Contract disputes between local governments and their employees have led to the commencement of arbitration in the Municipality of Monroeville and the East Allegheny School District. The process of arbitration is quite different owing to the fact that the disputes are governed by separate state laws, Act 111 of 1968, which governs collective bargaining between police and/or firefighters and their employer, and Act 88 of 1992, which applies to collective bargaining for public school employees.
Both methods of arbitration rely on a panel of three officials, one chosen by the employer, one by the employee, and a neutral third. Under Act 111, the employer (the municipality) pays the cost of its arbitrator and the neutral; under Act 88, the costs of the neutral arbitrator are split in half (if arbitration is voluntary) or the entire panel cost is split in half between the state and the employer/employees (if arbitration is mandatory).
Since police and firefighters cannot strike, the majority vote of the arbitration panel is final and “…shall be binding upon the public employer and policemen and firemen involved”. On the other hand since there can be a strike or a lockout in a school district, the majority vote of the panel is final and binding upon the employer and employee unless either party rejects it formally. If that happens, then a strike can be resumed or initiated, substitute workers may be employed, or a lockout may be resumed or initiated.
As we noted in this week’s Taxpayer Q+A, the Pittsburgh Public Schools will be deciding on what happens, if anything, to the concept of pay for performance for teachers in the upcoming contract (it is probably a good bet that incentives for principals would remain, as that was in place prior to the teacher program). Interestingly the Wilkinsburg School District, which borders PPS to the east, just handed out bonuses to its two elementary school principals based on the scores of those two schools on the state’s performance profile.
As for the validity of the state’s profile that led to the bonuses? Well, we just recently wrote on the topic, and one of the two schools in the Wilkinsburg district was a major part of that analysis.
About a week after not taking a stance on a proposed joint resolution that would amend the state Constitution on the subject of tax-exemptions for purely public charities, the Mayor of Pittsburgh announced today he is opposed. Also weighing in on the matter is Pittsburgh City Council, which had on its calendar for today a resolution opposing the bill. It is not yet clear if the resolution was acted upon.
The debate in Harrisburg stems from a 2012 Supreme Court case that upended the legislative standard on what qualifies as a purely public charity, a class of property that the General Assembly is given permission to exempt from taxation in the Constitution currently. If the joint resolution passes this session of the Assembly it can go on the ballot for the electorate to consider. The late 2014 report from the Auditor General on exempt property in ten counties provides a short summary of the issue.
Pittsburgh’s share of tax-exempt property has grown in the last decade, from 33.7% of total value in 2004 to 41.5% of total value in 2015. But as we have pointed out before, tax-exempt property includes alot of property that is not just non-profit or charitable. And there is plenty of property that falls under categories that previous and current officials don’t want to pay taxes nor would ever ask to pay taxes. The issue is focused on hospital and health related facilities, a category that was highlighted in the Auditor General’s report. There was even a plan to extend the City’s payroll tax to charitable non-profits but nothing came of that, and it is not yet clear if the County has completed its examination of determining if non-profits that are exempt as a purely public charity are truly worthy of their exemption.
A news article today points out that the Pittsburgh Public School Board set the amount of the district’s homestead/farmstead exemption at $29,447, not much changed from where it was last year. The article also points out that the money from legalized slots—which are taxed in order to pay for said homestead/farmstead relief in districts across the state—is roughly the same this year $15,579,488 as it was last year ($15,579,449).
It might come as a surprise to readers (or perhaps not) that the amount of gaming money for the district was $15,588,532—roughly $9,000 more—in 2008-09. Based on data from the Department of Education, the amount of state funded local tax relief in this fiscal year is $616.2 million. Six fiscal years ago the amount was $612.8 million. So the amount that districts receive (via formula) and the number of homesteads/farmsteads applying determines the amount of relief per homestead/farmstead. In Pittsburgh, with some slight fluctuation over the years, the relief per homestead/farmstead has ranged from $267 to $281. That’s consistent with what we found when examining the impact of gaming money in 41 of the County’s school districts in a 2014 report.
The 2015 certified values were released by the County last week, and it shows that the value of all real estate (taxable, exempt, and public utility property value) is $98,359,690,447. Of that total $75.2 billion (76%) was taxable, $23 billion (23%) was exempt, and public utility property at $92.3 million (1%).
Since the 2013 reassessment and the certification of total value of $98,030,298,609, values are up 0.3%. Since there has not been a reassessment since then the growth has to be attributed to new construction, improvements, and appeals likely undertaken by school districts and/or municipalities.
If we look at taxable and exempt growth, the former increased 0.28% between 2013 and 2015 and the latter increased 0.53% in that same time frame. While exempt property includes charitable non-profits, it also includes publicly-owned property, churches, colleges, etc.
Almost a year ago the Auditor General (AG) pointed to two major problems he saw with the local pension system in Pennsylvania: one, there are too many plans and some type of consolidation should be in order, and two, the assumptions of investment rate of return was too optimistic. We wrote a blog on the AG’s work last February.
The release of the latest PERC status report on local pensions is the impetus for the AG to once again look at the issue. The AG’s report notes that “562 municipalities administer pension plans that are distressed and underfunded by at least $7.7 billion”. This is true, however, there are levels of distress under Act 44 of 2009 with cutoff points on funding ratio. So, while a pension plan that is 89% funded is distressed it should be noted that it is in the category of “minimal distress” and one point underneath the “no distress” category. In addition, when the pension plans in Philadelphia and Pittsburgh are removed from the picture the total unfunded liability falls to $1.8 billion.
