Tag Archives: New York City

The “Pac-Man” of New Haven’s budget

Steven Malanga of The Manhattan Institute has an article tracking the impact of compensation in municipal budgets.  New Haven’s Mayor John DeStefano, long a public sector union ally, now finds himself in the position of trying to reduce the fast-rising costs associated with employee compensation. In the city’s $475 million budget, pension and health care benefits are projected to rise by $12 million this year. Other cities facing out of control employee costs include Costa Mesa, California, Pittsburg, PA, New York City, Chicago and Newark, N.J.

But so far attempts at money-saving by city officials has mainly been met with union protests.  A self-defeating stance.

As Malanga notes, the local level is where these costs are most strongly felt. Municipal managers are increasingly being forced to choose between offering basic services and keeping up with fast-rising benefits costs – in some cases the result of state-level statutes that enhanced benefits and failed to consider the costs.

In a forthcoming paper we find that one culprit is decades of budgeting in the dark. These costs appear to be a surprise because budgets don’t indicate in a meaningful way to the public how  much a municipal government is carrying in pension and health care costs. Budgets reflect what the municipality chose to pay in a given year and not how much is needed to keep the system funded. In fact, in the case of New Jersey, these numbers aren’t always made clear to the local governments due to state reporting conventions.

For more on the pressures in local budgets, read the original article here.

New Jersey Network (NJN) to be operated by NYC public broadcaster

New Jersey Network, known to New Jerseyans as NJN is now NJTV and is to operated by WNET the New York public broadcasting station. Governor Christie made the announcement today saying, “no one elected me to be programmer in chief.”

The sale saves the state about $11 million a year. The state of New Jersey will retain the TV license and will sell nine public radio licenses to Philadelphia (WHYY) and New York City (WNYC and WQXR).

New Jerseyans essentially have two out-of-state markets for their news: New York City and Philadelphia, a void NJN was to fill when it began in 1968.  According to reports the new non-profit will be required to dedicate 20 hours per week to New Jersey programming and will be made up of a board of New Jersey residents.

The legislature has 15 days to veto, otherwise the deal goes into effect on July 1.


NYC Union Protest Budget Cuts By Not Plowing

The New York Post reports that New York City’s sanitation workers were told by supervisors to not plow the streets and leave the boroughs covered in snow drifts  in order to send a message to Mayor Bloomberg over his cuts to the department’s budget. The action resulted in emergency vehicles being stalled in the snow with tragic results for one young woman in labor. Feeling guilty, the workers came forward and told officials of the plot which included overtime pay for work undone. New Yorkers aren’t happy with how the City has handled the blizzard. Streets remained unplowed for 72 hours.

The question is what should the Mayor do? The City does supplement its own plow crew with outside contractors and private plowers but the call went out too late to bring in enough workers. Many private contractors may have already been called in by the airports. The debacle has caused the city to re-consider its snow strategy. The Sanitation Department union doesn’t like the idea of the City relying more on “privates” claiming, “You can never count on the privates, because they don’t have to show up,” he said. “What obligation do they have?

“Dropout Factories” and “The Lemon Dance” in Waiting for Superman

Last night I saw Waiting for Superman the much-acclaimed documentary that follows the charter-school lottery odyssey of five students hoping to escape from failing schools.

Without giving away too much one thing that impressed me was how the director translated research findings into powerful visuals. Two in particular worth mentioning are The Dropout Factory and The Lemon Dance.

What is a Dropout factory? It is a high school where no more than 60 percent of freshmen make it to Senior Year. The phenomenon was first identified by Bob Balfanz of Johns Hopkins University. How many are there in the U.S.? About 2,000. And only Utah escapes the distinction of not having such a high school.

And The Lemon Dance (also known as the Turkey Trot) involves schools swapping their worst-performing teachers at the end of the year on the bet that their lemon isn’t as bad as another school’s lemon. The reason: it’s impossible to fire a teacher for anything short of a criminal act, ergo, New York City’s infamous “Rubber Room.”

