Category Archives: Uncategorized

More public subsidies for Salem’s

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And the public subsidies for Salem’s Market and Grill just keep on keepin’ on.

There already was a list of limited lease, tax and expense abatements and a lengthy list of equipment conveyed for $1 for the government-picked and -subsidized grocer to succeed the last (and failed) government-picked and -subsidized grocer in the Hill District.

Now, the Urban Redevelopment Authority of Pittsburgh (URA) has approved a nearly $1.4 million loan – part of a larger bank-based loan and company equity deal – to get Salem’s up and running, and all to tackle a much touted but quite illusory “food desert” (as this scrivener detailed in a February column).

The URA, of course, is a public authority doling out public money. Oh, and that bank-based loan? It’s being guaranteed by the U.S. Small Business Administration, another public agency doling out public money.

“We’re looking for a complete transformation of the location,” Salem’s Market CEO Abdullah Salem told the Post-Gazette. “We want to bring a food mecca to a food desert.”

Additionally, Salem told the P-G he wants to build one of the best and most modern groceries in the state, one that will be an asset to the community and provide goods “at the most competitive rate possible.”

But, again, and for the umpteenth time, that should be the function of private investment. Taxpayers have no business being turned into venture capitalists to assist Salem.

As one commentator on the P-G story succinctly put it:

“Subsidizing a grocery store that will never work is pure insanity. If business owners thought that location was profitable, they’d put a store up and wouldn’t need the URA.

“Junk economics and junk politics,” the poster noted.

Give the poster a gold star.

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

More PPS superintendent search questions

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The Pittsburgh Public Schools board will pay an Illinois consultant up to $55,595 to lead the search for a new district superintendent. But the board never spoke to any of the other districts where the consultant worked to discern how the consultant performed.

The board hired BWP & Associates last week to find a replacement for the departed Anthony Hamlet, who was hired under one cloud and left under another.

BWP, which has conducted searches for scores of districts, was selected from among five companies that responded to the district’s February request for proposals (RFP).

Board president Sala Udin told the Post-Gazette that board members looked at several districts comparable to Pittsburgh where BWP & Associates have placed superintendents but have not yet spoken with leaders in those school systems. He said they plan to do so in the coming weeks, the P-G reported.

Well, wouldn’t it have been prudent to do so before signing a contract?

“Our decision was to first get who we felt was the best proposal that was submitted, and then vet the proposed contract to confirm,” Udin said. “We were operating under a severe time crunch, and so that’s part of the reason also why we decided to do it that way.”

So much for due diligence.

Oh, by the way, who were the four other companies that submitted RFPs? We don’t know.

What were the respective “up-to” bids of the four not chosen? Were they higher? Lower? The same? We don’t know.

Last month, the school board said it would choose a firm based on how it responded to a district-set criteria for selection. What were the criteria? We don’t know.

Nothing has been made public.

And as we’ve noted more than few times now, once BWP and the board have developed a pool of candidates, no names will be divulged — until the chosen superintendent is named.

That’s supposedly “out of respect” for those in the running. So, how does withholding their names at one point then releasing them at another see to their “respect”?

Never mind the total lack of respect for the public.

So much for the “transparency” that the board of education keeps promising.

Oh, but one thing we do know? The latest selection-assisting firm is not the same company that included Anthony Hamlet the last time around.  That firm – Perkins Consulting Group – was contracted for $100,000 seven years ago.

If past searches conducted by BWP are prologue, the company says its candidate-vetting process will include, among other things, “deep Googles” and “background checks, probably with a private investigator.”

Will those findings be made public? For all the candidates? They should be.

And will BWP interview those associated with any prospective candidates to reconcile resume claims with reality? They should be. For that apparently wasn’t done with the Hamlet hire.

“Community input” meetings are supposed to begin in April.

That’s all well and good. But we’re talking about a public school district that derives its operating income from the public. Until Pittsburgh Public Schools pledges full transparency in its superintendent search, that should be considered suspect.

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

Pausing in unison

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It was in 1836 that William Leggett, the outspoken editorial writer for the New York Plaindealer, wrote that he found “something exceedingly impressive in the spectacle which a whole people presents, in thus voluntarily withdrawing themselves on some particular day, from all secular employment, and uniting in a tribute of praise for the blessings they enjoy.”

Mr. Leggett, generally recognized as the “intellectual leader of the laissez-faire wing of Jacksonian democracy,” was speaking of Thanksgiving Day. But his comments prefaced a most contrarian argument for his day.

Against “a custom so venerable for its age” and “so reverently observed,” Leggett took great exception to the practice of our constitutionally elected leaders issuing Thanksgiving proclamations.

