Living in a city once meant that those who could not afford their own private amenities, such as large backyards, country club memberships, second homes, and bookshelves full of books, could enjoy less expensive shared amenities such as public parks, pools, beaches, libraries, and entertainment. The great supporters of these services and facilities were often wealthy people who did not need them, but nonetheless donated money to support them, because they believed the common people would be ennobled by them. Many libraries, for example, were built with money donated by steel magnate Andrew Carnegie, and many New York State parks are on land donated by people like Averell Harrmian. With the highest state and local tax burden in the country (those states where most of the taxes are on mineral resources aside), one might expect that New York would have more spending on public amenities, as a percent of its residents’ personal income, than other states. But is that true?
If there is one thing that virtually every public policy commentator and politician seems to believe, it is that more should be spent on infrastructure. And yet the direction of public policy has been in the exact opposite direction, with maintenance often unfunded or funded by debts that now soak up a large share of revenues dedicated to roads, bridges, airports, and transit, water and sewer systems. The trend has been at its worst in the Northeast. And as costs from the past, including pension funding and debt service, increased between FY 2004 and FY 2014, expenditures on the future – on the infrastructure – decreased when measured per $1,000 of personal income. It’s a trend that, according to anecdotal evidence, continues to this day, with consequences that continue to appear over time as the sold out future becomes the present.
The big revelation when former Mayor Bloomberg put all the costs for most big New York City agencies, including pensions and fringe benefits, on one page, and deducted federal and state aid to show city-funded expenditures, was how expensive the so-called uniformed services – police, fire, correction and sanitation –are for city taxpayers. While health and welfare and education cost as much and more overall, there is substantial federal and state funding for those services. In FY 2014, according to New York City’s February 2014 Financial Plan Budget Summary, the uniformed services cost $17.4 billion, 23.5% of the $73.8 billion in total spending by the City of New York. As for city funds, however, these services cost $16.5 billion, 31.5% of the $52.25 billion in total city costs.
Many other city services, moreover, are provided by private, often non-profit organizations, or other agencies such as the Metropolitan Transportation Authority. What is spent on these services in a given year is what they cost that year. The uniformed services and the public schools, on the other hand, have retirement benefits that are much richer than those of other city workers, let along private sector workers, and these benefits that can be gamed or suddenly increased by the state legislature. Thus we are actually still paying more today, and will pay still more tomorrow, for work provided by the uniformed services in FY 2014, as a result of pension spiking and retroactive pension increases. But how much did they cost at the time, how did that compare with FY 2004, and how does this compare with the national average, the rest of New York State, and other states? That is the subject of this post.
New York City was long known as America’s welfare capital, with a large dependent poor population and extensive services for them. But one doesn’t hear much about that anymore. New York State has also had the highest Medicaid spending in the United States, but one doesn’t hear much about that anymore either. The data shows New York still spends more on aid to the needy than most other states, as a share of its residents’ personal income, but the gap between New York and the rest of the country closed between FY 2004 and FY 2014. As the gap closed, aid from the federal government to New York shifted to other places. Today, moreover, most of this “social” spending is on health care, and thus on older people, not on those with lower incomes. A discussion of these trends, with tables and charts, follows.
For the United States and most parts of it, the decade from FY 2004 to FY 2014 saw soaring public employee retirement costs, and weak growth for taxpayer income. In response to these trends state government assistance for public elementary and secondary schools fell relative to the income of all state residents, and total spending on public schools fell as a share of everyone’s income as well. But there was an offsetting factor. School enrollment fell as a share of the total population, and in many cases in absolute numbers, as the very large “Baby Boom Echo (Gen Y, Millennials) Generation exited school with smaller generations behind them.
At the same time, and perhaps driven by the same demographic shifts, state and local government spending on public higher education increased when measured per $1,000 of everyone’s personal income. But how did different states compare, and how was per-student elementary and secondary school spending affected? That is the subject of this post.
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,
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.
Whatever this data shows, things have gotten worse since in most of the U.S.
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.
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.