The AG’s work also outlines plans by the assumed rate of return municipalities attach to them, which the AG notes is defined by state law and must fall between 5% and 9%. Recall Pittsburgh’s debate about lowering the rate of return from 8% to 7.5% and what that would mean for the budget (see here and here and here). Amazingly, 304 defined benefit plans are currently assuming a rate of return greater than 7.5% and about 30% of those have a funding ratio of less than 70%.
We’ve written about pensions and pension reform for some time now, including yesterday’s Policy Brief on the topic, and how most reforms are targeted toward new hires. For example, a defined benefit plan that allows workers to retire with full benefits at age 60 with 20 years of service could be amended (either by changing a statute or through collective bargaining) to say “employees hired after (a certain date) will need to reach age 60 and have 25 years of service to receive unreduced pension benefits”. That does not affect people working at the time of the change that were hired prior to the date the plan was altered. Additionally a governing body could, if permitted, close an existing defined benefit/contribution plan and convert it to something else.
Findlay Township, located in the western part of Allegheny County, has started off 2015 with changes to its pension plans. The data available from the PA Public Employee Retirement Commission (PERC) for 2013 shows three pension plans for the township: defined benefit plans for non-uniformed (19 active members) and police employees (16 active members), and a jointly trusteed, multi-employer plan (7 active members). The article on the changes notes that new non-uniformed hires will enter a defined contribution plan and new police hires, due to a reopened contract, will have a retirement age of 55 rather than the current 50. The township manager noted in the article that “the [township] is trying to do what they can to make the pensions as solid as possible”. Currently the funded ratio of the non-uniformed plan is 83% and the police plan is 69%, making the plans minimally and moderately distressed, respectively.
In order to “…provide taxpayers and other stakeholders with some data on the potential tax revenue from properties that are currently exempt from property taxes”, the state’s Auditor General released a report yesterday that showed the dollar value of property in ten counties in Pennsylvania, including Allegheny County.
The data for Allegheny County shows that the total value of all property (taxable and exempt) is $100.4 billion, all exempt value is $24.6 billion, and the amount of exempt value attributed to medical facilities that are classified as purely public charities at $3.1 billion. The report repeats these classifications for nine other counties, and attempts to calculate a potential tax liability if such property were fully subject to county, municipal, and school taxes. In Allegheny County, for example, if all current tax-exempt property were stripped of their exemption and subject to millage rates, the $24.6 billion in value would pay $619 million in real estate taxes to the County, municipalities (based on the average municipal millage rate), and school districts (based on the average school millage rate). The municipal and school taxes would be concentrated where those properties are located.
Of course, that that total would be accurate if publicly owned property (attributed to Federal, state, local, school, authority) paid taxes and if the government would tax small charitable providers and churches. That probably won’t happen, and that’s why the debate over tax-exempts “paying their fair share” typically falls to universities and medical facilities, the latter being analyzed in the current report. When the Allegheny County Controller examined tax-exempt property in 2012—an analysis noted in the AG’s report and one we wrote about—the share of tax-exempt property owned by government was slightly more than the share owned by churches, hospitals, and higher-education.
So when one looks at how much of a share tax-exempt property is in the counties examined by the Auditor General, we see two counties (Allegheny and Dauphin) with over 20% of total assessed value accounted for by tax-exempt property; one county (Monroe) had less than 10% and the remainder fell in between. When one looks at the share of exempt value that is accounted for by medical facilities, the highest share in the sample belongs to Lehigh County (15%) followed by Allegheny and Dauphin, both at 13%. That means in Allegheny County that while its $3.1 billion in medical exempt value is far and away above any of the other counties examined there is still $21 billion in exempt value in other classifications.
When the most recent iteration of a City-County merger was discussed in 2008 the focus was on a “Louisville type” approach where municipalities other than the City of Pittsburgh would be untouched. The County’s 43 school districts would also not be part of the deal. But the idea of school district consolidation—statewide and in Allegheny County—has been raised numerous times. Even in western Pennsylvania the district of Central Valley arose from a consolidation of two separate districts and two districts in Allegheny County raised the issue of a merger/consolidation over the summer.
Much of the push behind consolidating school districts is to achieve economies of scale, especially by getting savings on the administrative side. That’s why the state’s Independent Fiscal Office recently undertook a study of combining districts in a single county, York, in southeastern PA, to see what would be the results on costs, taxes, state funding, property tax relief, etc. The 62 page report looks at many of the complex issues and runs scenarios of what a countywide school district might look like after taking into consideration the variations of tax rates, how much the state pays for, how much is raised locally, administrative costs, etc.
It should be noted that York County has a third of the total number of districts that Allegheny County has (15 to 43). However, a consolidated York County District would result in a combined student population of 62,000, making it the second largest district behind Philadelphia. The study finds that “the costs of consolidation would likely outweigh the savings from the district level administrative combination—even if one assumes a very aggressive level of savings”.
There are plenty of storylines coming out of the passage of the City’s 2015 budget, including a property tax hike, the return of diverted Regional Asset District money, amended agreements with the Parking Authority: most of these have been discussed in our 2014 Policy Briefs. But let’s look at the one decision that did not happen, the decision to hold off on policing parking meters after 6 PM.
In fact, nearly two years ago the City brought up, debated, held off, and then ultimately ended a plan to enforce meters after 6 PM after similar concerns about negative effects were raised. That plan would have affected more City neighborhoods and it was the current Mayor (then on Council) who proposed ending the plan. It was held until June 2013 when it was ended.
The rate increases for meters did stay in place, and following August 1 hikes at garages and lots (with rates expected to rise again in 2015) there will be a lot of money flowing for Authority operations and for agreements with the City.