Let’s Make Deal on a Transportation Bill

Democrats and liberal op-ed writers are busy beating up Republicans for refusing to do what Republicans are supposed to always do, shut and vote for higher taxes to fund roads, bridges and public transit.

Republicans should agree on some revenue enhancements when Democrats are ready to make two key concessions. First, Democrats will agree to unlink highway funding from transit funding. The issues need separate priority and have many differences when it comes to the best way to fund them and at what level they should be funded. Second, Democrats will stop opposing the elimination of prevailing wage requirements.

Simply having Republicans hold their noses and vote for revenue enhancements for transportation will not serve the Commonwealth’s long term best interests. Savings opportunities will have been foregone and needed structural changes will not be enacted.

There is a reason Pennsylvania is now facing a multiplicity of serious financial problems. The state government-for too long-has kicked cans down the road as it kowtows to the power and influence of unions. Teachers, transit workers and other government workers have had their way with legislation regarding strikes, prevailing wages, pensions, layoff rules, and so on for decades. Every problem is met with demands for more money to feed the monster that has been created. Especially noteworthy are the Port Authority of Allegheny County as well the largest school districts in the state.

Previous governors have redirected highway funds to keep the Port Authority from going on strike robbing Southwest Pennsylvania of dollars needed to keep roads and bridges maintained. Why do the complainers about Republican inaction not want to hear about that abuse of power? Then too, tens of millions of Federal highway funds were redirected to the North Shore Connector in Pittsburgh. Where was the outrage over that? Likewise, almost a hundred million in state and local tax dollars were required to build the Connector. That’s a lot of road and bridge work. But as always the supporters of public transit were 100 percent behind building the tunnel regardless of costs: one that provides free rides to users.

The mindlessness encapsulated by this venture is the single greatest argument for Republicans to demand some concessions from Democrat and transit supporters before folding and voting for the higher revenue status quo fans want.

Legislature Restarts County Pension Reform Effort

Is this the year changes come to Allegheny County’s Retirement System, a self-insured defined benefit plan covering more than 7,400 non-uniformed employees, jail guards, deputy sheriffs, and County police officers?



If that question sounds familiar, it should: in the 2011-12 session the House version of a reform bill passed that chamber unanimously but never got past the Senate Appropriations Committee (it made it there just about this time last year).  Earlier attempts were likewise made in recent legislative sessions but the changes sought by proponents have proven elusive. We noted in a Brief in December (Volume 12, Number 61) that the proposal might come back.


Because Allegheny County system’s guidelines are codified in the Second Class County Code, any substantive change has to come from Harrisburg. The General Assembly has done plenty of tinkering with the County’s retirement statute over the last forty years. Consider that the statute as it existed in the 1950s required all employees to reach age 60 and have 20 years of service to attain normal retirement benefits.  Amendments lowered the age of retirement for police to 50 (in 1974) and to 55 for the sheriff and deputy sheriffs (in 1989), prison guards (in 1992), and probation officers (in 1998).     


Thus far, legislation has passed the House and is now in a Senate committee (there is an identical Senate companion bill that is in the same committee) and, based on a reading of the House’s fiscal note on the 2013 bill, not much of the tenor has changed from earlier versions of the legislation.  Should the reforms become law, new County hires would no longer be able to count overtime into their pension, would have to work more years for the County to be qualified for a pension (25 years instead of the current 20), would have a period to vest of ten years instead of eight, and would calculate final average salary from the highest two years of the final four to the highest four years of the final eight.  With interpretation of the state’s Constitutional language on the impairment of contracts taken to mean pensions for current workers cannot be touched, so savings are gradual and obtained by changes to future employees. As employees under the current system retire and new hires eventually replace them, there would be a corresponding decrease in the normal cost for the pension system (both the County and the employees contribute at the same rate) that would reach $16 million twenty years after the enactment. 


It is easy to see how the argument is going to shape up.  Those in favor of the reforms from the County government as well as the County’s legislative delegation are looking at a system that was 85 percent funded in 2005 that is now 58 percent funded as of 2011 and have probably taken note of the pension problems encountered by the City of Pittsburgh and may want to head similar problems off before things get really bad.  Every year that passes before changes apply to new hires postpones the time when cost savings would arrive.


Those opposed to the changes, on the other hand, have to make a convincing argument that employees who are not yet even employed by the County, don’t bargain with the County, and have no standing should not have a different pension than the one in place.  This is what happened in 2009 when a House committee took testimony in Pittsburgh on the changes and heard from heads of bargaining units.  One made an argument about a “two-tier” system which “…is a dangerous thing between workforces, unions in the workplace in general. You have certain people that are able to benefit from something and others that are not.  They do the same job, work the same hours, complete the same task…”  Presumably the insinuation was that there might be intra-union conflict if employee A could count overtime into his pension and retire after 20 years of service while employee B could not. Of course anyone taking the job would be willingly accepting the differential-no one would be compelled to work for the County. 


