The advocacy group A+ Schools has produced its annual report card on how well the Pittsburgh Public Schools leadership-the nine member elected school board-handles itself.  Overall, the board got a B-: on components of the grade they received a B- for conduct (down from a B last year), a C+ for clarity, B- for competency, and B+ for transparency.  These last three grades were unchanged from last year.

 

Perhaps the most eye-opening grade was a C for time management, a downgrade from last year's B- which was due partially to "The ‘excessively long" meetings'-some lasting more than four hours" according to the group's director.

 

If the board was spending hours on end trying to figure out how to improve performance, encourage competitive options for parents seeking to better their child's education, or how to reduce the massive per-pupil expenditures, then excessively long meetings might be in order. 

 

Ultimately, the best barometer for the board's performance could be tied to one indicator: enrollment in the District.  And on that measure (enrollment has fallen from 32% since the start of the decade and significantly outpaces the overall decline in City population) there can be no above-average grade.

 

Just over the border from Philadelphia-the city that accounts for 80% of the aggregate shortfall of all local pension plans in the Commonwealth-reform of public sector pensions is taking shape. 

 

According to an article in the Philadelphia Inquirer, the reforms would include a roll back of a 9 percent pension increase approved in 2001, a requirement that new part-time workers to receive 401(k)-like plans rather than defined benefit plans, and a minimum threshold of weekly hours worked for employees to qualify for a pension.  A constitutional amendment would force the state to fully fund its pension obligations over a seven year period. 

 

These changes follow several attempts earlier in the decade to obtain long-term change in the state's pension system.  With long range pension and health care obligations estimated to be around $112 billion (that's for the state only, not the locals), some lawmakers have decided to take the issue on.  There will be tremendous pushback from the state's public sector unions.  Consider it a prelude to life in Harrisburg in 2011. 

 

 

The Mayor didn't veto Council's prevailing wage legislation because he knew the veto would be overridden.  Because of concerns about its effects on future development and enforceability, he didn't sign it either.  Thus the legislation became law.  Just one more burden the City taxpayers must bear. 

 

While the Mayor is understandably concerned about its impact on future development, he also needs to worry about its impact on the City's finances.  The law requires the City Controller to study and determine the median wages for all affected job classifications.  For a department that is already stretched thin, this is a cost-increasing mandate. How is the controller going to allocate resources to carry out what could be a fairly expensive undertaking without affecting his ability to do the work already required? Will he ask for more money from council or allow needed work to slip or get done in an unsatisfactory manner? And they don't have much time to get it done, as the law takes effect in 60 days. 

 

The increase to the Controller's budget is not the only concern.  The law also requires the City and firms operating under City contracts to pay the prevailing wage to janitorial and food service workers.  City employees already making less than the prevailing wage will not be the only ones getting a boost, but to maintain workplace hierarchy, those above them will be increased proportionally as well.  And of course firms or agencies with City contracts will pass this cost onto the City in the form of higher prices in any future contracts and could ask for or sue for immediate additional funding assistance on the grounds the terms of their contract have been affected.   

Does the Council have a plan to pay for these increased costs?  It's doubtful they will look to raise taxes on their constituents, but continue to pursue suburbanites and others that don't vote in the City.  This mandate will do very little to lift people out of poverty, but it will do very much to sink an already financially strapped City.

 

Moreover, since the law will almost certainly reduce the amount of new development in the City, significant tax base and income generation that might have occurred to help City finances won't happen.  

 

All told, the prevailing wage law is a surefire loser for city taxpayers both near and long term.  But Council in its best Alfred E. Neuman portrayal is saying, "What, me worry?" 

 

Last week we analyzed the financial problems related to the debt owed on an incinerator in the City of Harrisburg.  The incinerator is owned by an independent authority, but the City apparently is on the hook for a good portion of the debt.

 

One of the possible solutions floated to get money to the City is to raise water rates to customers served by the water system (according to the 2008 CAFR for Harrisburg, the same authority runs the incinerator and the water system) which includes both city and suburban users.

 

Imagine that-using rates for water in order to pay down the debt of another project of the authority.  While an official of the Authorities Association of PA was quoted in the Harrisburg Patriot News that such actions are above the board and legal and likely not the first of its kind (Pittsburgh sold its water system to an authority to raise cash, and municipalities likely borrow from similar funds to meet general needs), it would be hard for customers to swallow the fact that they would be paying higher water rates-based on the amount of water they consume-to not fix the water infrastructure but to pay off a bad debt. 

 

The Pittsburgh Public Works Department claims it does not have enough manpower and equipment to deal with the snow problem and cannot hire more people because of spending constraints. This in a city that was looking to tax college tuition in order to make payments on massively underfunded pensions and that has enormous bond debt obligations and that has no problem finding money to make very generous longevity pay for public safety employees. 

 

One of the City's primary responsibilities is to maintain streets and make it possible for people to get around to work, doctors and shopping. Yet because of spendthrift, poor management policies for years it now finds that it cannot do what the citizens need. Maybe the citizens should long ago have demanded a bit more responsibility in fiscal matters.

 

One wonders if they are beginning to get it.

 

For some time we have heard that the presence of Parking Authority garages-publicly owned and exempt from taxation-act as a check on the privately-owned garages in the City.  The Authority garages (and lots) had lower rates and kept parking affordable for people wanting to come Downtown.

 

That's why a consultant for the Downtown Partnership urged that if the Authority owned garages and lots are sold or leased to a private operator that rate controls become a condition of the deal so as to keep Downtown competitive.  Citing his familiarity with the lease deal in Chicago (the deal from which Pittsburgh has taken inspiration), he feels that losing public-owned garages and lots would be a detriment to Downtown commerce. 

