Testimony on Local Government Minimum Wage Authority

April 30, 2014. In testimony presented before the New York City Council, FPI’s James Parrott reviewed several reasons why it makes sense for New York State to authorize cities and counties to establish higher minimum wage levels than the statewide minimum. Parrott’s testimony cited data showing that there are wide disparities across counties within the state in terms of the local cost of living, and that there is a similar wide disparity in median wage levels, particularly between New York City and suburban counties on the one hand, and most upstate counties on the other. His testimony also pointed out the disparate living wage levels currently established by local governments that apply to companies and organizations providing services under local government contract.

Parrott pointed out the flurry of activity just since the first of the year around the country with six states raising their minimum wage levels, bringing to 26 states altogether that have raised minimum wages above the $7.25 minimum wage level. Even when New York State fully phases in a currently legislated minimum wage increase to $9.00 an hour by 2016, the purchasing power of the minimum wage will still be 25 percent lower than achieved in 1968 when the minimum wage was $1.60. State minimum wages are set to increase to a level of $10 or more in four states (CA, MD, HI and CT) , and as a result of the fact that they index their minimums to inflation, both Washington and Oregon likely will pass $10 an hour within a few years. The District of Columbia recently acted to raise its minimum wage to $11.50 an hour in mid-2016, and two neighboring Maryland counties followed suit. Major cities including San Francisco, Seattle, San Diego, and Oakland are considering raising their minimums to $12-$15 an hour.

Finally, a recent poll of small business owners found that 74% of small business owners in New York State support raising the minimum wage and indexing it to rise with the cost of living. The poll, conducted by the Small Business Majority, also found that two-thirds of small business owners believe local economies should be allowed to set and increase their own minimum wage “to supplement an increase in the state’s minimum wage in order to ensure it makes sense for local economies.”

Parrott-Brecher Debate on NYC Municipal Contracts

April 25, 2014. Negotiations are underway to settle New York City municipal contracts, almost all of which have been expired for four or more years. Pattern bargaining has long been the norm in the City, but about one-third of the City’s 300,000 unionized workers, including teachers and nurses, never received raises from the last round. FPI’s James Parrott engaged in a spirited on-line debate discussing the topic “What can the City Afford?” during the week of April 21 with Charles Brecher of the Citizens Budget Commission. The debate was hosted on the www.publicsectorinc.org website maintained by the Manhattan Institute.

Arizona Law on Immigration Spooks Business Leaders-FPI in Huffington Post

April 16, 2014. FPI’s David Dyssegaard Kallick wrote an op-ed for the Huffington Post, reporting on how Arizona business leaders see the economic impacts of the state’s “Show Me Your Papers” law. It may be hard to statistically measure the economic impact of the bill, widely perceived as anti-immigrant, argues Kallick. But a good gauge of the damage done is how serious the state’s business leaders have been about efforts to turn the anti-immigrant perception around. And, Kallick says, falling behind the curve on the immigration legislation is part of what motivated business leaders to act quickly in opposition to the recent Arizona proposal to allow businesses to deny service to gay and lesbian customers.

One of the most striking stories I heard was about a delegation of Arizona legislators that went to Mexico City to talk about trade relations recently. Mexico is Arizona’s biggest foreign trading partner, and state officials wanted to discuss ways to reduce friction between the two economies — reducing wait time for trucks carrying goods across the border, road upgrades and the like.

What Arizona legislators got was instead an earful about SB1070. “You hate us. Why are you here?” was the first reaction of the Mexican officials, according Catherine Miranda, an Arizona legislator.

 

Corning and MasterCard Paid .6% in State Taxes

April 14, 2014. As New York struggles with tough budget decisions about essential public services, profitable Fortunate 500 companies like Corning, MasterCard, Lowes and Consolidated Edison are paying 2% or less in state income taxes for 2012 thanks to copious loopholes, lavish giveaways and crafty accounting. The recently passed state budget did nothing to close these loopholes and this will continue the unlevel playing field where the rich are able to take advantage of the system.