After all, he argued, in framing our political institutions, had not “the great men to whom that important trust was confided taught, by the example of other countries, the evils which result from mingling civil and ecclesiastical affairs”?

Indeed, they had. So, how can such a “failure” to keep separate affairs of church and of state be justified?

Harry Truman not only did a pretty good job of that on the Sunday before Thanksgiving in 1952 (at the cornerstone-laying of the Westminster Presbyterian Church in Alexandria, Va.), he pretty much defined what the role of religion ought to be in our constitutional republic:

“In Thanksgiving,” President Truman said, “we have a purely American holiday — fashioned out of our own history and testifying to the religious background of our national life. That day expresses what we mean when we say that our form of government rests on a spiritual foundation.

“It is from a strong and vital church — from the strength and vitality of all our churches — that government must draw its vision,” he continued. “In the teachings of our Savior, there is no room for bigotry, for discrimination, for the embittered struggle of class against class, or for the hostilities of nation against nation.”  

Concluded Mr. Truman, in churches we find “the seeds of our vision of society. But we cannot keep that vision strong, or carry it out, without God’s help. And the churches must help us keep that vision always before us.

“Religious faith is the strength of our nation, and the hope of all mankind.”

Truman’s words are those we ask everyone to ponder today as they prepare to partake in what even contrarian William Leggett had to admit was the exceedingly impressive spectacle of pausing in unison to give thanks.

Happy Thanksgiving from all of us at the Allegheny Institute for Public Policy.

The better way to target one-time relief dollars

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Lame-duck Pittsburgh Mayor Bill Peduto and City Council are taking considerable heat from special interest groups and the Post-Gazette’s editorial page for not kowtowing to their demands for “inclusion” in deciding how to spend federal pandemic dollars.

But, and in a rare spate of fiscal prudence, the mayor and the council got this one pretty much right.

The city’s Covid-19 federal relief package totals about $335 million. And it’s been abundantly clear from the get-go how this money is to be spent – to make up for tax dollars used for basic and fundamental public services that had been lost because of pandemic-related closures, etc.

The money is expressly not intended to fund new programs for which, after the relief dollars dry up, there would be no funding source. And neither was it intended to be a kitty to be exploited for special interests’ pet projects – and among those, especially not those hatched by “progressives” (and worse) peddling the “woke”-inspired worst of social re-engineering designs.

But that’s exactly for what Peduto and city councilors are being tripoded and gutted in the latter’s 8-1 vote approving the plan.

And a rather juvenile Post-Gazette editorial this past week only cemented how ignorant the criticism is.

“Despite vociferous opposition from citizens groups — as well as the presumptive next mayor of the city — council voted nearly unanimously to codify its druthers for the allocation of the unprecedented federal windfall,” the editorial noted.

“(I)ts druthers”? How about shoring up operational imperatives left sucking for air when tax receipts started drying up.

The P-G was particularly odoriferous in its criticism of the four-year plan for which the federal relief dollars will be applied.

“They could have — and should have — opted for a plan that closes gaps in the existing budget and maybe next year’s. But, four years? No,” the editorial chided, claiming such a long-term deal “encumbers” presumptive incoming Mayor Ed Gainey for too long.

And with good reason. Again, such one-time money is best suited for replacing scarce operational dollars required to keep the city running and solvent.

All that said, however, there should be concern that some of this money appears to be set aside for future operational shortfalls.

Indeed, it’s a more sound use for such money than what activists wanted. But, then, it also likely indicative of systemic structural budget problems that also must be addressed with more than just one-time Band-Aid money.

Added the P-G editorial:

“Mayor Bill Peduto’s office applauded the vote, demonstrating just how out of touch he is with his constituents.”

But being “out of touch” with “progressives” even further to the left than Peduto certainly should be applauded as a virtue, not derided as a vice.

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

Bill Peduto’s Fantasyland foe

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HEADLINE: Bill Peduto’s Fantasyland foe

Pittsburgh Mayor Bill Peduto issued an executive order last week calling for, among other things, a reduction of fossil fuel emissions and making the city “carbon-neutral” by 2050.

But the order is problematic on a number of levels, beginning with its dubious opening claim:

“Whereas, climate change is a global issue with severe local impacts, and as a result of our changing climate, Pittsburgh has experienced record rainfall and snowfall, hotter than normal summer months, and landslides that have devastated our neighborhoods and strained our municipal budget … .”

But no reasonably educated human being can make the cause-and-effect claim that “climate change” (formerly “global warming”) is to blame.

And that’s just the beginning of an entreaty that only can be described as cow tripe, overstuffed with fantastical (as in “illusory,” not “wonderful”) social re-engineering designs.

