Allegheny Institute Blog

The College Board has just released the scoring results for college bound seniors who graduated in 2006 and who took the SAT Reasoning test during their high school years at any time through April 2006. Countrywide, scores dipped a bit from the results posted in 2005. Pennsylvania’s reading score also fell a fairly sharp 8 points to 493.

Analysts of all stripes are trying to dissect the numbers to explain the sudden dip. Maybe it’s real; maybe it’s not. But that is not Pennsylvania’s most telling problem. Pennsylvania’s 2006 crop of test takers performed below the national average in math and reading as well as the new writing test.

What’s worse, Pennsylvania SAT scores were lower than North Carolina’s. In math the NC average score was 513 while the PA average was 500, a significant difference. Reading scores were 495 and 493 respectively, only marginally different. Interestingly, both African-American and white students scored better in NC than in PA. Whites in NC had a combined reading and math score of 1058. In PA the combined white score was 1021—a major gap in performance between the two states. For African-American students, the NC combined reading and math score was 857 while PA’s African-American combined score was 809, a substantially worse performance.

Thus, in reality the NC test takers of each race scored far better than the Pennsylvania test takers. The reason the overall NC SAT score gaps over PA are as low as they are comes about because 21 percent of the test takers in NC were African American while only 8 percent of Pennsylvania test takers were African American. In short, it is the heavier weighting of lower scores in NC that keeps the overall gap with PA as close as it is.

But here is the worst part. Pennsylvania spends far more on education than North Carolina. PA teachers in 2003, the year the latest graduating class entered high school, were being paid an average of $52,600. At the same time, NC teachers were receiving $43,000. a difference of $9,600 or 22.3 percent. Likewise, PA total spending per student of $8,997 far outpaced NC’s expenditure of $6,562, a remarkable 37 percent difference. This reflects both higher teacher salaries in PA as well as a 50 percent greater per pupil expenditure on administration and other non-instruction costs.

Bottom line, Pennsylvania spends more and gets less in return on education than North Carolina. And yet to hear Pennsylvania teachers and public school apologists tell it, the state’s education system is first rate. Sorry, the truth is, it isn’t even average.

July 2006 jobs numbers for the Pittsburgh region are in. Once again, there has been some slight improvement in private payrolls as employment at area establishments posted a meager 7,000 year-over-year gain. Meager in that it represents a well below one percent annual rise—very unsatisfactory and disappointing for a metro area in its third year of recovery from recession.

Again, manufacturing jobs were down in July, registering a loss of 2,900 since July 2005, bringing the total for the last five years to nearly 25,000. Construction jobs are flat for the third straight year while retail employment continues its surprising six-year long downward trend.

And in an increasingly repetitious story, the region’s private establishment job growth over the last 12 months is accounted for almost entirely by two sectors—education and health along with leisure and hospitality. Health and education recorded a July to July gain of 4,700, with the bulk, 3,800, in health care. Similarly, leisure and hospitality posted a 12-month expansion of 4,100 jobs with half of those in eating and drinking places.

It hardly needs saying, but a labor market that depends so heavily on these two sectors must be viewed as anemic. There is no doubt that the growth in health jobs has some benefit for the region to the extent that non-Pittsburghers are coming here and paying for services. But a region as large as the Pittsburgh metro simply must have a broader base of growth if it is to ever provide enough jobs to keep its people here.

By the way, the household survey confirms the establishment survey numbers. Indeed, the picture with that data is even more drab. While July 2006 employment, as measured by the number of people who say they are working, posted a modest 2,100 increase from July 2005, household employment remains below the levels reached 1998 and 1999. Meanwhile, the area’s civilian labor force has not returned to the peak of July 1999. Thus, despite the Labor and Industry Department’s press release touting the fact that unemployment rate has remained below five percent for six of the last eight months, the best one can say for the household employment and civilian labor force data is that they are edging their way to levels achieved seven years ago.

The latest industry on the Governor’s job “hit parade” was the manufacturing sector, when the administration used the conference of the Industrial Resource Centers (IRCs), which are regional non-profit organizations that tailor their efforts to manufacturers with 500 employees or less, to unveil a study of their effectiveness. The IRCs are budgeted to receive $15 million for the current fiscal year.

Just how valuable are they to the manufacturing sector? It is hard to tell since the survey company contacted over 4,000 firms but only received competed surveys from 357, or 8 percent.

