Taxing bodies continue appeals win streak

In 2018 the Allegheny County Board of Assessment Appeals and Review considered more than 6,600 property value appeals.  These appeals were filed by owners and taxing bodies on residential and commercial parcels constituting $2.402 billion in assessed value. The net change in value between owners seeking to reduce their property value and taxing bodies seeking to raise property values was an increase of $77.7 million to $2.479 billion.

It is a familiar story in Allegheny County: with assessed values based on a 2012 base year, taxing bodies will seek out recent sales where the purchase price exceeds the assessed value by some dollar amount or percentage and file an appeal.  This practice unfortunately singles out recent buyers since properties might have risen in value as much as the one they just bought but properties that don’t sell are not subjected to a taxing body appeal.

Appeals brought by owners resulted in a decrease in assessed value of $239 million.  But this was outstripped by a $316 million increase in value on parcels where the appeal was filed by a taxing body, which, in the majority of cases, was a school district.  That’s not surprising given the fact that school taxes represent the bulk of the total property tax bill and school districts have a much greater incentive to appeal values.  The county and the respective municipality also net more taxes on successful upward appeals.

There were eight appeals brought by school districts that resulted in a change from pre- to post-appeal value of $2 million or more.  An appeal on an office building in downtown Pittsburgh resulted in an increase of $11 million from $60 million to $71 million.  If that value stays in place (it is being appealed in the Court of Common Pleas) that would result in an additional $296,000 in property taxes for the three taxing bodies.  It would also stand as the largest increase in terms of value to result from a taxing body appeal in the last three years.

More frequent reassessments would probably never eliminate appeals of property values altogether but might curtail a bit of the activity.  As in previous sessions of the General Assembly, there is a yet to be introduced proposal to ban appeals based solely on the incidence of a sale and would instead require a change to the nature of the property to be appealed.

 

 

Economic truths

Organized labor and its government skid-greasers in Southwestern Pennsylvania and across the commonwealth long have advocated for an ever-higher state minimum wage.

Now set at $7.25 hourly, the Democrat Wolf administration would like to raise it, in phases, to $15. Even some in the Republican-controlled General Assembly have indicated they’d entertain an increase, though not nearly as high as the administration’s proposal.

But before anyone in state government forms a union of lemmings to jump off that cliff, they should consider into what they’d be jumping. Let’s call it the Sea of Economic Reality.

You might recall how Internet retailing giant Amazon – roundly criticized for driving brick-and-mortar retail (large and small) out of business – was granted a modicum of redemption by “progressives” when, effective last Nov. 1, it enacted a $15 hourly wage floor for all its Whole Foods employees.

Other employees were given $1 hourly raises while “team leaders” were given raises of $2 an hour. (Which, by the way, is proof that arbitrarily setting a wage floor pressures existing higher pay rates even higher.)

Of course, something else happens that is most axiomatic when wages are raised arbitrarily and not based on productivity. Yes, class, that’s right – reduced hours and/or fewer jobs.

The Guardian newspaper in England reports that Whole Foods employees have told it “they have experienced widespread cuts that have reduced schedule shifts across many stores, often negating wage gains for employees.”

And the reductions hardly have been insignificant. The newspaper cites the experiences of Whole Foods employees in Oregon, Illinois and Maryland. The most graphic example came in Illinois where an employee told The Guardian that part-time hours were slashed from 30 to 21 hours weekly.

The laws of economics are immutable. Arbitrary actions, those not based on sound economics, have deleterious consequences. It’s that basic. It’s that simple. It’s that fundamental.

The Post-Gazette reports that Highwoods Properties of Raleigh, N.C., is seeking a $10 million state Redevelopment Assistance Capital Program grant to construct an office building at an undisclosed location in downtown Pittsburgh.

A second developer, McKnight Realty Partners, is seeking $5 million from the same program to, as the P-G reports it, “redevelop what it is calling a ‘high-profile building’ Downtown for offices, retail and restaurants.”

A company spokesman declined to identify the building citing a nondisclosure agreement.

Hold the phone! Why should taxpayers have any skin in these games? Worse, where’s the propriety in demanding public subsidies but shielding the projects from public scrutiny? There is none.

Public officials long have turned omission into an art form. The latest case in point comes in a recent radio interview in which a former Pennsylvania Department of Transportation regional press secretary who’s now a state representative whistled past the graveyard of the real problem facing the Pennsylvania Turnpike Commission and its massive $11 billion debt.

