News articles yesterday wrote about the year-over-year and five year changes in Allegheny County’s and the metro area’s population and noted not much has changed metro-wide and that the County saw a decline in population for the first time since 2010. This is a reversal of the previous year-over-year changes since the 2010 Census where County population increased 0.30%, 0.24%, and 0.21% from 2010 to 11, 2011 to 12, and 2012 to 13, respectively, but quite a difference from population changes in the County from 2000 to 2006.
Of Pennsylvania’s 67 counties (we will count Philadelphia as a county here) Allegheny County grew 0.61% from 2010 to 2014, which ranks it 19th in population change. It was one of 25 counties to report a higher population in 2014 than it had in 2010. The increase in Allegheny County is sandwiched between Delaware County (0.70%) and Tioga County (0.59%). The net 7,458 population increase in Allegheny County, in numerical terms, is roughly the same as Cumberland County (7,809) and Lehigh County (7,651).
Compared to the “large population counties”, by this measure looking at the seven counties (including Allegheny) had a 2014 population of 500,000 or more (Chester County entered the group in 2011) all increased in population and Allegheny was 6th out of 7 (Bucks County increased 0.22%). Both Lancaster and Chester Counties grew by more than 2.5% from 2010-14.
In 2009 we wrote a full length report on the condition of pensions in the state’s ten largest cities. At the end of that year the state passed Act 44 which dealt with municipal pensions. As evidenced by yesterday’s blog there is still alot of work to be done and there is an effort to make sure that municipal pensions are not forgotten in the search for solutions to the statewide pension problem.
A recent article looked at big city pensions by presenting data on active workers, retired workers receiving pensions, and the funded ratio (assets/liabilities) for the same ten big cities. The article noted that nine of the state’s ten largest cities have more pensioners than active workers (only Lancaster had a ratio of less than one).
So how do things compare from our 2009 report (which reported 2007 PERC data) to the recent article (which uses 2013 PERC data)?
- In 2007, four cities had a ratio of greater than 1 on active to retired workers, now nice cities do.
- In 2007, three cities had a funding ratio of 60% or less. In 2013 four cities did (Allentown at 60%, joining Philadelphia, Pittsburgh, and Scranton)
- Only Pittsburgh had a decrease in its active-retired worker ratio, falling from 1.37 to 1.28. It had essentially the same number of active workers but the number of retired workers fell by 6%.
- Four cities (Reading, Bethlehem, Scranton, and Harrisburg) had a double digit drop in the number of active workers from 2007 to 2013. Four cities (Reading, Bethlehem, Lancaster, and Allentown) had a double digit hike in the number of retired workers over those years.
- Only Pittsburgh saw its funding ratio increase (16%) and the ten cities are divide in half with five cities having a funded ratio 70% or greater and five cities 69% or below.
As we have written quite often, the state talks “pension reform” and most of the time that means they are talking about the two large plans covering state workers and public school employees, and does not include local governments in the Commonwealth, which includes 3,000 plans. About 300 of these are in Allegheny County.
A new proposal from the state legislature would create a new cash balance plan for public safety employees in all municipalities except Philadelphia that have full-time personnel. It is a reintroduction of legislation from the prior session. It would place new hires into a cash balance plan, which is a hybrid of a defined benefit and defined contribution plan. Retirement age and length of service for normal retirement would be raised to 55 and 25 respectively, and those covered by a present defined benefit plan would stay in place until there were no longer any employees or beneficiaries under the db plan.
So, there is a bit of uncertainty on education spending this week with the state outlining areas where districts can spend proposed new money (and wanting the details by May 15th) and the reaction to that there will be this one certainty: for the 10th school year (running on a fiscal year from July to June) district tax increases will be subject to the Act 1 index.
The index represents the ceiling to which millage rates can go: of course, the ceiling can be evaded if the district secures an exception from the Department of Education (common) or places a question on the ballot in front of the voters (rare). Our 2014 report looked at the impact of Act 1 in Allegheny County, examining all school districts except Clairton (a split millage rate) and Pittsburgh (calendar year). The state’s Department of Education has historical data on all districts.
