Notes on the state of things

Pennsylvania Gov. Tom Wolf’s push to increase the state minimum wage in excess of 100 percent “is facing a rocky road,” reports The Associated Press.

And with good reason.

As the AP also reports, the state’s Independent Fiscal Office concludes that raising the wage floor from the current $7.25 to $12 an hour – the first step on the road to a $15 hourly wage mandate by 2025 – would lead to the loss of 33,000 jobs.

No doubt, raising the minimum to $15 will lead to even more job losses. And that will hurt the very people their professed benefactors so ardently claim they are trying to help.

Still, Rep. Matthew Bradford, a Democrat, laments that the $7.25 minimum “is not commensurate with the dignity that we all propose work should come with.”

As if a misguided public policy that, just to begin, eliminates 33,000 jobs somehow is dignified?

In the name of “security and safety,” Pittsburgh officials are attempting to clamp down on economic liberty.

The Post-Gazette reports that public safety officials want to crack down on towing operators competing for accident work. Not only has the city requested proposals from tow companies to bid for the right to tow wrecked vehicles from accident scenes – and limiting bid-winning towing services to geographical zones — it wants to apply a city ordinance that caps general towing fees to accident tows.

Furthermore, it attempts to dictate not only what kind of equipment eligible tow companies must have to participate but what kind of business they run.

To wit, towing companies affiliated with auto body shops are barred from bidding under the new zoned regimen. Talk about arbitrary and capricious government-knows-best malarkey.

The rationale for this latest spate of government interventionism comes from an official who laments that tow trucks competing for accident business create “several safety concerns.”

Among the claimed concerns – tow truck operators “often speed and break traffic laws to get there first” and “add to traffic congestion.”

What, there’s poor enforcement of speeding and traffic laws? And by this rationale, surely it’s also time to crack down on the Pittsburgh Pirates’ weekday afternoon games for the near-gridlock they regularly cause.

Also cited was a recent incident in which two competing tow operators brawled, leaving one in critical condition. And police are reported to have complained about regular trouble between tow truck drivers.

What, there are no existing laws to address such situations?

It should be difficult to imagine any government jurisdiction proposing such a perversion of the marketplace. Sadly, it is not difficult in the City of Pittsburgh, where government believes markets exist to attempt to command them and that the fundamental laws of economics are not immutable at all but merely suggestions.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Pittsburgh Metro’s December jobs report disappointing

Summary: The latest employment figures for the Pittsburgh Metropolitan Statistical Area (MSA) is once again disappointing.  The area’s total private job gains fail not only to match the national growth rate, but also the growth rates of comparable metros.

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The employment figures for December 2018 recently released for the Pittsburgh MSA (Allegheny, Armstrong, Beaver, Butler, Fayette, Washington and Westmoreland counties) were not encouraging.  Private sector payroll employment (not seasonally adjusted) rose by just 8,100 (0.75 percent) between December 2017 and December 2018. This continues a trend of relatively weak growth that defined the local economy in 2018.  Seasonally adjusted data are not available for payroll data at the metro level. However, the 12-month-ago comparison eliminated most if not all seasonal effects and is a good measure of year-to-year gains.

To provide perspective, this Brief will compare employment growth in Pittsburgh to jobs gains in the metro areas of Columbus, Ohio, Indianapolis, Ind., Nashville, Tenn. and the national performance.  Data in all comparisons will be private employment changes from December 2017 to December 2018. Comparisons are presented for total private jobs, jobs in goods production and private service sector production as well as in the focused areas of manufacturing, education and health, and leisure and hospitality.

Nationwide total private jobs grew 2.02 percent from December 2017 to December 2018.  Indianapolis’ and Nashville’s MSAs job counts topped that by rising 2.31 and 2.14 percent, respectively, while Columbus’ MSA fell just short (1.72 percent).  Meanwhile, the 0.75 percent pickup in the Pittsburgh MSA was well short of not only the national growth but also the gains in the sample of comparable metros.

In the goods-producing super sector (which includes mining and logging, construction and manufacturing) employment nationally posted a solid 3.13 percent gain.  The highest jump among the metro areas belongs to Indianapolis (5.67 percent) with Pittsburgh coming in a distant second at 1.41 percent but not too far above Columbus (1.33 percent).  Nashville had a decline to its number of employees in the goods-producing super sector (-0.88 percent).  Much of Pittsburgh’s pickup, 80 percent, was in the construction sector.

