Social and Community Services

Recession’s Divide: Food Stamp Caseload Soars, Welfare Caseload Does Not

Posted by Paul Lopatto, September 13, 2010

In stark contrast to the limited effect of the recent economic downturn on the public assistance caseload, the recession has contributed to a relative explosion in the city’s food stamp caseload. Following years of slow growth, food stamp enrollment began to accelerate in the early part of 2008. The number of New Yorkers receiving food stamp benefits has risen from 1.2 million in January 2008 to nearly 1.8 million in July 2010, an increase of 555,000 or 46 percent. [see graph]

The greater sensitivity of the food stamp program to rising unemployment and falling incomes can also be seen at the national level. Federal statistics indicate that in the two-year period between December 2007 and December 2009 the number of food stamp recipients increased by 41 percent, nearly three times the increase in the public assistance caseload. Part of the reason may be a matter of public perception. As public opinion towards receiving welfare became increasingly negative, the food stamp program has emerged as the more acceptable form of income assistance. Moreover, policy changes that have made food stamps easier to access have also boosted food stamp caseloads.

There appears to be another change developing in terms of public assistance as well. The public assistance caseload and spending on welfare grants for city residents have generally followed a downward trend since welfare reform began in the mid-1990s. That pattern has begun to change.

After rising modestly in the last two years, the Mayor’s budget office projects that total grant expenditures will rise by 19 percent to about $1.6 billion in fiscal year 2010 (final numbers are not yet in for the year, which ended on June 30), and to remain at that higher level for the foreseeable future. While economic downturns are commonly associated with greater demand for social services, what makes the increased grant spending especially notable is that it has very little to do with any increase in the number of welfare recipients.

What’s driving the increased spending? One factor is a state-mandated increase in the basic grant, which covers costs other than rent and utilities. In July 2009 the state increased the basic grant by 10 percent, after it had been frozen for nearly two decades. A similar percentage increase was implemented this past July, with a third round scheduled for July 2011.

While this has pushed up total grant expenditures, city revenues have been spared so far. In order to limit the impact of this mandated increase on local budgets, the state agreed to cover the local share of the incremental costs through 2012, using state and federal funds. Starting in 2013, however, the city will be responsible for its share of the costs, adding significantly to the city’s welfare expenditures from that point on.

A second factor driving the cost increases is the Advantage Rental Assistance program, which provides rent subsidies for up to two years to families and individuals moving out of the city’s shelter system. As the shelter population has increased, the Advantage program has emerged as a key component of the city’s strategy for reducing homelessness. Since it began in 2007, the program has moved roughly 20,000 families from shelters to apartments.

The move out of shelters is coming at a rapidly growing cost. In 2009 the city spent $122 million in total funds on Advantage subsidies—city funds cover roughly a third of the cost with the balance coming from state and federal revenues. Costs are projected by the Bloomberg Administration to have reached $188 million in fiscal year 2010 and rise to $207 million in 2011. City officials have recently moved to limit costs by requiring participants to pay a higher portion of their rent out of pocket, and by increasing the number of hours they must work. These changes may well affect the program’s future growth.

Public assistance outlays in 2010 also were boosted by the Back-to-School grant program, which made use of federal stimulus funds to provide one-time grants of $200 per child for families receiving public assistance or food stamp benefits, to purchase school-related supplies. The city budget included $102 million for Back-to-School grants for 2010; the one-time program did not require any city funds.

Just a small portion of the increase in grant costs can be attributed to an increase in the welfare caseload. As the city’s economy started to shed jobs during the recent economic downturn some observers expected a marked increase in the public assistance rolls as large numbers of the newly unemployed sought out government assistance to replace lost income. In fact, after reaching a low of 334,000 in September 2008, the number of public assistance recipients rose slowly, reaching 358,000 in December 2009, an increase of 24,000 over 15 months. Since then, the caseload has resumed its downward trend, with 344,000 individuals receiving assistance in July 2010.

The limited effect of the recession on the public assistance rolls provides further evidence that city, state, and federal welfare reform policies of the mid-1990s made it more difficult for city residents to access and retain public assistance grants.

Taxes

Taxes Foregone Shouldn’t Be Forgotten

Posted by Doug Turetsky, September 1, 2010

In July Deputy Mayor Stephen Goldsmith unveiled his initiative to eliminate inefficiencies in several areas of city government, from getting rid of unused office space to consolidating information technology operations. The Deputy Mayor aims to save money and improve services. That’s a laudable set of goals. Similar efforts to root through city operations are taking place inside and outside City Hall as policymakers and pundits champion ideas to balance the city’s budget. Interestingly, few seem to be poking at one fairly large corner of the city budget: tax expenditures.

