Allegheny Institute Blog

The state Education Secretary has finally made the decision to shut down the Duquesne School District’s high school. After years of substandard academic performance, with skyrocketing costs, he will ask the state Legislature to grant him the power to dissolve the school. They should grant his request immediately, but with modifications.

The rest of the Secretary’s plan involves sending the approximately 250 high-school students to other public high schools in the area on a tuition basis. This is a non-solution and should be scrapped immediately. There’s a big problem with this proposal and it involves the readiness of Duquesne students and their assimilation into other school districts.

According to their PSSA scores from 2006, the students in the Duquesne school district scored below 50 percent efficiency on the reading portion of the exam. That’s all grade levels who took the exam, third through eighth and eleventh grades. The eighth and eleventh grade classes, who will be transferred into another district not only did poorly on the reading part of the exam, but on the math portion as well—26.3 and 48.8 percent respectively. Placing them into another school whose students are performing better, and since the Duquesne school district is at or near the bottom of the state’s ranking, nearly all districts are better, will only put the Duquesne students at a severe disadvantage.

There are two better solutions to this problem. The first involves giving parents a voucher for tuition and letting them send their children to a school that best suit their needs. Not only will this give the students the best chance of succeeding in school, but it would save the taxpayers money. The most recent figures show per pupil costs in Duquesne at more than $20,000—most of this being picked up by state taxpayers. Giving parents a voucher for $10,000 would save money and allow them to pick from a plethora of private and public schools. This system has been very effective in other areas, such as Cleveland, Washington, DC, and Milwaukee with low-income, low-achieving students.

Given that vouchers in Pennsylvania have been vehemently resisted by teacher’s unions, another solution may be more palatable. Hire a private company to come in and take over the Duquesne high school. The company would have complete control over the academic curriculum as well as disciplinary measures. There are several private education firms operating schools in low-income areas who have been very successful with these students and at a cost that would be much lower than the current per-pupil allotment. This solution not only keeps students in Duquesne, an option favored by parents, but it gives them a better chance at academic success.

But these are not choices the Secretary of Education is giving the parents and children of Duquesne. Instead of being bold and offering real solutions, he offers more of the same, no doubt from fear of teacher unions. However, the cure for the ailing Duquesne school district needs to be much stronger—he needs to give these students the best chance for success, and that chance lies with the school choice.

A three judge panel of Commonwealth Court overturned Allegheny County’s smoking ban. The panel said the state’s 1988 Clean Indoor Act preempted the County’s ordinance, which Council was warned about by a County Solicitor and the president of the state restaurant association. However these warnings went unheeded by Council which was determined to pass a smoking ban. They did so by such as wide margin—14-1—that the County Executive could not veto the measure and have it hold.

Instead of being challenged by the County Executive, the ordinance was contested based on its legality with state law—again, a challenge they were told they would lose. So why did they press forward? Are the members of County Council so arrogant that they thought they could supersede the state statute? Or, knowing that it would be overturned, did they use the opportunity to grandstand and gain publicity?

Either way they had to be embarrassed by the panel’s decision. The Clean Indoor Air Act clearly exempted only Philadelphia, allowing them to enact their own smoking ban. If County Council was so bent on passing a smoking ban, they should have started with lobbying the legislature to amend the Act to exempt Allegheny County. Instead they have wasted taxpayer money on a legal fight they were bound to lose. They also imposed costs on businesses across the county as they spent time and money implementing and enforcing the ban.

This is an interesting case. If the two restaurants had not fought, would the statute have gone into effect only to be overturned by a later lawsuit? To have the ordinance thrown out six months into a smoking ban would have played havoc with restaurants and diners.

This is no way to run a government. Passing ordinances that violate state law in hopes they can win in court does no credit to the Council.

The Governor has proposed three solutions to the transportation funding crisis facing the Commonwealth’s roads and bridges. The first solution, and the one favored by the Governor, involves the long-term leasing of the Pennsylvania Turnpike to private investors; the second has at its crux the creation of a new tax-exempt authority to allow for the private management of the Turnpike; and the final alternative would follow the Turnpike Commission’s plan of raising existing tolls as well as tolling Interstate 80.

Either way tolls along the Pennsylvania Turnpike are going to increase—the only question is by how much. The solution that should result in the smallest increase in tolls will be the first—privatizing the toll road. Experience from around the country indicates that toll increases are limited by legislation. Not only are states regulating tolls, but some states also regulate the rate of return earned by the private operator. Obviously the more stringent the regulations, the lower will be the overall bid for the Turnpike.

