Insolvency Travels North

Recall last year we wrote a reaction to the Auditor General’s audit of the Pittsburgh Public Schools and their claims of insolvency and how it kept getting pushed to the future.  That occurred even though the District was running surpluses.  The mention of insolvency was gone from this year’s budget.

Now the mention of insolvency has moved to the Erie City School District, which is currently in financial watch status under Act 141 of 2012, which is essentially the Act 47 for school districts.  The District was placed in watch status in September of last year.

An audit conducted pursuant to the law noted that the District’s ability to “…stay solvent and pay obligations on a timely basis” was in question.  Some comments in an article about the District’s status noted that insolvency usually applies to a private entity (since public entities can always raise taxes–it appears Erie last raised taxes in the 2011-12 school year), not a public one.  But districts in financial watch move to financial recovery when the district gets an advance on its basic education subsidy (if the district has more than 7,500 pupils) or is in litigation against the state for an advance in order to have the district continue in operation.  Whether or not Erie is there or headed there is yet to be seen.

Three More Executive Orders Related to Affordable Housing Issued

Our last blog discussed Executive Orders 01 and 02 related to the work of the Affordable Housing Task Force and three more came late last week on the same subject.  The new orders direct various officials and departments as well as independent authorities (the URA is mentioned again, as well as the Pittsburgh Land Bank) to focus on various recommendations from the Task Force.

One recommendation directs the Finance Director to work with Allegheny County and Pittsburgh Public Schools to:

“Evaluate the potential for a uniform property tax assessment appeals policy for those appeals initiated by any of the three taxing bodies so as to limit any unexpected tax increases to City residents that disproportionately harm elderly residents and those residents living on fixed incomes.”

As we noted in the blog and in a Brief last year, the Task Force was directed to come up with something regarding appeals following the Mayor’s decision to withdraw 2016 appeals and issue a moratorium on new ones, but did not, so the Executive Order 05 looks to do something regarding appeals that might take place on a property in the City of Pittsburgh, realizing that one of three taxing bodies could choose to file an appeal on a property.  As noted in a 2016 newspaper article, the City went after properties they felt were underassessed by 50% or more and the County did not appeal values.  The School District appealed commercial properties where they felt was an assessment that was 85% lower than market value and residential property that sold for above $500,000 and were subject to that same standard, based on communications with the District.

So the charge to the Finance Director is to talk to the other two taxing bodies and find common ground.  The county could say “don’t do appeals, we don’t” but try convincing the District of that.  The City could say they would follow the District’s appeal standard (assuming that did not change).  Or the City could make its case for appeal policy that contains new elements to the District and the County (assuming the County wants to enter the appeal business).

 

Mayor Issues Two Executive Orders Related to Affordable Housing

The Mayor of Pittsburgh issued two executive orders yesterday (the most recent one was November of 2015) related to the Affordable Housing Task Force report from last year.  These executive orders issue directives to various parties (the City Finance Director, the Bureau of Neighborhood Empowerment, the Chief Urban Affairs Officer–all of these are under the administration–and the Urban Redevelopment Authority and the Housing Authority–independent authorities whose boards are appointed by the Mayor, but qualify “subject to appropriate board action”) to carry out recommendations made by the Task Force.

Various aspects will be explored, with status reports due back at different points in 2017.  The Bureau of Neighborhood Empowerment is to examine titles of properties and work on financial education and is supposed to have a report in six months time; the URA is to examine residential projects that request public funding or purchase publicly owned land on tenant protections and report within six months; the Housing Authority is to look at what the Task Force recommended for that Authority and present findings in six months time.

The Finance Director is to carry out two functions that we discussed at length in a Policy Brief last year related to a long-term owner occupant relief program and/or the possibility of “increased homestead exemptions for longtime owner occupants”.  The Finance Department is to work with Allegheny County and the Pittsburgh Public Schools on these two topics, and allow for review by each “…during the third quarter of 2017″.