Maybe this neglect is because tax expenditures are money foregone rather than money spent. But the taxes foregone are substantial—$4.6 billion in taxes administered by New York City in fiscal year 2010, according to the Department of Finance’s most recent report on tax expenditures. That’s almost double the $2.4 billion foregone in 2003. Neither figure includes millions more in tax expenditures Albany requires the city to make: for example by not allowing the city to levy property taxes on colleges and universities.

These foregone billions are the result of dozens of individual tax exemptions or abatements. Each exemption or abatement is connected to a policy or programmatic goal such as creating and preserving affordable housing or spurring job creation and retention. But not all of the tax exemptions and abatements may be delivering the intended results, their costs may be outweighing their benefits, or they may conflict with more recent policy goals.

Take one such abatement, the tax break for co-ops and condos. Created 13 years ago, this abatement was intended to take a first step towards reducing the property tax for co-op and condo owners and making their tax burden more like that enjoyed by owners of one- to three-family homes. The co-op and condo tax break cost the city $393.4 million last year, according to the finance department. Yet as IBO has previously noted a large share of the abatement goes to co-op and condo owners whose property tax burdens were already as low, or even lower, than those of other homeowners. How much did these “extra” benefits cost? About $192 million in foregone taxes in 2010—enough to pay the salaries of roughly 3,000 teachers or 1,500 police officers.

There are other examples. How many New Yorkers know that residents of Manhattan get a special tax break when they reserve a long-term garage space for their cars? Not only does it cost city tax coffers about $12 million in lost revenue but it seems to run counter to more recent policies discouraging car use in the city. And many New Yorkers, including elected officials, have questioned the logic of continuing to exempt Madison Square Garden from property taxes at the cost of $14.1 million in revenue foregone last year.

Mayor Michael Bloomberg proposed the elimination of two tax expenditures in January, on aviation fuel and on the recording of mortgage for co-ops and condos. But it was a brief consideration, abandoned in his Executive Budget.

As policy- and opinion-makers comb through the city budget and consider the effectiveness and affordability of all sorts of city spending, they should follow the Mayor’s original impulse and not forget about tax expenditures; though they are harder to see, a dollar of taxes forgone costs as much as any other dollar spent.

Seniors

For Some Seniors, the Closest Senior Center Will Be at Least a Mile Away

Posted by Nashla Salas, August 25, 2010

When the city’s budget for the new fiscal year was passed in June, the Bloomberg Administration and the City Council added enough funding to reduce the number of senior centers planned for closing by the Mayor from 51 to 27. To decide which centers to close, the Bloomberg Administration used criteria including how many meals are served at the center, the center’s level of use, and the quality of record keeping by the center’s operator. After the closings some seniors will still have centers nearby while others may find the closest center is a considerable distance away.

The city contracts with operators of over 300 centers to provide services to seniors age 60 and over, although as shown in this map there are some mismatches between concentrations of seniors and the location of centers. Harlem and East Harlem (Community Districts 10 and 11 in Manhattan) have fewer seniors in residence compared with many other community districts but have a higher concentration of senior centers than neighborhoods such as Laurelton and Floral Park (Community District 13 in Queens) with significantly more seniors but just a few senior centers.

Currently, Queens and Brooklyn each have 30 percent of the senior population, Manhattan comes in third with 20 percent, Bronx has 14 percent and Staten Island has 6 percent. The share of seniors in Brooklyn, Manhattan, and Staten Island is roughly in line with their shares of the overall population, while Queens’ share of seniors is higher than its share of total population and the Bronx’s share is lower.

Likewise, seniors are not evenly dispersed throughout each borough. For example, the largest concentrations of seniors in Brooklyn are in the southern portion of the borough, in neighborhoods such as Bensonhurst, Coney Island, Sheepshead Bay, and Canarsie (Community Districts 11, 13, 15, and 18). In Queens there are neighborhoods with large numbers of seniors across the borough, including Astoria (Community District 1) in the northeast part of the borough, Ridgewood/ Maspeth (Community District 5) in the center of the borough, Whitestone (Community District 7) in north central Queens, and Laurelton and Floral Park in southeast Queens.

The borough-by-borough breakdown of the 27 centers still slated for closure looks like this: Bronx 2, Brooklyn 5, Manhattan 8, Queens 9, and Staten Island 3. Two of the centers slated for closing are in community districts with some of the highest concentrations of seniors: Community District 1 on Manhattan’s Lower East Side and in Whitestone. Although there are a number of other centers in close proximity to the center closing on the Lower East Side, there is no senior center near the one closing in Whitestone.

IBO mapped how far each of the senior centers being closed is from the nearest center remaining open. Ten of the 27 senior centers have no other center within a half mile radius and five have no other center within a mile. Three of these five—including the center in Whitestone—are located in Queens and two are in Staten Island. The Bloomberg Administration has indicated that they will provide funds to transport seniors affected by the closings to alternative facilities, but more specific information is not yet available.