The administration is touting two findings. First, that 71 percent of the respondents (253 firms) reported that they had increased sales over the past two years and, second, that 88 percent (314 firms) stated that they had a profit in 2005. Taking a massive leap, a connection between these two findings and the state’s investment in the IRCs was drawn. “With the state’s support, Pennsylvania’s [IRCs] have played a vital role in this effort”.

“Vital” is an overstatement and is at odds with plenty of the supporting data contained in the report. For instance, the report notes that “many respondents have not heard of the IRC in their region”. Not high praise for a program that goes back almost two decades. Statistically, 32 percent “never heard of” their IRC and another 13 percent had only “heard of” the IRC. A scant percentage higher—16 percent—reported “knowing very well” of their regional IRC. Of those having some familiarity with the regional IRC, less than half held a view “very favorable” of the organization. Perhaps familiarity does breed contempt as the old saying goes.

The IRCs offer a tier of strategies for strategy, sales, marketing, and new product development, charging up to $50,000 for these services. 53 percent of the respondents indicated that they would have “no interest” in the services offered by the IRCs. That leaves less than half interested in at least one of the services, indicating that, industry-wide, the state’s allocation to the IRCs is likely going to benefit less than half of the manufacturing sector. Of those that indicated an interest in IRC services, the majority was willing to pay at a rate well under the top rate charged for the service.

So here is the situation in a nutshell: the state-funded IRCs are, by and large, not known by their constituency and there is not a lot of interest in using their services. But that’s not to say that they have not had some effects. For instance, who knows if any private-sector consulting firms have been put out of business as a result of the state’s creation and funding of this program? That’s an effect that is not going to show up in the press releases on job activity.

In the battle of two regional assets over tax money, it looks like the Convention Center—a perpetual loser in covering its costs—has won over the Mellon Arena.

Since the great salvation of legalized gambling is going to fund both the operating deficit at the center and provide a revenue stream from whomever wins the casino license, all seemed to be fine and dandy with both facilities. But since the timeline for getting gambling up and running has been delayed and the Governor does not seem keen on giving the center money this coming year, the County Executive and the Deputy Mayor have instructed the Sports and Exhibition Authority, which owns both structures, to petition the RAD board for $2 million for the center instead of $1 million for the arena.

It is telling that the convention center, larger and more glitzy than the former center, still cannot attract sufficient business to cover its costs and close the operating deficit. As we have previously noted, the supply of convention space has increased while convention demand has plummeted.

The money from the County hotel tax should have been enough to cover the deficits, but a lot of that was committed to getting the center built. After a proposed car rental tax failed, the option of gaming was plugged in to fill the void. That the Executive insists the action is “temporary” to get the center “through 2007 and maybe 2008” shows that we should not expect an uptick in business at the center for it to cover costs.

Recurring deficits at the center and local officials scrounging around for money was not the rosy picture painted by boosters who wanted the center. But it has become reality.

In the long list of economic development hand-outs that didn’t work out, one state has decided to ask for its money back. Cabela’s Inc., the country’s largest outdoor retailer, promised that, in return for a $400,000 economic development grant, it would employ 400 people at its destination retail store in Buda, Texas. They fell short of that goal and Texas is holding them accountable. They have to repay $28,000 and forfeit the remaining $200,000 of the grant.

There are lessons Pennsylvania can learn from this—cut your losses and hold grantees accountable. Something Pennsylvania seems to have a lot of trouble doing. The state’s failure to act in a responsible manner has put taxpayers on the hook. A prime example is the Lazarus department store in downtown Pittsburgh. Sales and employee levels fell far shy of predictions and surrounding development never took place. After the minimum required five years in the building, the store closed. Taxpayers put up $23 million—an $18 million loan from Pittsburgh’s Urban Redevelopment Authority and $5 million in City assistance. The project was also the beneficiary of a substantial TIF package. Lazarus never achieved sales levels that would have triggered repayment on the loan and, at the time of its closing, only 115 of a promised 250 people were employed.

Obviously the Governor, state economic development officials, as well as local politicians eager for development have not learned from the Lazarus fiasco. The state has promised $15.5 million to Bass Pro Shops, the nation’s second largest outdoor retailer, for a destination retail store at the proposed Victory Center development in Washington County. Of course Pennsylvania has bought the hype that this project will produce huge increases in jobs and sales.

