What’s the future for fiscal federalism in New York?

December 28, 2016. The following op-ed by James Parrott appeared in City & State New York on December 28, 2016.

With President-elect Donald Trump and a newly empowered, Republican-dominated Congress soon taking control of the federal budget, the potential for substantial cuts in domestic spending poses gargantuan challenges for New York state and city budgets.

Roughly $57 billion in federal dollars flow into our city and state budgets annually. Medicaid accounts for approximately $35 billion, with another $14 billion in categorical funds flowing to the state, and roughly $8 billion to New York City. The federal treasury provides another $4 billion to $5 billion to support the New York City Housing Authority, the Metropolitan Transportation Authority’s capital budget and the city’s public hospital system, entities where steep funding cuts will set off alarms in Albany and City Hall.

Federal spending cuts are hardly new, but unprecedented cuts seem to be headed our way. A massive tax cut is one of the few significant Trump proposals that could be readily adopted in the first 100 days. Trump nominated a founding member of the anti-government, deficit-hating House Freedom Caucus, U.S. Rep. Mick Mulvaney, to be his budget director. Mulvaney has repeatedly demonstrated his willingness to shut down government or block increases to the debt ceiling unless spending is cut severely. Some Republicans will likely seek to offset as much of the tax cuts as they can get away with by slashing non-military spending.

After Medicaid, social welfare is the biggest area of federal funding for the city and the state – about $8.1 billion combined – supporting a wide range of programs from foster care and child care to public assistance. Education aid – $5.3 billion – is the second-largest source of federal funding, particularly for schools serving low-income students. Other areas receiving considerable federal support include public health, housing and community development, and criminal justice and anti-terrorism, each receiving roughly $2 billion.

We’ll see if, given the chance, die-hard anti-government Republicans will sharply cut funds for needy children. After all, 36 percent of all low-income children are white. But it is not hard to imagine, given the incoming budget director and Cabinet appointments, that funding for many social welfare, education and housing programs could shrink, in some cases severely.

Repealing the defining characteristics of Obamacare would, of course, risk taking health insurance away from 1.1 million New Yorkers. It could also entail a rollback of $4 billion in federal Medicaid dollars associated with expanded health insurance coverage in New York. Block-granting Medicaid, favored by U.S. Rep. Tom Price, Trump’s nominee for health and human services secretary, would destabilize a system that covers more than one in four New Yorkers.

Trump’s infrastructure plan, at least according to the detailed version released during the campaign, suggests that it is mainly a tax-reduction scheme for private investors. To the extent new federal funds are committed, it would likely also come at the expense of other domestic spending and add to the budget squeeze.

Other policies favored by members of the incoming Cabinet could weaken foundational elements of the safety net most Americans rely on, including Medicare and Social Security. If that were to happen, added pressure would be placed on the city and state budgets to repair some of the damage.

The progress President Barack Obama made in using federal tax policy to reduce income inequality very likely will be undone. As the latest Economic Report of the President demonstrated, Obama’s policies delivered the most significant reduction in market-generated inequality since the Great Society programs in the mid-1960s. The combined impact of his tax policy changes and Obamacare’s taxing of the rich to pay for expanded health coverage cut by 20 percent the ratio of average income of the top 1 percent to the bottom 20 percent.

Trump’s tax policy, including killing the century-old estate tax, likely will shower almost all of its cuts on the richest 1 percent. Using data from the Tax Policy Center, it appears that New York state’s top 1 percent could get a $20 billion windfall. Eliminating the deductibility of state and local income taxes, hinted at by U.S. Treasury Secretary nominee Steven Mnuchin, could decrease the tax windfall for the rich by $8 billion.

In the event there are draconian federal spending cuts that threaten the well-being of millions of New Yorkers, the state should consider a special tax to recapture some of the federal tax cut windfall that would flow to the state’s richest 1 percent. Whatever happens in Washington, Albany needs to extend and enhance the state’s millionaire’s tax, due to expire at the end of 2017. Without it, New York would be inflicting harmful budget cuts on itself.

As we peer into the Washington chasm that we’ll face in 2017, vigilance will be needed in every dimension of democratic governance, civil society, environmental stewardship and foreign affairs. While budgets may not be the most important priority given the epochal challenges we face, we know that government spending, or lack thereof, will profoundly affect the world we want to leave our children, and our children’s children.