At the same time, manufacturing employment rose 2.11 percent from December 2017 to December 2018.  While the Pittsburgh MSA had positive growth in manufacturing jobs (0.12 percent), it was not only well behind the national rate, it was much slower than Columbus (1.49 percent), and Indianapolis (1.41 percent) but ahead of Nashville, which was the only metro in this sample to see a decline in manufacturing jobs (-1.56 percent).

In the private service-providing super sector, employment nationally recorded a rise of 1.81 percent—a much slower pace than the goods-producing super sector.  In the group of metros, only Nashville exceeded the national pickup (2.64 percent).  Columbus’ (1.77 percent) was just below that of the nation closely followed by Indianapolis’ MSA (1.71 percent).  The Pittsburgh MSA followed well behind all areas with a mere 0.64 percent jobs gain.

A key private service-providing subsector is the education and health subsector, often known as “eds and meds.”  The Pittsburgh MSA prides itself on being strong in this area with its many hospitals and universities.  However, the employment gain in “eds and meds” from December 2017 to December 2018 was the lowest for all comparison areas at a paltry 0.47 percent. Nationally these jobs climbed 2.25 percent over the 12 months with the highest growth posted by Columbus (3.21 percent).  While the Indianapolis and Nashville MSAs came in below the national gains (1.86 and 1.72 percent respectively), the gains were far stronger than in the Pittsburgh MSA.

Leisure and hospitality job growth is the last sector examined. This sector includes the accommodation and food services subsectors (the largest subgroup) as well as the arts and entertainment subsectors.  The Pittsburgh MSA did quite well in the leisure and hospitality group posting growth of 2.33 percent from December 2017 to December 2018.  This was much better than the national growth of 1.18 percent and handily besting Columbus (1.06 percent), Nashville (-0.79 percent) and Indianapolis (-3.83 percent).

However, as has been explained in previous Policy Briefs, this is the one sector that perhaps does the least to boost economic growth because of very weak multiplier effect and low wages.  For example, statewide (timely wage data are not available by sector below the state level) the average weekly wage of all employees in the manufacturing sector was $881.50 in December 2018—a 2.17 percent increase over the weekly wages rate one year ago.  By contrast, the statewide average weekly wage for employees in the leisure and hospitality sector was just $385.79—up just 1.45 percent from its year-earlier posting. Manufacturing wages are more than twice as high as leisure and hospitality wages in Pennsylvania and contribute more to the state and MSA’s tax coffers, as well providing stronger multiplier effects.

Average weekly hours worked for each sector show workers in the manufacturing sector have much longer work weeks and far beyond those in the leisure and hospitality sector (41.6 hours vs. 25.1 hours).  It’s not hard to see why manufacturing jobs are more sought after than are those in leisure and hospitality—yet the latter sector is where the Pittsburgh MSA excels.

A primary reason that jobs growth continues to languish in the Pittsburgh MSA, and even statewide, are economic policies that make the business climate less friendly than other areas and consequently making it a less desirable place for startups and for existing businesses to grow.

The latest salvo aimed toward business is a plan announced by the governor to raise the minimum wage in Pennsylvania from the national minimum of $7.25 per hour to $12 per hour in 2019 with the ultimate goal of increasing it to $15 by 2025.

Apparently, no amount of evidence of the negative effects of large increases in mandated minimum wages will deter politicians who prefer to look concerned about incomes, as opposed to helping their states and regions grow businesses and employment with higher wages and produce strong demand for workers. Strong sales and good profits lead to higher wages in a competitive labor market. Avoiding this truism is not a good way to boost economic prosperity.

As long as Pennsylvania, and the region, continues to ignore the impact of policies on business friendliness—which seems to be the case—job growth will remain stunted and future disappointing jobs reports will be the norm.

Convention center machinations

A timely reminder came this week from the Post-Gazette about how taxpayers keep footing part of the bill for the confabs of this group or that group at the David L. Lawrence Convention Center.

And just why it keeps happening remains an important public policy question.