To date the expected payment has fluctuated from a few billion to as high as $30 billion—the Governor’s advisors are now estimating $18 billion. The true value of the road will not be known until all of the restrictions and conditions are stipulated and the bidding process is undertaken. It is to be kept in mind that ownership of the road will still rest with the Commonwealth. If any private lease holder were to violate the agreement, then the lease would be voided and the state would then retake control of the road.

Of the three options advanced by the Governor and his advising team, privatizing the Turnpike makes the most sense for the citizens of Pennsylvania. Not only does it eliminate the patronage-ridden Turnpike Commission, it will provide the Commonwealth with much needed capital to deal with the pressing road and bridge repairs.

However, it is time for the Governor to share with the Legislature the letters of interest he received last December. There is no need for secrecy about this. That only breeds distrust and animosity toward moving forward with the lease plan.

The Post-Gazette’s transportation reporter once again reached into the past this weekend and wrote a feature piece that drew heavily upon the experience of a former PAT executive director. That director now serves as the chief of the country’s major advocate for public transportation.

In his present capacity, the former executive director speaks with credibility as to what the rest of the country does for public transit. He notes several successful systems that have good leadership and good funding. One of those systems he mentioned was Denver, which is interesting because we have noted on many occasions that Denver’s public transit success is, in large part, due to the fact that Denver contracts out a hefty percentage of its bus service. This kept the system going when in-house drivers went on strike last year. Contrast that with the union power at the Port Authority and their ability to shut down the system to force favorable concessions.

The director notes that he tried time and again to secure predictable and dedicated funding and even at one point had an agreement for a local add-on to the state sales tax. Wonder how that idea got hijacked to use for regional assets like the zoo and the aviary.

But the overall tone of the piece is that the state has failed in its role to simply throw more money at public transit. “We made progress in all areas but the funding”. That’s not surprising coming from someone who is clearly biased for public transit. Maybe he meant progress toward the day when the system would go bankrupt. There is no mention of the expansion of retirement and health benefits that occurred under this director’s watch and the consequences of that expansion today. That’s not to say that the director has not weighed in on the benefits before: he did so in a March PG article that noted he still gets over $5,000 a month from PAT. Noting that he did his time and paid into the program, he said “I pay my required share for health care and I've been paying it for a number of years…it is what it is.”

Too bad the state—which has done its part for public transit by allocating a portion of the state sales tax, creating a public transportation assistance fund, convening a Transportation Commission, and helping with capital costs—does not get the same “it is what it is” leeway. The state has done plenty for transit, yet it ends up as the punching bag. The director goes on to point out that cuts are shrinking the system to a non-operable level and that even the County should kick in more. The only party the director forgot was those that ride the bus and pay a fare.

But what is missed all along is that more money would have just exacerbated the problem and the necessary changes would have been glossed over for a lot longer. The attitude of apologists for PAT is not different from the attitude of those that clamored for more money and expanded taxing power for the City of Pittsburgh. Maybe the director and these others failed to read the Governor’s Commission report.

The transportation reporter then ended the piece by interjecting his editorial opinion by labeling the state legislature a “jackass” simply because it won’t do what the reporter, the director, and the transit activists want by just throwing more money around. That’s a real cheap shot and not deserved. The reporter and those of similar stripes need to look at their stubbornness in just directing their anger at the state and maybe think about the effects the pensions, health benefits, and driver pay have had on the service they receive.

The latest labor force statistics have been released and the news for Pennsylvanians is not good—the state lost 2,100 non-farm jobs from March to April. In response the Governor chose to boast about the year-over-year gains of nearly 47,000 jobs (0.8 percent). While the gains made from April 2006 to April 2007 are positive, they lag the national growth rate of 1.3 percent.

Significant losses were felt in the Construction industry as well as in Leisure and Hospitality, and Manufacturing, which continues its downward spiral. The strongest industry in Pennsylvania continues to be Education and Health Services, which posted a 0.3 percent gain from March and 2.7 percent since April 2006.

But growth in Education and Health Services can be misleading since this industry is highly dependent on government spending. Furthermore the Governor has been going around the state handing out large checks to select industries and has announced yet another corporate giveaway program called the “First Industries Fund”. This Fund will continue his policy of funneling taxpayer money to businesses without seeing any appreciable returns. Picking and choosing industries to subsidize continues to be a losing proposition for taxpayers.

If the Governor were serious about “our commitment to economic and workforce development” he would begin by taking the shackles off all business by eliminating the capital stock and franchise tax, reducing the corporate income tax, and eliminating onerous regulations such as mandated wages and compulsory unionism. True economic freedom, and not shell games, will enable the Commonwealth to grow opportunity as well as jobs.

