SECTION 9: ADMINISTRATION, PROTECTIVE INSPECTION AND GENERAL GOVERNMENT NOT ELSEWHERE CLASSIFED

This section tabulates the level of state and local spending, relative to personal income, in administration and protective inspection, and in the miscellaneous categories the Census Bureau tabulates as General Not Expenditures Not Elsewhere Classified. It also tabulates the number of state and local public employees in administration categories, relative to population, and their pay, relative to the private sector. Data is presented for different regions of New York State, the national average, and New Jersey. The 1997 census of governments is the primary source of information.

According to the Census Bureau, General Government, NEC includes activities that are not applicable to other general functions, are multifunctional, or are unallocable by specific function. The most important of these are:

1. Lump-sum contributions for employee benefits (retirement, unemployment and workers' compensation, health and life insurance, etc.) other than transfers to own insurance trusts; and

2. Either premiums for government-wide fire, auto, liability, and other such insurance; or (if a jurisdiction is self-insured) judgements and compensation for injury to persons or property.

These are major costs of doing business in government. As discussed in the introduction, in some cases these are allocated to individual government functions – especially when functions are performed by separate governments – and in some cases they are not. In New York City, the data for non-Mayoral agencies (NYC Transit, Board of Education, Health and Hospitals Corp, NYC Housing Authority) tends to include fringe benefits (and pensions), while the data for Mayoral agencies (Police, Fire, Sanitation) tends not to.

General Government, NEC also includes a number of small government functions, including state-local military activities (militia, National Guard, armories, civil defense, etc.); central service agencies (e.g., public works, motor pools, communications) other than financial administration and government-wide executive services; administration of multi-functional agencies; purchase of computer equipment for government-wide use; economic development; voter registration and elections; job training and employment programs (e.g., JPTA); programs for senior citizens not based on need; crime victim compensation; and activities for which a specific function is not applicable to that type of government (e.g., expenditure for state parking facilities or local veterans offices and employment for protective inspection and regulation, NEC).

The census of governments has changed little over the years, and its budget has been reduced in inflation-adjusted dollars. Several former data tabulations, such as an annual compilation of all local governments in major county areas, have been eliminated. Field visits to state and local financial staff, which might have cut down on some of the errors the author has discovered and corrected, have also been eliminated. Judgements and claims and employee health benefits were presumably smaller costs, and smaller issues, in the past than they are today. The inability to analyze these categories of expenditure separately, and to have benefits tabulated the same way for all jurisdictions, is a major deficiency of the census of governments, one that ought to be corrected.

 

Chart 9.1: Spending on Administration by Type
Local Government: 1997

Sources: 1997 Census of Governments. Income: Bureau of Economic Analysis. See introduction for details.

New York City spends less than the national average on administration, public buildings and inspectors.

In fiscal 1997, New York City spent 0.36 percent of its residents’ personal income on administration, public buildings, and protective inspection, less than the national average of 0.44. Spending as a share of income was higher in some major urban counties such as Los Angeles (0.57 percent or income), San Francisco (1.01), Fulton – Atlanta (0.58), Baltimore City (0.66), and Philadelphia (0.71)., but lower in others such as Dallas (0.32) and Harris – Houston (0.25).

The Upstate Metros (0.38 percent of income) and New Jersey (0.40) also spent less than average, while the Downstate Suburbs (0.45) spent slightly more. The Rest of New York State spent 32 percent more than average. In part, this is because small governments, such as those in primarily rural counties and in the Downstate Suburbs, tend to house their employees in general “public buildings” rather than in separate buildings for each agency. Spending on central staff is also high as a share of income in the Rest of New York State. For a spreadsheet, with data for all New York State counties, click here.

 

State Government

Sources: 1997 Census of Governments. Income: Bureau of Economic Analysis. See introduction for details.

New York State’s spending on administration and related functions was above average.

New York State spent 0.43 percent of its residents’ personal income on administration and related functions, 30 percent higher than the national average (0.33 percent). The State of New Jersey, at 0.27 percent of income, was below average.

 

Chart 9.2: Spending on Administration & Related: Percent of
Personal Income, NY State, New Jersey, United States, 1972, 1987 & 1997

Local Government

Sources: 1997 Census of Governments, Income, Bureau of Economic Analysis. See introduction for details.

Local government spending on administration and related functions is much lower than it once was.

New York State local government spending on administration and related functions fell from 0.63 percent of personal income to in FY 1972 to 0.41 percent in FY 1987. It fell from 0.54 to 0.38 percent in New Jersey, and from 0.55 to 0.46 percent in the United States. New York State’s drop was the steepest, a 35 percent decline. In both states, and the nation, spending changed only slightly as a percent of personal income from FY 1987 to FY 1997.

State government presents a mixed picture. In New York State, spending on administrative and related functions fell as a share of personal income fell from FY 1972 to FY 1987, then rose from FY 1987 to FY 1997, to end at about the same level. In the United States, it rose gradually throughout the period. In New Jersey, a sharp spending rise from FY 1972 to FY 1987 was partially offset by a steep fall from FY 1987 to FY 1997.