We noted that the Task Force mentioned a court case in the late 1990s related to a long-term owner occupant program (but no citation for the case was provided, nor could we locate one or find anyone who knew the name of the case, so perhaps that will be made clear in the report) and currently all three taxing bodies offer a homestead exemption (though there is no distinguishing factor on length of ownership time, just so the property qualifies as a homestead) with the County permitting an $18,000 exclusion, the City $15,000, and the School District $29,447.  The School District’s exemption comes from slot machine gaming, so its exclusion is based on the number of homesteads and the amount of money from gaming.  The City and the County simply establish theirs by ordinance and could change the amount.

Higher LST Tax Not Sitting Well With Some in Scranton

In 2014, the General Assembly made changes to Act 47, the statute that outlines financial recovery for municipalities.  One of those changes was to allow distressed municipalities to seek a boost in the Local Services Tax (LST) a flat tax levied at a maximum of $52 on people who work in the municipality (regardless of residence).  We wrote about the proposal because Pittsburgh, an Act 47 municipality, was prohibited from pursuing the increase.

Scranton is in Act 47 and has levied the tax and planned on doing so again this year, but a lawsuit in Lackawanna County Court of Common Pleas against the increase (here and here).  One claim is that the distressed municipality is required to seek court approval prior to levying the tax, but the City did not do that for 2017.  According to the news articles the LST in Scranton applies to around 30,000 people and the boost in the rate has raised around $5 million.

Washington County’s Values Certified at $17.2 Billion

In a blog in late September we wrote about preliminary values that were published for Washington County, the county immediately south of Allegheny County and the only adjacent county to have a recent year of reassessment and a pre-determined ratio of 100%, similar to Allegheny County.

Last year, with an assessment year of 1981 and a PDR of 25% Washington County had taxable value of $1.6 billion.  This year, taxable value is $17.2 billion, about $200 million less than where the preliminary values from September stood.

As we wrote in a blog in late December Washington County established its millage rate and updated millages for municipalities in Washington County should be available soon.

 

How Will State Shrink Workforce?

In the 2016-17 budget proposal, the state’s “authorized component by agency” see page I3 in this document envisions full-time equivalent headcount falling by 3,442 (4%) from this fiscal year to next.  There is a bit of reorganization in departments with the creation of Health and Human Services and Criminal Justice Departments proposed, but the net decrease from the current fiscal year to next is, at this point, based on eliminating positions.  The state’s full-time headcount has decreased each year since the 2012 Fiscal Year, based on this table (see table 17).  The biggest percentage drop in the last ten years came from 2010 to 2011.

How will the downsizing this budget proposes be accomplished?  From several newspaper articles it appears an early retirement incentive will be a component.  If the state offers what has been described as a “30 and out” which is described in one article as “…employees who currently have at least 29 years of service credit would be given the extra years of service needed to retire without penalty and with full benefits.”  By initial count about 2,000 employees would qualify, but initial plans count on about half of those accepting it.

It has been a while since the state offered an early retirement incentive, but we last wrote of a similar program at the local level in 2014 as part of the City of Pittsburgh’s 2015 budget.

Charging for State Police Coverage

Almost nine years ago we wrote about proposed legislation that would have placed a fee on communities that rely on state police for police coverage (in lieu of establishing a municipal police force or banding together with other municipalities to form a multi-municipal force).  At the time, the proposal would have had a population threshold (a community would have to have 10,000 people or more) and the fee was $100 per person.

The idea has come back as part of the 2017-18 proposed budget, though this time there is no population qualifier and the fee would be $25 per person.  A 2014 state report looked at the issue of police coverage and classified how municipalities were handling police service.  And, as we noted in the fall, the fact that the increase in fuel taxes to the motor license fund was going to state police costs, and that the state police was providing local coverage (meaning the money was not going to roads and highways) may have had a hand in addition to the budget deficit.