Peduto’s executive order is such a mishmash of political causes masquerading as public policy that it is a gross perversion of, and embarrassment to, the latter.

There’s divesting pension funds from those dastardly fossil fuels that fueled great philanthropies that, to this day, Peduto attempts to exploit.

Then there’s forcing corporations to heel to “climate change”-related “social … guidelines.”

Consider Peduto’s inexplicable call to make it government’s role to provide “culturally acceptable” food.

Or to encouraging “Pittsburghers to ‘recycle right,’” never mind that the claimed benefits of most recycling long has been dubious.

And, lest it be passed over, the gobbledygook of “a comprehensive strategy to lead a just transition from heavy industry to a more sustainable future.”

A “just transition”? Really? Well, you get the warped picture.

And this social manifesto nonsense goes on and on in Peduto’s executive order. As does the specter of regionalization that one is forced to ask: “At what cost, economically and to personal liberty?”

Is there any redeeming value in Peduto’s executive order? Some, such as calls for greater energy efficiency – as long as the energy it takes to implement the “efficiency” is not greater that the energy already used, as too often is the case.

And, yes, we all can, individually, become greater stewards of our

environment. Indeed, that is the difference between environmentalism and conservationism.

As Heartland Institute scholar H. Sterling Burnett often has reminded, there is little doubt that the Earth has been warming, just as it has gone through cooling periods. It is, after all, the natural, cyclical nature of the planet in which sunspot activity plays a major role, he reminds.

“(B)ut the list of breaches of the scientific method and ethics by researchers whose careers are intimately tied to the ‘truth’ of climate alarmism provides more than enough reason to doubt the claim that the science is settled and the Earth is doomed, absent giving government authoritarian control over all aspects of peoples’ lives.”

Bill Peduto is not the first and he won’t be the last politician to exploit “climate change” in an attempt to re-order society in the name of “progressive equity.”

And in a once proud city now plagued not by “climate change” but by, among other maladies, a rising serious crime rate (a child recently had his throat slashed in a Downtown McDonald’s) and an utterly failed public school system (“achievement” is an oxymoron in Pittsburgh Public Schools), declaring war on a largely mythical foe should force residents to wonder in what Fantasyland its leaders are living.

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

Pandemic madness

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Too little too late: Gov. Tom Wolf is asking the Pennsylvania Liquor Control Board (PLCB) to help un-wreck the wreck that he created with his arbitrary and capricious lockdown of, then continuing occupancy restrictions on, Keystone State restaurants.

He’s asked the PLCB to waive 2021 liquor licensing fee (though some observers say it would take an act of the Legislature to do so).

Whoop-de-do. And BYOB establishments? Sorry, there’s nothing for you here.

As more than few restaurateurs have noted, the projected $700 to $1,500 savings per establishment is a drop in the bucket to the losses the industry has sustained. It will do little to nothing to reverse the slide of many into bankruptcy. Many restaurants already have closed, never to reopen. Many more will follow.

Given the paucity of evidence that restaurants were or would be any kind of super-spreading centers, it’s a slap in the face to restaurateurs who, seeing to their respective business’ best self-interest, most assuredly would practice mitigation efforts on their own.

Turkey tyranny: Of course, government imposing restrictions on public business is one thing, government imposing coronavirus pandemic-related restrictions on one’s castle is quite another.

California Gov. Gavin Newsom has banned home indoor Thanksgiving gatherings and outdoor gatherings of no more than three households.

Yes, you read that right. And that’s just the crazy beginning.

As Elle Reynolds writes in The Federalist:

“Not only is California limiting the number of households that can come for Thanksgiving, the state also requires hosts to write down the names of all attendees for contact tracing.

“For families who want to celebrate the holidays with both sets of in-laws, ‘participating in multiple gatherings with different households or groups is strongly discouraged.’

“In addition to limiting how much of your family can gather, California is mandating that all gatherings happen outside. That means families can’t congregate in the kitchen to cook together, serve food in the kitchen or sit around the dining room table.

“Family members can leave your backyard and enter your house to use the restroom, but only if the restroom is ‘frequently sanitized.’”

But wait, there’s more:

Members of different households must maintain at least six feet of distance between themselves outside, including when they sit down for dinner. Food or beverages must be in single-serve containers “as much as possible.” Thanksgiving gatherings can’t last more than two hours.

Oh, and when it comes to Christmas gatherings this year in California, well …

“Finally, don’t count on singing Christmas carols at any holiday parties this year,” Reynolds notes. “Singing is ‘strongly discouraged.’ If you do sing, you must wear a face mask the entire time. Further, you’re ‘strongly encouraged’ to sing quietly” and stand far apart from everyone else.