The Turnpike Commission has been forced to borrow heavily to meet the terms of a state mandate that hundreds of millions of dollars in turnpike proceeds be delivered annually to pay for non-turnpike highway projects and mass transit. That’s in direct contravention of federal law and, based on that, now the subject of a lawsuit by two turnpike-using groups, including truckers.

The Turnpike Commission has suspended any payments to PennDOT pending the outcome of the lawsuit. That, in turn, has created a funding crunch for these “public purpose” sucker fish.

But the PennDOT flack turned legislator more than intimated that the problem somehow was created by the Turnpike Commission. And that was a gross misrepresentation of the public policy matter at hand.

Granted, the commission has had its share of problems and scandals over the years. But this mess was created by greedy pols and highways and mass transit officials who view turnpike operations as a perpetually filled dairy cow’s udder.

By all means, let’s discuss the matter. But let’s employ all the facts in the process.

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

Evaluating the governor’s plan to mandate higher wages for teachers

Summary: The governor’s proposed budget for the upcoming fiscal year includes a mandate to set the minimum wage for Pennsylvania public school teachers at $45,000 per year.  This proposal will not only increase the wage for those earning less than the mandate but have ripple effects on the pay scale, driving up salary and salary-based costs such as pensions.  This will, of course, increase a school district’s expenditures which they will pass along to local and state taxpayers.

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When Gov. Wolf released his proposed budget for the next fiscal year, a lot of attention was placed on his desire for a higher minimum wage, a severance tax and other items on his wish list.  But one proposal has received little or no attention, viz., raising the minimum wage for Pennsylvania teachers and other education professionals from the current mandatory level by 140 percent.

In the summary of the proposed budget from the Office of the Budget—under “Building the Nation’s Strongest Workforce, Attracting and Retaining the Best Teachers for Our Kids” —it is noted that in the 1980s legislation was passed that “arbitrarily sets compensation for Pennsylvania teachers and other education professionals, including counselors and school nurses at a minimum $18,500 per year, or $8.90 per hour assuming a 40-hour workweek.”  The governor wishes to raise that minimum to $45,000 per year.

What would be the impact on local school districts if the minimum were raised to $45,000 for classroom teachers and other professional personnel?  This question can be answered in large part by looking at current average classroom teacher salaries paid by public school districts across Pennsylvania.  Data for the 2017-2018 school year are available on the Pennsylvania Department of Education web site.

Average classroom teacher salaries by district range from $37,444 to $99,707 per year.  For professional personnel, the range is $40,184 to $101,864. It is important to bear in mind that the statewide average teacher salary is $67,535.  In an earlier Policy Brief (Vol. 17, No. 44) it was noted that for the year 2016-2017 there were 316 of the state’s 499 districts with average pay below the state average with 56 districts having average pay that was 20 to 40 percent lower. One year later, that number did not change much, 312, with 49 districts 20 to 40 percent below the state average. This means there are likely to be a fairly high number of teachers making under $45,000 or not much above.

Obviously, some teachers earn more than the average and some less. Still, average pay provides the best (if not perfect) measure for showing how teacher compensation varies across districts.  Note, too, that Pennsylvania public school teachers are represented by public-sector unions and labor contracts are negotiated at the district level.

Moreover, districts have individual budgetary constraints dictated by the ability to garner tax dollars, whether they come from local property or earned income taxes or from state appropriations (a small percentage comes from the federal government or other sources including borrowing).  For the 2016-2017 school year (the most recent available), total revenue for all Pennsylvania school districts was $30.75 billion, of which $16.84 billion (54.9 percent) came from local sources with $11.3 billion (36.8 percent) coming from state sources and the rest from federal sources.

But as the Policy Brief mentioned earlier pointed out, the amount of state support depends in large part (but not solely) on how much a district can raise locally.  For example, in the Turkeyfoot Valley Area School District (Somerset County), which has the lowest average classroom teacher salary, just 31.6 percent of its total revenues come from local sources while 64.9 percent comes from the state. The most extreme example is the Duquesne School District, which receives just 9.9 percent of its revenues from local sources but 77.7 percent from the state. Meanwhile, in Council Rock School District (Bucks County), which had the highest average classroom teacher salary in the state, 76.7 percent of its revenue was derived locally and only 22.6 percent from the state.

So, if the governor gets his wish and the minimum salary for classroom teachers and other school professionals is raised to $45,000 per year, it will mean an immediate or near-term increase for all classroom teachers and professional personnel earning less than the new minimum. And it will mean increased pension payments as well and for other benefits tied contractually to salary.

