Macy’s is Downsizing-Not Asking for Government Help

Macy’s is reducing its Downtown store’s active floor space by 32 percent. Of course, employees are worried about possible job losses. This downsizing comes on the decades long trend toward smaller downtown retail operations. Since the early 1980s Horne’s and Gimbel’s have left, Kaufmann’s sold and downsized while heavily subsidized Lord and Taylor’s and Lazarus have come and gone quickly.

Meanwhile, Saks Fifth Avenue is telling City officials that it will need government financial help if it is to keep its Downtown store open. One can hope that after the horrible experience and financial losses Pittsburgh has suffered had in trying to prop up or grow Downtown retailing, and in view of the City’s own fiscal problems, elected officials will resist the temptation to waste even more money subsidizing an upscale retailer.

The encouraging part of the Macy’s downsizing story is that the store has not asked for government financial help to maintain its current size or to avoid possible employee cuts. Perhaps the company is being a good citizen expecting to pay its own way and to rise and fall on based on its own efforts and resources. Or perhaps the company simply has seen the pushback to the Saks request and understands the City and state are not in a position to subsidize retail outlets.

Not that there is ever a justification for subsidizing retail. Retail is driven by consumer spending. Helping selected retailers creates an unfair competitive disadvantage for non-subsidized retailers and produces no long term net increases in total sales. It merely attempts to redistribute where sales occur. As Pittsburgh has learned to its chagrin, fighting long term retail trends by throwing money at Downtown department stores is foolish. Too bad City officials refused to listen to folks who tried to tell them back in the mid 1990s what was going to happen if they embarked on a massive scheme of subsiding Downtown retail.

One City in the Institute’s Benchmark Takes a Big Action

Last week we released our most recent Benchmark City report updating data to reflect 2010 budgets. But the school district in one city in the Benchmark-Charlotte, NC-is showing signs that it is preparing for the economic hardships that are surely ahead in the coming years.

Just this week the district announced that it plans to layoff 600 teachers for the fall term and is cutting pay for 224 assistant principals. According to the Superintendent "performance" will be the guiding factor in determining who gets laid off.

Let’s put the 600 layoffs into perspective: Charlotte-Mecklenberg School District has 10,497 teachers and support staff employees listed in their most recent annual report. Letting 600 teachers go amounts to a 5% downsizing. If Pittsburgh Public Schools were to layoff 5% of the workforce classified as teachers/support staff, it would amount to 115 people (based on 2,303 teachers and academic coaches listed in the most recent school CAFR).

Consider too that enrollment in Pittsburgh is falling while enrollment in Charlotte-Mecklenberg has been on the upswing (since 2004, Pittsburgh is down 26%, Charlotte is up 15%) yet, on a per 1000 student basis, Charlotte has 79 teachers/support staff and Pittsburgh has 88 teachers/coaches, 14% higher in the Steel City (total overall staffing is even more disproportionate with Pittsburgh having 39% more employees per 1000 students).

Imagine what rancor 100 layoffs in the Pittsburgh Public Schools would cause. And if those layoffs were based on performance without regard to seniority the ire among teachers would be off of the charts. Ironically the teachers’ union in Pittsburgh would want to set aside performance for layoff decisions while it tries to define what constitutes good performance to satisfy the requirements of the Gates Foundation grant. Moreover, under the union contract and state law it is unlikely that either spending or layoffs will occur in Pittsburgh no matter how tough the economic environment. Indeed, raises for teachers will have to be paid according to contract terms no matter the hardship for taxpayers in Pittsburgh and across the state. Somehow the state and Federal government will be counted on to fill any gaps.

What a difference in approach in NC, a state that has no recognized public sector unions and where teacher and other public employee strikes are not allowed and would result in serious penalties if they occur.

Pittsburgh’s school board just voted to close two schools because of falling enrollment. Is there a chance a single teacher will be let go as a result of declining numbers of students? Not in Pittsburgh where public sector unions are in firm control.

And Pittsburgh taxpayers have not seen the worst yet. The school board requirement to boost funding sharply for teacher pensions in a couple of years will cause school tax rates to jump. Then too, the 2012 county wide reassessment will undoubtedly cause enormous heartburn for people whose properties are seriously undervalued currently. One must wonder how charitable toward teachers’ unions taxpayers will feel by then. But unless they are willing to vote differently they will just have to grin and bear the higher tax burdens.