Temporary Assistance for Needy Families (TANF) Spending in New York

December 27, 2005. This report, by FPI Senior Economist Trudi Renwick, reviews the evolution, over the past nine years, of New York State’s use of its federal TANF block grant funds and the related “Maintenance of Effort” (MOE) resources. It also presents a preliminary review of the implementation, by social services districts across the state, of the Flexible Fund for Family Services (FFFS), New York’s new state-to-local block grant.

Who’s right on pension costs – the MTA or the TWU?

December 22, 2005. One of the issues raised by the late December 2005 strike by Local 100 of the Transport Workers Union (TWU) was the future of pension or retirement plans for American workers.  A debate has also ensued about the validity of the claims by the Metropolitan Transportation Authority (MTA) that pension costs are a significant cause of its projected budget gaps in 2008 and beyond, and about the pros and cons, from a policy perspective, of the MTA’s efforts to cut back on employee pension benefits. FPI’s James Parrott writes one of a pair of point-counterpoint op eds on these questions in the New York Daily News.

New York City’s Labor Market Outlook with a Special Emphasis on Immigrant Workers

December 9, 2005. A presentation for a forum sponsored by the NYC Education and Training Coalition: “NYC’s Labor Market: Where Are the Jobs?” Presentation >>

Comments by Frank J. Mauro on the Budget Reform Constitutional Amendments

October 17, 2005. The comments below were presented by Frank Mauro at a press conference today at the Legislative Office Building in Albany, New York. These comments were based on his September 1, 2005, analysis of the budget reform constitutional amendments. The Fiscal Policy Institute, as an organization, has not taken a position in support of or in opposition to the proposal on the November 8, 2005, ballot. These are the views of Frank Mauro and not those of the Fiscal Policy Institute.

The current provisions of the State Constitution, as they have been interpreted by the Court of Appeals, create a situation in which the Governor can include changes in permanent law in his proposed appropriations bills and the Legislature can not delete or change the Governor’s proposed statutory changes. This puts the Legislature in a “take it or leave it” position. The Governor says the Legislature can just say “no” until an agreement between the two branches is reached. This means that the Legislature’s only recourse under the current constitutional arrangement is to refuse to adopt the Governor’s proposed appropriations bills until the Governor agrees to change the statutory language that the Legislature finds unacceptable. But this is exactly what has happened in recent years and what critics point to as a failing of the current system.

This situation can and should be fixed in one of several ways. For example, the constitution could be amended to require the Governor to submit changes in permanent law in non appropriation budget bills. This approach is taken in a proposed constitutional amendment (A4630) given first passage by the Senate and Assembly earlier this year. For this amendment to go to the voters for their approval, it would have to be given second passage by the Legislature elected in 2006. The amendment (S1) that will be on the ballot on November 8, 2005, on the other hand, gets at the “balance of powers” question in a very convoluted and inadequately defined way that would make the state budget process even messier and more complicated than it currently is.

While many of the critics of S1 oppose it because it would increase the power of the Legislature in the budget process, I believe that the power of the Legislature should be increased, but that it should be increased in a way that deals directly and clearly with the impact of the Court of Appeals decisions. When I served as Secretary of the Ways and Means Committee in the mid 1980s, the Governor and the Legislature both operated under the understanding that the Legislature could amend the “terms and conditions” language that the Governor included in his proposed appropriations bills and that the Governor could veto those changes if he disagreed with them. That certainly did not create a budget process with a weak or ineffectual Governor nor did it run contrary to the concept of the Executive Budget. I think that the balance of powers in the budget process needs to be changed back to something like that and I believe that the constitutional amendments proposed in A4630 would do a decent job in that regard.

S1, on the other hand, gets at this dilemma in a roundabout way that would create an even messier budget process than we now have. S1 does not limit the Governor’s ability to include changes in permanent law in his appropriations bills nor does it authorize the Legislature to make changes in such submissions. It only increases the Legislature’s relative power in the budget process by taking the Governor’s appropriations bills off the table if they are not all acted on by the start of the state fiscal year and then giving the Legislature greater discretion in amending the “contingency budget” (that would take effect in such a situation) than it has in amending the appropriations bills submitted by the Governor in conjunction with his Executive Budget.

But neither S1 (nor the accompanying implementing legislation which will take effect if the constitutional amendments proposed by S1 are approved by the voters), assign responsibility to anyone for preparing the “contingency budget” let alone for doing so in a timely fashion.

Moreover, S1 has internally inconsistent language regarding the contingency budget – referring to it in one sentence as being based on the prior year’s appropriations (i.e., authorized spending) and in another sentence as being based on the prior year’s disbursements (i.e., actual cash out the door). The result is that the lower of these two levels would prevail under the contingency budget. This opens the door to incredible unintended and undesirable consequences.