UPDATE, September 9, 2010: The 27 senior centers that closed were among 46 for which contracts were allowed to expire on June 30, according to Director of Public Affairs Chris Miller of the Department for the Aging. The City Council is providing funding to help keep 17 of those centers with expired contracts open and the Bloomberg Administration agreed to provide funding for an additional seven. The City Council funding will not cover the assistance for food and transportation for seniors that was part of their prior contracts. The Department for the Aging will not consider the 17 Council funded centers as part of the city’s network of contracted senior centers. There is no money allocated for the 17 centers next year, and it will be up to the City Council (or other sources) to provide funding if they are to remain open in 2012.

Local Economy

New York City’s Long-Term Unemployment Rate Continues to Outpace U.S. Rate

Posted by Theresa Devine, July 30, 2010

In terms of job losses, New York City has fared much better than the nation in the last two years, and while the city’s unemployment rate has climbed, it has stayed close to the national unemployment rate. But there is one labor market indicator where New York City is doing worse than the country as a whole. The city’s long-term unemployment rate has shot up and consistently stayed above the nation’s, even as the national level of long-term unemployment has reached record highs.

Since the recent recession began, New York City’s unemployment rate (the share of the labor force not employed and looking for work) has tracked the national unemployment rate quite closely. From late 2007 to early 2009, the city’s unemployment rate was lower than the national unemployment rate, but the differences were no more than one-half a percentage point. From mid-2009 to early 2010, the pattern was reversed, but differences were still small. Both New York City and the nation had unemployment rates of 9.5 percent in June. This recent history is quite different from trends in prior recessions. New York City’s unemployment rate exceeded the national unemployment rate by an average of 3.5 percentage points in 1992 through 1993, and by an average of 2.8 percentage points in 2002 through 2003 (graph).

In contrast, the city’s incidence of long-term unemployment has exceeded the nation’s since 1989. New York City’s long-term unemployment rate (defined as the share of the labor force continuously unemployed for a half year or more) averaged 3.7 percent in 2009, the highest annual rate in the three decades for which we have data. The next highest annual average was 3.2 percent for 1992 and again for 1994. The city’s average long-term unemployment rate far exceeded the national average rate of 2.9 percent last year, which itself was far above its past high of 2.3 percent in 1983 (graph). In the first half of 2010, the national and local long-term unemployment rates both continued to climb sharply, with the U.S. average of 4.3 percent approaching the city average of 4.5 percent.

Last week the President signed into law legislation that extends federal emergency unemployment benefits. Many New Yorkers will benefit from this legislation, although the maximum duration of unemployment benefits for New York State residents will be 93 weeks, rather than a maximum of 99 weeks available in some other states. This is because New York State’s three-month average unemployment rate of 8.3 percent is just shy of the 8.5 percent federal threshold for the higher maximum.

Education, Health

School Nurse Cuts Would Hit Private Schools the Hardest

Posted by Jenna Libersky, June 11, 2010

Six years ago the City Council passed a law requiring more nurses on site at public and private elementary schools in the city. Mayor Bloomberg’s Executive Budget would “expel” some of those additional nurses from their schools.

The nurses affected by the Mayor’s plan are funded through the Department of Health and Mental Hygiene. The proposal has some challenges ahead, including the need to first have a change in existing law which requires the presence of a nurse at schools with a certain number of enrolled students. For the cuts to take effect, that threshold number would have to rise.

If that happens, the health department estimates that 19 public schools and 127 private and parochial schools would lose publicly funded nursing coverage for about 33,000 students. Others outside the Bloomberg Administration have cited larger effects.

The Mayor’s proposal would have a minimal effect on middle and high schools, as they are not currently required by law to have nurses on staff. The budget would reduce the number of full-time equivalent school nurses directly employed by the health department by 62 through attrition, saving the department $3.1 million in 2011 and more in subsequent years. Contracts with nurse providers that supplement the nurses on the health department’s payroll would also be reduced.

The department’s school health budget has grown from $53.4 million in 2004 to $90.6 million in 2009, with about 60 percent of the total coming from city funds. The number of full-time equivalent nurses on the department’s staff has increased from 697 in 2004 to 802 in 2009, with the bulk of the positions in both years filled with part-time nurses. The department also contracts out for nurses; currently, an additional 84 nurses work under contract with the agency.

The growing school health budget is largely the result of the changes in city policy. In 2004 the City Council enacted Local Law 57 to require more elementary schools to have nurses on staff. The law lowered the enrollment threshold at which an elementary school was required to have a nurse on staff to 200 students. The Department of Education has also been pushing the development of new small schools, further increasing the number of nurses required. Between 2004 and 2009, 68 new elementary schools were added to the list of sites requiring nurses. The total number of public elementary school sites with health department nurses now totals 717, excluding 52 sites where special School Based Health Centers provide more intensive primary health care services to children.