That might work for “Silent Night” but it sure will put a crimp in “Up on the Housetop.” Click! Click! Click! and Ho! Ho! Ho! and all that.

And “local health jurisdictions” have been given permission to enforce even stricter at- and in-home restrictions. What that tacit threat means is unclear.

Oh, and as Newsweek reports:

“Musicians are allowed at gatherings but they must be from one of the three households. The playing of any wind instruments (those that are played by the mouth, such as a trumpet or clarinet) is ‘strongly discouraged.’”

As The Federalist’s Reynolds concludes, “Some of Newsom’s rules might be fine as recommendations or suggestions.”

And it might even “be wise for certain families with at-risk members to follow some of these precautions this year,” she adds.

“But that should be a decision left to individual families — not mandated by the state.”

Should it come to pass that California officials spread out over The Golden State on Thanksgiving Day to enforce its turkey tyranny, our grand nation will be left with liberty’s rotting leftovers.

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

Another pot-metal ‘solution’ in ForgingPGH?

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Is it prudent planning or just another in a long line of central plans preordained to fail?

The City of Pittsburgh has announced “ForgingPGH,” characterized as a comprehensive 20-year land-planning effort.

As the Tribune-Review reports it:

“According to the mayor, city officials face a choice: They can continue to work with developers who have their own plans for what they want to do in the city and work to meet their needs. ‘Or we can change the way that we do urban planning in the City of Pittsburgh. We can play offense,’ (Mayor Bill) Peduto said.”

What exactly does this mean? It certainly sounds a lot like “The State” yet again attempting to command the marketplace, does it not?

The city says it will spend the next year seeking input from residents of each of the city’s 90 neighborhoods. That information will be incorporated into a land-use plan to help guide future development.

OK…

Additionally, the city will hire two consultants – each paid about $100,000 – to evaluate Pittsburgh’s housing needs and to work on an economic development plan.

But, gee, wasn’t it just in January that, as the Post-Gazette reported it, “Peduto introduced the city’s new development leaders … saying they are a team ‘comprised to be able to address the realities of Pittsburgh today and Pittsburgh of tomorrow’”?

Hmmmm…

The Trib also reports the plan will take into consideration issues of equity and systemic racism during the process.

“We can put into our urban plans a model that breaks away from generations of disinvestment in our black communities,” Peduto said.

“We can turn that model into a different model. One that looks through the lens of equity in assuring that everyone has a place at the table for the future of Pittsburgh.”

OK…

But Peduto’s overriding rationale is a lesson in dichotomous ignorance of history, at best:

The mayor says the “ForgingPGH” approach was used in the 1960s and 1920s but has not been employed since Pittsburgh dealt with the decline of the steel industry and the loss of its manufacturing base.

“During the 1980s, during the 1990s, the beginning of the 2000s, there wasn’t much investment happening in the City of Pittsburgh,” Peduto said. “We were playing defense. We were trying to save our city and keep our head above the water.”

Hold the phone!

Weren’t the 1960s that Peduto so fondly recounts the era of such central-planning failures as the destruction of the predominantly black Hill District to build the Civic Arena, replacement of a large tract of the central North Side with the Allegheny Center abomination and the bulldozing of East Liberty?

Uhm…

And weren’t predominantly taxpayer-subsidized professional baseball and football playgrounds and the rebuilt convention center of the late 1990s and early 2000s touted as wonderful “investments” that would pay endless returns, all proof-positive of Pittsburgh’s next great “renaissance”?

Never mind, too, that public officials ram-rodded those projects down the people’s throats after new stadiums were overwhelmingly rejected at the ballot box.

But, but but, we’re now told that Peduto’s plan will change all that. The people will be in charge. But, naturally, “The State” will direct that development on behalf of the people because, having listened to the people, it knows best.

After all, all we need is one more government intervention to end all government interventions, right?

So, what might this brave new world look like? For one thing, more publicly funded grocery stores in neighborhoods that likely can’t support them, right?

For another thing, it very well could be more faux “environmentally sound” development that likely has few real environmental benefits and is not sustainable economically, right?

And there can be little doubt in this “ForgingPGH” plan that developers will be forced to kowtow to even more “social justice” prescriptions – think of the already mandated paid sick-leave policy – that stand to defeat the very idea of “development” and strictly limit and even negate profit potential.

What might be next, attempting to force developers into projects at a loss?

Indeed, racism in public policy is abhorrent. But so, too, is “equity” not based on the kind of equal opportunity that free markets engender and for which sound public policy makers must strive.

Wrote Aldous Huxley in “Brave New World,” the 1932 novel of dystopian society:

“One believes things because one has been conditioned to believe them.”

