In northeast Pennsylvania, the city of Scranton (population 76,000, only Second Class-A city in Pennsylvania, home rule since 1976, in Act 47 since 1992) and the county in which Scranton is located, Lackawanna (population 214,000, one of twelve counties of the Third Class, home rule since 1977) are proposing some very southwestern Pennsylvania ideas as of late.

For Scranton, a state senator has raised the possibility of a Pittsburgh-like shift of business taxes like the reforms made in 2005 when the General Assembly approved creating the payroll preparation tax and eliminating the mercantile and business privilege taxes.  The senator noted "This would be a tax shift...[however] I haven't gotten a clear view on whether it makes sense." Many of the arguments made in the Pittsburgh case pointed out the exemptions that had been crafted under the BPT and that a payroll tax would be fairer and fall on businesses across the board (non-profits and government are exempted from the tax).

Lackawanna County is debating whether to amend its home rule charter to replace the three commissioner system with an elected executive and a part time council, though that option would not be binding on a government study commission.  There is also talk of consolidating some of the administrative row offices that are elected under the County's charter (clerk of judicial records, recorder of deeds, register of wills) and appears that the whole of the matter might end up in court since there is a petition for a study of the Charter at the same time an ordinance calling for a referendum on the row offices. 

 

AMTRAK has told Pennsylvania that the Pittsburgh to Harrisburg route-known as the Pennsylvanian-would likely be suspended unless the state comes up with the $5.7 million needed to cover the subsidy now being covered by money from the Federal government.  This route has one train a day inbound to Pittsburgh and one train outbound from Pittsburgh to Harrisburg with continuing service to New York City.  The inbound train arrives Pittsburgh at 8:05 PM having left New York at 10:52 AM and Harrisburg at 2:36 PM. Outbound from Pittsburgh departs at 7:30 AM and arrives Harrisburg at 12:55 PM and New York at 4:50 PM.

 

For fiscal year 2012, there were 129,372 combined boardings and disembarkings at the Pittsburgh station for the Pennsylvanian train and the Capitol Ltd. service that goes on west to Chicago by way of Cleveland and east to Washington DC. The Capitol Ltd service is also one train per day in each direction leaving for Chicago at midnight and DC at 4:50 AM. Ridership on the Capitol Ltd and Pennsylvanian are very nearly the same, posting just over 100,000 passengers each in the first six months of fiscal 2012. The Pittsburgh passenger count has fallen substantially since 2008 when it was well over 140,000. In any case, even if the majority of passengers at the Pittsburgh station are from the Pennsylvanian, the number of passengers is almost certainly fewer than 100,000 per year or 270 people per day-probably about evenly divided between boardings and disembarkings.

 

Further, the passenger count at the Altoona station, the busiest between Pittsburgh and Harrisburg, has fallen from 35,850 in 1998 to 26,798 in 2012, a drop of 25 percent. Thus, the recent trend of usage of the Pennsylvanian is clearly down.  The key question "is the trend reversible?" If it is not, should the state be putting money into a train route that will require increasing subsidies year after year as the gap between revenues and costs widens?

 

The single trip each way is obviously a weak selling point.  The departure and arrival times in Pittsburgh are not really the most convenient for many potential passengers.  Then too, the five and half hour travel time to Harrisburg is off putting considering the alternatives.  Granted the trip from Altoona to Harrisburg is shorter and if the final destination is Philadelphia or New York the trip times are much more comparable to travel by car or bus. But that being the case, why is the passenger count at Altoona in such decline?

 

Passengers going from Pittsburgh to Harrisburg will pay $40 for the trip. Passengers traveling by MegaBus from Pittsburgh to Harrisburg pay $14 or $16 depending on which of the three daily departure times they choose. The MegaBus trip is a three and half to four hour journey with no stops.  Thus, the advent of the MegaBus has created major competition for the train in terms of convenience, travel time and cost.

 

And without question, for most people making the trip to Harrisburg, especially people on business, getting to the Harrisburg train station is just the start of the excursion.  If they want to go to a meeting in Swatara or other neighboring community, they will need transportation.  Unless someone is there to provide transportation, it will mean getting a cab or renting a car. Either would represent considerable extra expenditure of money and time.  Moreover, the business person going to New York would not arrive until very late in the afternoon and would have missed most of the work day, meaning a night in a hotel. Whereas a flight leaving Pittsburgh at 7:30 AM would have the person in NYC in time to get in several hours of meetings or sales calls and still catch a late afternoon or early evening flight home.