Not all of the schools that would lose a health department nurse due to the proposed increase in the eligibility threshold would be left without access to a health care professional during the school day. The Department of Education is responsible for providing nurses to public schools enrolling students with special medical needs as required by Section 504 of the federal Rehabilitation Act and the Individuals with Disabilities Education Act. The education department employed 549 full-time school nurses of its own in 2009, up 24 percent since 2004. The Executive Budget does not cut funding for Department of Education nurses.

The joint Office of School Health manages both the education department and the health department school nurses but maintains their budgets separately. Since there are many schools that qualify for a nurse based on both local and federal standards, the two agencies have reached a labor agreement to avoid duplicating efforts. Schools that fall into this category are assigned either an education department or health department nurse. The nurses from both departments are licensed professionals with either associate or bachelor’s degrees in nursing, have similar skill sets, and according to the labor agreement, provide similar services in the schools they serve.

The overlapping requirements that govern school nurse coverage mean that enrollment is not the only factor used to determine which public schools would lose their nurses under the plan. The Bloomberg Administration estimates that the proposed change to Local Law 57 would leave 68 public schools at risk of losing nurses based on current enrollment; however, 36 of these sites enroll students with daily medical needs that would qualify them for nurses under Section 504, leaving 32 schools at risk of losing coverage.

Moreover, many of the public schools in New York City are co-located with other schools. Even though co-located schools are administratively separate, the Department of Health and Mental Hygiene stresses that they could share a nurse if needed. Of the 32 schools that are eligible to lose a nurse, 13 of the schools share a site with another school whose nurse would remain. Consequently, if Local Law 57 is amended and the Executive Budget cut is not restored, 19 public elementary schools would lose nursing coverage, according to the Mayor’s estimate.

While Department of Health and Mental Hygiene officials estimate that 19 public schools would stand to lose a nurse, the result would be greater at private and parochial schools. The Bloomberg Administration estimates that 127 private and parochial schools would lose nurse services, meaning that 3,000 public school children and 30,000 nonpublic elementary school children could lose access to the services that school nurses provide. These services include monitoring vaccine compliance, administering daily medication, screening for hearing or visual impairments, and linking children to additional health services. Losing these services might be a hard pill for some New Yorkers to swallow.

Local Economy

Wall Street Wages: A Rough Ride on Easy Street

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Posted by David Belkin, June 8, 2010

Much has been made in recent months of last year’s record profits on Wall Street, the myriad ways (near-zero interest rates, bailouts, accounting rules changes) that government policy boosted those profits, and the seven or eight figure bonus packages that some Wall Street executives awarded themselves from those profits. There has been less said, however, about what happened to aggregate wages and salaries across the securities industry in New York City in 2009. Not only did wages fall, but the fall was the steepest in modern history—including the Great Depression.

Real average annual wages—including baseline salaries, cash bonuses, and exercised stock options—in the city’s securities industry slipped from $412,915 in 2007 to $396,370 in 2008, and then tumbled to $311,279 in 2009. (All amounts here and below are in constant 2009 dollars.) Adjusted for inflation, average wages in the securities industry plummeted 21.5 percent in 2009 and 24.6 percent over two years.

How could wages nose-dive in 2009 while Wall Street profits skyrocketed? First, most of last year’s wage decline reflected the industry’s crack-up in 2008: New York Stock Exchange member firms posting record losses, revenues dropping almost in half, and the year-end bonus pool shrinking in tandem—those bonus reductions were almost entirely felt in the first quarter of 2009. Real average bonus payments for the year as a whole fell 38.2 percent in 2009, on top of a 6.6 percent drop in 2008. It should be noted that bonuses measured here do not count grants of stock options; rather, reported wages include the gains realized on previously awarded options when they are exercised. But many options were “underwater” in 2009 due to the steep slide in the stock market, and this also depressed wages.

At the same time, while Wall Street profits surged in 2009, firm revenues did not recover. One result was continued pressure on employment—the securities industry lost 18,400 jobs in New York City in 2009, more than twice the decline over the course of 2008—and this appears to have weighed down baseline salary growth. The negative effects on options and salaries combined to reduce real average non-bonus wages in the city’s securities sector by 7.4 percent in 2009.

By comparison, securities industry job losses were much greater in the post-9/11 slump, but prior year bonuses and current year baseline salaries and option realizations never all fell at the same time. As a result, real average wages declined by “just” 10.1 percent in 2002 (and 11.2 percent over 2002 and 2003). Before that, there have been only three occasions since 1929 when real average securities wages fell by at least 10 percent in a year. None of these were during the Great Depression itself. That epoch was marked by drastically shrinking securities employment but surprisingly limited effect on industry average real wages; long-term stagnation rather than precipitous drops was the rule. There was much more securities wage volatility during the 1940s, a reflection of both wartime dislocations and two major bear markets. Trading controls may have also contributed to the steep postwar slide in real average wages, which included a nearly 18.0 percent decline in 1947. There was also a slightly larger than 10.0 percent drop in 1969—auguring the onset of the “Slow Crash” of the 1970s—and lastly a 13.7 percent dive in 1994, partly due to a crash in the bond markets that year, but mostly an artifact of a shift in the timing of bonus payments.