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Syrian Immigrants: Doing Well, and a Strong Receiving Community for Refugees

December 13, 2016. A new report by the Fiscal Policy Institute and the Center for American Progress looks at how Syrian immigrants fare in the United States.

After a political campaign season in which Syrians coming to the United States were met with harsh words and proposals, this report takes a calm look at how immigrants from Syria are faring in the United States. The findings are reassuring: Syrian immigrants are highly educated, disproportionately likely to be business owners, learn English, and become home owners invested in their communities. Refugees come under different circumstances than the immigrants who came before them, but the fact that there are people in the United States who speak the same language and know the culture they come from can be a substantial help to the newcomers in finding their way into American society and the American labor market.

This report is a companion to the report FPI and CAP released in June about the integration of four refugee groups in the United States over the span of several decades: Hmong, Somalis, Burmese, and Bosnians.

 

Press release: Thriving Communities of Syrian Immigrants Integrate and Succeed in American Society, Are Strong Receiving Force for Syrian Refugees

Full report: Syrian Immigrants in the United States: A Receiving Community for Today’s Refugees

Minimum-wage bump is good for all; Even businesses in low-paying industries will benefit

December 11, 2016. This op-ed by Lorelei Salas and James Parrott appeared on crainsnewyork.com and in the December 12, 2016 print edition of Crain’s New York Business.

When the state’s minimum wage rises to $11 an hour from $9 on Dec. 31, workers at New York City businesses with more than 10 employees will see the largest percentage minimum-wage increase in 60 years. It will be a welcome and much-needed addition to paychecks for more than 800,000 low-wage workers struggling to make ends meet in our city.

According to the Economic Policy Institute, more than a third of these workers are raising at least one child, and the wage hike will help almost 75% of people living below 200% of the federal poverty line.

Benefits from the increase are not limited to low-wage workers; neighborhoods will be helped, too. Local businesses that rely on their neighbors to stay afloat should see sales rise—and more local spending means more local stability. Government also can gain, as an increase in the minimum wage means fewer residents on public assistance.

A recent New York state-focused University of California study concluded that businesses will be able to adapt to the higher wage floor without profits falling. They will save money on turnover and operations as workers stay on the job longer and improve their performances. Increased consumer spending will boost demand, which should be able to absorb modest price increases that would allow businesses to stay competitive. The overall result will be more-efficient businesses and no net reduction in jobs.

Several large employers around the country, including Target, T.J. Maxx, Marshalls, Ikea and the Gap, have already started raising wages to better recruit and retain workers, and to improve customer service. According to The Economist, even Wal-Mart now says that “higher wages come before price cuts,” as the company knows it needs to better motivate its workers to boost productivity and morale.

Higher wages can also benefit smaller or lower-margin businesses in sectors such as retail and food service, which can grow even while paying decent wages. Take, for example, Café Grumpy, a New York coffee shop chain that pays most of its employees at least $14 an hour. In January, it is set to open its eighth location, up from just one in 2005. Shaak Shatursun, who oversees the company’s retail operations, reported that offering decent wages has helped attract and keep better talent, and also represents the company’s commitment to helping its employees manage the city’s high cost of living—all while it has continued to expand.

This is the type of growth that our workers need to feed their families and that our city needs to thrive. As Shatursun can tell you, there’s no reason to be grumpy about higher wages.

Lorelei Salas is the commissioner of the New York City Department of Consumer Affairs, which houses the Office of Labor Policy and Standards. James Parrott is the chief economist of the Fiscal Policy Institute.

2016 FPI Annual Breakfast in NYC

December 14, 2016, Manhattan. FPI’s 2016 annual breakfast fundraiser will honor Deyanira Del Rio, Henry Garrido, and Steven Greenhouse.

Do Immigrants Present an Untapped Opportunity to Revitalize Communities?

Wednesday, October 19. As many cities across the nation experience population decline and an increase in vacant and distressed property, there is a need for economic and housing revitalization. New research from Welcoming Economies Global Network and Fiscal Policy Institute indicates that immigrants represent some of the brightest potential for revitalizing urban communities. However, experience suggests, that immigrants are often overlooked and underestimated by homeownership, community development, and affordable housing advocates, practitioners, and programs.

This report, which includes an interactive tool, show that immigrants have strong rates of potential home ownership in 23 target cities, and suggest that efforts that encourage homeownership and/or vacant property purchase could yield significant returns by targeting immigrant groups.