 

In short, business travelers are unlikely to ever make up a big part of the Pennsylvanian's passengers. And non-business travelers seeking to save time and money now have a much better alterative in MegaBus.

 

For the state to ante up the $5.7 million, which is about half the estimated cost of running the Pennsylvanian service, it will have to justify the expenditure of funds on other than economic considerations. Indeed, the state ought to survey the ridership to ascertain whether subsidizing half the cost of the trip is warranted.  Do they have alternatives, too poor to travel any other way, or have no bus service? Is there a sizable group of people who ride the train to take advantage of the subsidy but who could easily afford to drive from Johnstown or Altoona?

 

The only other reason to keep the line going would be to have it available and in working condition against the possibility of a major long term highway outage or restriction. Or perhaps Turnpike tolls will get so high people will abandon the Turnpike in favor of a train ride.

 

The budget for fiscal year 2013-14 was presented today by the Governor and reforms for pensions were outlined.  To be clear, as we have written before, when the state level reforms are mentioned the focus is on personnel covered by either SERS (state workers) or PSERS (school employees).  The remaining county, local, and authority plans aren't the subject of reform.  That's not to belittle the plan: to be sure, the unfunded liability of SERS and PSERS is a combined $41 billion. 

 

The highlights: as with most retirement cost reform, new employees (presumably all, with no exceptions for public safety) will come under a new pension system, here a proposed defined contribution plan with employees contributing 6.25% of pay; current retirees get no new benefits, and current employees will see no change to the benefits they have accrued, however, the future benefits of current employees will have a lower multiplier and compensation reforms (overtime and Social Security caps). 

 

This will likely be a very contentious issue as there will be much discussion over whether Constitutional language on impairing contracts has an impact on future benefits for current employees.  Note that the budget proposal states that current employees can pay more into their pension to keep the multiplier from dropping. 

 

As part of the drive to find efficiencies in County government and determine the proper functions of County government the Parks Department and Council's Parks Committee might test the slopes to see if there is a private interest out there who might want to take over the skiing and snowboarding functions at Boyce Park.  We have written previously about the County's efforts (here, here, and here) which go back to a 2007 study on identifying revenue sources in the park system.  The County put out a request for proposals for the Boyce Park facilities but it was not successful in drawing interest. 

 

The Executive, sounding a bit like the Governor when discussing the liquor store privatization plan, stated "We're going to take a look at, say, our ski slopes, (and ask) is that a business we should be in. I don't know that it is." 

 

That's the perspective the County needs to take as part of its next Sunset Review and not be dismissive of getting the report done and being serious about it.  The 2003 Review raised the issue of looking for alternative revenue sources for the parks, 

 

When the County, Robinson Township, and the Montour School District signed off on a tax increment financing deal way back when (the feasibility study for the site was in August of 1999 and the time of approval was December 1999; even the mention of the "Kaufman's Department Store" seems like a relic) they probably never thought going to court would be the way the mall and its peripheral development would arrive at the assessed value needed to retire the TIF bonds on time. 

 

But that's just what happened as the taxing bodies and the mall agreed to boost its assessment from $76 million to $108 million and retroactively for tax years 2010, 2011, and 2012 so to ensure the assessment throws off enough property taxes to pay the debt.  It was mentioned in the article that the $108 million value will last until the "bonds are paid off".  While the taxing bodies like the deal because it will accelerate the payoff they must be wondering (unless it is spelled out in the deal) what happens to the assessment once the payoff is over; after all, the TIF is sort of a "deferred gratification" model of development: some or all of a new development's incremental taxes are diverted to pay off debt for that new development's infrastructure or public costs and then, once the debt is retired, all of the incremental taxes flow back to the taxing bodies who agreed to the diversion in the first place.

 

Lots of questions, but this deal does not address a big one: why is the mall and its "peripheral development" still not producing the direct job count that was promised in the feasibility study?

 

By 2005, the study predicted that 5,455 direct jobs would have been produced by the anchors, the mall, three outlots, and the peripheral development.  When the Allegheny County Redevelopment Authority completed its TIF evaluation in 2008 it showed the projected job count of 5,455 from the study and placed its current estimate at 3,811; about 1,644 jobs short of projections.  The Authority noted "...180 acres remains undeveloped within the TIF district.  Commercial activity on these parcels would bring the job creation figures closer to the projections".  The same job count and rationale was repeated two years later in the Authority's 2010 evaluation.   