Sadly and tragically, too many people long ago became conditioned to believe the “progressive” proposition that ever more government direction of the economy is needed to “level the playing field,” to “right capitalism’s wrongs” and to “make the downtrodden whole.”

Never mind that it too often has been those very government “solutions” that only exacerbate the very problems they are touted as “fixing.”

Whether “ForgingPGH” results in hardened steel or pot metal remains to be seen. But at first blush, it has all the makings of the latter.

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

Dollars & nonsense at PIT

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The Allegheny County Airport Authority says passenger traffic increased by 1.2 percent in 2019 at Pittsburgh International Airport (PIT). That’s versus the 7.5 percent jump it reported for 2018.

Authority CEO Christina Cassotis blames last year’s reduced growth on the grounding, starting in March, of those troubled 737 Max jets which affected Southwest and American airlines, PIT’s largest carriers.

Never mind that some other airports with those airlines and the same jet issue posted better gains.

And what, throwing $3 million over two years at British Airways for direct Boeing 787 Dreamliner flights between Pittsburgh and London – a deal so highly touted that one would have thought it was The Greatest Business Coup Ever Achieved – wasn’t the cat’s meow it was sold to be?

Speaking of which, isn’t the public about due for an accounting of how those flights – four times weekly and which began a year ago next month – are doing?

Inquiring minds want to know if the “pent-up demand” Cassotis said was there really existed.

Speaking of PIT, the Tribune-Review reports that “travelers this spring will start seeing the prep work for a three-year $1.1 billion construction project this summer that will build a new terminal at Pittsburgh International Airport.”

Of course, that oft-quoted price, Airport Authority officials were forced to admit, won’t be the final price. And we’re not talking about it being less.

Cassotis has yet to quantify how much more the “modernization” project will run. But there always seems to be that concomitant rationalization with such talk about how no local tax dollars will be used and that the airlines are footing the lion’s share of the bill.

But you can bet your bottom dollar that there will be taxpayer dollars in this project from federal and state sources. And, of course, there are gambling dollars in the deal.

The simple fact remains that the Airport Authority and PIT are public entities and the public that, yes indeedy, will be helping to pay for a very expensive project that some have dubbed as dubious have a right to know what this thing really is going to cost – now.

That the authority appears to not have a steady handle on the eventual cost of such a large project at this stage of the game – or it knows and is not revealing it publicly — is not acceptable.

Effectively saying “We’ll know what it costs when it’s done” defiles sound public policy.

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

Gaming options expand in Pennsylvania

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Summary: Gaming revenues grew in 2019.  But it was due more to the expansion of gaming options than growth to the existing system. Sports wagering, fantasy contests, internet gaming and, soon, mini-casinos should continue the trend.  But is the commonwealth’s reliance on tax revenues a sure thing? Will gaming boost the economy?

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At the conclusion of 2019, the state Gaming Control Board reported that total gaming revenues were up by 4.5 percent over 2018’s tally.  The revenue gain did not reflect an increase in the number of people playing slot machines, which debuted in 2006, or even table games (2010); it was primarily due to the expansion of gaming options.  In 2019 internet gaming and video gaming terminals debuted while retail and internet sports wagering and fantasy sports contests had their first full year.  With mini-casinos getting ready to open soon, and a full year of operation for last year’s newcomers, 2020 gaming revenue is likely to top 2019.

Slot machines

Statewide, the 12 casinos in operation realized $2.363 billion in gross terminal revenues (GTR) from slot machines in 2019—a slight dip of $6.8 million (-0.3 percent) from the previous year (all data is calendar year).  The high-water mark for GTR occurred in 2012 ($2.471 billion) from 11 casinos (the resort casino at Valley Forge opened in March 2012 while the one at Nemacolin opened in July 2013).   

The monthly average number of slot machines in operation has declined slightly over the years.  In 2012 there were 26,550 machines available on average per month across the state.  By 2019 that number had fallen to 24,722—a drop of 7 percent.  It is likely that space previously used for slot machines is now being used by table games or areas for sports betting—which is not a surprise given that slot machines are taxed at a higher rate than those options.   

Nonetheless, Pennsylvania has a lot riding on the performance of slot machines.  As noted in earlier Policy Briefs (most recently in Vol. 19, No. 15), slot machine GTR is taxed very heavily at 54 percent.  There is a 34 percent assessment for property tax relief;  a 2 percent assessment for the local share (with an additional 2 percent for the two smaller resort casinos); a 6 percent rate is added on for the economic development and tourism fund with the remainder allocated to the racehorse development fund. 

It is very interesting that $12.4 million per year of the economic and tourism fund is being allocated in perpetuity to Pittsburgh International Airport.  Reportedly the airport will use some of that money to help pay for the construction of a new terminal.   