For a spreadsheet of this data, click here.

 

Chart 9.3: Local General Expenditures Not Elsewhere Classified

Sources: 1997 Census of Governments. Income: Bureau of Economic Analysis. See introduction for details.

New York City’s unclassified general expenditures were three times the national average.

In fiscal 1997, New York City spent the equivalent of 1.76 percent of its residents’ personal income on general expenditures not elsewhere classified, three times the national average of 0.61 percent. This figure includes a variety of economic development and employment agencies, election agencies, and New York City’s Department of the Aging. It also includes, as a lump sum, fringe benefit payments (other than pensions) for New York City employees, including health insurance and the employer’s share of social security.

According to U.S. Census Bureau governments division officials, in some cases employee benefits such as pensions and health insurance are reported as direct spending in functional categories (ie. police and parks) and in some cases they are not. In reality, therefore, New York City’s spending in some functional categories, relative to the national average, may be higher than the census of governments reports, because the national average will include some (but not all) pension and fringe benefit expenditures. Pension contributions could be tabulated using separate census of governments data fields and New York State administrative records, and were discussed in Section 2. Health insurance did not appear as a field in the census of governments.

In New York City, non-Mayoral agencies such as the Board of Education, and public authorities such as the Transit Authority, Housing Authority, Health and Hospitals Corporation, tend to have employee benefits and pensions included in their spending, as tabulated by the census of governments. Social services spending is little affected, since most of it is for vendor payments to health and social services agencies, not public employees. For mayoral agencies, which account for about one-half of local government employment in New York City, such benefits are reported as a lump sum, and appear in General Not Elsewhere Classified. According to the Chief Accountant of the City of New York, it is not possible to simply pro-rate fringe benefit and pension spending according to employment, since fringe benefits and pension plan participation varies by agency. In any event, such pro-rating would not make the national data comparable, since that data includes other jurisdictions that tabulate benefits as a lump sum as well.

Throughout the nation, functions that tend to be performed by separate “special district” governments are more likely to have pension contributions and other employee benefits tabulated as “direct spending” by function. This includes, first and foremost, school districts – the comparison between New York City’s school spending and school spending elsewhere is the most accurate in the report. It also includes transit authorities and other infrastructure functions.

Local government general expenditures not elsewhere classified were higher than the national average in the Downstate Suburbs, Upstate Metros, New Jersey and the Rest of New York State, but not as high as in New York City. To return to the administrative and related spreadsheet, click here.

 

Chart 9.4: FY 1997 NYC Operating Spending:
General & Unclassified Categories
Percent of Personal Income

Source: Annual Report of the NYC Comptroller. Income data: Bureau of Economic Analysis.

Fringe benefits were primarily responsible for New York City’s high general expenditures not elsewhere classified.

Although comparable data is not available for other places, it is possible to divide up New York City’s spending on general government not elsewhere classified, using data from the Annual Report of the New York City Comptroller. For a spreadsheet of more detailed item by item data, click here.

As the chart shows, in Fiscal 1997 the City of New York spent 1.26 percent of its residents’ personal income on public employee fringe benefits, not including those functions for which fringe benefits are included with direct spending. New York City covers the entire cost of HIP HMO health insurance for its employees, but those employees are permitted to choose other health plans, paying the difference themselves. According to Hewitt Associates, an employee benefits consulting firm (www.hewitt.com), the average employer cost for an HMO plan in the New York City area was $3,168 in 1997. According to New York City’s Office of Labor Relations, the cost of health insurance for the city was $3,460 per worker.

The City spent 0.14 percent of its residents’ personal income on judgements and claims (the City is self-insured). Comparable figures for local governments elsewhere, which would include not only judgements and claims but also liability insurance (for those not self-insured), are not available. According to the Annual Report of the New York City Comptroller, spending on judgements and claims rose faster than the city’s overall budget during the 1990s.

New York City’s spending on employment training, generally funded by the federal Job Training Partnership Act, and its spending on economic development, equaled 0.27 percent of its residents’ personal income in Fiscal 1997. This does not include the substantial contingent liabilities the City has taken on by, in effect, serving as a bank for private businesses, or guaranteeing private loans to private businesses. Similar arrangements led to a wave of municipal bankruptcies in the 1870s, many in Upstate New York, and to constitutional provisions precluding the issuance of public debt for private purposes. These provisions have been interpreted more liberally in recent decades.

New York City’s spending on other small agencies equaled 0.09 percent of its residents’ personal income. State and local spending on elections has become an issue recently, with the Mayor questioning the cost of the City’s campaign finance law and old machines causing chaos in the 2000 Presidential Election. Census data does not allow areas to be compared.

 

Chart 9.5: State Government General & Unclassified Spending

Sources: 1997 Census of Governments. Income: Bureau of Economic Analysis. See introduction for details.