 

Perhaps the total has improved from the measurements the County took in 2010. That would be a positive for the taxing bodies that participated in the TIF and for the boosters of the project. The issue is that the feasibility study projected that 578 jobs would be produced each year from 2001 through 2005 on "peripheral development" on which "construction...will proceed immediately and continue until full buildout over the next four years (2005)".  What happened?

 

At the national level, union membership fell in 2012 from the 2011 reading, tumbling from11.8 percent of the work force to 11.3 percent. Interestingly, union membership was down in the private sector and among government employees. Private union membership dropped from 7,202,000 to 7,037,000, pushing the percentage of workers in unions from 6.9 to 6.6 percent.  In the public sector, union membership dipped from 7,562,000 to 7,328,000 and the percent unionization declined from 37 to 35 percent.

Government union membership remains greater than the private sector membership even though there are more than five times more private sector employees than public sector workers.  The bulk of public union membership is accounted for by local government where about half of government workers are employed and where over 40 percent of workers are in unions. By contrast only 27 percent of Federal and 31 percent of state employees are in unions. Of course, with the military excluded from union membership, the Federal percentage unionization is lower than state and local percentages.

How did Pennsylvania fare?  Total union membership (private and public) fell from 779,000 in 2011 to 734,000 in 2012 which led to a drop from 14.6 percent unionization to 13.5 percent.  The breakout of changes to public and private union members are not available as yet but, given the slide in local and Federal job over the past year, there is reason to suppose that the number of government union members was also down somewhat.

But the biggest change would have been in the private count. Overall modest private sector job gains resulted from a mixture of weakness in construction and private education and strength in finance, leisure and hospitality, and professional and technical services.  Education and construction have relatively high percent unionization while the faster growth sectors have very low percentages of unionization. Thus the mix effect could account for some of the decline. However, there is almost certainly a general slippage in unionization across many industries.

Many other strong union states also experienced major declines in percent unionized workers. Among the biggest drops occurred in Wisconsin where the percentage fell from 13.3 to 11.2.  Maryland saw unionization slip from 12.4 to 10.6 percentage, West Virginia down from 13.8 to 12.1, Illinois down from 16.2 to 14.0 percent and Connecticut sliding from 16.6 to 14.0 percent.

In short, the decline in union membership is widespread and is quite heavy in some of the most heavily unionized states. This has happened notwithstanding the enormous effort of the NLRB on behalf of organized labor to promote membership and union powers.

There can be little doubt that heavily unionized states, particularly those with high numbers of public sector unions, are politically blue states. Unionized workers are a major political force, especially those with government jobs. Their interests lie with politicians will support spending that protects their jobs and compensation.

 

 

With the Governor's budget address coming up next week and the expectation that there will be something said about pensions-what with a presentation by the Budget Secretary on pension reform and the reaction by employee groups and the release of a pension report by the Public Employee Retirement Commission which comes on the heels of another pension report released earlier by the Governor's office-how much outside of the box thinking might there be? 

 

We have written about options over the years: switching new hires to defined contribution plans (this does not erase built up liabilities), selling off an asset and putting that into pensions, and of course there have been mentions of pension bonds (a la Pittsburgh in the mid and late 1990s), tax increases (the new report spells out what would be needed for income and/or sales hikes, no mention of local property tax increases for school pensions) but here are two mentioned in the PERC report that are quite interesting.

 

One is to examine what state and local governments in PA are putting toward retiree health care coverage and shifting that to pensions.  The report points out that retiree health care (as part of an overall group of benefits known as other post-employment benefits or OPEB) does not enjoy the same judicial and Constitutional treatment that pensions do (that they fall into the language preventing the impairment of contracts and that pension benefits are "future compensation for present services") and that "revenue saved by modifying the active employee health care plan, or by reducing or eliminating retiree health care, could be applied to pay for pension obligations".  Note that Pittsburgh, which ended retiree health care for police and fire personnel hired after 2005 (and was the subject of a Commonwealth Court case cited by the report's section) still has to pay for its OPEB liability that was built up, but it is not taking on more costs for this benefit. 

 

Another is to gradually wean local governments off of state pension aid (it comes from a tax on insurance premiums) and dedicate that money to SERS and PSERS.  "Such a major reallocation would shift the burden from state to local resources requiring those local governments to compensate for the funding lost from the state aid program". 