And that increase could set off demands for higher pay by those already earning $45,000 or higher, based on the argument that education levels and experience should be appropriately recognized and rewarded. The aggregate impact of such demands cannot be predicted a priori but it will almost certainly be sizable for many districts and for the state. The mandate will affect many districts with average pay above $45,000 in addition to those with below $45,000 average pay.  This, of course, means higher costs for school districts that will have to be borne by local and state taxpayers. And this burden will fall hardest on those poorer districts whose current average is below $45,000.

In Turkeyfoot, with an average pay of $37,444, some of the teachers are earning less than the average, say $32,000. That means they will receive a $13,000 raise while a teacher earning $43,000 will only get a $2,000 raise—unless the district tries to make raises somewhat equitable.

In either case where does the money come from? In total, the mandate will immediately force Turkeyfoot teacher-related expenses up by 20 percent (not just salaries but also other salary-related costs) and likely much higher as salary adjustments are made for those teachers with salaries already over $45,000.  Note total instruction costs are over $3 million. Thus, in light of the limited tax capacity of the district, such a large expenditure increase will be close to impossible.  As a result, it will fall to the state to fund much, or most, of the salary mandate’s added cost.

According to the salary data, there are five districts in the state (of the 499 districts or 1 percent) whose average salaries are below $45,000 per year.  (Three of those districts are in Somerset County with the other two in Cambria County.)  What we do not know is how many teachers and professionals across the state have salaries below $45,000. As noted above, many districts other than those with average pay less than $45,000 could have a significant number of teachers and other professional staff under $45,000. They, too, will be significantly impacted.

And, of course, the surface was just scratched as higher salaries will spur much higher total personnel costs including higher pension payments, unemployment compensation costs, Social Security taxes and any other perks tied to the employee’s salary.

These higher costs will be borne by the taxpayers, whether local or state level or some combination.  This, at a time when the need to pour money into pensions due to the enormous unfunded pension liability is hamstringing the ability of districts and the state to take on any additional expenses.

This mandate is just the state’s attempt to narrow its embarrassing teacher pay gap while failing to address the underlying cause—the vast differences in local tax capacity per students across Pennsylvania districts.  It is an attempt to appease unions while ignoring fundamental issues. The teacher pay gap and broader school district funding issues will not and cannot be effectively resolved given the state’s school funding method of using two funding sources (local and state taxes).  And what will this mandate do to the state’s recently enacted funding formula?

Interestingly, teachers in rich districts do not seem concerned about their huge pay compared to the teachers in less-well-off districts. Obviously, what the proposed mandate will do is require more state funding to cover the higher expenses resulting from the mandate mainly in poorer districts but maybe some significant additional expenditures in other districts as well.

In light of the state’s pension funding problems, that will require massive payments each year for a long time to come.  As a result, the state will not be able to afford this teacher pay generosity without economically ill-advised tax hikes or spending cuts elsewhere. Perhaps the state will be willing to cut its funding to rich school districts with their $20,000 and higher per student expenditures to help cover the extra costs the mandate will create.  If no offsets can be found, this proposal will face a very difficult time in the Legislature.

Unions vs. productivity at Wabtec

A spokeswoman for Wabtec, the corporate moniker for Westinghouse Air Brake Technologies Corp., says striking union workers at its newly acquired Erie locomotive plant (formerly owned by General Electric) are rejecting overtime pay of more than $50 an hour and $70 an hour, reports GoErie.com.

About 1,700 union members (of Local 506 of the United Electrical, Radio and Machine Workers of America) struck last week after Wabtec – now based in Wilmerding but about to relocate to Pittsburgh — took over the facility, complaining primarily about a two-tiered wage system that would pay existing workers what they’ve been paid and maintain their benefits but cut them for newly hired and recalled workers.

The union, according to the report, “is particularly concerned about the company’s ability to schedule overtime with little restriction. The company has said overtime would only be scheduled to meet the needs of customers.”

Customers – those folks who pay the bills at a facility the new owners maintain isn’t very competitive. Wages and benefits, of course, are a cost. The less competitive a company is the fewer orders it can land. The fewer orders it can land, the less profit it makes. The less profit it makes, the less it can pay its workers.

The more competitive a company is, the more orders it can land. The more orders it can land, the greater profits it can earn. The greater profits it can earn, the more it can pay workers whose productivity helped to make it more competitive.

It’s The Union Cycle vs. The Productive Cycle.

This is not a difficult concept to grasp. For most. A federal mediator now is involved. Let’s see what grasp of reality the mediator has.

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

 

 

Notes on the state of things

More than 1,700 union workers walked off the job last week at the former General Electric locomotive plant in Erie. They’re protesting demands made by their new owner, Wabtec Corp. of suburban Pittsburgh (Wilmerding).