New York’s state general expenditures not elsewhere classified were also above average.

New York State spent the equivalent of 0.56 percent of its residents’ personal income general expenditures not elsewhere classified, 47 percent more than the national average of 0.38 percent. New Jersey’s spending in this category, at 0.65 percent of income, was even higher.

 

Chart 9.6: March 1997 Local Administrative And Related Employment

Sources: 1997 Census of Governments. Population: the 2000 Census of Population, unadjusted data.

New York City had fewer administrative employees than average.

Like is spending, New York City’s employment in administrative, legal and related categories was below the national average relative to population in March 1997. Administrative and legal employment was above average in the Downstate Suburbs, Upstate Metros, the Rest of New York State and New Jersey. In New Jersey, judicial and legal employment was particularly high, while in the Rest of New York State, financial and other administration was high.

To return to the local government employment and payroll spreadsheet, click here.

 

Chart 9.7: March 1997 Payroll Per Employee:
Private Sector and Local Government Administrative
and Related Agencies, vs. the National Average

Sources: Local government: 1997 Census of Governments, March 1997 payroll divided by full time equivalent employment. Private Sector: Bureau of Economic Analysis, 1997 annual private earnings by place of work divided by annual average private employment. Private figures for New York City and the Downstate Suburbs are aggregated because they constitute an integrated labor market; data for finance industry workers in Manhattan are excluded.

New York City’s bureaucrats earn somewhat less than its private sector workers, relative to the national average.

In March, 1997, New York City’s financial administration employees earned 17 percent more than the national average, its judicial and legal workers earned 14 percent more than average, and its other administrators earned 16 percent more than average. This was all less, in a relative sense, than private sector workers in the downstate area, who earned 29 percent more than average (if the high-paid finance workers in Manhattan are excluded). Administrative workers tended to earn less than their private-sector counterparts in New Jersey as well.

On the other hand, financial administration and judicial and legal workers earned more than average, relative to private-sector workers, in the Downstate Suburbs, Upstate Metros, and the Rest of New York State. Other administrators were paid less than average, relative to the private sector, in these areas.

To return to the local employment and payroll spreadsheet, click here.

Chart 9.8: Local Other/Unallocated Employment

 

March Payroll Per Employee: Other/Unallocated Workers

New York City had fewer employees relative to population in other/unallocated categories, but pay was high.

Most unclassified spending, such as lump sum fringe benefits and judgements and claims, does not have an employment analogue. Therefore, the bulk of “other/unallocated” employment in New York City, which is relatively low, is presumably accounted for by economic development agencies. In many other places, local government workers who could not be divided among functional categories such as those in” public works” departments with water, sewer, highway and sanitation responsibilities, presumably account for most employment in this category.

Throughout New York State and New Jersey, local government workers in the “other/unallocated” category were well paid relative to the private sector and the national average. Pay was particularly high in New York City, perhaps because the city’s economic development agencies have to compete with Wall Street for workers, and the substantial financial risks of economic development activities requires top talent. On the other had, one need not be Milton Friedman to wonder what local governments are doing in the investment banking business anyway. To return to the local employment and payroll spreadsheet, click here.

 

Chart 9.9: State Admin/Other Employment

 

March Payroll Per Employee: State Admin/Other

New York State’s employment in administration, related functions, and other/unallocated was above average.

In March 1997, New York State had 96 financial administration employees per 100,000 residents, 63 percent more than the national average of 59. It had 88 judicial and legal employees per 100,000 residents, 83 percent above the national average of 48. New Jersey, at 148 per 100,000 residents, had even more.

New York’s state public employees in these categories tended to earn more than the national average, especially in the judicial and legal agencies.

To return to the state employment and payroll spreadsheet, click here.

 

Section 9 Summary

• New York City has fewer local government bureaucrats relative to population, and less spending on bureaucracy relative to personal income, than other parts of the state.

• A substantial share of New York State’s local government employee fringe benefits were lumped together under general expenditure not elsewhere classified, rather than allocated to particular functions such as police, fire, libraries and parks. This may cause spending in these categories to be under-estimated, particularly in New York City. Aside from potentially pushing the City’s public amenities spending in total above the national average, this error is not likely to materially affect the conclusions of this report. Some categories of expenditure shown to be above average in the City -- especially police, correction, fire and sanitation -- may in fact be even further above average, but it is doubtful that any category shown to be below average is in fact average or above.

• The author recommends that additional resources be allocated to governments division of the U.S. Census Bureau to improve data collection and tabulation. Municipal, state, and county comptrollers, together with the governments division, should work to provide comparable data on the cost of employee fringe benefits, economic development programs, and insurance, judgements and claims, and to provide detailed information more regularly through the standardized transmission of electronic records. The inter-jurisdictional comparisons made possible by more accurate, detailed and timely data could help public officials to find money-saving strategies that would more than repay the cost of the information.

To move on to the summary and conclusion, click here.