 

The County Commissioners Association of PA is a statewide association representing the interests of the state's counties, and it has released its "wish list" by setting priorities for its members of what they would like to see the General Assembly act on.  The priorities for county government include action on human services, Marcellus Shale, and 911, but let's focus briefly on three issues that we have written about:

 

Property Assessments: The Association talks about the 2010 study done on assessment practices by the Legislative Budget and Finance Committee, task forces, work they have done with other professional associations in the state, and would like to see the recommendations of the 2010 study (training, funding, tools to determine timing of assessments, etc.).  No word on the Association's feelings on the court battles that took place in the member counties of Allegheny and Washington over doing a reassessment. 

 

Transportation: The Association supports the work of the 2011 Transportation Commission on how to fund the state's road, bridge, highway, and transit needs overall, but points out that it "does not have a unified position on mass transit" because of the differences between systems across the state. 

 

Prevailing Wage: The Association notes how the prevailing wage requirement on public projects has not been updated since the 1960s and how a court decision brought what was considered "maintenance" under the auspices of the wage requirements.  Priorities the Association would like to see acted upon include indexing the amount, opt out provisions, or a full repeal. 

 

Proponents of funding public transit rallied at the City-County building this week calling for dedicated funding from the state for the Port Authority, one speaker noting that there is still a "transit crisis" that they hope will be ended when the Governor unveils his transportation plan for roads, bridges, and transit (that is now supposed to come at the budget address next month rather than today).  The speaker used the opportunity to state opposition to "privatizing" transit since that "spells disaster ... With privatized transit, fares go up while quality, safety and wages go down".  Why even mention it?  Because the speaker had heard the Governor make mention of it at a speech at the University of Pittsburgh.

 

Does the speaker realize that several small transit companies in western Pennsylvania, even some that drive buses into Allegheny County on a daily basis, contract with outside companies to run their bus service?  Based on our 2011 survey, some even paid higher wages than those that kept their operations "in house". Of course, none could touch the wage of an average PAT driver ($25.48 to $15.23). Or that the Port Authority contracts with a company to provide ACCESS service?  The previous Governor's transportation commission in 2006 gave that portion of PAT's operations very high marks.  Know what else that Governor's commission did?  It directed PAT and other transit agencies around the state to evaluate competitive contracting opportunities, adjust service to meet market demand, reduce labor and management costs, and tie bus fares to inflation.  Sounds quite business-like. 

 

The speaker's worst nightmare might be riding a bus in Denver, Colorado.  A 1988 state law directed Denver's Regional Transportation District to contract out a portion of service, which now stands at 50% of "rubber tire" service. As of 2011 the RTD had 1,093 contracted fixed route drivers working alongside 1,826 represented employees; 537 buses were RTD owned and operated, 457 RTD owned and leased to private carriers.  A customer can't pick and choose whether an RTD driver or a contractor is going to pick them up on a bus trip.  And who knows if the quality of the buses under the direction of lessees is compared to the in-house driven ones. Has that uncertainty scared off bus riders?  According to statistics from the National Transit Database since 1996 (the farthest back the data goes) unlinked bus trips are up 16%; PAT's are down that rate over the same time frame. 

 

 

A handful of years since the voluntary merger of two Beaver County school districts lowered Pennsylvania's school district count from 501 to 500, the state appears poised to use its power to close down the Duquesne School District and bring the count to 499.

 

All that is left of the District is an elementary school-middle and high school students have been attending neighboring districts.  We documented the academic and financial condition of the District in late 2011 and showed that proficiency was not getting better in upper grades and had fallen in lower grades.  Spending per student approached $20,000, most of it coming from Federal and state sources.  That piece was predicated on work done by the Institute in 2003. 

 

Last year the District came under a new law, Act 141, which functions as a way to resuscitate distressed schools, much like Act 47.  The recovery officer for the District (Duquesne operated under a control board for much of its recent history) made it known that the economics of keeping an elementary school open won't work, nor would a charter school, so it looks like either a voluntary or mandatory transfer of elementary students. 

 

At the conclusion of that 2011 Brief we offered the following: "one would hope the board, the administration, and the staff would care enough about their obligation to the kids and taxpayers to support drastic remedial steps, including closing the school".  Here we are now, though the push to close the school is not coming from any of those parties