 

The Mayor's chief of staff responded that since "the city authority controls only about 25 percent of all parking Downtown" that moving the facilities into private hands will not be a big deal.

 

But it could have an impact, just not in the direction the Downtown crowd is thinking.  A private interest might offer better service and better maintained garages, and possibly could compete with existing garages on parking rates.  Sure, they would be keen to the bottom line, an action the consultant may not like, but in so doing the scarce resource of parking is allocated efficiently.  The more controls built into the lease the less attractive the up-front offer the City is betting on will be. 

 

Where does government turn when it is unable to carry out its obligations successfully? Why, the private sector of course. Finding itself unable to get streets cleared following the recent snow event, Pittsburgh called in private contractors to help with snow removal.

 

There is nothing wrong with this action, indeed, it is to be applauded.  The irony is that Pittsburgh has one of the most anti-privatization governments on the planet. In fact, it is amazing that we have not heard city union members complaining about their work being "given" to non-union private operators.

 

The larger point is there are many services the City ought to be contracting out in order to reduce its own employee count and to cut costs.  As long, of course, as the contracting process is open and above board. The possibilities of favoritism, cronyism, insider dealing and sabotage are always threats to efficient and cost saving outsourcing. Nevertheless, given the City's financial plight, there can be no excuse for not moving aggressively to adopt privatization opportunities. Even if that means appointing an outside group to monitor the process to ensure the above mentioned threats do not succeed in undermining the system.

 

Striking teachers in the Penn Hills school district offered to return to work a day earlier than required by the state. The district has accepted the offer.  Mr. Santicola-the spokesman for the state teacher union association and the Penn Hills teachers-in a statement on the issue said, "it's a gesture to all parties that we want this thing resolved".

 

Why would the teachers make such a gesture? It would seem fairly obvious.  They were heavy losers in the public relations battle. In the current economic environment and given the utter weakness of their case, that was to be expected. Yet they called a strike anyway.

 

The real reason for the strike? The union leaders wanted to create as much aggravation for the Board as possible and remind taxpayers of the power teachers wield by having the right to strike.  In this case, the small number of days they could be out curtailed their ability to have frustrated parents and propagandized students go to bat for them at Board meetings. All in all a very poor strategy. All they have done is reveal the depth of their disdain for taxpayers and students. But they have also added one more reason for Pennsylvania to end the ridiculous policy of allowing teachers to walk out with no loss of pay.

 

Wonder if the voters in Pennsylvania will ever see the light and demand an end to teacher strikes? In the end, it is they who must force the issue. Their elected officials are too afraid to do it.

 

With school districts facing as much as a sixfold jump in the amount they must pay for teacher pensions by 2012, teachers are very worried that school boards will have to cut programs and/or staff.

 

School districts and teacher unions are asking Harrisburg for a fix that will help cover the additional funding. Good luck with that. The state faces its own enormous pension payment increase and its finances are very shaky with looming huge deficits.

 

What to do? If teachers and their union leadership want to avoid program and staff cuts, they should offer to help. They should agree: (1) to accept a voluntarily salary freeze and (2) agree to pay more for health care. These actions would help to offset some of the impending huge pension payment increases.

 

Union leaders argue that school districts have been derelict by underpaying into the pension system. Maybe they should consider that the strident position taken by unions during bargaining, backed by the right to strike, have already stretched to the limit the ability of taxpayers to support schools.  No group has fared better economically than Pennsylvania's teachers during good times and bad. Virtually no layoffs, protection of underperformers, excessive, blind support by Harrisburg of the public school system, and lack of accountability are the real problems.  Addressing those is the best place to start.  In the meantime, let's see if teachers are willing to offer school districts any help with the pension payment hike.

 

Could a decision to guarantee an authority's debt on an incinerator turn Harrisburg's finances to ashes?  It seems to be the case as the state's capital (population 47k) is in such a pickle that elected officials including the city's controller are suggesting Harrisburg needs to "...decide which way to go, in bankruptcy or Act 47".  Much hinges on debt service payments that the City agreed to make for a waste-to-energy incinerator owned by a separate authority.

 

The Mayor stated that finances are so bad that they "might not be able to meet payroll this month".  Tax increases, asset sales, and an exploration of takeover remedies are on the table.

 

At least it does not appear that pension costs are what plague the city, at least not yet.  Harrisburg showed a very healthy fund ratio in 2007 with more than enough assets to meet its liabilities (118% funded).

 

As our 2009 report on Chapter 9 bankruptcy pointed out, the U.S. Constitution allows Congress to write uniform bankruptcy laws and municipalities are permitted to file for bankruptcy protection (debt adjustment may be more appropriate).  In order to preserve the Federal-state balance of power, states are free to prohibit their municipalities from filing and those that do can place as many restrictions on filing as they wish.  In Pennsylvania authorities cannot file for bankruptcy and the only statutory language on municipal filings flow through Act 47.  Thus, a municipality would have to be in Act 47 status and meet certain criteria in the Act 47 statute to proceed to bankruptcy.  No community in Act 47 has yet to file for Chapter 9 bankruptcy.

 

Maybe communities that are faced with a sudden catastrophe of an economic kind ought to have a quicker route to Chapter 9 than first entering into Act 47.  Consider that Harrisburg is in a really bad spot: the Act 47 process has to play out, then a recovery plan has to be written, and then one of the criteria related to a Federal filing has to be satisfied.  There may be some cases that require swifter action.