This coming year the average Act 1 index in 2.4% for the 41 districts. Ten districts have an index of 1.9%, which means they could boost their millage that much without an exception or a referendum. A 19% increase means different things in those districts, of course. In Montour and Quaker Valley millage rates would stay under 18 while in Mt. Lebanon and Upper St. Clair rates would be 23.5 mills and 22.6 mills, respectively.
McKeesport, South Allegheny, Sto-Rox, and Duquesne have an Act 1 index of around 3%.
The highest average was in 2008-09 when it was 5.4%. The lowest average index of 1.8% was in 2011-12. It has remained around 2 to 2.5% in the years since.
Eliminating overtime in pension calculations, moving new hires into “cost contained” plans, reforming the way state pension aid is distributed, reducing overhead for 3,000 separate plans: those were just a few of the suggested reforms for municipal pensions made by the Mayor of Pittsburgh to a state legislative committee. What’s important to note was that not only were those recommendations made yesterday, they were essentially made by the previous Mayor in 2008.
Of course, alot has changed since 2008 insofar as municipal pensions in PA are concerned: the state passed Act 44 of 2009, the City flirted with a plan to sell parking garages and opted instead for a long-term infusion of value, and Pittsburgh moved from “severely distressed” to “moderately distressed”. But there is still more to be done for municipal pensions, all the while the state still has not decided to do with state worker and teacher pensions.
Much news coverage was given to the distribution of state pension aid (here and here), a topic we wrote about in 2008, and raising the retirement age and years of service for normal (unreduced) retirement. While much was covered on the state aid and how it funds Pittsburgh and the Allegheny County suburb of Upper St. Clair, it is worth taking a look at those two communities on qualifications for normal retirement and plan type.
In Pittsburgh, police, fire, and non-uniformed workers are under defined benefit plans. In Upper St. Clair police and public works employees are under defined benefit plans, all other employees are in a defined contribution plan. A police officer in Pittsburgh can receive normal retirement benefits at the later of age 50 or 20 years of service. A police officer in Upper St. Clair can receive normal retirement benefits at age 54 and 25 years of service. That means an officer hired at age 25 would end up working 25 years in Pittsburgh but 29 years in Upper St. Clair. A public works employee hired at the same 25 years of age in either municipality would essentially be treated the same–in Pittsburgh, normal retirement is achieved at the later of age 60 or 8 years of service, while in Upper St. Clair it is age 60 and 10 years of service.
What would the Mayor want to see in Pittsburgh? An age requirement was last added for firefighters hired after 1976 (prior to that it was 20 years of service, now it is the later of age 50 or 20 years of service). Would it be 55 years of age and 20 years of service? 50 and 25 years of service? Would it be age or length of service or both?
Following yesterday’s Brief on the tax shift and the concept of the homestead exemption for school taxes comes news of across the state that taxpayers in a northeastern PA county have been found claiming more than one homestead exemption.
Luzerne County had a homestead exemption for county tax purposes from 2009-2015 which reduced the assessed value of a qualified homestead for purposes of county real estate taxes. That exemption is now gone but the County–and all other counties–have to certify homestead exemptions for purposes of school tax relief under Act 1, which takes tax revenues on legalized slots and returns them to taxpayers via homestead exemptions for school tax purposes.
Allegheny County went through an episode like this a few years ago when it was reported that there was some double dipping. A follow up audit found that although the County’s exclusion form lists penalties for violations of taking a fraudulent homestead exemption the County would remove the homestead exemption but not assess any “back taxes, penalties, or interest”.
We in Allegheny County have become familiar with using an alcoholic drink tax to fund mass transit, but would the state raise a glass to offset tax-exempt property?
The tax on wine and spirits (besides the sales tax you pay when you buy a bottle) is 18% and built into the markup (the PA Dept of Revenue notes “All liquors sold by the LCB are subject to this 18 percent tax, which is calculated on the price paid by the consumer including mark-up, handling charge and federal tax”) and is known as the “Johnstown Flood Tax” and was intended to be temporary.
That “temporary” tax goes to the state’s general fund, but a proposal that might seem like ages ago in policy terms (2008) might revive the idea to direct the proceeds of the tax to municipalities that host a certain percentage of tax-exempt property. As an LBFC report noted a year after the original proposal, two states provide payments to local government to offset the presence of hospitals and universities. A handful of others make specific payments for certain types of exempt property, and PA does make payments to municipalities hosting forested game lands.