For example, in closing out the 2002 03 fiscal year, Governor Pataki, for cash flow reasons, deferred the paying of $1.9 billion of 2002 03 bills until after April 1, 2003. The result of this action was that 2002 03 disbursements were artificially deflated by $1.9 billion and 2003 04 disbursements were artificially inflated by that same amount. On paper, General Fund disbursements, including transfers to other funds, went from $37.6 billion in 2002 03 to $42.1 billion in 2003 04. But adjusting for the $1.9 billion shift, 2002 03 disbursements were really $38.5 billion. If the proposed constitutional amendment had been in place at this time, the contingency budget for 2003-04 would have required spending for state operations and aid to localities in 2003 04 to be cut by $4.5 billion even though the actual spending levels for 2003 04 weren’t even sufficient to maintain current services in most parts of the state budget.

Only two states (Rhode Island and Wisconsin) have contingency budget mechanisms similar to the one being proposed in the S1 package. In neither of these states (nor in New York City which also has a version of this approach), is the contingency budget tied to prior year disbursements. And for good reason, since cash disbursements during a fiscal year are frequently different from the obligations actually incurred during that year.

The proposed Constitutional Amendment’s implementing legislation would also create an Independent Budget Office and would purport to give that office the authority to impose uniform, across-the-board reductions to all disbursements other than public assistance payments and certain federal funds if it projects that “annual receipts are insufficient to meet annual disbursements under the contingency budget.” This provision is very unlikely to pass constitutional muster, but if it did it would represent a very unbalanced approach to balancing the state budget. All the balancing would automatically come through cuts in state-funded services and none on the revenue side. Neither New York City nor either of the two states with contingency budget mechanisms have any provision for administratively imposed reductions of the kind authorized by this implementing legislation.

S1 is flawed in significant and substantial ways. It does, however, (in its own convoluted way) address the imbalance in power in the state’s budgetary process that has resulted from the Pataki Administration’s aggressive interpretation of the Constitution as upheld by the Court of Appeals.

In this context, it might have been worth living with the flawed provisions of S1 for two years if the Legislature had initiated a corrective amendment to be presented to the voters in 2007. But S1, without significant corrections, should not be made part of the New York State Constitution.

Fair Taxes: The Key to Better Schools

Fall 2005. A training curriculum prepared by the Public Policy and Education Fund of New York and the Fiscal Policy Institute.

The State of Working New York City 2005

September 27, 2005. A special supplement to the 2005 edition of the Fiscal Policy Institute’s biennial report on the State of Working New York. Presentation >>

The Effect of Welfare Reform in NYS

September 21, 2005. Testimony by Trudi Renwick, FPI senior economist, before the NYS Assembly Committee on Social Services.

New National Report Offers Sobering Look at Trends in New York’s Early Childhood Education Workforce

September 15, 2005. This issue of Fiscal Policy Note$ takes a look at a comprehensive new report, Losing Ground in Early Childhood Education, from the Economic Policy Institute, the Keystone Research Center, and the Foundation for Child Development. Among the findings: qualifications decline among early childhood education workers with less one fourth now having college degrees. Since the early 1980s, there has been a large and unsettling dip in the qualifications of the early childhood education workers in New York. The share of New York early childhood educators working in child care centers with at least a four-year college degree fell from 42% in 1980 to 32% in 1990 to 23% in 2000, based om analysis of Census data. Read the brief >>

An Open Letter on the Rebuilding Process from Civic Groups in New York on 9/11 and Katrina

September 15, 2005. An open letter to members of Congress and concerned individuals and groups on the Gulf Coast.

In Manhattan, Poor Make 2¢ for Each Dollar to the Rich

September 4, 2005. Sam Roberts cites FPI’s report The State of Working New York City 2005 in his New York Times story on income inequality in New York City.

Trump Tower on Fifth Avenue is only about 60 blocks from the Wagner Houses in East Harlem, but they might as well be light years apart. They epitomize the highest- and lowest-earning census tracts in Manhattan, where the disparity between rich and poor is now greater than in any other county in the country.

That finding, in an analysis conducted for The New York Times, dovetails with other new regional economic research, which identifies the Bronx as the poorest urban county in the country and suggests that the middle class in New York State is being depleted.

The top fifth of earners in Manhattan now make 52 times what the lowest fifth make – $365,826 compared with $7,047 – which is roughly comparable to the income disparity in Namibia according to the Times analysis of 2000 census data. Put another way, for every dollar made by households in the top fifth of Manhattan earners, households in the bottom fifth made about 2 cents.

That represents a substantial widening of the income gap from previous years. In 1980, the top fifth of earners made 21 times what the bottom fifth made in Manhattan, which ranked 17th among the nation’s counties in income disparity.