The Bass Pro project, similar to the Cabela’s store in Texas that has failed to live up to expectations, has also been accompanied by lofty promises of jobs and sales. But when (or if) sales and employment projections are not met, what safeguards do taxpayers have? Currently there are none. However, economic development officials should take a lesson from Texas and demand that companies receiving taxpayer dollars should be prepared to repay the amount when promises fall short. Subsidizing retail is a fool’s errand and not a venture that taxpayers should be undertaking.

In his first major newspaper profile, new Port Authority chieftain Stephan Bland outlined his vision for the bus and rail system. His quotes on making the system less Downtown oriented and moving away from the “hub and spoke” system and making the authority “less bureaucratic” sound encouraging.

But Mr. Bland’s comments on the biggest landmines facing the transit system right now show that he is flying under the radar and not willing to take on the challenges. For instance, he views the North Shore Connector as a done deal and that fighting it would make the region look bad in the eyes of the Feds, jeopardizing future funding. In other words, he has adopted the party line of “lukewarm enthusiasm”. This raises the question: why would the cancelling the wasting of enormous amounts of money make the region look bad?

Outsourcing and changes to pensions? “Easier said than done”, he says. The unionized employees of the authority? “Very committed to the organization”, which is not hard to imagine considering that labor peace was achieved before his arrival and the union won’t have to face competitive contracting proposals in the near future. Solving long term problems? He looks to the “Transportation Funding and Reform Commission…to go to root causes”, which likely means a new tax or a tax increase.

Perhaps Mr. Bland’s most telling quote was where he said that if nothing happened at the state level, the authority would have to do “some significant things at all levels”, meaning a lot of hardship at the Port Authority. And that would cause the “era of good feelings” at the authority to quickly dissipate.

The City of Butler is betting on a ball park to revitalize its downtown. The bet is $5 million dollars, to be exact, with half of that coming from public sources like the Redevelopment Capital budget. Oh, and they don’t even have a team committed to the stadium yet.

But why let that stand in the way of dreaming big, right? After all, look at all the wonderful things PNC Park has done for the North Shore. There are businesses there, but no one mentions that those businesses came from other locations, including Downtown Pittsburgh. Or that the parking garages are publicly built. The Mayor of Butler loves the fact that at PNC Park “people were eating out and paying to park”. Too bad she did not ask those folks where they were from or what they would be doing instead of spending money at the ball game. They likely would have been doing it somewhere else, and that other location suffers from the substitution spending effect.

Butler fashions its plans after Falconi Field in Washington County, even to the point where it will court the same baseball association, the unaffiliated Frontier League. To be sure, a lot of Falconi’s appeal is a combination of novelty, affordability, and proximity by interstate to points in Allegheny County and the high population portions of Washington. It is unclear how that mix will work if replicated in Downtown Butler.

As one observer put it, calling what Butler is doing a “crapshoot” insults the odds present in gambling. They had a minor league team before, and there is probably a reason they don’t any longer. The City ought to solicit the $2 million they will get from tax dollars from private donations who think the stadium is the right thing to do.

This dream, if acted upon, will become an embarrassing nightmare.

In a remarkable change of position Governor Rendell has come out in support of legislator term limits. Setting aside any cynicism about whether the support of term limits is heartfelt, this is a very good proposal. There can be little doubt that one of Pennsylvania’s biggest governance problems is the historical pattern of a few legislators with enormous seniority taking the reins of power and using those positions to make sure they keep that power.

Some argue there are term limits in place; legislators can be voted out of office at election time. The problem with that argument is that the re-election rate of those seeking another term is over 90 percent. The way power is achieved in the General Assembly is to return and return and return. The longer the legislator is in Harrisburg, the more clout he/she has to bring home the bacon and do favors for financial supporters.

Then too, since the legislature has awarded themselves lucrative pension and retirement health care benefits (probably in violation of the Constitution), there is a huge incentive for legislators to stay as long as they can. Most will fight hard to keep their jobs and move in to positions of power as opportunities arise.

Since the system is set up in such a way as to give voters powerful reason to re-elect their legislators unless or until they completely go against the vast majority of voters wishes on some issue such as the pay raise, the best way to create a legislature that is more responsive to needed policy changes is to enact term limits. Besides, it could save the Commonwealth millions of dollars in retirement benefits down the road.