It’s no secret that the convention center, built and maintained with millions of taxpayer dollars, offers steeply discounted or even free space to national conventions that come to town. The rationalizations are those old standbys of “It’s how business is done” and “Hey, the subsidies pay for themselves.”

But as the P-G’s Mark Belko astutely exposed the elephant in the room, those discounts and freebies come “even as the center itself piles up annual operating deficits.”

And guess who gets to cover those?

Without getting too far into the weeds, officials steadfastly argue that the price paid in such concessions more than pays for itself in the money generated by convention center events.

But here’s a simple fact: Even more money would be generated if those using the convention center paid their own freight for that space and those deficits might just be eliminated.

And we’re not talking chump change when it comes to rental rates; we’re talking tens of thousands of dollars, if not well past $150,000.

Fear not, however, there always is some scheme to use taxpayer dollars – you know, taken from a bottomless pit lined and filled with gold — to further subsidize the already heavily subsidized facility to make up the difference.

Then there’s the argument that because of the “competitive” nature of the convention business, such discounts and freebies are an automatic. Otherwise, they say, conventions would go elsewhere. Only in public policy can extortion be rationalized in such a manner. Perhaps that’s the case for privatizing the convention center.

There is, however, another elephant in the room. And that’s the issue of taxpayers – and not effectively but actually — helping to foot the bill for private groups and causes they likely would not otherwise support and have no business having their pockets picked to support.

Think of things like a labor union’s convention, among others.

And then there’s the shell game of using VisitPittsburgh, the region’s tourism agency, to help cover the rent discounts using a “credits” system.

Or as KDKA Radio talk show host Wendy Bell wryly put it on Monday: “So, we pay for the building and for the event.”

Two decades ago, the new convention center was billed right up there with a new baseball field and football stadium as the be-alls and end-alls to foster Pittsburgh’s next great renaissance – something akin to perpetual money-generating machines that would make Rube Goldberg blush.

And to this day, their promoters rave on and on about the multiplier effects they have that don’t merely ripple through the economy but roll in like some kind of can’t-fail wave of great things fronted by the mechanical wave of a beauty queen.

Of course, the veracity of those claimed multiplier effects typically are dubious; governments are infamous for such exaggeration.

Long point short: If the convention center is the grand economic driver they claim it to be, there should be no need for discounts and/or subsidies; it should be self-sufficient.

Period.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

A pig in a poke in the Hill?

Court documents indicate the heavily publicly subsidized Shop ‘n’ Save grocery store in the Hill District has not been paying its rent. But it’s unclear as to why.

There are suggestions it’s because the Hill House Association, the struggling nonprofit that owns the property, has not been maintaining and/or policing the parking lot and lighting. That raises the question if the association has the management wherewithal to be the landlord.

There are other suggestions that there is an insufficient customer base to support the store. That raises the larger question of whether the store should have been built in the first place.

So, what are the answers?

For decades, the marketplace decreed that there was no market for a full-service grocer in this locale. And no private grocer would come in precisely because of this reason. Only when heavy public subsidies were offered, did Shop ‘n’ Save agree to come – and then with woefully little of its own skin in the game.

You’ll recall as well that 11 years ago the Save-A-Lot chain was ready to attempt a Hill District store. But that effort succumbed to the mindset that only a “full service” grocer was acceptable.

In 2008, Save-A-Lot featured a smaller, more targeted inventory but prices that it said were 40 percent lower than a full-service grocer. It might have been a better fit for the Hill. But, then again, there’s really no way of knowing that.

But given the public “investment” in the Shop ‘n’ Save, the public has a right to know what the full and real story is. That’s especially critical given that some pols already have floated the idea of replacing Shop ‘n’ Save with another grocer.

Is there another chain that sees enough profit potential to take over the Hill District location? Or will any replacement simply be another subsidized player — the same kind of pig with a new shade of lipstick, a newly gussied up salesperson for yet another pig in a poke?

Again, the marketplace has been speaking in one of two ways or both in this matter.

From the information made public, it’s either a case of the Hill House Association not having the chops to manage this property or there simply not being enough traffic to support this grocer, even heavily subsided – or both.

Whatever the real story is, it has become a textbook case on the hubris of marketplace interventionism. Bureaucrats have a not-so-funny and typically very expensive habit of doubling down on their mistakes to cover up the economic lie of interventionism, throwing good money after bad.