The film offers a good diagnosis of what prevents school reform (politically powerful unions). As to what works? Good teachers. That is the conclusion of Eric Hanushek of Stanford and scores of reformers, parents and students. But one connection is not made as clearly as it might be. Not only must students be free to learn, but good teachers must also be free to teach. The status quo punishes innovation and tolerates a baffling degree of teacher incompetence. I left the theater suspecting there are many more educational entrepreneurs like Geoffrey Canada who are instead trapped in this dysfunctional system: teachers- who much like their students – are prevented from offering their full potential.

The Next Layer in the Pension Crisis: Local Governments Also Face Shortfalls

States together face unfunded pension obligations that, when using the risk-free discount rate,total $3 trillion. But, what happens when local pension plans are factored in? That number gets larger by an estimated $574 billion.

Robert Novy-Marx and Joshua Rauh apply the approach they took to valuing state pensions to two-thirds of all municipal plans in a newly-released paper. In doing so, they find that as of June 2009 the unfunded obligations in municipal plans rises from $190 billion to $383 billion. Extrapolating this finding to the other one-third of plans not included in their sample lead the authors to the $574 billion estimate.

Several cities will run out of assets to pay beneficiaries over the next ten years. These include Philadelphia, Boston, Chicago, Cincinnati, Jacksonville, St. Paul and New York City. The trade-offs for policymakers on this level are stark. Meeting obligations means compromising basic city services.

And just as municipalities are increasingly seeking state aid to cover local debt payments, local pension debt will also flow upward to the states. Rauh notes in an interview with Bloomberg that political pressure will push pensions debts on to already stressed states. States will likely turn to the federal government leading to “a debt crisis of some kind for a subset of U.S. state and local governments” in the next five to ten years.

The Washington Post reports that Philadelphia Mayor Michael Nutter is advocating for pension reforms including switching workers to defined contribution plans.

Battling Bankruptcy in America’s Cities

Business Insider ranks America’s most bankrupt cities. Many in the list of 16 are wrestling with the same problems including unions that refuse to concede on salaries and benefits.

Detroit Mayor Dave Bing is showing particular resolve in trying to close the city’s $325 million deficit. He is pushing to reolcate residents from sparsely populated neighborhoods to shrink the city’s footprint. And he may privatize some city services. Last month he accused AFSCM, the city’s largest union, for stalling on contract negotiations, “Either they can’t read, they can’t add, or they can’t comprehend.” Mayor Bing would also like to transfer control of the city’s pension system to a non-profit.

Other cities making the list include Las Vegas, Los Angeles, Chicago and New York City.

Institutionalizing Failure

From the New York Times:

As advocates of charter schools, including the Bloomberg administration, try to persuade legislators to lift the limit on the number of such schools in the state, no one is as likely to stand in their way as Mr. Perkins, whose district encompasses nearly 20 charter schools. Several more are planned next year.

Over the last decade, as charter schools have multiplied, Mr. Perkins has undergone a dramatic shift and emerged as their most outspoken critic in the Legislature, writing guest columns in newspapers and delivering impassioned speeches criticizing the “privatization” of public schools.

First, calling charter schools “privatization” is a lie. They’re publicly approved, publicly financed, and publicly supervised. The only way they’re “private” is they are free of the education bureaucracy and the grasp of teachers unions.

There are two main arguments against charter schools, which are logically inconsistent. First, there are those who say that charter schools don’t improve educational outcomes, while conversely arguing that charters ‘”eave some students behind.” If there’s no benefit to charter schools, what are the students who stay in public schools being left behind from? In Mr. Perkins’ words:

“If there are people fleeing from something, it is cause for alarm,” he said in an interview in his office. Using an analogy he favors when talking about charter schools, he said: “That should tell you there is a fire, and those who are responsible should find out what is causing that fire, not just create a new place for those who flee and leave the rest inside to burn there.”

