Overview of State and Local Government Expenditures: FY 2014 vs. FY 2004, Census Bureau Data

State and local government public services and benefits are getting squeezed. There is less money available for them because of rising costs from the past, notably under-funded and retroactively enhanced pensions for public employees who are already retired or soon to retire. In some places, as noted in the prior post on taxes, this squeeze has been exacerbated by falling taxes as a percent of personal income. The total wages and salaries of those public employees who are still working are falling as a percent of taxpayer personal income just about everywhere, as is spending on services for the needy (other than those associated with health care). And the anecdotal evidence suggests that since FY 2014, the latest year for which data is available, the squeeze has gotten worse. Despite the third biggest stock bubble in history by one measure,

https://www.bloomberg.com/view/articles/2017-03-03/what-to-make-of-these-twice-in-history-s-p-500-valuations

which makes public employee pensions seem better funded than the really are, years of zero percent interest rates, which reduce state and local government interest costs, and a long-running economic upcycle, which has boosted tax revenues.

http://www.eastbaytimes.com/2017/03/03/borenstein-despite-booming-economy-oakland-finances-deteriorate/

Whatever this data shows, things have gotten worse since in most of the U.S.

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State and Local Government Revenues Other Than Taxes: Census Bureau Data for FY 2004 and FY 2014

As noted in my prior post on tax revenues New York State has more of them, at both the state and local level, as a percentage of its residents’ personal income than just about anyplace else. With a particularly high local tax burden in New York City. And New York’s state and local government tax revenues increased as a percent of its residents’ personal income from FY 2004 to FY 2014.

https://larrylittlefield.wordpress.com/2017/02/26/state-and-local-taxes-in-fy-2004-and-2014-census-bureau-data/

In this post, the data shows that New York’s state and local government revenues other than taxes are also higher than the U.S. average, albeit not to the same extent. New York City’s local government charges for services, and its miscellaneous revenues, increased as a share of its residents’ from FY 2004 to FY 2014, while falling in the rest of the state. The State of New York’s federal aid revenues fell as a percent of state residents’ income during those years, and New York City’s state aid revenues fell as a share of city residents’ income as well. Demographic trends, with school enrollment falling, New York City becoming better off relative to the rest of the state, and New York State becoming better off relative to the rest of the country, may explain this.

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State and Local Taxes in FY 2004 and 2014: Census Bureau Data

When measured as a percent of state residents’ personal income, the combined state and local government tax burden of New York State and, in particular, New York City is uniquely high compared with other states. Reputedly high-tax states such as Massachusetts, New Jersey, Connecticut and California aren’t even close. The only states where the tax burden is higher than, or even close to, New York are large, low-population states with extensive tax revenues from oil, gas, or other mineral production: Alaska, Wyoming, and more recently North Dakota, where a “fracking” boom has given way to bust. In these states residents and other businesses pay little in taxes – in Alaska they actually get checks. The Census Bureau data for FY 2004 to FY 2014 shows New York’s tax burden rising further, even as the average U.S. state and local tax burden remained close to 10 percent of personal income, about where it has been for decades. And yet all one hears in New York’s media is demands for still higher funding, and higher taxes, and higher staffing, and higher pay, and richer pensions made by New York’s public employee unions and the politicians they control, particularly in those in the New York State Legislature.

While the U.S. average is stable, the data shows a divergence among states. In many other states with above average state and local tax burdens in FY 2004, those burdens also increased further by FY 2014. And in many states where the tax burden was already below average in FY 2004 it fell even further, even in the face of soaring pension costs that have pressured state and local government budgets throughout the country. In several Midwestern states – Wisconsin, Ohio, and Michigan – the tax burden fell from somewhat above average as a percent of income to average or somewhat below, despite weak per capita income growth. In these aging states, public spending on seniors is rising, not only through federal programs that our current President has promised to protect (and his party has promised to protect for current beneficiaries but not younger generations), but also for the pensions and benefits of retired public employees. So the shrinking tax burden just adds to the downward pressure on other state and local government services, which benefit other age groups.   What do those three states, plus Pennsylvania which has a below average tax burden despite soaring pension costs, have in common? A spreadsheets, further commentary and charts follow.