And that’s the kind of public disservice that is anathema to sound public policy.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Government’s default position: Fleecing

What is it about government mass-transit projects?

New York City is moving forward on a controversial streetcar line to run through Brooklyn and Queens. And it appears to be another farce in the making, a la Pittsburgh’s North Shore Connector.

The original New York proposal for the Brooklyn-Queens Connector, or BQX, was to run 16 miles at a cost of $2.5 billion. But now, five miles have been axed from the project. And guess what? The cost has jumped to $2.7 billion.

File that one under “Stupid Government Tricks.”

Which brings to mind the Port Authority of Allegheny County’s North Shore Connector. Its “spine line” to the David L. Lawrence Convention Center was lopped off but the half-billion-dollar price tag remained. Then, some officials even snapped their braces about the project being brought in on budget. Really. Talk about chutzpah.

New York Mayor Bill de Blasio’s plan for that shiny new streetcar, supposedly guaranteed to spark economic development in the boroughs, took a big step forward Wednesday last.

The NYC Economic Development Corporation, which also runs NYC Ferry service, announced it approved a contract with a consultant to oversee the environmental review process for BQX.

The New York Daily News reports concerns remain about whether the trolley line will lead to gentrification and rising housing prices. Of course, the greater concern should be if ridership will end up being anything close to the projections always used to justify such projects.

Long answer short – it seldom is.

Oh, and there’s another kicker to the New York trolley project – “it still hasn’t (been) determined how it will be (fully) funded,” the newspaper reports.

An estimated $1.4 billion of the project’s cost will be covered through a scheme called “value capture,” or VC, the current darling of “creative financing” in Europe.

Value capture is not unlike that dubious methodology so favored in Greater Pittsburgh known as tax-increment financing (or TIF). That said, it appears VC is more market-perverting than TIF.

“It’s not yet clear where the remaining $1.3 billion will come from,” the Daily News reminds.

Oh, one can only imagine someone will cook up yet another “creative” financing scheme.

One needs to look no farther than the Pittsburgh Water and Sewer Authority to understand how dysfunctional “government water” can be.

The PWSA, you’ll recall, long was treated as a piggybank by the City of Pittsburgh and prone to the worst of political machinations. These days, it’s under state Public Utility Commission (PUC) oversight and faces a long slog to recover from that abuse.

On Thursday, the PUC approved across the board double-digit percent rate hikes to pay for long overdue upgrades. Future rate hikes are virtually assured.

In addition to mechanical upgrades, another of the many areas to be reformed is a 24-year-old agreement between the city and authority that, among other things, gave city government entities 600 million gallons of free water annually, saw the city cover authority pensions to the tune of $2 million each year and transferred millions more dollars in agency payments to the city.

PWSA board chairman Paul Leger tells the Tribune-Review:

“The old agreement is now invalid. What we are trying to do is come up with a new agreement that reflects itemized costs that we will pay for and/or that the city will pay for or perform that reflects current standards of operation both for us and for the city.”

You know, run things like a business — a private business. Ahem.

The better idea, obviously, is to get government and shadow governments (i.e. authorities) out of the water business. Which is about as popular with government bureaucrats as garlic is with vampires.

It’s certainly not as if there aren’t multiple scores of examples of private companies providing excellent services at competitive prices to multiple millions of customers, all still overseen by state utility regulators.

Right?

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Governor’s proposal for basic education

The 2019-20 proposed state budget for Pennsylvania would spend $6.5 billion on basic education.  This year, basic education consists of $5.5 billion distributed to districts under the “hold harmless” method and $538 million–all new basic education money from the 2015-16 fiscal year forward–distributed to districts under the student-weighted formula adopted by Act 35 of 2016.

Under the proposed budget, the share of student-weighted dollars would increase to $704 million and a separate $241 million block grant program called Ready to Learn would be moved into the basic education portion of the budget.

The Act 35 formula uses average daily membership, household income and local tax effort to compute a student-weighted value which then determines the share each district receives from the $704 million.  As proposed, about a half-dozen districts would see a decrease in 2019-20.