These episodes were all eclipsed in 2009. Also without modern precedent was the 29.4 percent plunge in real aggregate wages on Wall Street in 2009. Reflecting the combined effect of wage declines and layoffs, an estimated $21.4 billion in wages and salaries vanished in the city’s securities sector last year. Even in inflation-adjusted terms, the hit to aggregate industry wages last year was almost twice as large as in 2002.

But was the magnitude of last year’s wage drop actually just an effect of the prior years’ soaring—but ultimately insupportable—compensation growth? “What-goes-up…” may indeed be part of the explanation. However, workers on Wall Street saw their real average wages rise by $64,000 at the peak of the DotCom boom in 2000-2001, and then gave back 50 percent of those gains ($32,000) during the 2002-2003 slump. Over 2006-2007 real average wages grew by almost $100,400—and in 2008-2009, over 100 percent of those gains ($101,600) evaporated. Perhaps what has happened in the past two years can be viewed as a correction to the entire era.

What would a less lucrative but also less volatile securities industry, one that did not generate cycles of frenzied wage growth but also was less susceptible to catastrophic meltdowns of earnings, have meant for New York City’s economy? Just how lucrative and how volatile can be seen from the fact that from 1990-2009 there were nine years of double-digit percent increases in securities real average wages (including a high of +36.0 percent in 1992) and three of double-digit percent decreases (the worst was the -21.5 percent in 2009), all this yielding 5.4 percent annual average real growth over the whole period.

In the rest of the city’s financial sector (banking and insurance), by contrast, there were four years of double-digit real wage growth (the highest +14.5 percent in 1999) and no years of double digit decline (the worst, last year, was -6.8 percent), and annual average real growth over the period was 4.1 percent. Outside of finance, annual New York City private sector real wage growth averaged 1.6 percent, and never exceeded +6.2 percent (2000) or fell below -2.5 percent (2009) in any year.

So a securities industry that, from 1990 on, grew compensation at “merely” the robust pace of the rest of finance would have (all else being equal) delivered a much milder jolt to aggregate wages in 2009. But it would have also delivered much lower real aggregate wages—lower by $11.3 billion (22.0 percent) in 2009 and by an average of $15.7 billion (28.3 percent) per year over the past decade—than the securities wages actually paid in New York City.

This is just by way of illustration, but it does give something of the flavor of the challenge New York City could face adjusting to a securities industry that is unable to return to the kind of breakneck earnings growth it exhibited during the last 20 years—spectacular crashes and all. Just what kind of securities industry will emerge as Congress and regulators thrash out changes intended to protect borrowers, investors, and the broader economy is one of the great unknowns for both the city and the nation.

Community Boards, Social and Community Services, Youth

Some Community Board Budget Priorities Face Budget Axe, Again

Posted by Eddie Vega, June 4, 2010

As part of the city’s budget process, New York’s 59 Community Boards are provided surveys each year that ask them to rank, by order of importance, government services in their districts. The survey lists 90 services provided by 24 public agencies. This year 46 Community Boards, two less than last year, submitted responses. Some top priorities align with the Mayor’s budget. Most do not. (Click here for the survey.)

While there was some reordering from last year, for example, child protection services jumped from 8th to 4th place, the same items appear in the top 10 priorities for both years. Taking care of the city’s elderly continued to be an important concern for the Community Boards; for the second year in a row, services for the elderly ranked first. Likewise, protecting young people and developing their talents has weighed heavily in the boards’ considerations. Programs and services intended to help young people find jobs and access educational opportunities and to protect children from abuse scored high in the rankings: youth development services, after school/summer school programs, and child protection services, took 2nd, 3rd, and 4th place, respectively. Also important were parks and public safety: parks maintenance (down from last year’s 2nd place finish) and police patrols of public housing and transit along with auxiliary patrols tied for 5th place. (See IBO’s blog About Those Services You Prioritized on last year’s Community Board rankings.)

The surveys also identified the priorities by borough. Services for the elderly were among the top two priorities for each of the boroughs except Staten Island, where it dropped to 14th from 12th place last year. Youth development services were among the top five priorities in each of the boroughs except Staten Island, where it ranked 24th. There was greater variation in rankings of after-school programs: after-school was included among the top three priorities in Brooklyn, the Bronx, and Manhattan, but was ranked 11th in Queens and 38th in Staten Island. And while branch library services ranked in the top 10 citywide (with a rank of 7th), Brooklyn and Staten Island community boards ranked it even higher at 2nd and 3rd, respectively.