It was entirely predictable. The ACLU and the Puerto Rican Defense Fund are preparing to take the City of Hazelton to court over the city’s ordinance dealing with illegal immigrants. The ordinance imposes penalties on businesses that employ illegals and on landlords that rent to them. The ACLU feels that the law will automatically discriminate against any foreigner, legal or not and wants the courts to strike the law since the Federal government is charged with regulating immigration.

And we know what a wonderful job the Feds have done. Lump the state in that category as well. Citizens who try to take on the problem find themselves the subject of a lawsuit or in jail. That leaves places like Hazelton—truly the government closest to its constituents—to solve the problem. Hopefully the courts will see it that way.

Clearly, the “hate America” crowd is trying to scare Hazelton into submission. They ought to work on protecting the civil liberties of American citizens, natural and naturalized, instead of those that defy the laws and try to benefit illegally. Maybe there is a consolation prize: at least the illegals and the parties to the suit are getting a firsthand look at the litigious nature of U.S. society, much of it driven by the ACLU.

But the larger question must be this: if American citizens can expect no defense of their rights and the upholding of the law by any level of government, do they have a country?

Pittsburgh has once again managed to squeeze into the Top Ten of another national ranking, this time making the ninth spot on Expansion Management’s “Best Places to Relocate a Business”. The region made its mark based on health care costs, transportation, knowledge workers, etc. Pittsburgh’s good health care cost finding is interesting since Pennsylvania has some of the highest insurance rates in the nation.

Note that having new stadiums and arenas was not listed as important criteria. Two years ago, Pittsburgh was number 17 on the list. Pittsburgh has also seen other national rankings praise its business location desirability with Inc. Magazine and Site Selection Magazine weighing in on its assets.

These rankings are very puzzling considering that the Pittsburgh region is perennially at the bottom of real world business measure rankings such as job growth and startups and population losses. The latest Census tally shows another net loss of 12,000 people from the metro area. An earlier report showed that Allegheny County had suffered nearly 40,000 net outmigrants since 2000.

Obviously, there is a mismatch between the criteria national publications are using to build their rankings and the factors actually used by companies in making location decisions. The same Expansion Management ranking that places Pittsburgh ninth included a ranking by relocation professionals, presumably the people in the know. They placed Pittsburgh as 24th out of 50. And even that sounds unduly high.

The National Association of Manufacturers recently conducted a survey of manufacturers as to their location criteria. Not surprisingly, the key element is cost reduction. They need to be able to control operating costs and labor costs. Maybe that explains why Southeastern Right-to-Work states do so much better at attracting facilities than the North Central and Northeastern states.

Rankings based on factors that do not address items like union strength or put enough emphasis on government spending growth relative to tax base growth are worse than useless, they are misleading and counterproductive in that they delude politicians to congratulate themselves for spurious reasons.

A newspaper article dealing with communities in an early-intervention program and close to entering financial distressed status under Act 47 shows that the old canards dragged out by leaders in Pittsburgh when the City was declared distressed have surfaced in other parts of the state as well. For example, the City manager of Meadville notes that 40 percent of the property within Meadville’s borders is exempt from taxation and that there are not enough taxes for local governments to levy. Sound familiar?

Perhaps he forgot that Pittsburgh was levying eight different taxes at the time it was declared distressed and that, when the 2004 tax reform package for the City winds up at the end of the decade, it will still be levying seven. Is the ability to have numerous sources of taxes the means to avoid financial difficulties? Certainly not in Pittsburgh’s case. Ironically, Meadville was the beneficiary of Pittsburgh’s financial problems in that the legislature allowed municipalities to levy a $52 EMS tax instead of the $10 occupation privilege tax.

Perhaps they would like a system like Philadelphia, whose unique wage tax burden falls on all workers, regardless of residence, and has driven jobs and investment from the City for the last six decades. Philly is not in Act 47, but is under a state oversight board and has been since the early 1990s.

And though a good deal of Meadville’s property is tax-exempt, a good guess would be that a lot of it is held by Allegheny College, which is boosting the City’s tax take through wages on working students and for real estate taxes on employees living in the City. Would Meadville take a substantial one-time monetary package in exchange for Allegheny College relocating? Seems highly doubtful.

A local pundit also got it wrong that cuts to police or garbage will automatically bring disastrous results. Note that neither he nor the official from Meadville quoted in the article mentioned the need for changes to Act 111 to enable municipalities to control costs better. Neither did they mention the savings Pittsburgh could have realized by privatizing garbage collection.

