Inside the bubble

Reading yesterday's New York Times editorial about the Empire State's fiscal crisis, I couldn't ?help but think of the last days of the USSR. I'm sure there were many Soviets scrambling to move the deck chairs around while that?ship was sinking.

The Times does not paint a very pretty picture of New York:

At a time when public school students are being forced into ever more crowded classrooms, and poor families will lose state medical benefits, New York State is paying 10 times more for state employees' pensions than it did just a decade ago. ?.

In all, the salaries and benefits of state employees add up to $18.5 billion, or a fifth of New York's operating budget. Unless those costs are reined in, New York will find itself unable to provide even essential services?.

And the Governor's?mandate relief commission, a politically astute way for Mr. Cuomo to deliver bad news, just reported that:

  • New York has the second highest combined state and local taxes in the nation;
  • New York has the highest local taxes in America as a percentage of personal income - 79 percent above the national average;
  • Median property taxes paid by New Yorkers are 96 percent above the national median;
  • Property tax levies in New York grew by 73 percent from 1998 to 2008 - more than twice the rate of inflation during that period.

Whether you call it Empire State exceptionalism or the canarie in the mineshaft, you have to admit that the show is worth watching.

A better show to watch, however,?is Mike's?succint video about stretching the dollar? (see here ).?

These are times to?change the way?we do education.? This?is a huge challenge for an education status quo used to throwing money at problems?and not solving them???which reminds me again of the old USSR and the joke about the laborer who was asked to explain the socialist economy: ??We pretend to work and they pretend to pay us.?? -- but we better do something.

Also, however, if we?view the current fiscal crises?only as ?failures to bargain smartly with our public employee unions, we risk spending a lot of time fixing the carts? when, in fact, the horse may be lame.

The Times, for instance, points out that,

Last April, in the midst of one of the worst financial crises that New York and the nation have ever faced, the state's unionized workers got a 4 percent pay raise that cost $400 million.

The average salary for New York's full-time state employees in 2009 (even before the last round of raises) was $63,382, well above the state's average personal income that year of $46,957.

This surely proves how nimble government is -- not. But these dismal facts should also?tell us more than that legislators aren't tough or smart enough bargainers. And the Times doesn't address the larger question: could those imbalances be attributed to structural weaknesses?

The Times dances right up to the?question, attributing the problem to the ?outsized generosity to the state's powerful employees' unions in the early years of the last decade." But it doesn't see that such generosity is part of a?self-defeating system of?incentives?that our Founders strove mightily to avoid?when they?devised?their ?limited? government scheme. The Times even understands that ?the Legislature, ever eager to curry favor with powerful unions, added sweeteners to pensions and allowed employees to stop making contributions after 10 years.?

You don't have to be anti-union to wonder whether there isn't something odd about voting for the same people who are paying your salary; or, more importantly, paying the salary of the people who are paying your salary. It is no coincidence that last year the second largest lobbying donor in Albany, showering the legislators with $7.8 million (more than $36,000 for each of the state's 212 legislators) was the New York State United Teachers (see here).

Such oddly "outsized generosity" may indicate a big problem with the system.? Which reminds me of a conversation I had with Jim DeMint, then a freshman Congressman, in 2000.? "When this country was being formed," he said, "the critics of democracy said it won't be a permament form of government because sooner or later people are going to figure out that they can vote themselves more benefits from government without paying for it."

It seems essential, then, to keep asking ourselves what role, exactly, do unions play in our public schools.??We need teachers, no doubt about that, but are the negotiations their unions have with legislators? the political equivalent of??one hand clapping.? As Frank McNamara Jr, a former United States attorney for the District of Massachusetts, wrote in a letter to the Times:

The historical touchstone of labor union existence ? the balancing of asymmetric bargaining power between worker and management ? is no longer in play (if it ever was) for the public servants of today. The largely superfluous public employee unions have introduced a new dysfunctional asymmetry in favor of public employees that badly needs to be redressed.

Such asymmetry surely played a large part in the collapse of the Soviet Union.? And though I'm not looking for hate mail from teachers for saying this, there are surely parallels?to look for while examining the way we pay for our public education and distribute its benefits.

--Peter Meyer, Bernard Lee Schwartz Policy Fellow

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