As was the case last year, the Mayor’s Executive Budget proposes cuts to some of the services at the top of the Community Boards’ priorities. If enacted as written, the budget for 2011 would provide the elderly with fewer places to socialize and receive services because 50 senior citizens centers serving a total of 1,600 seniors would close. There would be fewer and busier child protection specialists to investigate complaints of abuse and neglect after the elimination of 32 units in the Division of Child Protection and a projected increase of the average workload for investigators from 9.5 cases to 10.9 cases. The parks might not be as well maintained after a reduction of 113 full-time equivalent positions for seasonal workers who clean, maintain, and provide security in the parks; also, four swimming pools would close and the pool season would be shortened by two weeks.

Other youth service-related cuts proposed in the Mayor’s budget include the elimination of Out-of-School Time programs at 33 schools that currently provide activities for 4,110 elementary and middle school children—about 7 percent of the 61,000 youth now served by the program. Additionally, there’s a $2.7 million reduction (7 percent) to school-based Beacon Centers, which provide after-school and other youth and family oriented programs.

A proposed $31.2 million cut in subsidies to the city’s public library systems would have a substantial effect on another of the Community Boards’ top priorities. This reduction, along with previously planned cuts, would bring the city’s subsidy for the libraries down about 20 percent to $247 million compared to this year’s level of nearly $310 million. The Brooklyn, New York, and Queens library systems have said that the reduced subsidy will mean branch closings and shorter hours of operation at many of the libraries that remain open.

While proposed cuts to youth, seniors, parks, and library services are often reversed in negotiations between the Mayor and the City Council, the challenging budget climate for the next few years means that the restoration of these reductions is far from certain.

Education

With Rising Enrollment Charter School Spending Increases, Shrinks for Other Public Schools

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Posted by George Sweeting, May 26, 2010

Buried amidst the bleak news for city schools in the Mayor’s Executive Budget there is one spending category that is growing at a rapid clip: funding for charter schools. And because of the way charter school funding is mandated, it grows proportionately with enrollment even while the budget for traditional public schools, which also have growing enrollment, is shrinking.

The Department of Education (DOE) projects charter school enrollment to grow by 9,400 students next year, up from 30,500 this year—an increase of 30.8 percent. This enrollment growth reflects the planned opening of 29 new charter schools for September 2010, plus the addition of new grades to existing charters as they gradually expand towards their planned grade span. Enrollment in traditional public schools is also forecast to increase next year by 11,600, although in percentage terms the growth is much less (1.2 percent). In the case of charters, enrollment growth results in additional spending by the education department to maintain per capita support. For traditional public schools, other than a broad maintenance of effort requirement for total expenditures and mandates to provide some specific services, there are no explicit requirements to increase spending in line with enrollment and thus per capita spending will fall.

Under the state’s charter law, New York City, as the local school district, must provide charter operators with a flat per student amount for each student at a charter school. The budget assumes that amount is unchanged from its 2010 level of $12,443. (See “Comparing the Level of Public Support: Charter Schools versus Traditional Public Schools” for a discussion of additional resources that the city provides to charter schools beyond the mandated per student payment.) Thus, the enrollment growth increases the identified cost of charter schools in the education department budget by $117 million. The cost of providing mandated special education services to charter school students is also expected to increase by about $10 million this year, which brings the required charter school expenditure for the DOE to $545 million, an increase of 30.4 percent over the amount for 2010.

That $127 million in increased charter school expenses has to be absorbed in a proposed overall Department of Education budget that is virtually unchanged from this year. The budget for school year 2010-2011 shows year-over-year reductions in state and federal aid, and an increase in city support for the DOE that is just enough to offset the loss in state and federal funding, despite growing enrollment and mandated costs, including charter payments. As a result, the portion of the DOE budget used for traditional public schools (i.e. subtracting spending for charters and nonpublic schools from the total DOE budget) will fall next year from 90.2 percent to 88.7 percent.

Looking just at the traditional public school part of the DOE budget, spending will decline by $285 million (1.7 percent). The combination of a smaller budget and higher enrollment results in a $475 (2.8 percent) reduction in per student spending for traditional DOE public schools.

So it is clear that charter schools’ guaranteed adjustment for enrollment growth means that the cutbacks in the education budget has a smaller effect on charters than on traditional public schools. But does that mean that the budget cuts for traditional public schools are greater because of the shift of more money to charters? That depends on how much it costs to educate each additional student in the regular DOE schools—the marginal cost of a student—which is different from the average or per capita cost.

Suppose the increased charter school enrollment (9,400) for next year were instead educated in DOE traditional schools. More students would add to the cost pressure on the DOE budget for traditional schools, but there would also be potentially up to $127 million in additional resources available.