Also, in his fiscal 2021 budget address, the governor is proposing to divert $204 million from the racehorse development fund to start a scholarship fund for students attending the 14 universities of Pennsylvania’s State System of Higher Education. The proposal is meeting predictable resistance from the racehorse industry.   

Table games

Tax revenue from slot machine GTR does not go into the state’s general fund budget.  But tax revenue from other gaming sources (table games, etc.) does.  The total tax rate on table games is 14 percent. A 12 percent rate is assigned to the state’s general fund and another 2 percent goes to fund the local share.  The only exception is for fully automated table games, which are taxed at 34 percent but there are far fewer of them. 

Table games were introduced in 2010 and the total revenues statewide have been on a fairly consistent growth path ever since (except a small dip from of 1.3 percent from 2017 to 2018).  In 2019 revenue from table games reached $903.6 million, $24.8 million (2.8 percent) higher than in 2018 and established a new high-water mark for the category.   

The average number of table games available per month statewide in 2019 was 1,275, up slightly from the 1,234 in 2018.   

Bear in mind that the increase in total table games revenue accounts for only 20 percent of the revenue increase from all gaming options ($24.8 million of $146.1 million) 

New forms of gaming

Two new forms of gaming were made available to the public in 2019 while two others had their first full years.   

Pennsylvania gamblers were able to play slots/table games on the internet beginning in July 2019.  Internet slot games are taxed at 54 percent, the same rate as traditional slots.  The allocation of the tax is a bit different:  34 percent to the state, 13 percent to the Commonwealth Financing Authority (county grants) and 7 percent for the local share.  The economic development and tourism fund and the racehorse development fund do not receive money from internet slots.  Funds from the state share of the tax are split between property tax relief (65 percent) and the state treasury.  Internet table games are taxed at the same rate as casino-based table games, 14 percent, with the same allocations.     

In just six months of 2019, internet gaming brought in $33.6 million in total revenues—$20.9 million from internet slots and $12.6 million from internet table games. 

Video gaming terminals opened at 20 truck stops across the commonwealth in August 2019.  A total of 100 machines collected $2.3 million in revenues over the last few months of 2019.  They are taxed at a rate of 52 percent—a 42 percent assessment going to the state’s general fund with a small portion of that going to a compulsive and problem gambling treatment fund and a 10 percent assessment to the local share.   

Fantasy gaming began in May 2018.  It is a process where a gamer selects players (typically football) to form a team that will compete (statistically) against other gamers’ teams.  This gaming avenue is taxed at a rate of 15 percent which goes to the state’s general fund.   

In just eight months fantasy gaming brought in $15.3 million in revenues in 2018.  For the full calendar year of 2019 fantasy gaming brought in $25.9 million, an increase of 69 percent over 2018.   

The final form of gaming, and the biggest of the new additions in Pennsylvania, is sports wagering.  Calendar 2019 represented the first full year of sports wagering in the commonwealth.  It is taxed at a rate of 36 percent—34 percent to the state’s general fund and 2 percent to the local share.   

Total sports wagering revenues in 2019 were $84.1 million (51.1 percent of that was wagered online, while the rest was wagered in person).  Sports wagering in 2018 consists of just November and December.  The total wagering revenues from these two months was $2.5 million.   

It is very likely that there will be substantial growth in Pennsylvania’s gaming industry in at least 2020.  First of all, the industry will grow with the addition of the new mini-casinos which should debut soon and some of these options such as video gaming terminals and internet based gaming have not yet had a full calendar year of operation.   

Gaming and the economy

But more importantly the national economic growth is putting more discretionary funds into people’s pockets and gaming is one form of recreation available in Pennsylvania. But is this a good thing?  Should the government be so dependent upon gaming as a source of tax revenue?   

Clearly, a dollar spent on one activity cannot be spent on another. Money spent on gaming comes at the cost of other options, most likely other leisure activities.     

According to Bureau of Labor Statistics’ (BLS) data, Pennsylvania’s “amusements, gambling and recreation” sector jobs stood at 58,500 in December 2019. In December 2018 that number was 62,200—a year-over-year loss of 3,700 jobs. The current job count stands 10 percent above 2009’s 52,400. In comparison, national employment in the “amusements, gambling and recreation” sector climbed 30 percent. Note that data for the gambling sector itself are not available at the state level. 

