School Districts Register Their Complaints Over Tax Shift

At the beginning of this month we noted in a blog that the possibility of eliminating school property taxes via a shift to income and sales taxes might get another consideration this legislative session.  An article from central PA focused on the objections several school districts have with the idea, which gets to the local control aspect of the issue.

We noted this aspect in many of our writings on the topic in the past, including last October where we wrote about a pending case before the PA Supreme Court and the chance that a tax shift would be taken up.  How would a plan be received if there was a dollar-for-dollar swap of local property taxes for state levies, where districts that now raise a lot locally would get money back from the state pot alongside districts that get plenty from the state?  Or what about if the state said fairness is ensured by giving all districts the same dollar amount?  Almost all scenarios face a pushback somewhere, though that Brief and one in 2015 raised the option of allowing wealthier districts to break off from the state system if they want to continue to raise dollars locally.

State System of Higher Ed Will Undergo Examination

Two years ago, the Institute wrote a Policy Brief that analyzed the financial and enrollment trends of the Pennsylvania State System of Higher Education (PASSHE) and noted with declining enrollment, a sluggish economy, and legacy costs “…PASSHE will need to take a hard look at the system as a whole and the individual schools to determine the best course of action regarding how to allocate scarce resources to best serve Pennsylvania students and taxpayers.”

Having just come through its first strike the head of PASSHE noted in a speech delivered this week that “Every bit of this system — as great as it’s been over the years — has to be examined…From how we operate the office of the chancellor to how we’re organized as a system … no preconceptions and no limits.”  That possibly could include merging or closing institutions.

 

Host Fee Deadline Extended

By virtue of a 6-1 decision by the Supreme Court of PA, the deadline for the General Assembly to craft a fix on the 2004 gaming law local share assessment (host fee) has been extended out to May 26th.  As we wrote last November on the court’s decision to sever the language on the host fee due to problems with the Uniformity Clause, the Court gave the General Assembly 120 days to come up with a fix, which would have expired tomorrow (January 26th).

Members of the Senate petitioned the court on January 12th for an extension, according to the dissenting opinion.   The reasons?  Not enough session days, the stay coming during lame duck time period, and the disagreements between the Senate and the House on a fix and the expansion of gambling.  The dissenting opinion raised the possibility that applications for relief from deadlines “…likely will become the rule rather than the exception”.

While some casinos and host municipalities/counties have come to agreements, it is unclear what happens if a final fix comes five months into the year and what that means, if anything, for obligations on the host fee in places where agreements have not been made.

Legislators Thinking About Muni Pensions

Our most recent report and a Brief from 2017 analyzed local pension health in Allegheny County and the possibility of reforms for municipal pensions based on our work and the suggestions of the 2015 municipal pension task force.  One of the points we raised in the report was “The General Assembly expects to take up pension reform proposals in the current session, but whether those reforms include local pensions or just focus on the state SERS and PSERS systems is yet to be seen”.

A recent article from northeastern Pennsylvania collected comments from members of the PA House on the topic.  The article noted “At the start of a new legislative session, Republican caucus leaders directed their remarks to curbing costs for the two giant state pension plans for state government and school district employees. However, many also stressed that municipal plans deserve attention, too”.

The thoughts are quite varied: do something for new hires, but maybe not all new hires (public safety vs. non-public safety employees); pension bonds; hybrid plans; etc.  All ideas that have been touched upon before, but will this be the session where something gets done?

County’s Taxable Value up 1.4% in 2017

Based on the certified County Assessment Roll for 2017, Allegheny County’s taxable value was $77.7 billion.  That’s an increase of 1.4% over the 2016 certified amount.  Since there was no reassessment conducted for 2017, changes in taxable value are the result of appeals, improvements, new construction, corrections to records, etc.  We have written previously about the details of the County’s certified values since the 2013 reassessment (here and here).

The increase by municipality shows that for 2017 the big increases are concentrated in the western suburbs of the County, with Findlay (8.6%), Robinson (4.3%), and south Fayette (4%) seeing taxable value growth at the top.  The northern suburbs of Marshall (5.6%) and Ohio (4%) rounded out the top five.  Decreases in taxable value were concentrated in the eastern suburbs of Wilmerding (-15.7%), Rankin (-4.2%), and East Pittsburgh (-3.9%).

 

 

West Mifflin Will Have to Take Funding Matter to Dept of Ed

Since the 2007-08 school year, West Mifflin School District has been educating students from the City of Duquesne who would otherwise attend high school in Duquesne, were there still a high school there (a few years later, 7th and 8th graders joined in the arrangement).  The terms of that deal were spelled out in state legislation, as was the payment arrangement for West Mifflin.  After trying to resolve issues over funding via negotiation, West Mifflin filed a lawsuit in May of last year.

That lawsuit was decided yesterday by the Commonwealth Court.  In short, the court stated that the proper place for a remedy is with the state Department of Education, not the courts.  Though there were six counts alleged by West Mifflin, this blog will look at the argument over per-pupil reimbursement.