By 1990, Manhattan ranked second behind Kalawao County, Hawaii, a former leper colony with which it had little in common except for that signature grove of palm trees at the World Financial Center. The rich in Manhattan made 32 times the average of the poor then, or $174,486 versus $5,435.

The analysis was conducted for The Times by Dr. Andrew A. Beveridge, a sociology professor at Queens College of the City University of New York.

The growing disparity in Manhattan helped drive New York from 11th among cities with the biggest income disparities in 1980 to fifth in 1990 and fourth in 2000, behind Atlanta; Berkeley, Calif.; and Washington, according to the analysis. “The gains are all going to the top,” Dr. Beveridge said. “It’s a massive class disparity.”

Last week, the Census Bureau reported that even as the economy grew around the nation, incomes stagnated and poverty rates rose. The Bronx, with a poverty rate of 30.6 percent, was outranked only by three border counties in Texas where living costs are lower.

Swollen, in part, by the earnings of commuters who work in New York City, median household income among the states was highest in New Jersey ($61,359) and Connecticut ($60,528). It was $47,349 in New York State, also above the national median.

A separate analysis, being released this weekend by the Fiscal Policy Institute in Albany, warns that the middle class is being depleted while the rich are getting richer and the poor are growing in number and barely getting by – more so in New York State and particularly upstate.

The loss of good-paying jobs, especially in manufacturing, “has meant that the ‘hollowing out’ of the middle of the income distribution continued at a rapid pace,” the institute, a union-backed research group, concluded. It said the number of families earning between $35,000 and $150,000 declined by 50,000 from 2000 to 2003 while the number that earned above $150,000 and below $35,000 increased.

Dr. Mark Levitan, senior policy analyst for the Community Service Society, a liberal research and advocacy group, said he did not believe the city’s economy was “uniquely weak,” but said an increase in the poverty rate from 19 percent to 20.3 percent, as measured by the census’s new American Community Survey, “is fundamentally a story about stagnant wages.”

Edward Wolff, a New York University economist, attributed the growing disparity to ballooning Wall Street incomes and declining wages for lower skilled workers. “Though these forces are at work across the country,” he said, “the heavy preponderance of corporate headquarters, the financial sector and the legal sector in New York City has made the increase in the ratio of income between the top and bottom quintile more extreme than in other parts of the country.”

Jared Bernstein, senior economist at the liberal Economic Policy Institute, said the income gap, which in Manhattan has historically been large, can endure indefinitely.

“The elites, the top sliver of the income scale, can drive consumption and investment forward while the bottom half slogs along,” he said. “If inequality had embedded within it its own seeds of destruction, it would implode sooner than later. But that doesn’t appear to be the case. Many who have fallen behind have a skewed notion of their prospects for upward mobility.”

Manhattan, he said, is “an amplified microcosm” of conditions elsewhere in the country.

The income gap in Manhattan was far wider than in any other county. In tiny Clay County, Georgia, which has only 1,355 households and ranked second, the rich, on average, made about 38 times what the poor made.

Compared with the poorest Manhattanites, those in the top fifth are disproportionately male, non-Hispanic white and married. Roughly equal proportions among rich and poor are immigrants, are employed by private profit-making companies and work in sales.

The lowest-income census tract in the city is a triangular patch of East Harlem east of First Avenue and north of East 119th Street, where, despite a hint of gentrification in a renovated brownstone or two, the neighborhood is dominated by the mammoth though generally well-tended public housing project called the Wagner Houses. The median household income there is $9,320, most of the residents are black or Hispanic and do not have high school degrees, 56 percent live below the poverty level and about one in 10 are foreign born.

Darryl Powell, a 43-year-old automobile mechanic, said that most were struggling just to get by. “They’re trying to keep a roof over their head,” he said. “People are trying to hold onto what they’ve got.”

Sheila Estep said she was facing eviction because she was working as a full-time mother raising three sons rather than returning to her earlier jobs as an electrician, plumber and cosmetologist. “If I fail at my job, they’ll fail at theirs,” she said.

Sharon Hammond, who sells cosmetics, said she and other tenants wished their neighborhood were better and that she had a working stove instead of a temporary hotplate in her apartment, but added: “Everybody can’t be rich.”

Manhattan’s highest-income census tract is a six-square-block rectangle bounded by Fifth and Park Avenues and East 56th and 59th Streets. The median household income in this mostly commercial section of East Midtown is $188,697 (average family income is $875,267); none of the residents identified themselves as black; nearly one-third have advanced degrees and more than one in three are foreign born. Even there, though, the poverty rate is 16 percent.

“The income gap, while supposedly increasing, seems to be a natural phenomenon,” said the developer Donald J. Trump, who lives in Trump Tower. “Times have been good, but times have been good for many people and many classes of people. I think there is a very large middle class – but not in this section, by the way.”

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