It’s the first strike at the facility in 50 years.

Wabtec closed on its $11 billion deal to purchase GE Transportation last week. And it’s seeking a two-tiered wage system that, while maintaining current wages and benefits for existing employees would, on average, pay new and recalled workers 38 percent less. Current employees have a starting wage of $35 an hour.

The union – the United Electrical, Radio and Machine Workers of America Local 506 – balked.

Wabtec, which told the Post-Gazette that the Erie plant has been GE’s least competitive facility, says that’s the same employment deal it uses at its Wilmerding manufacturing facility which is represented by the same union.

But as Jake Haulk, president emeritus of the Allegheny Institute, reminds, unions have a long history of driving jobs away from Pennsylvania to right-to-work states, if not driving them out of the United States all together.

“Their unwillingness to learn from the 1960s, ‘70s and ‘80s never ceases to amaze,” the Ph.D. economist says. “Pennsylvania will never fully recover or grow compared to right-to-work states; it buries itself in its fealty to unions, especially public-sector unions.”

Tragically, the most obvious lessons are the ones most difficult to learn. For some.

From the email inbox, a reader writes, part:

“How sad it was reading your column “Latest Pittsburgh jobs report disappoints (in the Tribune-Review).  When will we ever see growth again in this region like all my immigrant grand and great-grandparents experienced?  I don’t believe that today they would leave Germany, Slovakia and Ukraine for the USA.

“Locally you see the building of high rises, stores and renovations and new restaurants in Oakland and around Pittsburgh. But I guess that’s just in some areas while it seems a lot of our small towns and cities continue their now decades-old languish.

“All I see around me here in southern Armstrong County is the new world of broken-down buildings, crime and drug addictions and wasted lives of unemployed young people.”

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

Around the public policy horn …

There were a number of public policy developments this past week that government leaders, elected and appointed, and, of course, taxpayers should be keeping an eagle eye on.

The first comes from neighboring West Virginia where a Circuit Court judge has ruled that parts of the Mountain State’s right-to-work law – formally known as the Workplace Freedom Act of 2016 – are unconstitutional.

The West Virginia Supreme Court had remanded the case to Kanawha Circuit Judge Jennifer Bailey after it overturned her preliminary injunction against the law and ordered Bailey to hold a final hearing on the matter.

The Charleston Gazette-Mail reports that it was in her final ruling, issued this past Wednesday, that the judge said the law was unconstitutional because it allows workers to refuse to pay dues, fees or other charges to a union, which nonetheless must still represent those workers.

Perhaps the most troubling part of Bailey’s ruling is this line:

“Other states have reached a consensus that labor performed for money is property.” And the right-to-work law “would take union’s property without any compensation.”

If you just gasped, join the crowd. It is no stretch to extrapolate that sentiment to mean those covered by collective bargaining agreements are property owned by the organizing union. It is, in a word, nothing short of slavery. And it certainly gives new meaning to the phrase “slavish devotion to unionism.”

Additionally, the judge ruled that the law “unnecessarily and unconstitutionally imposes an excessive burden on the plaintiffs’ (i.e. organized labor) associational rights.”

Never mind the excessive burden placed on the associational rights of workers who might disagree with a respective union’s public policy positions.

And never mind that, at least where public sector unions are involved, the U.S. Supreme Court’s Janus decision would supersede any local or state court ruling. But, that said, this case is applicable only to private-sector unions.

No doubt this full and final ruling will be appealed to the state Supreme Court. For as even this judge was forced to concede:

“West Virginia clearly has legitimate and substantial interests in protecting workers from being forced to support political and ideological messages with which they disagree or to join an organization they do not support.”

We repeatedly are told by Allegheny County officials – those in county government and those at the county Airport Authority – that no local tax dollars will be spent on the $1.1 billion-plus reconfiguration of Pittsburgh International Airport (PIT).

The rationale is that bonds issued to pay for the project will be paid off by a combination of fees paid by the airlines operating at PIT and by proceeds from shale gas drilling on airport property that, per federal law, must be used to underwrite airport operations. And let’s not forget that the authority receives $12 million annually from gambling taxes.

But those same officials concede that state and federal tax dollars likely will be a part of the mix. Of course, local taxpayers contribute to those tax coffers.

All that said, here’s a question we’ve not seen posed anywhere else:

Given that union labor no doubt will be given preference for this construction project, and that prevailing wage laws will apply, what premium will the airlines and taxpayers be paying for the “privilege” of paying artificially inflated wages?