Cities included in the study are: Akron, Baltimore, Buffalo, Chicago, Cincinnati, Cleveland, Columbus, Dayton, Des Moines, Detroit, Indianapolis, Lafayette (IN), Manchester, Minneapolis, Philadelphia, Pittsburgh, Rochester, St. Louis, St. Paul, Syracuse, Toledo, Utica, and York (PA).

The interactive tool can be accessed here.

Click here to view the full report.

Testimony on the Report of the NYC Council Task Force on Economic Development Tax Expenditures

September 22, 2016. James Parrott, a member of the New York City Council’s Task Force on Economic Development Tax Expenditures chaired by Finance Committee Chair Julissa Ferreras, presented this testimony at a September 22 hearing on the Task Force report and recommendations for a rigorous, ongoing evaluation procedure.  He also urged the Council to convene a hearing on the Hudson Yards property tax breaks, the costs of which are rapidly rising.

PDF of Testimony

New Census Data Show Improvement in Poverty and Incomes in New York State

September 19, 2016. New York has reason to be optimistic as poverty is declining and incomes are on the upswing, according to new data from the U.S. Census Bureau.

FPI notes that there were significant declines in the overall poverty rates for New York State and New York City in 2015 from 2014 (but no other significant year-over-year changes).

The New York State poverty rate for 2015 was 15.4%, down 0.5% from 2014 (15.9%) resulting in approximately 90,000 fewer New Yorkers living in poverty. New York City saw a statistically significant decrease in poverty over the course of the last year as well with poverty rates falling 0.9% from 20.9% (2014) to 20% (2015).

While we have seen an improvement in the past year there is still much work to be done. Looking back over the past 15 years it is clear that poverty has been growing in New York State. Despite the improvement in this year’s numbers, we can see from the following chart that over the past 15 years poverty had been trending upward and has yet to fall to the level that prevailed in the early 2000s.

Child poverty rates also remain persistently high; the state’s child poverty rate fell from 22.6% in 2014 to 22% in 2015, but that change is not considered statistically significant. Child poverty was 28.6 percent in New York City in 2015, and even higher in many upstate cities.

New York State poverty rates 2000-2015

Poverty Trends 2000-2015

 

 

 

 

 

 

 

 

 

According to Ron Deutsch, executive director of the Fiscal Policy Institute, “While there is cause for optimism based on the most recent census data examining poverty, there are still nearly 3 million New Yorkers (and over 900,000 children) living below the federal poverty level. In one of the richest states in the nation these numbers should be completely unacceptable.”

New York’s median family income rose by an inflation-adjusted 3.7% in 2015 to $73,854. While the 2015 level is down slightly from the pre-recession high reached in 2008, the difference between the two years is not statistically significant according to Census Bureau methods. In New York City, median family incomes rose 4.4% to $61,413. Census Bureau sampling methods do not lend themselves to reliably reporting one-year changes for upstate cities.

“The historically weak national economic recovery is finally starting to deliver real wage and income gains for New York’s working families,” stated James Parrott, FPI’s chief economist. Parrott added, “State action this year to raise the minimum wage in the months and years ahead will help to keep this momentum going.”

 

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Driver’s License Fees: Low, Medium, and High-Cost States

September 16, 2016. The cost of getting a driver’s license has become entwined with many different issues recently. It is relevant to discussions of allowing unauthorized immigrants to apply for licenses. It has come up in states that require people to show identification in order to vote and in discussions surrounding fees that are a barrier to getting a state-issued ID. And, some states have acted to reduce the burden for some groups by allowing free or reduced-cost licenses to homeless people, senior citizens, veterans, or people recently released from incarceration.

The fee charged for a driver’s license varies substantially from state to state. For instance, after adjusting for the number of years for which it is valid and other factors to make a fair comparison, we find that the cost of a license in the lowest-cost state, Wyoming, is less than one tenth of the costs in the highest-cost state, Vermont.

This report lays out the fees for a driver’s license and associated costs in all 50 states plus the District of Columbia.

What Fees Are Charged?

