A “C” for School Finance

Where is Miss Shields from “A Christmas Story” when you need her?  Maybe Pennsylvania could have been given at least a C+ like Ralphie on the latest national education report card, this one produced by the Network for Public Education.

PA received a “D” overall but it tied with 29 other states and DC for that score, and no state received higher than a “C”; there is much work to be done according to the Network.

Much of the report’s take on school finance, where PA received a “C” grade, is based on the belief that the state does not put enough money into K-12 education and does not distribute it correctly, which is much of what the Basic Education Funding Commission heard for a year leading up to the release of its recommended formula in June of 2015.  From the report “states must sufficiently fund public education and then implement financial policies that are ‘progressive’ meaning they provide the most funds to districts that demonstrate the greatest need”.

In Allegheny County, on a per-pupil basis in 2013-14, money from state revenues went in the greatest amounts to Duquesne ($15,479), Clairton ($9,937), McKeesport ($8,604), Pittsburgh ($8,602) and Wilkinsburg ($8,045).  The districts at the bottom of the distribution were Quaker Valley ($2,364), South Fayette ($2,691), Pine-Richland ($2,703), Mt. Lebanon ($2,742), and Upper St Clair ($2,750).  But when local revenues are added in many districts at the low end leapfrog districts at the high end–is that the fault of the amount of effort the state puts forth?  Or is it the simple fact that when school districts with wildly different tax bases are able to generate money locally there will be significantly different results in the revenue available for school spending?

As we suggested in a Brief from September advocates who want to prevent this situation should call for a complete end to local taxation by school districts and move all school financing to the state level and then the state could decide the best method for funding schools (same per-pupil amount per district, more per-pupil in needier districts, etc.)

City Proposes Changes to Appeal Standards

As we have written in the past few years, there are various standards that taxing bodies use to decide whether to appeal the assessment of property.  Most times it is based on the sale price of a property compared to its assessment, and, if there is a standard met (sales price exceeds assessed value by a specific dollar amount, percentage, etc.) the taxing body will appeal.  There will always be an arbitrary nature to the process based on where the standard is set.

The City of Pittsburgh will now consider changes to its appeal standard based on a resolution (as of this writing, the Council agenda lists the resolution’s intent but there is no link to the specifics) that would include “…zero appeals of any property assessments within two years of purchasing the property; limits on the appeal on property assessments to once every three years; appeal values downward for properties where the assessment is 50 percent greater than their actual market value; and design a system to select properties to appeal, either upward or downward, based on comparable values rather than sales alone.”

From 2014 data on appeals in Allegheny County that we summarized in this Brief the City of Pittsburgh appealed 1,195 property values that year.  According to the article, the City expects to handle about 1,300 appeals this year, but the Finance Department does not expect that the changes proposed by the resolution will change that total much.

Recovery for Another District?

Just this week we recommended in our Policy Brief that, due to repeated claims of insolvency, that the Pittsburgh Public Schools investigate financial recovery provisions for school districts under Act 141 of 2012.

Pittsburgh’s neighboring district, Penn Hills, might instead be investigating the possibility due to its financial issues.   Currently the Duquesne School District and the Wilkinsburg School District are under the provisions of Act 141 (either recovery or watch).

 

County Rethinks Form of Government

While Allegheny County is going through the once a decade process of convening a Government Review Commission as required by the Home Rule Charter and the Commission is moving toward the end of its year long deliberations on proposals they would like to see taken up for Allegheny County (preliminary recommendations here) way over in northeastern PA Luzerne County is advancing a proposal to change its form of home rule government.

Luzerne is one of seven counties with a home rule charter in the state (we won’t include Philadelphia in this count, as they are a combined city-county are more thought of as a city than a county) and the most recent to adopt home rule.  The County adopted a council-manager form of government akin to a school district: there are eleven members elected at large from the county and they hire a manager (there is no separately elected executive).  An alteration to the form of government could involve reducing the size of the council or transitioning to a separately elected executive (two other home rule counties, Delaware and Lackawanna, have the “no executive” form of county government, while Allegheny, Erie, Lehigh, and Northampton have an elected council/commission and a separately elected executive).