Perhaps the state will move to a system of voluntary dis-incorporation or forced consolidations. But like the property tax reforms the state has been endlessly waiting for, those changes are likely a long way off. Until then, the emphasis ought to be on obtaining cost-effective services, a hard-nosed approach to public sector unions, and strict debt policy.

There is a situation playing out in Washington County that looks like a classic case of “bait and switch”. Two developers—Tanger and BassPro—plan on building a multi-million dollar retail development called Victory Center. Realizing that the public sector in Pennsylvania is quite generous with dollars to stimulate retail and entertainment venues, they applied for and were granted a tax increment finance package ($14 million) last year. Along with the developers putting in some of their own money ($8.1 million), the state ($15 million) and the creation of a Neighborhood Improvement District, or NID ($12.7 million) would cover the rest of the infrastructure costs, about $50 million in all.

Now that it is time to approve the NID, the sources of money have suddenly and suspiciously changed. The state money—viewed as a certainty when the TIF was approved—is missing. So is the developer equity. As a result, the borrowing amount tied to the NID will go, if approved, from $12 million to $43 million, a three-fold increase.

Why would such a thing happen? Is it possible that the state money will be spent, but on something else related to the development? Why, if the project is a touchdown, would the developer not put any equity into it?

With any economic development project that promises fantastic results, the buyer must beware. Favorable tax treatment for a selected developer pushes costs onto other established developments and often incurs the ire of those developments. Such has been the case with Victory Center and the change in the funding package will only add to the questions and bad feelings already surrounding it.

The state board of control operating the Duquesne City School District voted to finalize a $16 million budget, which has been bulked up thanks to an extra $3.5 million kicked in from state taxpayers. With less than 800 students, Duquesne’s per pupil cost has now topped $20,000. Is this finally enough money to educate its students?

For years apologists for the poorly performing school district have laid blame on insufficient funding. But as recently as 2004, Duquesne’s operating budget per student was in the 97th percentile among school districts in the state. The state and federal governments funded two-thirds of the total expenditures per student—that percentage has increased with this latest state grant. And what have taxpayers received in return? —One of the very poorest academically performing districts in the state. Clearly, as we have said time and again, more money is not the answer.

This school district has failed its students terribly. At this point, no excuse offered can be acceptable. It is time to implement radical changes—disband the district and give vouchers. Each year hand every parent a voucher for $10,000 for each child and let them send their children to the school that they think best suits the children’s needs. This reform would have two desired effects: first it would allow each student a chance for success and secondly it would save the taxpayers millions of dollars.

Of course it will never happen. The public educational apologists will never allow it. Instead they will focus on illogical excuses such as not enough African-American teachers in the district. But let’s hope those who constantly complain about inadequate funding will sit down and be quiet.

A liberal editorial writer in Pittsburgh has demonstrated once again and for all to see just how totally irrelevant facts and logical argument are to folks who want to see the role of government swell even further.

The complaints this time? Wages aren’t rising fast enough and jobs only expanded by 113,000 in July. The working people of America are being put through a wringer while the rich just keep getting richer. And, horror, the administration will try to take people’s minds off the economy for the November elections by dragging the country deeper into Middle East hostilities.

Maybe the writer has not noticed that the economy has cranked out 5.5 million payroll jobs since July 2003, boosting employment far above the five year ago level. Something Pittsburgh cannot claim. The op-ed writer might also want to look at the 2.4 million increase in the number of people working over the last year with 7.4 million more working than five years ago.

Moreover, how serious can the editorialist claim that people are dropping out of the job market out of despair when the there were nearly 700,000 more people in the labor force in July compared to June?

Meanwhile, the relatively slow increases in wages the writer complains about are easily understood if one takes a moment to reflect on factors affecting wages. First of all the massive increases in health care costs have forced employers to limit wage hikes in order to control the rise in total compensation costs. Second, the staggering numbers of illegal aliens that have entered the country in the last several years are clearly having a depressing effect on the wages of not only unskilled workers but they are also driving down wages in skilled occupations such as painters, dry wall installers, etc.

If one wants to do something useful to allow the market to push wages higher, they might want to get behind a program to slow the uncontrolled flow of aliens into the country. They might also want to support efforts to slow the growth in the cost of medical care including placing caps on punitive damage awards in malpractice cases.

It might also be pointed out that the absence of upward wage pressure allows interest rates to remain relatively low, especially long-term rates and mortgage rates. Both of which are very helpful to wage earners who are homebuyers and homeowners.