Pennsylvania Transportation Secretary Leslie Richards told the state Legislature on Tuesday that, “in a few years,” nearly 70 percent of the state Turnpike Commission’s budget will go toward paying debt service. It now stands at about 50 percent.

That’s do in large part to prior legislation that, in contravention of federal law, requires the commission to annually remit to PennDOT nearly half a billion dollars that is spread among non-Turnpike transportation “needs,” including mass transit.

That has forced the Turnpike Commission to keep raising annual tolls in an attempt to cover it all. But the commission has racked up, to date, a debt of $11 billion.

A lawsuit by a truckers’ groups, now pending in the courts, claims such transfers are illegal, per federal diktat, and that the ever-rising tolls (up an estimated 200 percent over the last decade and to rise more) are untenable.

Should the Turnpike Commission lose the lawsuit – and, given the federal prohibition against using tolls for non-Turnpike projects, it should – chaos could ensue for PennDOT projects and mass-transit agencies.

The Philadelphia Inquirer reports that the Southeastern Pennsylvania Transportation Authority (SEPTA) already has postponed nearly 40 improvement projects because of fears it could lose a third of its funding. PennDOT also has scaled back. It’s unclear what the effect has been on the Port Authority of Allegheny County.

The Turnpike Commission stopped making remittances to the state pending the lawsuit’s outcome. It also has stopped issuing debt.

This is what happens with legislators thumb their noses at the rule of law:

They rob Peter to pay Paul, then when Peter fails, Paul wails and everybody points fingers at everybody else. And the term “public policy” becomes a pejorative.

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

10-year jobs changes in Pennsylvania and the Philadelphia and Pittsburgh regions

Summary: Many Institute Policy Briefs over the years have analyzed the employment situation in Pittsburgh and Pennsylvania.  This Brief expands coverage to examine the state and its two largest metro areas including Philadelphia.  Because the five-county Southeastern Pennsylvania area accounts for about a third of Pennsylvania’s private-sector jobs, changes in that region will bear heavily in the state’s overall performance. This analysis evaluates the region’s role over the last 10 years in comparison to the state and the Pittsburgh seven-county metro area. A final comparison with the national performance is also provided.

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The jobs data used for comparison purposes are the Bureau of Labor Statistics (BLS) establishment payroll employment estimates rather than the household survey count that measures the number of persons reporting themselves as working. Performance is measured by the 2008 to 2018 changes in four categories—total private jobs, private services, goods-producing and manufacturing.

Data are readily available for the Pittsburgh metro area and Pennsylvania. However, Philadelphia’s combined five-county data are not provided by the BLS.  Philadelphia-area figures are reported for the three-county Pennsylvania metropolitan division made up of Chester, Bucks and Montgomery counties and for the two-county Pennsylvania metropolitan division comprised of Philadelphia and Delaware counties.  Philadelphia County and Philadelphia City are identical geographically.

The five-county area data are derived by adding the two-county and three-county divisional data together.  This procedure might produce different numbers compared to a process that sampled the five counties as a whole but the differences should be too small to affect the important findings regarding trends in the five-county region. For completeness this analysis looks at the two divisions separately as well.

All jobs figures are presented as annual averages of monthly data.

Total private employment

In the three-county division (Montgomery, Chester, Bucks) private employment rose from 947,000 in 2008 to 992,600 in 2018, a gain of 45,600 or 4.8 percent and a 0.47 percent annual average over the period.  Note that employment fell to 902,000 in 2009 and did not recover fully to the 2008 level until 2015.

In the two-county division (Philadelphia and Delaware) private jobs climbed from 753,500 in 2008 to 834,200 in 2018, a rise of 80,700 and a 10.7 percent increase or a 1.02 percent annual average over the ten years. Private employment fell to 735,000 in 2009 but had fully recovered to the 2008 level by 2012.

Combined the five-county region saw private employment move upward from 1,700,500 to 1,826,800, a gain of 126,300 or 7.4 percent, with 64 percent of the growth accounted for by Philadelphia and Delaware counties.  These two counties fared better during the recession and grew faster after the recovery began.

Meanwhile, during the 10-year period, Pennsylvania’s private-sector jobs rose by 285,000 or 5.7 percent. And during the period the Pittsburgh metro area’s private sector job count moved up by 50,000 or 4.9 percent. Thus, the five Southeastern counties posted stronger than state growth thanks to the 10.7 percent rise in the Philadelphia and Delaware county division. Indeed, the two counties had a jobs increase of 30,000 more than the seven-county Pittsburgh region.  On the other hand the Pittsburgh region kept pace with the Montgomery, Bucks and Chester division.