Obviously questions arise about the formula of distributing the money, replacing the liquor tax money if it is removed from the general fund, if government owned property would figure into the calculation, etc.
The Auditor General was in town this week to release his most recent audit of the City of Pittsburgh’s pension plans. The audit period covered 2012 through the end of 2013; right at the end of the audit period (in December 2013) is when the pension trust board decided to lower the projected rate of return on investments from 8% to 7.5%. The previous audit, released in 2013, covered the period right after (in December 2010) the City opted to make a three decade pledge of parking tax revenue to the pensions. What monumental decision can we expect to happen when the next time the AG releases a Pittsburgh pension audit?
If the AG’s suggestions were taken up, we could see municipal pensions consolidated, length of service or retirement age raised for new hires, the elimination of overtime counted in pensions, etc.
How would that play out in Pittsburgh? Right now, police officers have to reach age 50 and have 20 years of service to retire with 50% of their base salary averaged over the final 36 months prior to when they retire. Firefighters have to work for 20 years or reach age 50, which ever comes later, to receive 50% of the average monthly wages of any 3 calendar years of their employment, or the final 36 months prior to retirement.
So what could be altered to apply to new hires? It could be any combination of retirement age, years of service, or final average salary calculation. There have been changes made in the past. For example, the police final average salary calculation was altered for those hired after 12/31/91–prior to that it was a 12 month basis. Firefighters hired since 1976 have the age and service thresholds, but prior to the Bicentennial year employees had to work for 20 years to qualify for normal retirement. Note too that firefighters’ pensions are calculated on “average monthly wages” which means overtime can be counted, while police have base salary counted.
As we wrote in yesterday’s Brief, as well as in two from 2014 (here and here), the municipality of Mt. Lebanon was one of the main players in the appeal by taxing body activity in Allegheny County. It was in the second piece in 2014 that we examined some of the shortcomings of the criteria as applied to sales between 2006 and 2013.
But with all appeal criteria designed by taxing bodies that set either a dollar amount or percentage based gap between sales price or market value and the assessment on the books there will be properties that either fall within or just outside the cutoff range. Consider that the municipal commission recently extended its appeals to “all transactions that have occurred in Mt. Lebanon in the past”. From a follow up news article, the municipality will examine ” properties with a difference of $100,000 or more between the Federal Housing Administration comparable and the assessed value...”. On this standard the municipality identified 26 properties. Using just the dollar value probably helps to avoid some of the outcomes that came with a dollar gap and and percentage difference, but likely much of the reliability depends on the FHA comparable and how that is designed.
Two experts from Pittsburgh had their thoughts on reforming property assessments published in a newspaper across the state. The piece is not focused on tax shifts or eliminating school property taxes, but rather how assessments are conducted in Pennsylvania and how they can be changed. As our 2007 report pointed out, based on data collected by the International Association of Assessing Officers, Pennsylvania was the only state in the country where the state did not assess property (leaving it to local government), did not specify a reassessment cycle, did not verify sales data, and did not perform any audits on values.
Since 2007 eleven counties have carried out reassessments–Allegheny County as a result of a 2009 Supreme Court decision, and Washington County is undergoing one now likewise as a result of a lawsuit. As we pointed out in 2007 and years since there must be a cycle for reassessing; this is pointed out by the op-ed as well. Also since 2007 the state Tax Equalization Board has been moved within the Department of Community and Economic Development (and is now titled the Tax Equalization Division). The experts recommend moving STEB into the Department of Revenue (we recommended in the 07 report that Revenue or STEB or a new agency be in charge of overseeing assessments). When the state moved STEB into DCED it charged it with specific duties (described here). What did not occur in the folding in process was stipulating a cycle or coming up with a statistical trigger to inform counties when a reassessment is needed. With 22 states requiring annual assessments and 26 requiring periodic assessments Pennsylvania is woefully out of step.
The experts do suggest an additional $5 fee tacked on to all properties which would then go to Harrisburg but come back when the county is ready to reassess in accordance with national standards. That might help with the financial side, but what if a county simply does not want to reassess and is content with letting the money sit in Harrisburg while arguing to its residents that it should not have to go forward with the process?