Allegheny Institute Blog

After eliminating 29 weekday bus routes (15 percent of all runs) back in June, the authority thought it would see a 4 percent ridership reduction. Turns out the reduction was only 2.2 percent in August compared to a year earlier. PAT management was pleasantly surprised and encouraged that the fall off was less than anticipated.

This is a typical response of government agencies. Focus on the apparently positive aspects of the numbers. But in fact the new numbers point to the long term pattern of inefficiency and hidebound resistance to change at the Port Authority. That resistance has caused the waste of tens of millions of dollars of taxpayer money as the authority willfully ignored the clear indications of its inefficiencies and continued to operate routes that should have been closed down much sooner.

What’s worse, the Port Authority is still a long way from reaching the kind of cost effectiveness it needs to achieve. And as long as the legislature and the Governor keep coming up with more money to underwrite the money wasting organization rather than forcing the kinds of reforms that would lead to substantial improvements, the authority and its unions will go along their merry money wasting way.

An entry last week detailed three separate measures aimed to give County taxpayers added protection against the proposed vehicle rental and alcohol taxes intended to fund PAT operations. There is a petition drive to ask for a countywide referendum; an ordinance introduced by a Council member to have a referendum; and an ordinance extending the current super-majority provision of a 2/3 vote on property tax rates to cover any new tax the County may have the authority to levy.

That latter bill passed by a 15-0 count and was signed by the Executive at the end of last week. Under the terms of the legislation, it would now require 10 Council members to vote to authorize new taxes for mass transit.

It is unclear what effect, if any, the passage of this bill will have on the petition drive or the referendum bill, which is in committee. We have advocated putting these taxes up for a Countywide vote to serve as a binding declaration on what taxpayers think of the situation at PAT. Of course, if the Act 44 legislation crumbles because of the I-80 situation, the local option taxes will likewise be up in the air.

We have written on what may amount to a showdown over the City’s parking tax. Under the terms of the state’s reform package, the parking tax is on a scheduled reduction path which will bring the tax down to 35% in 2010. For the 2008 budget year, the tax is supposed to go from its current 45% to 40%. Some council members don’t want to implement the reduction, because in their opinion last year’s reduction did not lead to a reduction in parking rates.

“The revenue we lost [with this year's cut] isn't going where it was supposed to, which is into the hands of the people who park Downtown”, said one council member. The City Controller also noted that “the whole reasoning of lowering the parking tax was to give something back to the people who are paying a higher [EMS tax] and it's not going to them.”

So what does the Council member plan to do if the tax rate stays at 45%? He wants to redirect it to debt and pensions, which, while we agree are massive problems, aren’t going to be solved by $20 million over the next three years. And it goes counter to returning the money to the people that park Downtown—it uses that money to pay for Pittsburgh’s past promises to its workers and for its dalliances into “growing the City” without addressing core problems.

And forgive us for questioning this concern for the Downtown parkers and workers. Where was this concern in 2004 when the rate jumped from 31 to 50%? Where was the concern when Pittsburgh decided to take a lump sum $52 from every worker under the terms of the EMS tax provisions and make them fight for a refund if they were in fact exempt by virtue of not earning $12,000? The City certainly did not initiate changes to the EMS tax which go into effect at the beginning of this year—it was the General Assembly (after many missteps) who fixed the tax that will finally get it right for low income workers.

As we have stated many times before, Council should start with prodding on its Parking Authority to roll back its rates. Until that happens, it is the height of hypocrisy to complain that parking tax rates are not responding to tax reductions.

Though we have not seen all of the budget documents or the five-year financial forecast as of yet, here is what we have been able to piece together from newspaper reports on the City of Pittsburgh’s 2008 budget.

On the spending side, there is a projected increase of “$4.3 million to $423.7 million”. That means this year’s spending will end up at $419 million, which is where it was projected to end in last year’s financial forecast.