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State and Local Government Finance: Census Bureau Data for FY2014 Compared with FY 2004

The Governments Division of the U.S Census Bureau released its detailed state and local finance data for FY 2014 on January 31, and I have compiled it and produced a couple of large tables – one for all state governments and one for all local governments by state – comparing that year with FY 2004. The data shows, by category, the amount of revenues (property taxes, federal aid), expenditures (public school spending, police department spending) and debt for every state in the country and, at the local government level, for New York City and the Rest of New York State separately.

To be comparable across states and across the years, the data is presented per $1,000 of the personal income of all the residents of each state. Think of it this way. Your household else spends X percent of its household budget on food, X percent on housing, etc. And, via the taxes and government fees you pay, X percent of its income on public schools, X percent on police, etc. The data is presented per $1,000 rather than as a percent to make the data for small categories easier to see. I plan to write a series of posts, with additional tables and charts, for different aspects of state and local government finance separately. But in the triumph of hope over experience, in this post I will explain where the data comes from and how it was compiled, provide the whole database for download up front, and invite people to look at the numbers themselves at the same time I do, and decide for themselves what the data means. Before getting my take on it.

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Furbos and Fessos

I found this discussion of the similarities between Donald Trump and Silvio Berlusconi very thought provoking.

http://www.economist.com/news/united-states/21712157-fomenting-cynicism-and-partisan-divisions-his-best-chance-surviving-his-term-donald

In those bits of Italian society from which Mr Berlusconi drew his strongest support, it is a high compliment to be deemed a furbo, or a sly, worldly wise-guy. The furbo knows how to jump queues, dodge taxes and play systems of nepotism and patronage like a Stradivarius. In contrast the fesso is the chump who waits his turn and fails to grasp how badly the system is rigged, or how much of his taxes will be stolen. The fesso might cheer a new clean-air law in his city, naively taking an announcement by the elites at face value. The furbo wonders who in the environment department may have a brother-in-law with a fat contract to supply chimney scrubbers…

Living in that sort of society comes with costs. For decades anthropologists and political scientists have weighed the advantages of living in a high-trust, highly transparent country like Sweden, and measured how corruption and squandered human capital harm places like Sicily.

Then again, when you have had a furbo generation or two in charge, what is the alternative?   A generation or two the minority of which has preached, and even acted, as fessos, but the majority of which has acted as furbos with regard to the common future? The Trump/Clinton generation. And they desperately insist on no one even talking about it, “controlling the narrative” by talking about anything else.

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The DeBlasio Budget: Hiding the Facts

What is the most important fact about Mayor DeBlasio’s budget proposal?

http://www1.nyc.gov/site/omb/publications/finplan01-17.page

The unsaid.  During the Bloomberg Administration the “Budget Summary” document had included summary tables that showed how much money was spent on each agency for wages and salaries, how much for pensions, how much for other benefits, how much for interest, how much for lawsuits, how much for other non-personnel costs such as contracts and supplies, and how much of each function is funded by the city, and how much by other layers of government.

Last year DeBlasio provided that table for his budget proposal, but not for past years.  But I was able to make a comparison with that table from prior years and write this post.

https://larrylittlefield.wordpress.com/2016/05/12/new-york-citys-fy-2017-budget-proposal-more-for-those-who-have-more-leaves-less-for-those-who-have-less/

This year DeBlasio has apparently ordered that this information be omitted from the Budget Summary altogether, which is exactly the sort of stuff I fear we can expect from Trump.

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Like School Reform, At This Point Financial Reform May Be A Fool’s Errand

In my previous post, I repeated my thought experiment of reinventing the school system from the ground up, leaving past deals, favors, patterns and privileges behind. Creating alternatives that were less costly and better for teachers, parents and students. But what do I suggest for the existing school system? Reform? No.

School reform has been defeated by the teacher’s union in New York and places like it, and by those who want to cut funding for education to keep taxes down elsewhere.   In part due to soaring pension costs, the result of past pension increases in some place and underfunding in others. It’s time to face it. The idea that people had a right to expect more from the education system in exchange for more funding?   In New York they took the funding, revolted against expectations, and now demand even more funding.   The right alternative is to stop trying, stop lying and pursue alternatives in entirely new organizations. In this post I intend to extend that concept to New York City’s leading industry: finance.

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