However, at the national level, jobs data are available for the gambling industries.  In December 2009 there were 126,600 jobs in the gambling industry. The count rose to 132,300 (4.5 percent) in 2013 before dropping 13 percent by December 2019.  Over the 10 years 2009 to 2019 the nation’s gambling jobs fell by 11,200 or 9 percent. Furthermore, nationally casino employment is down 5.7 percent over the last 10 years and by 14.5 percent since the peak of 2013.  Is this due to automation and the advent of alternative online gaming? Or could it be that the gambling industry has peaked and is in decline?  At this juncture, it seems unlikely that gaming will have much of an impact on Pennsylvania’s job count in the years to come.  

In 2009, employees in gambling industries accounted for 10 percent of the jobs in the “amusements, gambling and recreation” sector.  By 2019, the gambling share had fallen to 7 percent.  While Pennsylvania’s gambling share of “amusement, gambling and recreation” employment is not provided by the BLS, it seems reasonable to assume it is in the 7 to 10 percent range. And, if it is following the national trend, the share is declining.

As for the tax revenues that policy makers are more than happy to collect, what happens when the economy has a downturn and the discretionary spending ebbs?  How secure are these revenue streams?  Politicians may be running out of ways to expand gaming in the commonwealth.   

Gaming as a recreational outlet must be kept in perspective.  Pennsylvania should not look to the gaming industry to sustain its economy or keep its tax coffers full, not to mention the social ills and costs that can accompany gambling addiction or the impact on lottery sales.

State System problems get worse

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Summary: Problems at Pennsylvania’s State System of Higher Education (PASSHE) continue to get worse. In May 2018, Policy Brief Vol. 18, No. 20, detailed enrollment losses through school year 2016-17 and discussed studies of the system’s problems and suggested solutions. Recently, several legislative proposals aimed at helping PASSHE deal with its severe problems have been presented.

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Enrollment

There is little doubt that for several of the universities in the 14-university system dramatic changes are needed. Since peaking in 2010 at 119,513, system enrollment has declined continuously to reach 95,494 in the fall of 2019. This loss of 24,019 students amounts to a 20 percent drop.  But that figure does not capture the whole story. There are very large differences in the enrollment losses among the universities. Note that West Chester, which now has the biggest student count at 17,691, has added 3,210 since 2010. Slippery Rock has seen enrollment remain essentially flat over the period.

All other schools have lost at least 10 percent.  Three schools—Millersville (10), Bloomsburg (14), and East Stroudsburg (16)—had the smallest percentage losses.  Three schools had losses in the 20 to 30 percent range (California and Shippensburg at 27; Kutztown at 23).  Two schools suffered losses of 30 to 40 percent—Indiana, 32 percent (the system’s biggest student number drop at 4,778) and Clarion, 36 percent.  Meanwhile, enrollment at two universities fell 40 to 50 percent—Edinboro, 46 percent (3,996 students) and Lock Haven, 42 percent. Finally, two universities lost over 50 percent of their enrollment—Mansfield, 51 percent and Cheyney, 61 percent.

Taken together, the schools with over 20 percent enrollment losses account for 23,687 or 87 percent of the actual decline in enrollment of 27,200 at the schools with declining enrollment. West Chester’s gain holds the system’s net loss to 24,019. 

Obviously, schools with 20 percent or more in student count losses face enormous difficulties. Schools with declines of 35 percent or more face extraordinary difficulties. How do they maintain economically justifiable class sizes or degree programs? How do they cope with all the surplus infrastructure—classrooms, dorm rooms, etc.? How do they handle layoffs of redundant faculty? How many doctoral or masters programs are at risk? Indeed, how can university status be maintained for schools that have lost 40 percent or more of students and are still shrinking?

Beyond the enormous problems many of the schools have with massive losses of students, PASSHE as a whole has developed major financial difficulties resulting not only from the enrollment issue but also from overly generous compensation packages for employees.  Then, too, a tightening of Governmental Accounting Standards Board (GASB) reporting requirements now shows the true level of financial difficulties PASSHE faces.

Assets and liabilities

The most definitive and succinct indicator of what has happened financially is the statement of net position—the difference between total assets and total liabilities. Note that all PASSHE financial data in this report are taken from audited financial statements for fiscal years ending on June 30 of each year cited (available online). Between 2010 and 2019, the aggregated system’s net position dropped precipitously from around zero to a negative $1.6 billion. In 2010 the reported net position was positive.  But it did not include the pension liability of around $700 million as required by GASB beginning in 2015. When the pension liability was not accounted for in 2010 there was a positive net position of $687 million.  

Liabilities climbed from $2.072 billion in 2010 (in which pension liability was not counted) to $5.460 billion in 2019. Every category of liabilities rose over the period including workers’ compensation and compensated absences.  The massive $3.3 billion jump was due in large part to the required inclusion of pension liabilities that had risen from about $700 million (based on reported net assets) in 2010 to $1.108 billion in 2019, a jump of nearly 60 percent.