If that increase holds, the $4.3 million growth amounts to a 1 percent increase, well below the 2.7 percent increase contained in last year’s forecast. In other words, the City was set to spend $431 million in 2008 but now appears to be spending below that at $423 million. Based on the current population (312k), the per capita difference from the new budget amounts to a $26 reduction.

And instead of borrowing more dollars, the City would finance capital improvements out of current funds.

Will this amount hold? If it does, the City is to be congratulated on its stance and officials ought to take that momentum and pass an ordinance which would call for a City Charter amendment to codify an annual spending limit.

We have written several Policy Briefs about the problems with the state’s transportation funding bill of 2007, Act 44. The centerpiece of the funding, which is to place tolls on Interstate 80, is under attack from many fronts. Members of the state’s U.S. House delegation are against it, trucking companies don’t like it, the business community in northeast PA is against it, and now a state legislator plans to introduce a bill to repeal the act.

A large part of the problem has to be that this would be an instance in which the tolls would not be plowed back into the road being tolled. Instead, the tolls would provide a guarantee for bonds that would provide revenue for the state’s other highways, bridges, and mass transit. The latter category is especially despicable since we know that PAT has a long way to go toward implementing efficiencies at the agency.

With opposition mounting to the I-80 plan in the northeast along with growing opposition to the local option taxes for Allegheny County authorized under the Act, it may be back to the drawing board on transportation funding.

The nation’s institutions of higher learning—especially those with a high price tag and an “elite” title attached to them—are failing to adequately teach U.S. history, civics, and free market economics to their students. This is the finding of the 2007 study of the Intercollegiate Studies Institute, which randomly sampled 14,000 students at 50 universities and administered a 60 question multiple choice exam to them.

This year, the average score for freshman was 50.4%, for seniors 54.7%, both considered failing grades. Harvard had the highest senior average, 69%. ISI also measures the “knowledge gain” by examining senior scores against freshman scores and examining the difference. Three Ivy League schools saw a knowledge loss as the freshman score was higher than the senior score. As reported in the newspaper, nearby Grove City College had a senior average score of 67% (second highest in the sample) and saw a positive gain of 3.62 percentage points above the freshman score. Carnegie Mellon seniors scored 56.9% and the gain was a positive 2.84 points.

Most stunning is that ISI figures a 5 year old would score 20% on the exam by guessing. By freshman year, that student would score the average 50%, a 30 point gain. But by the senior year, the average gain would be only additional 4 points. The annual gain in college is about half of the pre-college years.

The ISI notes that it is not all that bad: colleges and universities are starting programs devoted to institutions and Constitutional government, but the message is clear that higher education is doing precious little to expand the knowledge and understanding its graduates have of the nation’s history, the working of its governments, or how the world’s largest economy operates.

In a parody of Santayana’s famous quote, “those who do not know history won’t recognize history when it happens again”.

Under the state’s new transportation bill, Act 44, Allegheny County has the permission to levy new taxes on poured alcohol and vehicle rentals to fund mass transit. The taxes are optional, so Council does not have to enact them, and, if they do, can levy them at rates lower than the maximum allowed (10% on drinks, $2 per day on rentals). Bills concerning the taxes are pending in Council committees.

Council has also produced one piece of legislation, and is considering another, that would give taxpayers protection against the imposition of the taxes. Ordinance 3344-07 would require a 2/3 vote of the seated members of Council (10 out of 15) to levy “a new tax”, which would include the Act 44 options. This would extend the same degree of protection County taxpayers have on County property taxes. The County Executive has yet to take action on this ordinance, which Council passed 15-0.

Another bill, 3415-07, which has been assigned to Council’s Special Committee on Government Reform, would mandate a voter referendum on the Act 44 taxes. A simple majority vote of the electorate to the affirmative would authorize taxes for mass transit funding (it would apply to any new tax or changes to the rate of taxation).

In addition, there is a petition drive currently under way that would allow the electorate to direct the Council to put the issue on the ballot for a vote.