90 Reasons We Need State Corporate Tax Reform: State Corporate Tax Avoidance in the Fortune 500, 2008 to 2012 by the Institute on Taxation and Economic Policy (ITEP) and Citizens for Tax Justice examined 269 Fortune 500 companies that were profitable every year between 2008 and 2012. Twenty-six New York headquartered companies were on that list, exploiting existing loopholes, like the explosion in investment tax credits pointed out by Boyd and Rubin in their study for the Solomon-McCall Commission, which allows these large profitable companies to avoid state income taxes. “Business tax credits jumped from $600 million in 2005 to $1.8 billion in 2013 with little or no economic impact,” said James Parrott, deputy director and chief economist for the Fiscal Policy Institute and member of the Solomon-McCall Commission.

“It’s time for profitable companies such as Verizon and 21st Century Fox, to name a few, to pay their fair share. Middle class people shouldn’t have to subsidize the profits of large, profitable corporations,” said Fred Floss, executive director of the Fiscal Policy Institute.

Some of the report’s key findings:

  • 91 companies paid no state income tax at all in at least one year, and 38 companies avoided taxes in two or more years.
  • 10 companies, including Boeing, Merck, Rockwell Automation, paid no state income tax at all over the five-year period covered by the study.
  • The average weighted state corporate income tax rate is 6.25 percent, but the 269 companies paid an average rate of just 3.06 percent.
  • The companies examined collectively avoided paying $73.1 billion in state corporate income tax.

“The Governor and Legislature just agreed to cut the tax rate of many profitable New York corporations that are already paying less state tax than most average New York families,” said Ron Deutsch referring to the ITEP report showing how little many corporations pay in state taxes.  “We need to pass a real corporate tax disclosure bill in New York that will pull back the wizard’s curtain and let us see for ourselves exactly how much these corporations are, or are not, paying in taxes.”

The report comes at a time when lawmakers in New York have just cut corporate income taxes from 7.1% to 6.5% and reduced the rate on manufacturing companies to zero across the state. The 2014-2015 state budget also merges bank and corporate tax rates allowing banks to use a much lower single sales factor formula giving banks a tax windfall.

“The first step in any state’s corporate tax reform should be ensuring corporations are actually paying taxes,” said Meg Wiehe, director of state tax policy at the Institute for Taxation and Economic Policy.  “At a time when public services that ordinary people rely on face inadequate funding, we shouldn’t be having a conversation about lowering taxes for profitable corporations, which only means the rest of us have to pay more. We should be talking about how to ensure corporations are paying their fair share.”

PDF of Report

PDF of Press Release

New York State Economic and Fiscal Outlook 2014-2015

February 4, 2014. In its 24th annual New York State budget briefing, the Fiscal Policy Institute reviews the major spending and tax reduction proposals contained in Governor Andrew Cuomo’s 2014-15 Executive Budget.

FPI’s briefing provides a critical assessment of four fundamental assumptions that shape the proposed budget and state fiscal projections for the following three years. These assumptions deal with the preferred size of New York government, the optimal growth rate of state spending, the potential for budget savings related to government consolidation, and the linkage between taxes and New York’s economic performance. The briefing provides a different analysis of the 50-year trend in state spending and taxation than the one the Governor presented in his budget message.

On the heels of six years of austerity budgets dating to 2008, the Executive Budget proposes another year of spending cuts in a host of areas, and lays out a multi-year plan of steep spending cuts that will extend the austerity measures for three more years, thus completing an “austerity decade” for New York. A main purpose of the multi-year expenditure cutting plan is to create the appearance of a budget “surplus” in order to justify multi-year tax cuts that grow to more than $2.5 billion annually.

In assessing the proposed tax cuts, FPI finds that the property tax freeze is ill-conceived and will disproportionately benefit wealthier localities, and that the homeowners’ and renters’ personal income tax credits are ineffectively targeted. FPI puts it analysis of the proposed business tax reductions in the context of an already declining corporate share of state tax collections, and is particularly critical of the proposed bank tax repeal and its replacement that is likely to mean a sharp reduction in state tax payments by the largest New York City banks. FPI notes the irony that, given the state’s pronounced income polarization in recent years, the budget proposes to reduce the estate tax by 40 percent at a cost of $800 million annually, most of which will benefit 200 super-wealthy households. In response to hype about high income households fleeing New York for lower tax havens, FPI cites IRS data showing New York’s rising national share of households with incomes of $1 million or more.