Mandatory costs and details associated with obtaining a driver’s license differ depending on the state. The amount of time for which a license is valid ranges from 4 to 8 years[1]. In addition, some states require one payment to cover the permit and driver’s license, others require separate fees. Some states also charge separate fees for applications and testing. There are some fees that are only applicable to immigrants, such as an additional fingerprinting fee in Utah and a higher license fee for non-citizen applicants in Colorado. Colorado charges non-citizens $79.50 for a driver’s license, which is over three times the cost of a driver’s license for a citizen applicant. Many states, such as California, Vermont, Illinois, Nevada and others, offer two different licenses—a Real ID (can be used to enter federal facilities and board aircraft) and a standard ID. The issuance of two different licenses may affect the cost of a driver’s license.

A detailed list of the fee schedule for licenses in all 50 states can be found here.

To organize this information into a comparable list, we added together the fees for a license, which include the driver’s license fee, permit fee, application fee, test fees and for some states a yearly renewal fee. However, not all states had each of these separate fees. Since the most common length of time for a license to be valid is four years, we adjusted all to that standard (so, if a license was good for eight years we divided the cost by two).

Figure 1 shows the unadjusted cost of a license, breaking out the cost of learner’s permits and testing or other additional fees.*

Figure 1.

Figure 2 shows the cost of getting the same license in different states—again, this is the full cost for a regular driver’s license, standardized to the equivalent of a license valid for four years.

States that are categorized into the low fee interval were those with a cost below $25.00, the medium fee states were defined by $25.00 and above but less than $50.00 and lastly, the states which are classified as a high fee have a cost of $50.00 or more.

Figure 2.

The highest-cost state is Vermont, which charges the equivalent of $103 for a 4-year license. Other Northeastern states also have very high fees—Maryland, Connecticut, and Massachusetts. New York has different charges by region. Downstate New York—New York City and the suburbs that make up the Metropolitan Commuter Transportation District, has the 7th highest fee, at $66.60. And upstate New York (the rest of the state) has the 10th highest, at $51.40. The only other state to charge different fees by region is Kentucky—not included here because each of its 120 counties determines its driver’s license fees independently.

At the low end of the scale, the state with the lowest cost is Wyoming with a fee of $10.00. Florida ranked the highest in the low fee states with a cost of $24.00, but ranks as the 34th state overall. Many of the Southern states, such as South Carolina, Florida, Georgia, Louisiana and Arkansas have costs that fall within the low fee states.

In addition to these standard fees, there are also sometimes additional costs that are not accounted for here. States charge differing fees for renewals, for instance. We look only at regular licenses, not licenses for driving commercial vehicles, or for motorcycles. And states charge differing fees for duplicates to replace lost or stolen licenses, transferring a license from out of state and modifications made to the license, such as a name or address change.

And, some states waive certain fees for specific individuals such as those in the armed forces and veterans, recently released inmates, and homeless people. Hardship licenses can be issued in some cases, in acknowledgement that individuals may need a license to care for their family even during a time when their license is suspended. States that have some of the fee waivers listed above include Alaska, Florida, Georgia, and Maine.

The adjusted annual rate does not include these added costs or the fee waivers, but nonetheless gives a good basis for seeing where the fees are in each state and how the state ranks compared to others.

 

by Cyierra Roldan

 

[1] In many states, licenses for non-citizen drivers are valid for the length of their stay in the United States, while other non-citizen drivers are required to renew their license every year.

Additional Notes

*Kentucky was removed from Figure 1 due to varying fees by county and no standard state fee.

*For New York, both Upstate and Downstate, and Louisiana a range was provided on their Motor Vehicle websites. The lowest dollar amount was used from each range as the cost of a driver’s license.

*For license or permit fees that included a yearly renewal fee, the fee was added once to adjust for the initial fee of the license or permit. The states with yearly renewal fees include Iowa, Maryland, Tennessee and West Virginia.

Opening Keynote by David Dyssegaard Kallick Promises Timely and Relevant Discussion

Friday, July 22. David Dyssegaard Kallick, Director of the Immigration Research Initiative at the Fiscal Policy Institute since 2007, will be presenting at The Coalition of Urban and Metropolitan Universities’s 2016 CUMU Conference’s Opening Keynote.

David Dyssegaard Kallick’s keynote speech, titled “Can Immigrants Revitalize America’s Shrinking Cities?” will take place on Monday, October 24th from 8:30-10:00 AM at the 22nd Annual CUMU Conference: Charting the Future of Metropolitan Universities in Washington, D.C. His speech will explain why institutions in urban and metropolitan areas are struggling with a tax base that can not support them, and how cities rebounding with growing populations of immigrants are agents of change in supporting a multicultural revitalization of central cities.