Private-service jobs

In the three-county Pennsylvania metropolitan division private services added 62,800 employees over the 10 years rising from 787,100 to 849,900, a boost of 8 percent. In the two-county group the service employee count climbed by 89,500 above its 2008 level of 686,000 to reach 775,500, a 13 percent gain for a 1.2 percent annual average growth. Combined, the five counties saw service employment rise from 1,473,100 to 1,625,400, a pickup of 152,300 or 10.3 percent.

Over the same 10 years, Pennsylvania private service employees climbed 355,600 or 8.6 percent, well short of the 10.3 percent gain in the five Southeastern counties. In the Pittsburgh metro area, private service jobs were up 52,800 from 2008 to 2018, a 6.1 percent rise that was slower than the state and well below the five Southeastern county growth pace.

Goods-producing employment

Over the 2008 to 2018 period, goods-producing jobs did not fare well in the Southeastern, Pittsburgh area or in the state. In the three-county group, goods employment slid from 159,900 to 142,700, a drop of 17,200 or 10.8 percent.  For the two-county division, goods jobs were down from 67,500 in 2008 to 58,700 in 2018, a decline of 8,800 or 13 percent. Combined, the five Southeastern counties lost 26,000 goods-producing jobs and were down by 11.4 percent of the 2008 total.

During the 2008 to 2018 period Pennsylvania’s goods-producing jobs tumbled by 70,500, a 7.7 percent drop from the 2008 level. Pennsylvania’s goods-producing jobs decline was smaller in percentage terms than in the Philadelphia region. Pittsburgh-area goods jobs fared better than the state and much better than the Southeastern counties, declining by only 2,800 or 1.7 percent.

Manufacturing jobs     

Over the 10 years, the three-county Pennsylvania metropolitan division’s manufacturing jobs fell from 104,600 to 90,200, a decline of 14,400 or 13.8 percent. The two-county division saw factory employment plunge from 44,200 to 34,100 or 22.8 percent. Combined, the five Southeastern counties lost 24,300 factory jobs, 16.4 percent of the 2008 total.  Note that in the two-county division factory jobs represented only 5.8 percent of total private employment in 2008 and an even smaller 4.1 percent in 2018. For the five Southeastern counties, manufacturing accounted for 8.7 percent of jobs in 2008 and only 6.8 percent in 2018.

Meanwhile, manufacturing employment in Pennsylvania fell by a net 77,800 jobs or 12.1 percent over the 2008 to 2018 period to stand at 565,900 and account for 10.6 percent of the state’s total private employment. This represents a significant drop from the 12.8 percent figure in 2008. Factory jobs in the Pittsburgh region fell a net 11,600 or 11.8 percent to stand at 86,800. In 2008, manufacturing employment made up 9.6 percent of private jobs but accounted for only 8.1 percent in 2018.

The loss of high productivity manufacturing jobs and their replacement by lower paying service-producing sectors jobs in Pennsylvania is not a recipe for sustaining strong gains in real gross state product. Two of the biggest job gains over the ten years were registered by education and health (190,000 jobs) and leisure and hospitality (90,000 jobs). These sectors had statewide average weekly incomes in 2018 of $812 and $386 respectively. During 2018 manufacturing jobs paid $1071 per week. Almost any job growth is better than no growth but some jobs have much greater economic impact than others.

It is important to note also that mining jobs related to shale drilling pushed up mining jobs in Pennsylvania sharply by over 15,300 from 21,700 in 2009 to 37,000 in 2014. Much of that big jobs gain was lost through 2016. And despite a rebound in mining employment since 2016, jobs remain well below the 2014 level.

Comparison to U.S. employment

In comparison, U.S. private employment was up by 10.4 percent from 2008 to 2018, almost 3 percentage points or 40 percent faster than the five-county Philadelphia area and about double the state (5.7 percent) and Pittsburgh (4.9 percent) growth rates. Meanwhile, U.S. private service employment posted a 13 percent increase over the 10 years which was significantly faster than the five Southeastern counties’ 10.3 percent.  Likewise, the U.S. service employment gain easily outpaced the statewide growth of 8.6 percent and was more than double Pittsburgh’s 6.1 percent.

U.S. manufacturing jobs were down 5.4 percent over the 10 years although significant gains in the last two years have helped hold the 10-year decline to the 5.4 percent drop after the sector started to lose jobs in the second half of 2016. The factory employment percentage decline was much smaller than Pennsylvania’s 12 percent, Pittsburgh’s 11.8 percent and dramatically lower than the five-county Philadelphia area’s 16.4 percent loss.