What happens with any referendum—whether by ordinance or petition—hinges upon what the Executive does with the legislation before him. Approval could be viewed as an extension of the same protection taxpayers have now under the Charter, but would require him to convince 10 Council members to hold firm on authorizing new taxes. It could dampen the petition drive. A veto could be viewed as a slap at the charter, essentially treating these two taxes as special cases and not worthy of a super-majority requirement. Or it could be looked at as the Executive’s way of pushing for a referendum, although this seems doubtful in light of the fact that the Executive has pushed for the new taxes.

At the beginning of 2008, the collection of the $52 local services tax (the tax formerly known as the occupational privilege tax, and, for a brief stint, the Emergency and Municipal Services tax) will change, hopefully once and for all. When the tax was increased from $10 to a permissible $52 maximum, low wage workers saw their first paycheck of the year eaten away by a lump sum collection of the entire $52 annual levy. Ambulance service providers saw their donations dwindle because citizens thought the EMS tax was to benefit EMS providers (imagine that).

So the legislature revisited the tax, changed its name, elevated the income threshold, and stipulated that the tax would be collected $1 per week and remitted quarterly.

Now local officials, including some in Westmoreland County as evidenced in a recent newspaper article, are crying foul because of the administrative nightmares the new collection scheme would create and that the state is middling too much in local affairs. One official noted that his township “will suffer from this, but next year will show how much we will lose in revenues and whether the real estate tax will have to be raised to make up the difference.”

Really? Is it the township that suffers, or the taxpayer? This, and other statements, ignore all of the previous nightmares, particularly of those who saw their pay docked and may have never gotten a refund. In Pittsburgh, officials banked on the fact that by taking the tax all at once at the beginning of the year would ensure that workers—even those who should not pay the tax because of low income or because the City was not their primary place of residence—would not bother coming back for a refund at the end of the year.

Besides, if there is a drop in collections because of a more honest collection approach, the municipality should cover any revenue shortfall with spending cuts.

Let’s see how the new scheme works before tossing it out. After all, it is a matter of fairness to the people paying the tax, not those collecting it.

With apologies to the Bard for mauling Hamlet’s wonderful line, there can be no better way to say the truth. The examples of government waste, fraud and abuse are so plenteous that unimaginable levels of egregiousness are seen almost daily. Indeed, the public is so inundated daily with stories of government waste that they have become unable to do much more than shrug and say “what else is new”? And it is this jaded inability to be outraged day after day that politicians and bureaucrats rely on to keep citizens, voters and taxpayers from storming their offices.

Now comes yet another stupefying example from the Pennsylvania Low Income Home Energy Assistance Program. A recent report by the Auditor General disclosed profound and disturbing abuses of the program and “systemic weaknesses” in the program’s administration. Weakness is a kind description. Inexcusable negligence and astonishing incompetence would be closer to the truth.

For example, according to the Audit findings, between 2000 and 2006, 429 applicants in Philadelphia received $162,000 in benefits using Social Security numbers of dead people. And that is just the tip of the iceberg. And what’s worse, the state and counties have no meaningful monitoring system in place to detect fraud: so just as nature abhors a vacuum, unprincipled individuals will be drawn to easy pickings.

By nature, governments are inherently inefficient. But there can be no excuse for forcibly extracting money from hard working, honest citizens only to have it flushed down the sewers of incompetence and fraud.

There is some steam picking up in the movement to allow voters in Allegheny County have a say on whether they want to permit new taxes on drinks and car rentals to bail out the Port Authority. A radio personality is pushing a petition to get the issue on the ballot. A County Council member will also introduce a bill to put the taxes on the ballot.

Predictably, there is resistance. The Council president, who says he favors referenda “on large, large policy issues”, is hesitant because he thinks it will take away Council’s decision making power.