The law established that for a school district of the third class with a board of control that eliminated its high school, the Secretary of Education would “establish the per-pupil tuition rate that a school district…shall receive for each reassigned student in a regular or special education program”.  From 2012-13 forward that rate was the greater of $10,000 or the product of the prior year tuition and the greater of the percentage increase in total budgeted revenues available to a distressed school district or the Act 1 index.  In other words, the court opined, it is not Duquesne that is determining the payment, but the Secretary.  West Mifflin, in this part of the lawsuit, argued that the Secretary did not follow the second part of the formula, “… using the greater of either Duquesne’s total budgeted revenue percentage increase or the Taxpayer Relief Act Index when calculating Duquesne’s tuition rates.”  On this part, the courts pointed to the Administrative Agency Law as a remedy to challenge the tuition determination.

“West Mifflin’s real claim lies with the amount of tuition it receives for Duquesne students. This is a matter that must be addressed to the Secretary and, thus, Count I must be dismissed as to Duquesne” wrote the Court.  So it appears that the next step for West Mifflin in this dispute is to take up the matter with the Department of Education.

Interesting Signals Sent on Gaming

A newspaper article this week includes quotes from the new chairs of the respective gaming committees in both chambers on the topics of Internet gaming and the casino host fee for counties and municipalities.  The House majority chair gave his opinion that he feels it is doubtful Internet gaming will have any impact on the 2016-17 fiscal year (that concludes June 30th).

“It’s just not going to happen. I never thought it was going to happen when we approved the budget…I anticipate that we’re going to have a shortfall.”  We wrote about slowing revenue last year.

There was a bit more bullishness on getting a casino host fee fix.  According to the article the fact that places that do not host casinos wanting a share of host fee money may have been an issue.  Perhaps there was/is a desire to make the host fee more like the Marcellus Shale Impact Fee, where counties with drilling activity receive money but all counties get an allocation.

Here in Pittsburgh the Rivers Casino came to a voluntary arrangement with Pittsburgh for $10 million and, according to a casino spokesman, a deal with Allegheny County for its host fee (about $5 million or so) is being worked out.

 

Will this Report Change Pittsburgh Schools?

At this week’s board meeting directors of the Pittsburgh Public Schools received the findings of an evaluation completed by the Council of Great City Schools, which an article noted “…is likely the most comprehensive look at the district in recent history …”

In fact, the Council completed an evaluation of the District in 2006: the report can be found here, and our Policy Brief on the 2006 evaluation can be found here.  A search of the Council’s website shows four studies on Pittsburgh in the last eleven years.  It is also worth noting that the District received a report in 2013 as part of a “large scale visioning process”.

What does the Council’s 2017 report show?  At 175 pages there is a lot in there, but it should come as no surprise that the district’s enrollment is smaller (24,190) then it was in the 2006 report (35,146).  However, the District’s enrollment fell at a greater rate than the state (31% vs 5%) based on the 2006 Council data. The pupil to teacher ratio is about the same, 14 students per teacher, as it was in 2006 (13).  There is plenty of data about academic performance, benchmarked against the state and against other districts the Council analyzes.

So will this be the report that the District utilizes going forward?  Maybe, but was that not the case with previous reports as well?

 

Kentucky Passes Right to Work

With lightning speed following the seating of the new Republican controlled legislature, Kentucky has become the 27th state to enact Right to Work legislation. The Governor signed the bill on January 7. Missouri could be close behind.

 
Not only did Kentucky pass Right to Work—which means no worker can be forced to pay union dues as a condition of employment—the legislature as also eliminated the right of public employees to strike. And it is considering repeal of the Commonwealth’s prevailing wage law. If it does it will have carried out the trifecta the Allegheny Institute has called for in Pennsylvania for many years.

 
Prevailing wages and the right of public sector employees to strike, especially teachers and transit workers is an affront to good governance, Madisonian foundational principles of a self- governing people, and the public weal.

 
Michigan, Wisconsin, Kentucky, Indiana and soon Missouri are showing the way back to economics as determined by market forces of supply and demand, entrepreneurship and liberty and away from government interference and distortions. There will be hue and cry from the unions’ aggrieved membership but their intransigence has produced slow growth, job losses and overbearing government for far too long to warrant getting their way any further.

 
Kentucky marks the fifth state in just over four years to adopt Right to Work. Maybe Pennsylvania will see the light and get there in the next four.

Most Pension Plans in County Holding Steady

We are currently working on our latest installment of analysis on the 300 or so local pension plans in Allegheny County (see previous reports here).  Overall, not much change in the plans, the data on which are collected and submitted to the Auditor General’s office, a change due to state legislation passed last year.  Our analysis adds in five other pension plans in the County (the County’s plan, and four with the Port Authority).

In all (reflecting 2014 data) there were 304 plans in the County, with 80% the defined benefit type, and the remainder as non-defined benefit plans.  This has changed ever so slightly from our first report in 2011 when the division was 82%/18%.

In terms of financial distress, only one plan (Clairton’s police plan) was at a level of severe distress (18% funded when dividing assets by liabilities).  However, Clairton’s fire and non-uniformed plans are in better shape (114% and 77%) and thus, in the Act 44 schematic where municipalities (not plans) are ranked on distress level, Clairton is minimally distressed.  285 of the 304 plans were at a level of no distress or minimal distress.