Pittsburgh School Enrollment by Race

The combined African American population of Pittsburgh and Mt. Oliver—the two municipalities in the Pittsburgh school district—stands at just under 26.5 percent or roughly 81,000 people. As of 2015, African American students made up 53.5 percent of the District’s enrollment and a very high percentage (estimated at 80 percent) of charter schools in the City. The Pre-K enrollment numbers were not considered.

 

Data for the percentages of Pittsburgh’s school age population by race are not readily available but if they are close to the overall population percentages, then it is safe to say that black students make up a disproportionately large share of the overall K-12 enrollment in the Pittsburgh school district. While the cause of this over representation is an important question, we will pass over that issue in this blog entry. Instead we look at how the over representation of black students in the District manifests itself in the individual schools.

 

By grade level and type of school, the racial makeup of schools is fairly close to the overall ratio in the District. There are two anomalies. In the four traditional 9th to 12th grade high schools, blacks are underrepresented in three schools and overrepresented in one. In the seven traditional 6th to 8th grade middle schools, African Americans make up 76 percent of the enrollment with four schools over 70 percent black.

 

For the school grouped by other grade arrangements the overall racial mix reflected fairly closely the District wide numbers. In the 22 traditional K-5 elementary schools the overall enrollment includes 57 percent African Americans. Six are predominantly non-black with an average black enrollment of 30 percent or less black–the lowest being Banksville at 11.3 percent African American. Meanwhile, ten schools had predominantly black populations with several over 90 percent led by Miller at 97.5 percent.

 

In the K-8 schools, blacks made up 51 percent of all students. The lowest percentage is in Brookline at 9.7 percent while the highest is at Weil at 91.2 percent. Seven of the 14 schools had moderate to very high over representation of black students and five had moderate to high overrepresentation of non-black students.

 

These data show fairly convincingly that schools reflect to a large extent the neighborhood demographic makeup. The magnet schools are not neighborhood defined but with few exceptions are not very different than the mix seen in the other schools. CAPA stands out with only 30 percent black enrollment. Several magnets have overrepresentation of black students such a Fulton K-5 at 82 percent.

City Bullish on Fire Agreement

“It takes two to tango”, “one municipality does not a merger make”, etc. etc.  Pick one of these or any other phrase to describe how a successful merger or consolidation of public sector services or government entities themselves has to happen.  Both sides have to see the benefits.  Right now, the proposal to have Pittsburgh provide firefighting services to the Borough of Ingram is a decidedly one-sided affair (here, here, and here).

In the sole municipality where the City executed a fire service merger (Wilkinsburg, where fire service was not volunteer) a former council member of that borough noted it took two years of discussion.  Ingram’s department is volunteer and the arrangement would involve a direct payment to Pittsburgh–no employees have to be absorbed and no issues of seniority or benefits have to be sifted through.

So Pittsburgh likely views the issue as smooth sailing.  Council already approved the deal in December for a sum of $459k for the period January 1, 2016 through December 31, 2020.  Though it does not show up as a line item in 2016’s revenues, the 2016 Pittsburgh budget states ” The City provides Fire and Refuse collection services to the neighboring borough of Wilkinsburg, and will be expanding its fire coverage to the borough of Ingram in 2016″.  The City plans to receive $958k for trash collection and $1,697k for fire protection from Wilkinsburg in 2016.  Based on the proposed total and length of contract the Ingram agreement would amount to $92k per year.

 

Johnstown’s Pension Health is Slipping

Six years ago we released a full-length report on the finances of Johnstown, PA, a municipality that has been in Act 47 distressed status since 1992.  In 2010 the City began the year with layoffs and a tax increase and the possibility of a municipal bankruptcy was raised.

That never happened, though the City is now on its 6th amended recovery plan (2013) and that plan pointed out that there were pension issues that the City was facing.  More retirees than active workers (252 to 139 that year) and the aggregate funded ratio of the City’s plans steadily eroded from 2003 through 2011, falling from 57% to 47%.  In 2009 the state passed municipal pension legislation (Act 44) that included placing levels of distress on a municipality’s pension plans, meaning Johnstown would have reached “severe” by 2011.