Assuming the additional money was allocated to the traditional public schools, this would likely have a somewhat smaller effect on classroom instruction spending—even with the higher enrollment—than will result from shifting those students and their funding to the charter schools. This is because the marginal cost of adding one student to the system is almost certainly lower than the average cost of educating a student or even the per capita charter school payment ($13,654, counting the required special education services), although how much lower is uncertain.

Operating cost adjustments in response to lower enrollment can take time. The loss even of thousands of students in a single year will not immediately lower the cost of running centralized departments such as human resources, information technology, food and supply warehousing, building maintenance, and the chancellor’s office. Even at individual schools, shifts of a handful of students may not significantly alter a school’s budget until the difference is large enough to trigger the loss or addition of a class section. While these adjustments can be expected to eventually occur, they almost certainly could not occur fast enough to offset the effect of next year’s shrinking DOE budget for traditional public schools.

Taxes

On April 15, Many New Yorkers Spell Relief “EITC”

Posted by Kerry Spitzer and Michael Jacobs, April 14, 2010

At a time when some programs benefitting lower-income working New Yorkers are on the wane, there’s one program that continues to grow: the earned income tax credit, also known as the EITC. As April 15 approaches these credits are on the minds of many because the EITC is a significant boon to the hundreds of thousands of city tax filers who benefit from the tax credit. In 2006 (the most recent year for which comprehensive data is available), low-income New Yorkers received well over $2 billion in earned income tax credits through the city, state, and federal governments, with refund checks for some or all of the credit sent to over 80 percent of recipients.

The EITC is also a boon to the city because New Yorkers who receive the credits tend to spend nearly all of their income, and they spend it locally. This provides a boost to neighborhood economies.

Given the benefits, the city’s Department of Consumer Affairs has run promotions encouraging New Yorkers to apply for the credits and the Department of Finance has mailed amended returns to filers who might qualify. The cost to the city of these efforts is relatively modest, since the credit largely comes at the expense of the federal and state governments, and administrative costs are low with much of the assistance to filers applying for the credit provided by volunteers.

The earned income tax credit, which has become the nation’s largest antipoverty program, is a form of tax relief for low-income, working Americans. For filers with very low incomes, the amount of the credit increases as income from work increases and is adjusted each year for inflation. For example, a single mother with two children can receive an EITC against her 2009 federal income tax liability of 40 cents for every dollar earned up to $12,570, at which point her maximum credit of $5,036 is reached. The EITC for such filers remains at the maximum for income levels up to $16,420 and then declines gradually for higher incomes and is phased out entirely for incomes above $40,295. Filers with one or no children receive smaller credits, and the federal stimulus package enacted last year temporarily provides larger credits for households with more than two children and for many married couples filing joint returns for 2009 and 2010.

New York State also offers an EITC against state income tax liability, equal to 30 percent of the federal credit and residents of New York City—one of only three localities in the country to offer an EITC—can get a local credit against city personal income tax liability, equal to 5 percent of the federal credit. Thus, if the New York mother cited above is eligible for the maximum federal EITC, she would also receive credits of $1,511 from the state and $252 from the city, an additional $1,763. All three EITCs are fully refundable, meaning that filers receive the full benefit of the credit even if they owe little or no tax prior to taking the credit, with the unused portion paid out like a tax refund.

While it is difficult to quantify how many eligible families and individuals fail to claim the EITC, evidence suggests that many are unaware of the credits. Others miss out because their earnings are so low that they are not legally required to file tax returns.

The city has taken a number of steps to encourage all eligible New Yorkers to claim the credits. Starting in 2002, the Department of Consumer Affairs organized efforts to publicize and increase the number of volunteer income tax assistance sites, commonly known as VITA centers, where people can get help preparing tax returns and file for the EITC. The volunteer centers also serve as an alternative to some private preparers who attract cash-needy clients by loaning them the amount of their refund upfront. These loans also enable customers to pay for the tax preparation services, but often come at the cost of substantial interest payments. Although the percentage of EITC filers using tax preparers who provide loans in anticipation of customers’ refund checks is down and the number of returns prepared by volunteers has increased, in 2006, five times as many city filers used preparers who offered refund anticipation loans to obtain their federal EITC than used volunteer sites.

In addition to encouraging New Yorkers to claim the credit for the current tax year, in 2007 the Department of Finance started mailing amended prior-year federal and New York tax returns to tens of thousands of low-income filers who had not claimed the credit. In order to claim the federal, state, and or city credit retroactively, filers needed only to review the forms, enter social security numbers and dependents’ information, and sign and mail in the forms. The department estimates its mailing of tax year 2005 amended returns led to city filers receiving 3,600 federal, 3,300 state, and 3,200 city credits totaling nearly $3.6 million. Similarly, amended returns for 2003 and 2004 resulted in EITC refunds totaling $10 million for the two years combined.