In short, the state and its two largest metropolitan regions have lost ground relative to the country over the 2008 to 2018 period despite weathering the recession of 2008-2010 better than the national economy largely because the housing crisis was not as bad in the state.  Philadelphia and Delaware counties performed about on par with the country in private jobs and service jobs but were hit much harder in the manufacturing sector.

Government as grocer predictably fails

Those who hold no affinity for the concept of “government as grocer” will find little comfort in the words (or at least the intimation therein) of Pittsburgh Mayor Bill Peduto regarding the imminent closure of the Hill District Shop ‘n’ Save.

The store, which opened five years ago with painfully little investment by the owner, will close March 20. While there are allegations and counter-allegations of why the store failed, the bottom line is that no matter how much third-party money went into the facility, there was no market for such a grocery.

Perhaps that’s why, prior to its opening, there had not been such a full-service grocer in the Hill for decades.

And one can only wonder, given Peduto’s words, if the mistake of attempting to command the grocery market will be repeated. As the Post-Gazette reported it, the mayor says the city is “just trying to figure out the financials of what it would take to have (a new) operator move in.”

“A lot of the costs associated with it are brick and mortar and setting up the store,” Peduto continued. “Those costs are already taken care of. It’s a question of whether or not they’d be willing to open a store in the Hill District.”

At a premium – another public premium, one is to surmise?

But what makes anyone believe that a grocery store that could not make a go of it with a plethora of government, foundation and other assistance can make it now?

Mayor Peduto argues that another government operation overlording another central plan will create the kind of marketplace necessary to support Son of Shop ‘n’ Save.

That would be the redevelopment of the old Civic Arena site, which includes a hefty complement of housing, some “affordable.” You’ll recall that government handed the Pittsburgh Penguins redevelopment rights to its old home site but has maintained a heavy hand in all the whats and wheres of the project.

The Shop ‘n’ Save was built to, supposedly, satisfy a long-running demand for such a store. After all, the Hill District had become a “food desert,” we were told. That demand proved to be a mirage; this was a customer desert.

Fear not, however, a new central plan will create demand for a new grocer at the same site and likely with more incentives, is that it?

When at first you don’t succeed, fail, fail again?

Oh, the hubris.

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

Beaver County lets court decide reassessment fate

Summary: Beaver County has not conducted a countywide reassessment since 1982, a span of time which is permitted by Pennsylvania’s assessment laws. A lawsuit challenging the county’s assessments is currently in front of the Supreme Court of Pennsylvania. The county filed an appeal on January 18 seeking to have lower court rulings overturned.

Having suffered adverse decisions by the Common Pleas and Commonwealth courts, Beaver County officials are hoping that the state’s highest court will spare the county from being ordered to conduct a countywide reassessment for the first time in 37 years. A lawsuit against the county’s assessment practices was filed in late 2015.

This is the Supreme Court’s third foray into reassessments in Southwestern Pennsylvania in the last decade. It rendered a 2009 decision striking down Allegheny County’s base year and opted not to hear an appeal from Washington County in 2013. Both counties ended up conducting reassessments.

So what will the court decide in the Beaver County case? If previous rulings are upheld under the principle of stare decisis that allows earlier decisions to guide rulings, Beaver County is likely to lose its appeal.

If it upholds the decisions of the lower courts it will likely fall to the Common Pleas Court to oversee a Beaver County reassessment. In that court’s original decision from late 2017 the process was to be underway by June 2018 with a completed reassessment two years later. As such taxing bodies would be equipped with new values for the 2021 calendar year and 2021-22 fiscal year. Given the delays created by appeals it seems improbable that new assessments could be ready for 2021-22.

In the three years since the lawsuit was first filed and the appeals have followed, the state’s Local Government Commission convened a property assessment task force that produced a guide on how to determine the need for a reassessment by “self-evaluation.” In Beaver County’s case there has not been much of anything done about assessments since the 1982 revaluation as recited in the court proceedings. The county admitted that “material differences may have arisen in the rates of value changes among various taxable properties in Beaver County since the last reassessment in 1982.”

The self-evaluation guide noted the industry standard of four to six years between reassessments to achieve maximum accuracy. Likely realizing the reluctance in the Legislature to move Pennsylvania to a four year cycle of revaluation, the task force recommended a longer period of 10 years between reassessments. Sadly, but predictably, that more lenient recommendation has not been acted on nor is there any legislation pending that would put into law statutorily mandated revaluations on regular intervals. Note that even under a ten year requirement, Beaver County has gone three times that number of years since its last revaluation.