It is at that point that the state Auditor General’s office picked up with an audit on the City’s pension plans, and the health of those plans and points out a dire situation: “The city keeps draining money from other municipal services and keeps relying residents to pay for this enormous pension burden. Yet, the city keeps losing ground.”

The audit notes that despite being in severe distress and having mandatory remedies prescribed by Act 44 the only change that the City made was to place age and service length requirements for police officers hired after March of 2010.  A pension recovery plan has not been implement nor submitted to the Public Employee Retirement Commission, according to the audit.  The audit also found pension provisions that were out of compliance with the Third Class City Code of the Commonwealth and recommended changes.

No Surprise, County Does Not Want to Conduct a Reassessment

As we have written plenty of times before, officials will always come up with reasons not to conduct a property reassessment.  Pennsylvania puts county government in charge of property assessment, but the state does not mandate a cycle for when revaluations have to be done, so the state has counties like Westmoreland where properties have not been reassessed since 1972.  Unless there is a lawsuit over values by taxpayers or other taxing bodies then it is up to county government to move forward.

Though a member of the board of commissioners cited Allegheny County, there have been other counties in the western half of the state that have undertaken assessments in recent years, including two counties with older base years than 1972.  Citing a county where there was vehement opposition to reassessing and a court case that went all the way to the Supreme Court seven years ago, while important, is not the only example that can be brought up.  Even with Pennsylvania’s non-existent cycle, plenty of counties have reassessed since Westmoreland and Allegheny.

While the County may not want to do a reassessment, it certainly has taken steps to prepare for one in the event that a lawsuit orders them to do so (the article notes “…commissioners have laid the groundwork for a reassessment by updating computer records and having aerial photographs taken of all county properties”).  But it seems clear they will be reactive when the time actually comes.

 

Section 8 Home Ownership?

The Mayor of Pittsburgh is proposing to convert Section 8 rent supplement payments into mortgage payments.  These rent supplements typically amount to 30 percent of a person’s (or household’s) income and are used to subsidize housing for people so they can live in homes other than public housing. The government makes the payments directly to the landlord. The Mayor’s plan would have the payments made to a mortgage lender.

Two problems immediately present themselves for this scheme. Where will the down payment come from?  Will people who qualify for a Section 8 housing subsidy have enough money saved to make a down payment or will the down payment have to be waived? No down payment loans are notoriously bad for defaulting. Except in this case the government is making all or most of the mortgage payment. If the person abandons the home because insurance, taxes and upkeep prove too costly, and the home loses a large share of is value, who takes the financial hit?  The taxpayers of course.

Second, suppose a homeowner under this scheme starts doing well economically and no longer qualifies for the Section 8 subsidy. Will the Section 8 payments stop? Indeed, once a person enters the Section 8 program, the incentive to do better, work harder and earn more is severely diminished. And in the case of the long term mortgage guarantee, that disincentive is even greater.

Since mortgages are typically made for 30 years, there are an enormous number of life possibilities that can occur with the homeowner. For example, in the event of the death of the homeowner well before the mortgage is paid off, who gets the property if there are no surviving family members or if none of the heirs qualify for the Section 8 mortgage subsidy?

How will legal documents be drawn to anticipate questions of who owns the equity in the property?

Being a homeowner is a great thing. But homeownership must be driven by economic capability and willingness to put some “skin in the game” in terms of commitment, saving for a down payment and ability to take care of a property, pay taxes, etc,  Otherwise, why not just have the government buy the homes and give them to people?

 

Fare Overhaul at PAT?

News today (here and here) indicate that the Port Authority could begin discussing a proposal to do away with the zone pricing system and peak fares, charging less if a rider uses the connectcard instead of cash, and adding a visitor day pass.

Fare revenues in the years 2009-2013 as outlined in data available through the National Transit Database shows that, as a portion of “sources of operating funds”, fare revenues provide about 25% to 28% of PAT’s total sources (local, state, Federal, and other provide the remainder).

There were fare increases in 2011 and 2012, and total fare revenue rose 14% in those years (from $87.9 million to $100.5 million).  In 2013 the $100.5 million in fares provided 28% of all operating fund sources.  Nationally, the Database shows that in 2013 fare revenues provided 33% of all sources of operating funds.