In Allegheny County—where discussion of property taxes and assessments is a local pastime—none of the 42 school districts voted to implement the Act 1 option to authorize an increase in the earned income tax or a shift to a personal income tax in order to lower school property taxes.

The margin of defeat in most districts was overwhelming: the average in all the districts was 3 to 1. Not surprisingly, the Allegheny Valley School District proposal to levy a nearly 3 percent personal income tax was defeated by the largest margin, 8 to 1. In the eight districts proposing a switch from the current earned income to personal income tax, the average margin of defeat was 4 to 1.

The highest affirmative percentage was in the Wilkinsburg School District, where 38 percent of the district’s voters opted for the shift. Thirteen other districts had a “yes” vote threshold that exceeded 30 percent.

The unpopularity of the measure here is reflected in the statewide results as well where it looks like only 4 districts of over 370 that reported have authorized the shift.

With results still pouring in this morning, the option for school district taxpayers to shift some of their property tax burden to local income taxes (either earned income or personal income) does not look good. Early numbers show that the voters went 3-1 or 2-1 statewide against the option. No southwestern Pennsylvania school district approved the tax shift plan. We will update the results as specific districts report the totals.

Already the excuse machine is in full gear in the Governor’s office. Recall that Act 1 involves the expansion of the senior citizen rebate (already in effect), the gaming money, and the optional local tax shift to reduce school taxes. The shift would have varying impacts from taxpayer to taxpayer, so it was up to the voter to determine if they would gain or lose from the shift.

“The Governor doesn't believe that the defeat of the local tax shifting question is an indication of anything other than confusion…Many voters didn't have the information they needed to make a good choice.”

Excuse us, but there was plenty of information available to determine if the choice was good or not. Each district had to convene a local tax commission to study the issue, which was then presented to the public at meetings. Many schools had websites and some even had calculators to allow voters to compute where they would stand under the shift. Radio shows and newspapers spent a lot of time on the issue.

Voters had the opportunity to clearly understand what the issue meant to them. To attribute the poor results to confusion and lack of information is wrongheaded and misleading and a disservice to voters—what are they, stupid? After all, this was the product of a special legislative session on property taxes. If there was a possibility that voters wouldn’t “get it”, the legislature and the Governor should have huddled long ago.

House Bill 1222 would amend Act 47 to allow a distressed municipality to keep committing the same type of behavior that got them into financial distress in the first place.

How does that happen? Simply by amending the Act 47 language that governs the execution of labor contracts after Act 47 status has been granted. Where the language presently states that a contract negotiated after the adoption of a plan “shall not in any manner violate, expand, or diminish its provisions”, the new language would allow the contract to “deviate from” the plan. It also permits a contract not consistent with the plan if the coordinator feels the revenues under the plan will be sufficient to pay for the costs.

Ironically the bill also adds new language on police and fire arbitration that mandates the consideration of “the financial ability of the distressed municipality”.

So, if the changes happen, what’s the point of the plan in the first place? The law is supposed to give a municipality help with its financial problems through technical expertise and much of that comes with the ability to control costs, labor being a major one. The state won’t permit municipalities to declare bankruptcy, break its contracts, and go out of business, so it has substituted Act 47 in its place.

The bill’s sponsor has stated that “as it stands now, Act 47 hurts our unions and our ability to negotiate with unions”. This might make things better for unions, but not anyone else. We have already seen that larger cities like Pittsburgh often dictate to the recovery team how things will operate. Now any tough medicine on the labor costs would also be gone as a result of this amendment.

The region is still in the throes of a population decline, with the City of Pittsburgh a significant contributor to the outflow of people. Pittsburgh City Schools have seen enrollment drop from 40,000 in 1998 and is expected to stand at just over 25,000 in the 2009-2010 school year. This rate of decline is faster than the overall drop of City population, meaning that those leaving have school age children or that those parents are taking their children out of Pittsburgh Public Schools.

The year-over-year enrollment losses average about 1,200 between 2007 and 2010. At that pace, the City schools could be serving less than 20,000 students by 2015. Amazingly, Charlotte, N.C. schools have added over 30,000 students since 2000, more than Pittsburgh’s current total enrollment.

With the falling enrollment we have seen some job cuts and school closings, though most of the former category will come from retirements and the latter has mostly been achieved.

The stunning realization for the school district is that even if they manage to cut a targeted $16 million per year over the next three years, total spending will still stand at $514 million in 2010. With an enrollment of 25,000 students, the district will still be spending over $20,000 per pupil. That is way out of line with other districts in the County and the state and far too high a price for the poor to mediocre academic achievements of the students.