Most major areas of state education investment and human services spending have seen sharply reduced funding commitments during the past six years of austerity budgets. State grades K-12 local education aid has declined as a share of total school spending to its lowest level in 65 years, with state foundation aid $5 billion behind where it would be had the state honored its 2007 legislative response to the Campaign for Fiscal Equity lawsuit. State aid to SUNY has declined by over 40 percent in real terms since the start of the Great Recession. State funding for human service agencies dropped 12 percent over the past three years. At a time when a growing number of local governments are fiscally stressed, the proposed budget holds aid to municipal governments flat for the next four years despite an inflation-adjusted 75 percent reduction in such aid since 1980.

FPI’s briefing provides an overview of economic conditions in the Empire State and suggests that budget-makers do more to respond to those conditions. Although New York State has fared better than many states during the Great Recession and the weak recovery, income gains have been concentrated at the top and pronounced economic hardships have taken a toll on millions of New Yorkers. The indicators are disturbing: continued high and prolonged unemployment; high mortgage debt burdens; and faltering wages, incomes and living standards, precipitating a rise in poverty, hunger, homelessness, and economic insecurity.

FPI suggests several budget, tax and economic policy ideas that New York’s leaders should consider to address this heightened economic insecurity and the growing income polarization that has spawned that insecurity. Four more years of budget austerity will only serve to further exacerbate economic insecurities.

Press Release

Briefing Book

Case Studies Examine Shale Drilling’s Mixed Legacy

April 11, 2014.  New case studies of the impact of shale gas drilling in Carroll County, Ohio; Greene and Tioga counties in Pennsylvania; and Wetzel County, West Virginia, provide numerous cautionary tales for New York as it considers whether or not to allow Horizontal Drilling and High-Volume Hydraulic Fracturing in the Marcellus Shale and Other Low-Permeability Gas Reservoirs.

The case studies, which were completed by the Ohio, Pennsylvania and West Virginia organizations that are part of the Multi-State Shale Research Collaborative, build upon the Collaborative’s November 2013 report Exaggerating the Employment Impacts of Shale Drilling: How and Why. That earlier report documented the ways in which the oil and gas industries and their supporters have exaggerated the employment impacts (both actual and potential) of shale drilling. It also exposed the motivations for these exaggeration strategies: to preclude, or at least to minimize, taxation, regulation, and even careful examination of shale drilling. The Fiscal Policy Institute is a member of the collaborative along with Policy Matters Ohio, the Keystone Research Center, the Pennsylvania Budget and Policy Center, The Commonwealth Institute for Fiscal Analysis (in Virginia), and the West Virginia Center for Budget and Policy.

While the case studies make important contributions to the process of identifying and exploring the social and economic costs of shale drilling booms, much work remains to be done in order to fully and accurately quantify the costs and the benefits involved in the application of horizontal drilling and high-volume hydraulic fracturing technologies. The studies also provide important reminders of the many public health and environmental questions that remain unresolved regarding the various stages of the shale drilling process. According to the case studies, issues regarding water quality and waste disposal are proving to be particularly problematical.

In addition to employment impacts being more modest than industry studies of the last five years had predicted, very few of the higher paying jobs in the drilling industry and other oil and gas industries themselves have gone to local residents. The West Virginia Center on Budget and Policy, for example, reported that:

  • “The promise of more jobs in this already hard-hit area, however, has fallen flat.  Wetzel County still suffers from double-digit unemployment despite having some of the highest natural gas production in the region.” And that
  • “According to the interviewees, many of the oil and gas jobs are going to out-of-state workers from areas of the country where the industry is more developed, and the workers more experienced.”