All 43 districts in Allegheny County would see a boost in Act 35 dollars over this year; close to $10 million in additional money would de divided with the total in the county rising from $33.8 million to $43.2 million (28 percent).  Steel Valley School District would see Act 35 money increase from $615,166 to $988,375 (61 percent).  Woodland Hills School District would see an increase of close to $200,000, from $1.9 million to $2.1 million (10 percent).

Using these two districts and the Act 35 components for this fiscal year and next shows that Steel Valley’s student-weighted average daily membership and local tax effort indices increased.  As a result, its student-weighted value increased 23 percent.  Woodland Hills saw all three of its indices fall and would see student-weighted value fall 16 percent but it will still get more money.

Of course, the budget is still a proposal, and it will offer the opportunity for discussion on what taxpayers are getting in return for the increase in spending.  PSSA results are not encouraging. Besides basic education there is another $6.6 billion in spending and growth of 3.61 percent, which is greater than the overall percentage change in the general fund (2.8 percent).

 

Peers could point way on Port Authority performance

Summary: The state Auditor General’s Office recently released a performance audit of the Port Authority of Allegheny County (PAAC). State law requires the audit to be undertaken once every four years. Transit systems in comparable metro areas were used to measure transit performance. The next audit should utilize this peer group to see how PAAC compares on several critical indicators of transit operations.

The audit covered the period from Jan. 1, 2016, to Dec. 31, 2017. It focused on the mass transit agency’s hiring procedures (in the time period 330 new hires were added to bring the total headcount to 2,533 at the end of 2017) and how new service requests are processed.

It also reviewed bus and light-rail operations measured by on-time performance, the percentage of time vehicles are in service and passengers per revenue hour. To evaluate the Port Authority, four peer agencies (MTA in Baltimore, GRCTA in Cleveland, Bi-State in St. Louis and Metro in Minneapolis) were selected due to “similarities in city/metropolitan area populations, transit service levels, modes of service provided, or methods of route management,” according to the audit.

In the audit time period, vehicle in-service time was 85 percent for buses, slightly lower than the peer average of 90 percent which PAAC attributed to the locations of two bus garages and language in the collective bargaining agreement with the transit union on meal breaks. On passengers per revenue hour, PAAC ranked second behind MTA. To improve where lacking, the audit recommended a renegotiation of the collective bargaining provisions when the current labor contract expires in 2020 and different locations for garages to reduce time out of service.

While the audit is to be commended for looking at other agencies to benchmark PAAC’s time-related performance, quite a deeper look at the costs of mass transit service and how funding is provided could have been made part of the examination.

The National Transit Database (NTD) recently published 2017 data for transit agencies. All five agencies in the audit provide mass transit through various modes but bus trips accounted for at least 60 percent of all unlinked trips. The Port Authority was highest with 84 percent of all transit trips provided by bus. PAAC provided more bus trips per vehicle revenue hour than the peer group average (33.2 to 27.6) and only the MTA had a higher rate than PAAC (40.1 trips per hour).

Consider the following indicators:

Bus operating expense per vehicle revenue hour—This is the non-capital outlay required to deliver services divided by the hours buses are actually on routes picking up and discharging paying passengers, an indicator that we wrote about at length in a 2018 Policy Brief (Vol.18, No.18). PAAC’s expense was $187.02, which was higher than the peer group average of $143.95, a difference of 30 percent. Only MTA was remotely close to PAAC on this measurement at $174.13. That figure cries out for attention given the sizeable gap between PAAC and its comparable peer group. It would have certainly raised a red flag if included in the audit.

Salaries/wages/benefits—The Port Authority spent $301.9 million on salaries/wages/benefits in 2017. This was higher than the peer group average of $239.9 million by 26 percent. MTA and Metro were not far behind in dollar terms, with each spending $297 million on the category. The outlays for GRCTA and Bi-State were quite lower with both agencies spending less than $200 million. If the peers were selected for their similarities to PAAC, an obvious question should be why the level of salaries/wages/benefits was the highest of the five.

As a percentage of all operating expenses (which would include purchased transportation, materials and supplies and other expenses) PAAC had a share of 75 percent. This was higher than the peer group average of 66 percent. Only Metro had a higher percentage share at 79 percent.