That means the district administration and board ought to be setting a much more aggressive pace to cut more from the budget. Let’s face it, even with what the community already sees as overly-aggressive will still leave outsized per pupil spending. No cost saving measures should be off the table, nor should new approaches to improving achievement such as vouchers and privatization. But we’re sure union contracts and obedience to the will of the unionized employees will remain the closest thing to holy writ the school district observes.

Failure to deal with the spending and achievement issue now will set taxpayers up for severe heartburn when the teacher pension time bomb goes off in 2013.

“There is no way we can take you from here to there without a lot of pain, a lot of squealing and you hearing complaints from a lot of folks” were the words of the superintendent. Appropriate and no doubt sincere words. But will the board be willing to do what is necessary when union bosses begin campaigns to unseat those who are talking about drastic changes?

There was a newspaper report that pondered the question “wondering why the Pirates' attendance has fallen off?” While some people may enjoy a few extra seats for elbow room, consider that the average attendance thus far this year—17,602—is down about 20 percent from this point last year, when it was 22,401. At this pace, the team will draw a projected 1.377 million, the lowest in the seven years PNC Park has been opened and about the same as Three Rivers Stadium.

The front office puts the reason for the decline in season ticket packages, which are down 20 percent from last year, on the norm for cities following the year they host the All Star Game. “Our season-ticket sales are where we had expected them to be based on what other teams have experienced in the year following the [game]”.

Even in the All Star Year the team’s total attendance was only 1.861 million which itself was a slight bump over the 2005 total of 1.794 million in 2005, which was the run-up to the All Star Season.

So here’s what the Pirates’ organization and the region’s boosters who lobbied for an increase in the sales tax and then cobbled together Plan B need to hope for: a significantly improved product on the field that boosts attendance more in line with those grandiose promises.

After all, you can only debut the park once, and it will be a good while, at least twenty years, before the All Star Caravan comes back into town. Fireworks and bobbleheads can only do so much.

The newspaper reports today concerning the City of Pittsburgh’s finances presents this sobering picture: the City has a surplus, but the big bills are coming due, and soon. As a result, the surplus, pegged at $80 million, is going to be put into a “taffy pull” as officials are going to debate what to do with it. Should it go to crumbling infrastructure, police, pensions, or debt? All are necessary goods and have worthy arguments for getting a share of the funds. Yet everyone, from the Controller to members of both overseers, have pegged 2009 or 2010 as the year when, if at all possible, the “other shoe” drops yet again.

Here’s the deal: the Mayor is going to try and sell the General Assembly on “a story of six or eight years of spending cuts and low taxes when [the City goes] hat-in-hand” looking for state pension aid or the ability to move into the statewide pension pool. First, why would the state need to hear a story of low taxes? They mandated the reductions, phase-outs, and swaps in the package in 2004 when they created the oversight board. The City did not lower the parking tax or the business privilege tax. And while actual spending has decreased and stood at $401 million last year, there’s still a lot to be done to get that number down to a per-capita level more in line with better performing cities.

Second, the state has yet to deal with the mass transit and transportation fix or to really look at the coming pension avalanche with school and state employees. What makes the Mayor optimistic that Pittsburgh is going to get agenda time and attention by 2009?

All parties involved seem to be on the same countdown. Let’s see what they do with that time frame.

The recent audit of the Peterson Events Center at the University of Pittsburgh reveals that state taxpayers paid too much for its construction. The State’s Auditor General notes the 12,500 seat arena’s costs soared to $119 million—triple the original estimates of $35 million. This does not count needed repairs to the leaking roof—an estimated $6 million repair. Taxpayer contributions also ballooned from $13 million to $66 million.

The Auditor General made some good recommendations for reforming the process by which future projects will be regulated. These include the State’s Department of General Services holding outside managers accountable, keeping the number of prime contractors to a minimum of four, and establishing a mechanism to seek a return of state money for improper construction. While putting in recommendations to prevent cost overruns is needed, he neglected to mention one reform measure that can save taxpayers millions of dollars per year on state funded construction projects—the elimination of prevailing wage requirements.

Prevailing wages, which artificially raise the wages of workers participating in government construction projects, adds at least ten percent to the cost of a project. Thus if the prevailing wage requirement had been eliminated, taxpayers could have saved a minimum of $11.9 million on the construction of the Pitt arena.

The latest Census Bureau state expenditure data available (2003-2004) for the Commonwealth shows state and local outlays of $6.88 billion for construction projects. The repeal of prevailing wage laws can save a minimum of ten percent on these projects or more than $688 million.

The prevailing wage law is a relic from the Depression era that was designed to protect local workers from low-wage migrants. However, it has become a shield that protects union workers from competition through mandating higher wages. If Pennsylvania government is serious about reform, repealing the prevailing wage law is a great place to start.