State Number 28 Enacts Right to Work

On February 6th Missouri’s Governor signed a bill making the state a Right to Work state. Missouri thus becomes the 28th state to join the ranks of the states that have chosen to provide the freedom of employers and employees to enter into a relationship without the employee being forced to join a union or pay union dues.

 
There will be push back by Missouri unions who plan to use the referendum process to overturn the law. Whether that effort will be successful would appear doubtful in light of the recent election results. The Governor ran on a platform that pledged to work for and sign the Right to Work bill.

 
The law goes into effect in August unless the union can get the required signatures to hold a vote on the issue. If they are successful, the law cannot go into effect until after a vote is held in 2018.

 
Ohio Republican legislators want to adopt Right to Work but the Governor seems intransigent on the issue. Still, Ohio and New Hampshire would appear to be the next two likely states to pass Right to Work. Oddly, Alaska and Montana are not Right to Work but tend to support Republicans in presidential elections. There seems to be little pressure in those states to push the issue. Presumably it is not a big factor in the economic health of those states.

 
That is not the case in Pennsylvania. The problems created by pro-union policies, especially the power that has been given to public sector unions, are a major drag on the state’s economy. Right to Work is badly needed in the Commonwealth.

Auditor General Would Need Permission to Look at PWSA

In reaction to this week’s issues with water in part of the City of Pittsburgh that affected around 100,000 customers Pittsburgh City Council wants the Auditor General and Attorney General to look into the operations of the independent Pittsburgh Water and Sewer Authority.

The City’s Annual Financial Report describes the PWSA as “… legally separate from the City and is reported as a component unit. The PWSA Board consists of one City Council member, the City Treasurer, the City Finance Director, and four members chosen by the Mayor, and the City can to impose its will on PWSA”.

The PWSA is audited annually, and with City Council and administration representation on the board it is not clear what another inquiry will uncover. One of the officials called upon by Council, the Auditor General, noted “…his office is open to auditing PWSA. But under state rules, he said, PWSA itself would need to request the review.”  Why?

PWSA was created under the Municipal Authorities Act of 1945 and that statutes says that the Attorney General “…shall have the right to examine the books, accounts and records of any authority”.  It is curious as to why the state would not place the responsibility of looking at financials in the top Auditing official, but it is similar to the issue we wrote about when the Allegheny County Controller wanted to audit authorities related to the County, only to have a court rule that the Attorney General had responsibility for three and the Auditor General for one.

This is an area that the General Assembly should examine.  It does not make a lot of sense to have auditing responsibility placed under the Attorney General’s office rather than the Auditor General’s.

 

FC Not Keen on 76

“…Radical changes in education funding”

“Loss of local control of our education dollars…”

“Class sizes will increase…”

Yesterday’s blog covered the negative reaction to a proposed tax shift on school district property taxes that may arise in the General Assembly this year (nothing has been introduced yet, but there is a co-sponsorship memorandum) in central Pennsylvania.  Tonight there is a forum at the Fox Chapel School District on the proposed legislation.

An article from last week quotes the District’s spokesperson as saying “The research we have gathered from multiple organizations shows that increasing income and sales tax will not replace property taxes dollar-for-dollar.” Based on the latest Department of Education data through the Summaries of Annual Financial Reports (AFR) in 2014-15 Fox Chapel Area raised $70.6 million in local revenue–that ranked it 57th in the state in terms of local revenue raised–and received $15 million from the state (178th from the top).  FC Area raised $16,576 per-pupil locally that year, ranking it just behind Quaker Valley in the County.  This would be one of the districts that would receive a lot of state money to swap out local dollars under the plan.

If the proposed legislation does what the memorandum states, that is, to “…replace dollar-for-dollar the revenues lost by the school property tax elimination” then the research gathered by FC Area is obviously at odds with this provision.  And the memorandum says that after all property taxes are eliminated a district could go to its voters and ask to boost earned income or personal income taxes via a ballot referendum, which the backers of the proposal say is “…the greatest form of local control”, not a point of view held by the District.