Sources of operating funds expended—In presenting the audit findings the auditor general stated that transit fares should not rise and that “it’s critical that Harrisburg make greater investments.” Two agencies in the peer group, GRCTA and Bi-State, are primarily locally funded whereas Metro and MTA, along with PAAC, received at least 50 percent of all operating funds (federal, state, local and other) from their respective state. MTA received the highest percentage share, at 75 percent, while PAAC and Metro were at 56 percent and 60 percent, respectively. In dollar terms MTA’s state subsidy of $566 million was far greater than the $228 million received by both PAAC and Metro from their state governments.

To what level does the auditor general believe state subsidies for Port Authority should rise? And would that argument be made if the audit had included a comparison of operating expenses and payroll to the peer group to see how far above the others the agency is?

Future performance audits, beginning with the next one in 2022, should utilize the peer agencies to measure PAAC’s standing on operating expense per vehicle revenue hour, the amount and share of salaries/wages/benefits and the amount and share of state subsidy for the agency. Previous work has shown the costs here to be greater than in numerous other locales, including Boston, Washington, D.C., Columbus and Buffalo. Only New York City was found to be higher. With enough attention paid to these measures it might be possible to reduce the gap between the Port Authority and its peers.

The ‘green’ road to trouble

Pittsburgh Mayor Bill Peduto would be wise to review a Feb. 3 Investor’s Business Daily commentary by John Merline. It questions the practical, economic and environmental efficacy of “100 percent renewable energy.”

Peduto, of course, is a big proponent of “green energy.” Among his proposals are “achieving 100 percent renewable electricity consumption for municipal operations” and “development of a fossil fuel-free (municipal) fleet.”

The mayor is not alone in his efforts. Myriad “progressive” governors around the country propose even more expansive “green energy” programs. So do many prospective Democrat presidential candidates.

One proposal, now before Congress, seeks to stop using any fossil fuels for energy production by 2035.

But Merline details how just 12 percent of all U.S. energy production currently comes from “renewables.” Government estimates, based on current trends, suggest that will rise by a mere three percentage points by 2050.

“In other words, attempting to turn the country’s energy supply to 100 percent renewable would be a monumental task,” he writes. “It would involve fundamentally reshaping the nation’s energy economy. And it would add significantly to energy costs – since renewable energy is generally more expensive.

“How that could be achieved without crashing the economy is anyone’s guess,” he says.

Additionally, even “environmentalists” question just how “green” renewables are. To wit, hydroelectric power generation can take a serious toll on wildlife. The same goes for wind and solar.

“Most forms of ‘clean’ energy require massive amounts of land to produce a relatively small amount of energy,” Merline reminds. As one example, he cites the 3,500 acre (5 square miles) Ivanpah Solar Electric Generating System in California that produces 392 megawatts.

But a natural-gas fired generating plant in Michigan, “which is a postage stamp by comparison,” generates 1,633 megawatts, he says, reminding that “wind power is even more of a land hog.”

“A study by Harvard researchers found that meeting current electricity needs using wind power alone would require 12 percent of the entire continental U.S.,” an area twice the size of California, Merline writes.

Here’s another inconvenient fact: Heritage Foundation scholars found that states requiring 25 percent or more renewable energy have utility rates higher than those lower mandates (10 percent or less) and 50 percent higher than states with no such mandates.

Wow, there’s an “incentive” to live and do business in such states, eh?

“Once you get beyond the bumper sticker appeal, calls for 100 percent renewable energy look like a bad deal for the economy, families and even the environment,” Merline concludes.

Indeed, conservation efforts are a wonderful thing at every level of government. But by the very same token, this blind pursuit of “100 percent renewable energy” looks to be one of those proverbial “cures” far worse than the “disease.”

And how troubling it is that such “cures” too often permeate public policy proposals.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Voters in Penn Hills to get a say on school taxes?

A recent blog noted that the Penn Hills School District was placed into financial recovery and will have a state-appointed coordinator that will help the district with its finances.  However, the normal timeline of school district budgeting must go on.  And with requirements under Act 1 of 2006 the budget process has an important deadline coming on Feb. 20.  That’s when districts have to adopt a preliminary budget for the 2019-20 school year.