Meanwhile, other post-retirement benefits (OPEB) liabilities rocketed from $723 million to $1.977 billion, a spectacular near tripling of that liability. Bond debt increased 40 percent from $825 million to $1.155 billion during the nine-year period.  The “other” liabilities more than doubled from $404 million to $1.070 billion.   

Obviously, given the decline in enrollment, on a per-student basis, the increases in liabilities are even worse than the percentages shown above. Note, too, that assets grew substantially from $2.760 billion to $3.850 billion from 2010 to 2019, a $1.09 billion (or 39 percent) gain, leaving a negative gap of $1.6 billion compared to liabilities. The nine-year period reflects an increase in assets, other than capital assets, of $600 million to reach $1.308 billion and an increase in capital assets, net of depreciation, of $655 million to stand at $2.016 billion in 2019.

The depreciated value of buildings and improvements jumped from $1.051 billion to $1.654 billion (a 60 percent rise) to account for most of the rise in capital assets.  The large rise in the value of buildings helps the balance sheet.  But with enrollment down 20 percent overall and much more at half the schools, all the new building is a financial disaster.   

Revenue and spending

System revenue was fairly flat from 2010 to 2019, rising from $1.903 billion to $2.104 billion, an increase of 10 percent in nine years. Operating revenue over the nine years rose from $1.301 to $1.386 billion, a rise of just 6.5 percent.  The largest component of operating revenue in 2019 was student tuition and fees (61 percent) with grants and auxiliary enterprises making up most of the rest. The bulk of non-operating revenue is derived from state appropriations (68 percent) with gifts and other sources making up 25 percent.

Total expenses grew from $1.859 billion in 2010 to $2.125 billion in 2019, a rise of 14.3 percent. Employee expenses (salaries and benefit payments) climbed from $1.248 billion to $1.388 billion during the nine years, an increase of 11 percent. This, while enrollment was falling 20 percent. Non-personnel outlays climbed from $611 million to $737 million, reflecting increases in interest payment and losses, depreciation and auxiliary enterprises. On a mildly positive note, expenses hit their high point in 2017 at $2.196 billion and fell slightly in 2018 and 2019.  

In short, PASSHE as a whole has severe financial issues related to declining enrollment that affects the ability to grow revenue through student charges and state appropriations for operations because student counts have fallen, substantially and dramatically, at some schools. Raising tuition becomes self-defeating when demand is falling.  The university system’s overall financial picture has worsened substantially because of accounting requirements and growth in employee benefits especially retirement benefits and continued pay increases. 

Employment

Aggregate employment—full time and part time—at the 14 schools has fallen 12.0 percent from 2010 through the 2018-19 school year. Faculty—full and part time—fell 12.6 percent over the nine years with full time down only 9.5 percent. Bear in mind that enrollment is down 20 percent while salaries and benefit payments are up 11 percent and liabilities for pensions and OPEB are up 53 percent and 174 percent, respectively.  Note that layoffs are strictly based on seniority. Newer faculty members with lower salaries are let go first regardless of ability to teach, part-time faculty has been reduced by 20 percent and annual pay increases continue based on union contracts.  All this combines to push costs higher despite the payroll count reductions.

What to do?

Legislation has been proposed to deal with the system’s severe problems while it endeavors to come up with ways under existing legislation to deal with shrinking enrollment. The most promising proposal, if passed, would give the PASSHE board the ability to close or combine schools.  Most of the other actions being developed or approved will do little to deal with the problems created by faculty unions whose powers cripple management prerogatives and, with the threat of strikes, push contractual compensation costs upward continuously in the face of the system enrollment declines and very large declines at half the schools. 

The Legislature must recognize the surplus of state-supported university capacity. With Penn State’s enrollment of over 74,000—not including professional schools or online students—Temple at nearly 40,000 and Pitt and its affiliated campuses at 34,000 students, these three state-related schools have more enrollment than all the PASSHE schools combined. And all push hard to sustain enrollment in an environment that is increasingly competitive because of falling high school graduate counts.

Moreover, there are many private schools, large and small, competing for many of the same students, not to mention schools in other states. The Legislature also must recognize the importance of union-free faculties.  Unions are inimical to containing costs, education excellence and management prerogatives such as hiring decisions and layoffs.    

Pennsylvania’s State System of Higher Education should be moving to combine the smaller failing schools, including Cheyney, with other schools. It should also contemplate letting West Chester go its own way and any other school that feels it can make it as a free-standing university. As of now, the high acceptance rates and dropout rates and low graduation rates after six years at several schools are simply not what taxpayers should be supporting.

It is time for the Legislature and the governor to address these problems head-on.