He is wrong on many fronts—aside from assessments and the additional 1 percent sales tax (neither of which had any exposure to referenda), the enactment of new taxes to fund the Port Authority is a large, large issue. It might be the biggest faced by County Council since its formation. It touches upon the most fundamental aspects of County government, which currently writes a $25 million check from property taxes to PAT every year. If the new taxes are passed, the $25 million won’t be returned to the taxpayers: it will go to fund the County’s escalating health care costs. If the taxes are denied, then the message is that voters don’t want more money spent on transit. The decision making power goes back to Council to work on how to extract $25 million in savings from the existing budget.

The referendum process will allow both sides of these issues to be aired before the vote. The Home Rule Charter obviously intended for issues a chance to get on the ballot rather easily given the fact that only 500 signatures are required to petition Council.

The president also noted that “I don't know if you can put every single question on a referendum”. That’s just hyperbole: this is not like California’s liberal petition system. In fact, there have only been three referenda votes to date, twice on whether Council members ought to be allowed to keep their seat while running for another office. Surely, whether to impose new taxes is just as important.

Yesterday’s blog entry noted that the House Majority Leader wants to get the ball rolling on discussing table games so as not to lose a step in the gambling “arms race” with West Virginia. A newspaper article today outlines some of the sentiment in the House from supporters in the House and in the gaming industry. Even the opponents refer to implementing table games as a “win-win”. The train is full steam ahead.

So why wait? If this is the prevailing attitude, the foresight should have been for the Gaming Board to do this once, not twice. Supporters would likely say that they took the incremental approach—show the benefits of slots, let the programs and proceeds develop, and then go for the full package. But those same supporters now note that there is not enough time to wait.

The process is going along slowly. Only five of the 14 slot parlors are up and running. The state has just settled on a plan for a final harness track, which is virtually guaranteed to get a slot license. So while we have heard all of the great initial benefits, we have yet to realize the costs; for instance, what happens when there is a parlor in the City of Pittsburgh and what effects will it have on gambling at the Meadows and the track in Lawrence County?

What about the value of gaming—it obviously goes up if there are table games. Does that call for a new round of licensing and application fees?

Pardon us if we find table games as a fait accompli a bit delusional.

Everyone could see this coming—debate may be starting on whether to allow table games at the slot parlors, some of which have not even been opened up as slot parlors yet. The reason? Well, West Virginia has just permitted table games, and the Keystone State’s tracks, most likely the Meadows in Washington County, will begin to feel the effects.

“It's the obvious move. We're being attacked by West Virginia and now's the time to respond,” were the words of one executive of the Meadows.

Wouldn’t it be nice if the state responded to our more pressing issues—Right to Work, tax rates, regulation, voter referendum and initiative, teacher strikes, public safety bargaining, etc.—by looking at the actions of other states and responding with vigor?

Consider the quotes below:

“It’s an effort that is going to take time, it’s going to take dialogue”

“You can’t budget based on that…we don’t know what they’re going to give us from one year to the next”

“Our experience has been, don’t count on it”

Now, are the quotes attributed to a public official talking about either (1) the Pittsburgh Promise, which is a fund that is supposed to provide free or discounted college tuition to graduates of City high schools or (2) the Pittsburgh Public Service Fund, which is the City’s agreement with non-profits who are voluntarily contributing to the City’s budget?

Suffice it to say, both the Promise and the Fund are ideas whose success or failure relies upon the contributions of somebody else’s money. But look at the different reactions to the two: audits from the City Controller’s office detail how much non-profits would be paying if they were taxable, a state Senate committee comes to town and mentions reexamining the state law that governs non-profit-municipal relations, and editorials urge hospitals, specifically UPMC, to pump its profits into the City’s coffers.

Yet the Pittsburgh Promise gets no such heat, no excoriating. An editorial noted that “while the Pittsburgh Promise may have suffered for being unveiled before it was ready, it doesn't help to criticize now. As ambitious as it is, it is a good idea and there's still time to make this work”. Would the kid gloves be taken off if the City and the School District had unveiled an idea to make money available for City residents who wanted to send their children to charter or private schools? You bet.

But with its actions on the Pittsburgh Promise, are the City and its schools acting that much different from the non-profits they often complain about?