In addition, these out-of-state employees frequently work on schedules that minimize any ongoing economic benefits and create short term problems. As the Wetzel County case study reported,

  • “These ‘transient workers’ are often based out of state and are transported onto the work site for a period of one or two weeks before returning to their home for an equal length of time. These workers typically do not maintain permanent residence. This has kept the employment and economic gains limited to service industries, and there has yet to be a permanent increase in population or workforce due to drilling activity.”
  • When asked about the lack of local workers, gas companies claim that it is difficult to find local workers who can pass a drug test, but such claims which have also been made by gas companies in Pennsylvania remain uncorroborated.

Besides very little employment in drilling and other gas and oil industries going to local residents, the Greene, Tioga and Wetzel case studies all found that the income from signing bonuses and royalties (which increase per capita income, i.e., all the income of an area divided by the total number of residents) has not been broadly shared. It turns out that a small number of landowners, including out-of-state businesses and out-of-state residents, own a large share of the property, meaning that much of the lease and royalty income is concentrated in very few hands, and that the benefits to the local economy have been diluted as income “leaks” out of town and out of state.

The experience of Tioga County, Pennsylvania, which is part of Pennsylvania’s “northern teir” and borders New York State, is even more troubling in that it demonstrates the ephemeral nature of many shale and other natural resource booms. As the industry shifted its focus from drilling for methane, or dry gas in Tioga County to more lucrative wet gas and shale oil in Greene County and parts of Ohio and North Dakota, the story in Tioga became one of “boom and bust.” According to Sharon Ward, the lead author of the Tioga County study, “The community was largely unprepared for the sudden overwhelming presence of the industry, with few tools to manage or plan for growth and change. And then just as suddenly, the industry packed up and left town, taking many of the jobs with them.”

The case studies also do a good job of identifying the wide range of costs that are being shifted by the industry to state and local governments, and to the local economy more generally, in the form of more traffic accidents and more road congestion and road damage, increased police and emergency services costs, increased rents, increased homelessness as lower income residents are priced out of the rental housing markets, increased crime, and increased emergency room visits. In Greene County, Pennsylvania, the researchers even found that low-income families, unable to find affordable housing, were separated as children were placed in the foster care system.

Amanda Woodrum, the author of the Carroll County, Ohio, report concluded, “It’s a complicated story. Whether fracking ultimately helps or hurts the local economy will depend on whether the money stays local, where the gas is refined, who gets the jobs and business, and what the costs are to the community, the environment and public health. Overall, the economic benefits of fracking fall far short of what was promised and come with costs to safety, the environment and the community.”

Carroll County, Ohio

Policy Matters Ohio Web Report

Full Report (PDF): “Fracking in Carroll County, Ohio: An impact assessment,” by Amanda Woodrum, Policy Matters Ohio, April 2014

Press Release

Greene County, Pennsylvania

Full Report (PDF): “Measuring the Costs and Benefits of Natural Gas Development in Greene County, Pennsylvania: A Case Study,” by Stephen Herzenberg, Diana Polson and Mark Price, Pennsylvania Budget and Policy Center, and Keystone Research Center, April 2014

Press Release

Tioga County, Pennsylvania

Full Report (PDF): “Measuring the Costs and Benefits of Natural Gas Development in Tioga County, Pennsylvania: A Case Study,” by Sharon Ward, Diana Polson and Mark Price, Pennsylvania Budget and Policy Center, and Keystone Research Center, April 2014

Press Release

Wetzel County, West Virginia

West Virginia Center on Budget and Policy Web Report

Full Report (PDF): “Impacts of Gas Drilling in Wetzel County,” by Sean O’Leary, West Virginia Center on Budget and Policy, April 2014

Press Release

New York City Social Services Workforce

April 3, 2014. In doing research and analysis of the New York City social services workforce, a preliminary chart pack was assembled that includes:

  1. NYC Contract Budget for Social Services
  2. Demographics of Private Social Service Workforce
  3. NYC Social Services Sector: Annual Earnings by Occupation
  4. Social Services Wages & Hours
  5. Social Services Workers: Family Income Relative to Poverty Status