Mayors Suggest Changes

At a forum yesterday in Harrisburg, three Mayors, representing the cities of Harrisburg, Lancaster, and York, addressed “The State of Our Cities”.  As noted in news coverage, “the challenges they shared about their cities were starkly familiar.  So were the solutions they were seeking from the state: pension reform, property tax reform, and consolidation of municipalities and school districts”.

All three cities are home rule and Harrisburg is the only one of the three to be in Act 47 financial distress.  The moderator of the panel asked why so many municipalities are in financial distress.  There are 18 municipalities in Act 47–with 2,561 municipalities in PA, that is less than 1% in distress.

The Mayors lamented lack of annexation powers (PA is one of six states with no unicorporated territory, which makes annexation much more difficult) and the Mayor of Harrisburg wants “consolidation and boundary expansion”.

How does PA compare on the number of local governments (municipalities and town/townships as counted by the 2012 Census of Local Governments)?  Examining the 50 states (excluding DC) PA reported 2,561 local governments which ranks it 3rd out of 50 (behind Illinois and Minnesota) and represents around 7% of all local governments in the 50 states.  Compared to states with similar population (13-10 million, which includes Illinois and Ohio) the total is not out of line (2,729 in Illinois, 2,245 in Ohio).  If measured on a per 100,000 person basis, PA has 20.2 local governments per 100,000.  Indiana, Illinois, Alaska, and Ohio are close to that rate.  There are 27 states that have 10 or fewer local governments per 100,000 people.

Most of local government in the country serves a small population.  By the Census’ count, 314 local governments served a population of 100,000 or more, which is about 1% of the total number of local governments.  PA has 4 of these, and 6 other states likewise have 4 local governments serving 100,000 people or more.

Deer Lakes Hasn’t Chased Appeals, Still Won’t

A newspaper article summarized the sentiment of the Deer Lakes School Board in regards to filing property tax appeals on properties they feel might be underassessed: they are not interested.  As we noted in a 2015 Brief Deer Lakes was one of four school districts not to file appeals, and the municipalities that comprise it were not appealing properties either.  Based on the 2016 certifications there is $1.044 billion of taxable property in the District.

One curious take from the article was a quote attributed to the District’s solicitor that “Allegheny County properties are reassessed every three years…”  It would be accurate to say it has been three years since the last one, but the County certainly is not reassessing this year and, based on the comments of the Allegheny County Chief Executive last month when an article was written on the common level ratio for Allegheny County, there are no plans in the future for one.

More on the School Funding Case

Wednesday’s blog addressed the case the PA Supreme Court is hearing over school funding.  In April of 2015 the case was dismissed by Commonwealth Court based on the prior rulings of the PA Supreme Court on the topic.  Commonwealth court’s majority decision cited the Supreme Court’s decision in noting that the PA Constitution “…does not confer an individual right upon each student to a particular level or quality of education, but, instead, imposes a constitutional duty upon the legislature to provide for the maintenance of a thorough and efficient system of public schools throughout the Commonwealth”.

It added “the only judicially manageable standard this court could adopt would be the rigid rule that each pupil must receive the same dollar expenditures”.  That would be a difficult undertaking statewide–true either if it was directed by the judiciary or the legislature–and the districts in Allegheny County illustrate that.

Let’s look first at per pupil expenditures on instruction–in 2014-15 the average was $10,056.  Let’s assume Pennsylvania was to say each district would have to spend $11,000 per-pupil on instruction.  In order to have a rigid rule, seven districts in the county would have to reduce spending, with four of these (Wilkinsburg, Duquesne, Pittsburgh, and Fox Chapel) by more than $1,300 per pupil.  Twenty two districts would have to increase spending by $1,300 or more per pupil.  The state average per pupil instructional expense was $9,241 in 2014-15; if the rigid standard were $9,700 per pupil then 21 districts in the County would be required to reduce spending.

What if the standard was that the state had to give each district the same amount of revenue per pupil?  That does not happen now due to aid ratios which give more money to districts with lower market value and personal income.  But as we have pointed out before with local property taxation districts with large tax bases can raise a lot of money.  Thus, despite the state giving more money to property tax poor districts on a per pupil basis those districts can easily be leapfrogged by local tax effort.

Look at districts in Allegheny County that receive almost identical amounts from the state.  There was a $4 difference between state funding per pupil in East Allegheny ($6,842) and Brentwood ($6,838).  Yet East Allegheny raised $4,290 more per pupil locally.  There was a $29 difference between Northgate ($5,887) and Deer Lakes ($5,859).  But Deer Lakes raised $671 more locally.  In probably the only case of state and local funding similarity, Avonworth and Moon had a $44 difference is state revenue and a $45 in local funding.

As we pointed out in prior Briefs (here and here), unless the state is going to assume 100% of public school funding, end local school taxation, and then make a state level decision on what fair and equitable means (does each district get the identical amount per pupil?  Or do places with lower market value and personal income get more as they did with the aid ratios?) it is hard to see how the Supreme Court could divert from the Commonwealth Court ruling.