On the other hand, if the Supreme Court goes against its earlier rulings and overturns the decisions of the lower courts on the Beaver County lawsuit , it would leave in place a base year that “does not reflect, uniformly and accurately, the proper assessed values of the 96,000 tax parcels in the County” as described by the Commonwealth Court decision. The county argued, unsuccessfully, that the plaintiffs failed to submit anything into the trial proceedings that showed how they were personally harmed or damaged by the base year assessment scheme.

Beaver County currently has $2.1 billion in taxable assessed value with $1.8 billion of that attributed to residential and agricultural uses. The pre-determined ratio (the ratio of assessed to market value) is 50 percent. That means a house with a market value of $25,000 would be assessed at $12,500. The county’s property tax millage is 26 mills, which last increased in 2017 from 22.2 mills. The county collected $51 million in property taxes in 2017.

Moving to an updated valuation is likely going to cause three things to occur. One, it will increase the total assessed value countywide and, two, the pre-determined ratio will change. And it is probable that most, if not all, school districts and municipalities will see an increase as well.

For comparison purposes note that when Washington County reassessed and changed from taxing property at 25 percent of its 1981 base year value to 100 percent of its 2015 base year value the change in total taxable value rose from $1.6 billion to $17 billion. The change in pre-determined ratio to 100 percent brings additional clarity to the assessment process so that a taxpayer who has a property with a market value of $75,000 is assessed at $75,000 instead of some value less than that.

As pointed out in the self-evaluation guide, most counties in Pennsylvania that have undertaken a reassessment in recent years have moved to a 100 percent pre-determined ratio.

And the third development is that millage rates will adjust downward and will have to settle at a revenue-neutral rate. This is due to the requirements of Act 93 of 2010 (for the county and municipalities) to roll back the millage rate so that, with the exception of new construction and improvements, the taxing bodies collect in taxes what they brought in the year prior to the reassessment. If there is a desire to increase tax revenue above the previous year level as the new values go into effect then there must be a separate vote by the governing body to boost the millage rate. School districts have to follow the millage requirements of Act 1 of 2006, which requires them to keep increases below the Act 1 index of the year prior to the reassessment.

In deciding to push on with the court appeal and avoid undertaking a reassessment, county commissioners were quoted that they had heard from their constituents. How many of those constituents are aware of what would happen to millage rates following a reassessment? How many are aware that their taxes might actually decrease depending on their value change measured against the changes in the taxing bodies as a whole? Taxpayers being treated inequitably deserve better. Indeed, the state’s Constitution requires it.

Would the county be willing to undertake an education campaign through the mail, on electronic media, and in public venues to make the process clear? Could they have done that many years before the lawsuit arose, seeking to do what the county should have done long before now?

Local pensions show good bill of health

The 2019 status report for Pennsylvania’s local pension plans has been released.  As earlier reports have illustrated, the pension system is actually a collection of 3,300 plans that separately cover police officers, firefighters and non-uniformed employees and are administered at the local level. The majority of the plans are small and are defined benefit in nature.

As of Jan. 1, 2017 the 304 plans in Allegheny County covered 7,921 active employees and had an aggregate funding ratio (assets divided by liabilities) of 75 percent.  To see the influence of Pittsburgh’s police, fire and non-uniformed plans, removing those plans (combined funding ratio of 56 percent) raises the funding ratio to 91 percent.  No municipalities in the county were “severely distressed” based on the Act 44 ratings.

A recent Policy Brief detailed the benefit structure for new hires of the state’s pension systems.  To summarize, all new state and school hires will have a pension plan that either relies in part or wholly on a defined contribution aspect.

Is this happening in Allegheny County? 50 of 304 plans (16 percent) are defined contribution.  There are 941 active employees covered by these plans and $110 million in actuarial assets, about 12 percent and 5 percent, respectively, of the totals in the county.

Since the 2015 valuations, on net there are 29 more active employees in a defined contribution plan (a 3.2 percent increase) and actuarial assets grew from $103.1 million to $110 million (a 6.6 percent increase).  The growth in actives was greater than the 2.3 percent increase in actives in defined benefit plans but slower than the 9.6 percent increase in asset value for defined benefit plans. Four new defined contribution plans in Findlay, Ross and South Fayette Townships and Thornburg Borough were created sometime between 2015 and 2017.

Will there be additional growth in defined contribution plans at the local level in the next few years?  To date Harrisburg has been reluctant to make a wholesale change like it did for new state and school hires so at this point it may be largely voluntary on the part of local governments.