budget and spent, in part, in Upstate New York.  Even as the subway system went into deferred maintenance, and most of the MTA capital plan was unfunded and never took place.  The MTA still refuses to publish a 20-year needs statement, showing this planned decline, today.

There is plenty of money, it’s just in the wrong hands.

That’s what Mayor Bill DeBlasio said, before signing labor contracts that ensured that those who benefitted from one retroactive pension increase after another wouldn’t be asked to make any offsetting sacrifices to help to pay for it.  Those members of the political/union class in on the deals could take more without anyone else other than a small number of $billionaries being left with less, he wanted to pretend. 

No blue state bailouts.

That is the attitude of Kentucky Senator Mitch McConnell’s view of the federal money being sent to “fiscally irresponsible” declining Blue States, perhaps at the expense of “self reliant” Red States.   

All but the last of these statements were made at a time when educated and talented Millennials, and the businesses that sought to hire them at low wages, were pouring into a small number of large central cities, including New York, even as the cost of real estate soared and the standard of living fell, creating a gusher of federal, state and local tax revenues pushing outward.  The reversal of this started slowly in the mid-2010s, after subway service decline to a “state of emergency” level as inflation-adjusted rents and sales prices peaked in NYC – and then surged during 2020 in association with the pandemic.  

So now, will money flow in the opposite direction, from other parts of the U.S., New York State, and from the political/union class to ordinary New Yorkers?   Or are New York City’s fiscal relationships a check valve that only allows money to flow in one direction?

Graphic Summary: 2017 Census of Governments Data

Over the past six weeks, I’ve posted a series of analyses of state and local government finances using data from the Governments Division of the U.S. Census Bureau, starting with the 2017 Census of Governments and including similar data for prior years.  The posts include well over 200 pages of text, 296-plus charts, 25 tables, 34 spreadsheets with that data, those tables and those charts, plus additional spreadsheets. It is the fifth time I have done this, based on the Census of Governments, which comes out every five years.

Did you read them all?

If not, I will now attempt to summarize what the data said about state and local government in New York City compared with the rest of the country, prior to the cornonavirus crisis, with a series of selected charts and a sentence or two each.  Most of the data is for all the governments in a state or county added together, with revenues and expenditures divided by the personal income of everyone in that state or county, to adjust for the relative cost of living and ability to pay. The first post in the series, which includes spreadsheets with revenue and expenditure data on the full scope of state and local government activities, and explains where the data comes from and how it is tabulated, is here.

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

Bureaucracy: 2017 Census of Governments Data

This, the final analytical post based on a tabulation of state and local finances data from the 2017 Census of Governments, is about the most governmental of activities. The kind of activities one might expect to find taking place in city and town halls, county seats, county courthouses, and state capitals.  Reviewing applications, keeping records, adjudicating cases and doing inspections, rather than providing services.  The functions included are, as delineated by the U.S. Census Bureau, Judicial and Legal; Financial Administration; Central Staff, General Public Buildings and Other Administration; Protective Inspection & Regulation; and, at the state level, Social Insurance Administration (state Departments of Labor) and “Other Education,” which includes state public school oversight agencies.  I have grouped them under the title “Bureaucracy.”

The budgets of these functions are small individually, but they add up. In FY 2017, also including public Health, state and local governments collectively spent $18.54 per $1,000 of U.S. residents’ personal income, or 1.85% of the income of everyone in the United States, on these functions.  And 1.6% of the personal income of residents of New York State, which ranked 38^thin the country in Bureaucracy spending.

The relative level of spending on Bureaucracy in different states, when adjusted for the total personal income of residents of those states, doesn’t come close to matching what people might believe, based on what they read in the media.  Yes California is 11^that $23.63 spent per $1,000 of personal income, and Texas is last at $13.31.  But Massachusetts, 45^that $15.15, New Jersey 49^that $14.00, and Illinois, 44^that $15.41 ranked near the bottom.  Whereas Wyoming was first at $43.78 spent per $1,000 of personal income, albeit with a good chunk spent on Health.   And South Carolina made the top ten at $23.73.

Public Amenities & Vices: 2017 Census of Governments Data

Over the years I’ve heard so-called conservatives try to make the case that the business sector is the foundation of the economy, while the public sector provides nice-to-have services that we may or may not be able to afford.  As if what the government does is the cherry on top of a sundae, perhaps desirable but not absolutely necessary.  There is a reasonable “conservative” case to be made about the relative value of services produced by the public and private sectors, but that isn’t it. The types of services that can’t fund themselves, and are in the public sector, include education, much of health care, most infrastructure and public safety.  And certainly aid to the needy.  The types of services that can fund themselves with sales in the private sector include alcohol, tobacco, other pleasurable but addictive substances, gambling, pornography, and prostitution.  Do we need less of the former, and more of the latter?

Perhaps the conservatives where thinking about the subject of most of this post:  Parks, Recreation, Culture, Natural Resources, and Libraries.  They have certainly been among the first services to be wiped out in NYC when money gets tight, along with services to keep poor children from being abused, neglected and killed.  But there was no fiscal crisis going on in FY 2017, the year of the latest Census of Governments, or in FY 2007 and FY 1997, prior Census of Governments years.  So how much was spent on these services then, in NYC and elsewhere?  This uses post Census of Governments data to find out.