PA Supreme Court Hears School Funding Case Despite New Formula

Over in Philadelphia the PA Supreme Court heard opening arguments on the distribution of state school funding dollars yesterday.  The suit was filed in 2014 and named several state officials as defendants, and has now put the current Governor in the position of opposing the lawsuit and extoling the new funding formula signed into law as Act 35 of 2016.

The case has already raised the question of the judiciary’s role in determining education funding.  The article on the case noted a citation of Federal data about the gaps between wealthy and poor districts in the state, and argument that has been made time and again but obfuscates the role of districts being able to raise money locally.

The new formula will apply to new money appropriated beyond 2014-15 for basic education purposes, as our most recent Brief pointed out.

PAT Contract Rejected

The rank and file membership of the Port Authority’s transit union have rejected the contract proposal that was presented as a tentative agreement last week.  The law creating the Port Authority–the Second Class County Port Authority Act of 1965, which is codified in PS 55--states that “The authority through its boards shall deal with and enter into written contracts with the employes of the authority through accredited representatives of such employes or representatives of any labor organization authorized to act for such employes concerning wages, salaries, hours, terms and conditions of employment, and pension or retirement provisions”.

So if one party rejects a contract proposal, there is language in the act allows for binding arbitration, if both parties agree, as well as neutral fact finding, which can be requested by either party (the board or the union).  A search of the PA Labor Relations Board record of fact finding reports (available back to 2011) shows that the most recent Port Authority related fact finding report involved a dispute with Port Authority police in 2014.

State Police Coverage Fee A Possibility Again?

We first wrote in 2008 about a proposal to have communities that don’t provide for their own police protection and instead rely on the state police for patrol to pay a fee for that service.  Four years later, in 2012, we looked at the issue again and in 2014, based on the findings of a state study on municipal police protection, we provided a breakdown of where the state provides service, where municipalities provide their own service, and where municipalities rely on a neighbor or are part of a multi-municipal force.

In 2016, one argument over state police patrols of municipalities is focused on the money that comes out of the motor license fund that goes to fund state police rather than going to infrastructure.  The director of the state’s municipal league stated that the time might be appropriate to once again look at a fee for coverage.

Quietest PAT Contract Agreement in a Decade

According to a published report, there is a tentative agreement between the Port Authority and its union for a new agreement (the current four year deal expired June 30th).  If it is like the previous two deals, it would take the Authority through 2020.  The specter of a transit strike is not present, unlike previous contracts.  Recall the following:

In 2005, the big issue was a board/management proposal to contract out a percentage of service; that never happened.

In 2008, negotiations involved national groups and resulted in a tiered system of health benefits, a major cost driver.

In 2012, an agreement on supplemental state funding in exchange for contract savings saw the elimination of lifetime retiree health care for new hires.

In between came decisions to place new hires not in the largest union into new pension plans (2011), a reorganization of the PAT board (2013) and the passage of a state transportation funding bill (2013) with significant impact for the Authority.

Thus the proposed new agreement would be the first to be voted on by the new board (a mixture of state and county appointments, unlike the previous county only appointments) and by employees who are comprised of personnel at differing levels of retirement benefits.


No Second Strike for District

Last spring teachers in the Highlands School District went on strike this past April (in the 2015-16 school year) and there was a chance that an unsettled contract situation would have led to another strike to start this school year, but it has been announced that a five year contract has been approved by the school board and the teachers’ union and school will start on time this coming week.  We wrote about the presence of school strikes in Pennsylvania when the Highlands strike occurred.

Judge Nullifies School Tax Hike

Lower Merion School District, in Montgomery County in southeastern PA, approved a millage rate of 27.3965 for the 2016-17 school year.  That was up 1.1642 mills, or 4.4%, over last year’s millage rate of 26.2321.  Based on Department of Education data on real estate tax rates, Lower Merion raised taxes each year from 2011-12 through 2016-17.  Lower Merion is one of the top spenders in the state (its 2014-15 total expenditure per-pupil was $28,172; the PA state average was $15,854).

It is also one of the wealthiest districts in the state. Measured by the market value/personal income aid ratio calculated by the Department, Lower Merion was tied with 20 other districts in the state at 0.1500 (the lower the ratio, the wealthier the district).  It ranked third in the state for market value of property per pupil ($1.3 million per) and second for personal income per pupil ($715,937).

But this year’s tax increase, which was allowed to exceed the District’s Act 1 index thanks to an exception granted by the Department has now been partially rescinded by a Judge as a result of a lawsuit brought by a resident as part of a class action. If the decision is upheld, the District would be allowed to boost its tax rate to its Act 1 index (0.6295, or 2.4%) but would have to forego the 0.5347 permitted through the exception.  The lawsuit argued that the District had been building up a sizeable surplus (the District’s business manager stated that the district has $50-60 million “in the bank”) while it was predicting it was going to have annual shortfalls.  Sounds similar to the situation in Pittsburgh that we wrote about earlier this year and was highlighted in an audit by the Auditor General.

The District plans to file an appeal on the decision.