The analogy is apt; public schools are failing students at catastrophic rates. Students and parents are fleeing, with good reason. Mr. Perkins, however, is firmly blocking the door. I’ll never understand people that refuse to accept choice and freedom because of some unpredictable future. Is the devil you know really better than the chance at something better?

Interestingly, Alex Tabarrok points to the NBER Digest‘s summary of recent research on the schools in Harlem:

Will Dobbie and Roland Fryer find that in the fourth and fifth grade, the math test scores of charter school lottery winners and losers are virtually identical to those of a typical black student in the New York City schools. After attending the Promise Academy middle school for three years, black students score as well as comparable white students. They are 11.6 percent more likely to be scoring at grade level in sixth grade, 17.9 percent more likely to be scoring at grade level in seventh grade, and 27.5 percent more likely to be scoring at grade level by eighth grade. Overall, Promise Academy middle school enrollment appears to increase math scores by 1.2 standard deviations in eighth grade, more than the estimated benefits from reductions in class size, Teach for America, or Head Start.

Those numbers indicate that the failures of monopolistic public education are so institutionalized and ingrained in students, it takes years of instruction and adaptation to the new institutional arrangements of charter schools to rehabilitate students, and then they can begin to blossom.

However, the article notes that Mr. Perkins decided charter schools were unsatisfactory after… a few months.

NYC’s Metropolitan Transit Authority: The Customer Is Always Last

Toy MTA TrainNew York’s Metropolitan Transit Authority is broke. Back in May, Governor Paterson approved $2.1 billion in tax hikes to plug the authority’s $383 million hole, including, as the Manhattan Institute’s Nicole Gelinas notes, an ill-advised payroll tax in the middle of a deep recession. Predictably, revenues fell short. On top of this, the Governor agreed to $91 million in pay increases for top MTA officials. The MTA’s hole is now $400 million.

As if to hammer home that the MTA exists to serve its employees rather than its customers, a judge ruled this week that the state must pay the Transit Workers Union an 11 percent pay increase over the next few years.

The result: MTA will cut off service on the W and Z lines, reduce service on the G and M lines, and shrink 49 bus routes. Riders are guaranteed longer wait times, and cars will be packed. An MTA board member calls it “a failure of government.”

For some policy ideas, the MTA might review its history. Initially, NYC’s buses and and train services were private. Between 1932 and 1953, the city and the state acquired New York City’s transit systems. And since that time it has experienced frequent financial crises. In spite of years of subsidies, transit prices continue to rise. As Wendell Cox writes, New York transit remains immune to competitive pressure and instead relies on the deep pockets of taxpayers. By contrast, the Tokyo and Hong Kong transit systems get most of their revenues from rider fares.

While privatizing is a near-impossibility, Cox notes that competitive contracting might go a long way to lowering MTA’s runaway spending. The Transport for London bus system took this route and reduced costs per mile by 40 percent.

High public sector salaries and fake pointsettias in New Jersey

To save money, many New Jersey municipalities are cutting back on holiday decorations. The Star Ledger reports fake pointsettias have replaced real ones in Newark’s city hall. The outdoor Norwegian spruce will be powered by solar lights. Woodbridge has reduced holiday banners by one-third.

While it may seem miserly to cut down on festive decor at city halls, this doesn’t mean bare streetscapes. Bill Dressell, director of the New Jersey League of Municipalities, notes in many cases local business districts and other groups decorate downtowns and main streets for the Christmas season.

What is truly depressing is the difficulty of reining in public sector salaries. According to the Asbury Park Press the median public sector salary for New Jersey’s 398,000 state and local employees (excluding police officers)  is $49,164. That’s less than the median salary for New York City’s (251,000 public employees) of $48,076. New York City has a population of 8.3 million, slightly less than the entire population of New Jersey. The highest paid public servant in New Jersey earns over $290,000 as head of the Passaic Valley Sewerage Commission.

If municipalities really want to save  money, take a cue from holiday cutbacks and reduce the public sector’s footprint on the local economy. It’s likely many currently public jobs can be provided by the private sector or non-profits. Lower property taxes will more than make up for missing tinsel.