It would also be helpful if we could get liberals to allow more drilling in the US territories and allow some new refineries to be built. Otherwise the complaints about gasoline prices from these folks are a tactic to divert attention from their own culpability.

The real interest is in beating up the administration while enjoying the supposed moral high ground of opposing every meaningful reform that would actually solve some of the problems they are so concerned about. This will enable them, once they are in control of the government again, to launch even more draconian controls on the economy.

It is well known that modern day liberals in the U.S. place income and wealth redistribution high on their list of policies government should pursue. Imagine their anguish when the Republicans made them the offer of raising the minimum wage in exchange for permanently eliminating the estate tax. The holy grail of the liberal’s agenda is and has been raising the minimum wage. Not only is it an income redistribution tool. It also allows a liberal to do his next favorite thing, i.e., interfere in the free market by mandating the price of labor. A two-fer in the patois of the political class.

On the other hand, allowing people to pass on wealth without grabbing a chunk of it for the government is cause for horrendous heartburn in the redistributionist’s world. So, what to do given the choice of ending a wealth grab in exchange for hiking the minimum wage? Punish employers or punish people with significant estates? As it turns out, we know the answer. Keep the estate tax and hope perhaps for a minimum wage boost in some other compromise. So, at first blush, it would appear that punishing folks with estates is the higher value for modern day liberals.

Alternatively, it could be that Senators who refused to support the swap simply do not believe their own propaganda about how critically important it is to raise the minimum wage. Remember all that hyperbolic rhetoric about America needing a raise so badly? But apparently not as badly as it needs to keep the death tax. Then again, maybe the Senators realized that with the vast throngs of illegal aliens who will work for what they can get and for whom the minimum wage is irrelevant, a boost in the minimum wage for Americans could actually price some Americans out of a job as illegals become even more attractive. Or is that giving too much credit to people for whom the role of supply and demand is a mere nuisance?

We can count on the death tax doing one thing: It will keep an army of financial advisors and tax accountants in business. Surely that cannot be an ulterior motive for the Senators’ refusal to make the offered trade.

It does make good campaign rhetoric to beat up Republicans for tying the two issues together. But to the extent many on the left need the “moral” victory of an increased minimum wage, it will not be a good selling point.

Put generously, former Senator John Edwards is confused. Put cynically, the Senator is deliberately misstating the employment conditions at Wal- Mart to make political points among those who are lacking in their understanding of economics. Or said another way, those who think it is government’s responsibility to control the economy for the purpose of redistributing income-- no matter the horrendous consequences such control inevitably brings.

In a truly remarkable statement, the Senator said that “taxpayers should not be subsidizing (Wal-Mart) employees’ health care.” The unstated argument apparently being that Wal-Mart should provide the same Cadillac package of plans that have bankrupted other companies.

Let’s dissect the Edwards statement. First of all, how do we know that employees’ health care is being subsidized? Undoubtedly, some of the employees-- many of whom get company paid benefits-- are second income earners in families where the primary breadwinner has benefits. Then too, many employees are retired from other careers and already receiving Medicare benefits.

But most importantly, for those employees who rely most heavily or completely on their Wal-Mart paycheck, the Wal-Mart job is probably their best employment option; otherwise they would be doing something else for a living. And in all likelihood earning less and receiving fewer benefits than they get from Wal-Mart.

Thus, it is preposterous for the Senator to claim that taxpayers are subsidizing Wal-Mart employee health benefits. If they were out of work, they would be getting unemployment—a major governmentally forced subsidy—and Medicaid and or/ welfare both of which are substantial taxpayer subsidies. If they were earning less money at another employer, they would be worse off and might place more demands on government programs. So by providing them better paying jobs, Wal-Mart is helping reduce the burden on taxpayers.

Of course the seeker of the Presidency will never look at the positives of the situation as long as he can make political hay out of pandering to those who want to believe the worst about the private sector. No wonder the nation is in such a mess. Maybe the Senator could tell us how he is fighting to stop the flood of illegal aliens who are driving down wages for entry level and many skill level jobs in this country. Now there is a real issue.

Developers have been building office space on the North Side and South Side. While local officials see this as economic progress, this increase in office space continues to contribute to the hollowing out the Golden Triangle. The most recent data, for the second quarter of 2006, shows that the office vacancy rate for Pittsburgh’s central business district reached 28.3 percent—up from 18 percent in the third quarter of 2004.