For Penn Hills, the preliminary budget includes a tax increase of 1.92 mills, which would raise the rate from 28.66 mills to 30.58 mills.  The district’s Act 1 index would only allow an increase up to 29.58 mills (0.9 mills) without an exception granted by the Department of Education or by approval through a referendum in the district.

Penn Hills wants to be granted exceptions for special education and pension costs.  But the state representative from Penn Hills has made a direct request to the secretary of education to deny the exceptions and either “require the school district to reduce the tax-rate increase to no more than the index, or require it to submit a referendum question for voter approval in the next election.”

Since the 2007-08 school year–when Act 1 requirements on tax increases first went into effect–there has been one voter referendum on a school tax increase.  School districts across Allegheny County exceeded their Act 1 index with permission from the Department of Education via an exception 68 times in the last 12 years.  Penn Hills did it for the last three years with increases of 6, 5 and 4 percent year over year.

From 2013-14 to this year the taxes on a median value home in Penn Hills ($68,500) have increased $343 after accounting for homestead property tax relief for school taxes from gaming money (that’s gone up $13).  With the placement of the district into financial recovery and another above-index tax increase, maybe putting the decision in the hands of the voters would give an indication of their feelings about the situation.

Shale tax shibboleths & sophisms

It was French polymath – that is, a universally learned person – Gustave Le Bon who, in 1895, perhaps best defined a climate permeated by those constantly employing shibboleths to argue their cases.

It came from his seminal work “Psychologie des foules” (or, in English, “The Crowd: A Study of the Popular Mind”):

“Reason and argument are incapable of combating certain words and formulas. They are uttered with solemnity in the presence of crowds, and as soon as they have been pronounced an expression of respect is visible on every countenance, and all heads are bowed.”

Shibboleths, in another word, are sophisms, arguments that, though plausible, nonetheless are fallacious. Uttered with the greatest of regularity, typically by politicians, they paint themselves in the veneer of truth.

But, alas, if reasoned people take the time to peel back that veneer, they uncover the cheap particle board beneath. The gross misrepresentation. The outright lie.

Which brings us in this ‘round-about way to Pennsylvania Gov. Tom Wolf.

For the fifth-straight year, the second-term Democrat governor will, in his annual budget address, urge the Republican-controlled General Assembly to enact a severance tax on shale gas extraction. Lacking “legs,” it’s likely dead on arrival.

But still expect Wolf to trot out the usual shibboleths and sophisms as he yet again attempts to make his dubious case. After all, he’ll reiterate, Pennsylvania is the only state without such a tax. We’re “leaving money on the table,” he’ll likely argue.

Or, in the nomenclature of his preview comments:

“It is far past time that Pennsylvania stop allowing our commonwealth to be the only state losing out on the opportunity to reinvest in our communities.”

Of course, omitted from the governor’s statement is that Pennsylvania indeed already has a tax on shale gas. It’s called an “impact fee.” And, in fact, the state’s Independent Fiscal Office projects it will raise a record $247 million in 2019.

Those receipts are split, as the Post-Gazette reminds, to primarily “compensate (the) state and local communities for the burden on public services and the environment.”

But Wolf is taking this year’s entreaty for a new shale severance tax to another level – legacy-seeking.

The governor said that as long as there is no additional tax, “my vision of a restored Pennsylvania that is ready to compete in the 21st century economy will never become reality.”

Ah, there it is, the old nub of the rub: We must tax our way to prosperity! What is it that prevents “progressives” from learning anything?

And Wolf not only wants to attempt to improve our lot in Pennsylvania by confiscating more private dollars, he wants to drive the commonwealth ever deeper into debt to achieve his vision, using the shale gas industry as collateral.

The governor wants the Legislature to approve the borrowing of $4.5 billion over four years, to be repaid using new severance tax receipts – over 20 years.

But much like Wolf’s proposal to more than double the state minimum wage and his plan to allow higher-wage workers to file for overtime pay, this “benefit” also comes at great cost.

There will be less money to invest by an industry operating on thin margins. There will be fewer jobs. Prices could rise. Ancillary industries will suffer. And, depending on how his new tax is structured, it runs the risk of siphoning impact fee dollars for other uses.

Since when is raising the cost of doing business any way to enhance one’s competitive advantage? Since when are such proposals — by any stretch of the imagination or by any sound economic metric — sound public policy?

Well?

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).