The live streamed video of his speech can be accessed here.

Click here for more information on the event and to register.

 

Shale Researchers Release Local Government Handbook and State Policy Report Card

July 5, 2016.  Last week, the Ohio, Pennsylvania and West Virginia organizations that are part of the Multi-State Shale Research Collaborative (MSSRC), released two new reports: a handbook for local officials entitled Lessons from the Gas Patch: A Local Government Guide for Dealing with Drilling; and A Report Card on Shale Gas Policies in Ohio, Pennsylvania, and West Virginia.

The new reports build upon

The new Report Card on Shale Gas Policies in Ohio, Pennsylvania, and West Virginia grades the three states on their policies in each of nine areas of fiscal, social, and economic policy. The report card is limited to issue areas in which the MSSRC has expertise. Thus, for example, the report card does not evaluate either the states’ environmental policies or their substantive public health policies.[1]

The nine policy areas on which the Report Card evaluates the three states’ policies are:

  • Severance Tax Policy.  Do state policies allow for the collection of sufficient revenue to cover the cost of the public services necessary to deal with the impacts of shale drilling in a timely manner and to allow for sufficient investments in a secure economic future?
  • Property Tax Policy. Do state policies allow local governments to raise the revenue required to meet the local service costs and the local infrastructure maintenance costs that come with shale drilling?
  • In-State Jobs Policies. Do state policies help to increase the in-state share of shale jobs through training and job matching initiatives and by encouraging formal agreements that give qualified in-state workers first shot at available opportunities?
  • Employment Documentation Policies. Do state policies accurately measure direct jobs impacts; estimate indirect jobs impacts in a reasonable manner; and systematically track jobs going to in-state workers?
  • Policies for Addressing the Boom/Bust Cycle. Does the state address the negative aspects of the boom and bust cycles of natural resource extraction by dedicating a portion of its drilling-related revenues into a permanent trust fund that grows over time, generates a stabilizing revenue stream, and creates a lasting benefit from the use of a non-renewable resource?
  • Policies for Managing Road Damage and Other Road and Traffic Impacts. Does the state: require drillers to pay for directly attributable repair and maintenance costs; have sufficient bonding requirements; require pro-active upgrade and use agreements with drillers; and require drillers to repair and maintain roads that service pipelines and compressor stations?
  • Policies for Addressing Affordable Housing and Other Social Impacts.  Does the state generate enough revenue (and effectively utilize that revenue) to address the impact of drilling on the availability of affordable housing for long term residents who do not benefit economically from drilling activities?
  • Policies for Tracking Health Impacts. Does the state log and analyze drilling-related health complaints and health care utilization on a confidential basis?
  • Polices Regarding Local Government Regulation.  Does the state allow local governments to regulate drilling and provide clear guidance on the extent of local power to address drilling impacts?

The grades earned by the three states in each of the nine areas are presented and explained in the Report Card and demonstrate significant room for improvement. All three states got at least one F with Ohio and Pennsylvania each receiving two Fs. In addition Ohio received three Ds and Pennsylvania received two. The only As were earned by West Virginia in the two fiscal policy areas (for the effectiveness of its severance tax policies and its policies governing local property taxes).

Overall, the Report Card is an important reminder that even if the negative environmental and public health impacts of shale drilling were not as daunting as they are, there are significant fiscal, economic and social problems associated with the implementation of shale drilling that will not be addressed without the proactive involvement of the states and their local governments.

  • State and local governments must monitor and proactively address the negative social, economic and community impacts of shale drilling.
  • State governments must empower their local governments to monitor and proactively address those negative social, economic and community impacts that are more effectively addressed at the local level rather than at the state level.
  • State governments must raise the revenue necessary to fund the state and local services and the infrastructure investments necessary to mitigate the negative social, economic, and community impacts of shale drilling.

 

[1] While the MSSRC Report Card does not examine the three states’ substantive public health policies, it does evaluate the effectiveness of their policies for tracking health impacts. For information on environmental and substantive public health issues related to shale drilling, see the materials published by the New York State Department of Environmental Conservation in conjunction with its comprehensive, seven-year review of the impacts of high volume hydraulic fracturing (HVHF). On the basis of this review, in June 2015, DEC issued a final State Environmental Quality Review (SEQR) Findings Statement officially prohibiting HVHF in New York State.

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