Why the increase? While the vacancy rate increased in the central business district, it declined in the suburban and fringe market. New office space has been constructed at the Southside Works, which has attempted to lure a major law firm from the Golden Triangle. Then too, the new office buildings on the North Shore have brought employees from older office buildings downtown. It is worth noting that these recent developments were done with public subsidies. In addition, PNC Bank has just started construction on a new office tower within the central business district that is being financed to the tune of $50 million by taxpayers. A major law firm will relocate there from existing downtown space.

Analysts believe that an equilibrium vacancy rate among national central business districts is about 10 to 12 percent. Through the first two quarters of 2006, Pittsburgh’s vacancy rate in the Golden Triangle is nearly triple that amount. The problem does not seem to be easing. Analysts from a major realtor noted that “vacancy in (Pittsburgh’s) CBD (central business district) is likely to climb as competing submarkets continue to lure tenants with new product, free (or inexpensive parking), good access, and lower taxes.”

But instead of addressing the issue of excessive government spending and high taxes, government officials seem to be content with using public money to spur development that the market doesn’t want or need, while the Golden Triangle continues to hollow out.

In case we needed any more proof of the education establishment—the cabal of teachers, administrators, union officials, and their supporters on school boards—view of power and entitlement, look no further that the reactions of the head of the Pittsburgh Federation of Teachers and one now unemployed teacher profiled in a newspaper article.

The PFT president said that from his union’s perspective “the only acceptable layoff number is zero”. What a shock. Even though the district’s enrollment has fallen to the point that the board finally approved a school closing plan, the union official would defend his membership to the end. After all, that is his job. Give him credit, though, for attributing the layoffs to the declining enrollment, showing that he remembers his lessons on cause and effect. But don’t expect the PFT to link their union power and pay scale and the resulting high taxes to the decisions of prospective homeowners not to move into the district or of those that have left. That’s always someone else’s fault.

Then we have the profile of a 25-year old teacher who is now out of work. Her plans to purchase a home will have to be put on hold. Think of the countless number of homeowners and wage-earners who have to put their plans on hold when school taxes go up or the teachers decide to stage a work stoppage. She probably won’t empathize. But she should be cognizant of the hierarchical union arrangement that put her out of work. She may well be much better qualified than some of those that were spared because of seniority.

And though she wants to work in the Pittsburgh School District that may not be in the cards. She may have to move south or to another district where there is demand to find work. She may even become a new advocate for performance based pay in education as a result of this episode. But then again, she might already be too steeped in the mediocrity-engendering mind-set of the teachers’ union to break free.

What do a former basketball player, a high-ranking union official, and a nun have in common? (And no, this is not a set-up for a joke). They are the latest appointees to the Intergovernmental Cooperation Authority—the Oversight Board—which is one of two agencies in charge of righting the City’s finances.

While they may have some qualifications, we are a bit surprised by the extent to which the makeup of the board has changed. The enabling legislation mentions two formal qualifications for members of the ICA: first, that they have “substantial experience in finance or management” and second, that they be “residents of [Pittsburgh] or have their primary places of business or employment in [Pittsburgh]”.

The first incarnation of the Oversight Board consisted of the former County Executive, two members of the financial community, a business executive, and the former president of Duquesne University. This group likely exceeded the statutory membership requirements through their knowledge and backgrounds and had a lot of respect in the community. As those folks have resigned, or in one case, were removed, new members have come on to form the newly-reorganized board.

To be sure, the defining moment for that ICA board was threatening to sue over the firefighters’ contract, noting that it would harm the City. In fact, the high cost of the Fire Bureau was mentioned as a “big problem” at the first meeting of the new board. The lawsuit was the right thing to do, but a compromise was forged and the suit dropped. The ICA’s effectiveness was curtailed, and the watchdog became a lapdog.

Last summer there was talk that the whole board was going to be scrapped, but the ICA lives on, albeit with a reduced budget and appointees that don’t strike us as people who are going to push for the hard solutions that the City still needs. This is particularly true of the union appointee who is likely to fight hard against any workplace changes when the bulk of the City’s problems arise from pensions, pay, and workers’ compensation.

Much like the recent purge of high-ranking City administration officials in favor of the Mayor’s political allies, the ICA seems like it will drift aimlessly and unproductively until its time to disband arrives in 2011.