The extent to which the city’s campaign for earned income tax credit participation is responsible for recent increases in EITC claims is hard to measure, but it is clear there has been an increase in the number of returns claiming the city and state EITC. For 2007, 857,000 city tax filers claimed the city EITC, up from 731,000 for 2004, the first year for which the city credit was available. Similarly, claims of the state credit by city residents grew from 741,000 for 2004 to 846,000 for 2007. For 2007, about 24 percent of all city filers claimed the city and state EITCs, with considerable variation among the boroughs—from a low of 12 percent in Staten Island to a high of 35 percent in the Bronx.

The EITCs increase the disposable (after-tax) income of many working New Yorkers who are most likely to spend their income locally and generate economic activity and tax revenue in the city. In 2006 city tax filers claimed $1.7 billion in federal, $435 million in state, and $76 million in city EITCs, making the combined average value of the credits worth roughly $2,600 per recipient. For families struggling to make ends meet, the EITC is a significant and dependable source of tax relief.

Federal and State Aid, Housing

NYCHA Plans to Federalize 21 City and State Developments

Posted by Kerry Spitzer, March 9, 2010

Every year the same story is told during the New York City Housing Authority’s (NYCHA) City Council budget hearings: There is a multimillion dollar budget gap in NYCHA’s operating budget, due primarily to the fact that neither the city nor the state provide operating funding for the 21 developments they built between 1949 and 1978. Because the city and state do not provide funds to independently support these developments, the federal funds intended to cover the 315 federal developments are being stretched to cover the costs to maintain all of NYCHA’s developments. According to NYCHA, the fact that these 21 developments have no dedicated support is responsible for $90 million of NYCHA’s annual operating deficit, which is projected to be $137.1 million in 2010. In addition, the developments are missing out on $20 million in capital financing that they would receive were they federal developments.

The American Recovery and Reinvestment Act raised the possibility of ending this storyline for good. Through a onetime exemption to the Faircloth Amendment, which prohibits the federal government from creating any new federally subsidized public housing, it will allow NYCHA to “federalize” the 21 orphan developments. To take advantage of this opportunity, NYCHA has developed what is called a Mixed-Finance Moderation plan. Under the plan, the 21 developments (which contain 20,143 apartments) will be sold to two non-profit affiliates, in which NYCHA will have a controlling interest. Stimulus money, bonds, loans and low-income housing tax credits that will leverage private funds will finance the purchase and rehabilitation of the developments. NYCHA will continue to own the land on which the developments are located and will continue to manage the apartments. Residents will continue to have the same rights and will not be displaced. While the lifting of the Faircloth Amendment restrictions will allow public housing authorities around the country to pursue similar plans the scale of the NYCHA plan is unprecedented.

For this plan to be realized, all of the needed funds must be obligated and the Mixed-Finance transaction must be completed by March 17, 2010. All stimulus-funded rehabilitation work must be completed by March 2012. The gears are in motion to make the plan a reality. According to NYCHA, the majority of the funds for the rehabilitation work have already been committed and the city’s Housing Development Corporation (HDC) has approved selling $535 million of tax-exempt and taxable bonds to finance the deal. As early as this week HDC plans to market a portion of the bonds. Furthermore, the state Assembly and Senate have approved the plan, and late last week Governor Paterson signed the bill. The deal needs approval of the New York State Division of Housing and Community Renewal. Lastly, the U.S. Department of Housing and Urban Development will need to issue final approval. NYCHA and the Bloomberg Administration are optimistic that the necessary approvals will be obtained in time for the deal to go forward.

The plan will benefit NYCHA by providing ongoing federal operating support for all of its developments. NYCHA anticipates that as early as October 2010 it will begin receiving the additional federal support. Under the plan, NYCHA anticipates receiving at least $65 million in new federal operating and capital subsidy over the course of federal fiscal year 2011, and hopes that when the plan is fully implemented it will receive $75 million to $100 million annually. Even though federal support for public housing is subject to appropriation risk, these funds are formula based and would be a much steadier source of revenue than the city or state. The private partners will benefit by obtaining Community Reinvestment Act Credits and tax credits.

While these funds will go a long way towards stabilizing NYCHA’s budget, the agency will continue to face operating and capital deficits. NYCHA’s Annual Plan for Fiscal Year 2010 projected an operating deficit of $137.1 million in 2010 and noted that the capital funds it has on hand are not sufficient to meet the ongoing needs of the aging developments. NYCHA expects that the additional funds will greatly reduce, but not eliminate, their operating deficits; nor will they be enough to fill the gap between the capital needs and resources of NYCHA. Federalization, if it is implemented as planned, will very much improve the financial stability of NYCHA, but it is not a silver bullet and more will need to be done to further stabilize NYCHA’s finances.