Maybe time will bear that out. In the intervening years since that testimony was taken several substantial changes have been made at the state and local level to differentiate new employees hired by the public sector:


  • The state passed Act 120 in 2010 that created two new tiers of school employees hired after July 1, 2011 with a lower multiplier rate on final average salary, a longer vesting period and a higher retirement age (to 65 from 62) and a new tier in the state employees retirement system for those hired after January 1, 2011 which did the same with the multiplier and increased retirement age by five years (changing most to either 55 or 65 years of age).  People hired since those dates are working alongside others who are not under those benefit structures.
  • The Port Authority made changes to its plans for non-represented and IBEW employees where new hires are in defined contribution plans, with those employees working alongside employees in defined benefit plans.  The Authority also negotiated a new contract with the ATU where new hires will only be eligible for three years of post-retirement health care, with those employees working alongside of current employees who are in various tiers of benefit qualifications tied to age and service requirements.
  • The Act 47 recovery plan for Altoona eliminates retiree health care for employees hired on or after January 1, 2014 and Harrisburg’s plan eliminates it for those hired after the adoption of the plan. 


That’s standard operating procedure: if pension benefits for current employees are viewed as sacrosanct and there are limitations for bankruptcy filings for local governments in steep trouble with generous retirement packages made by officials in previous years, then the gradual process of nurturing pensions back to health falls on new hires.


Whether the proposed changes to the County’s system makes it through the legislative process this year will provide insight as to the Commonwealth’s appetite to take on wholesale pension reform.

Last Gasp for Moratorium?

Back in September of 2009, we noted in a Policy Brief that attempts for the Legislature to pass a law that would stop court decisions from mandating property reassessments would create "…an explosive Constitutional crisis". It seems simple: the courts would be telling a county "do a reassessment" while the General Assembly would be telling the county "don’t do a reassessment". That September mention came months after the Supreme Court ruled that Allegheny County’s base year plan violated the uniformity clause of the Constitution and remanded the matter back to the County courts.

Nearly three years later, just as the budget deliberations were wrapping up, the moratorium issue came up again and was discussed as a larger piece of legislation dealing with the agency that handles issues related to assessments. The moratorium would have applied to Allegheny and Washington Counties.

No doubt the results will be decried by officials in those two counties as well as by legislators who pushed for the moratorium. But what about the counties that are scheduled to see new reassessed values go into effect in 2013 like Allegheny County?

Lehigh, Lebanon, and Erie Counties are all expected to have new values. Lebanon’s came about because of a court decision at the Common Pleas level. Same with Adams County, which completed its reassessment in 2011. Why aren’t legislators and the public hearing from the experiences in these counties?

Are Lavish Pensions Fostering Corruption and Ineptness in the Legislature?

As the reports of Bill Deweese’s sentencing were being written, it became obligatory for those penning the stories to mention that the convicted Representative would be forfeiting $2.8 million in pension benefits. Those benefits would have continued to increase if he had not been convicted of the felonies he was charged with. The legislative pension formula provides legislators 3 percent of their highest salary for every year served. If Deweese had kept his seat for several more years his pension would have gone up commensurately. Note that state employees get only 2.5 percent for each year employed. Money contributed to pensions by legislators is not forfeited but can be held for restitution.

Nor is Deweese the only high profile forfeiter of pension benefits. John Perzel, Vincent Fumo and Mike Veon among many others have done so earlier. Presumably Jane Orie is about to join the group. And Robert Mellow who left office in 2010 is under investigation and is at risk as well. Mr. Mellow would lose an annual pension of $138,958 after taking a lump sum of $331,025.

Needless to say, for those who stick around, legislative service can be quite lucrative. Thus the question: does the promise of a lucrative retirement lead members of the Legislature to engage in questionable behavior that attempts to insure their perpetual re-election? The numbers of Pennsylvania legislators that have been convicted of election related crimes and money related malfeasance in office aimed at securing reelection suggest that the lure of power and lucrative pensions are certainly at work.

But just as important, does the desire to stay in office lead to a lack of intensity in pushing needed reforms because it is better for reelection not to rock any boats? How else explain the failure of the Legislature to fix the grotesque assessment problems, reform the state’s labor laws that are so inimical to economic growth and cost efficient government, or even to do the simple job of putting liquor sales in the private sector? Obviously, fear of voter rejection plays a major part. If there were no lucrative pension or generous health benefits, would legislators be so enamored of keeping their seats?

And given the extravagant pension package the Legislature adopted for itself, is there any wonder that it keeps kicking the state employee and teacher pension problem down the road? To deal with that impending financial debacle, they would have to act in a way that might cut their own pension benefits-a very unlikely development.

All the talk of reducing the size of the Legislature is a smoke screen to keep the public’s view away from the real problems. The Legislature is hamstrung by member desires to remain in office and the need to protect the largesse these offices provide.

We will know the legislators are serious about pension reform when they vote to adopt a 401k type plan for themselves.

Legislature Ready to Undermine the Supreme Court

The Pennsylvania House has once again put on display its utter contempt for the rule of law by passing a bill that would overrule orders from the courts including an order of the Supreme Court that upholds the state Constitution. Amazingly, the House passed a bill that allows county leaders to decide whether they will obey court orders to update property assessments.

One can only hope the Governor will veto this threat to the separation of powers enshrined in the Constitution. One must wonder if the members of the Legislature who have sponsored this monstrosity have considered the oath they have taken in which they swear to obey, protect, and defend the constitutions of the United States and Pennsylvania. Those constitutions empower the Supreme Courts to decide on constitutionality of laws written by the legislature and actions brought before it through lawsuits. When the Legislature decides to enact legislation that directly contravenes a Supreme Court decision based on the Constitution we have the making of a crisis in governance.

Assuming the Senate also passes the bill, and the Governor signs it, the bill will face an almost immediate challenge in the courts and will certainly be ruled unconstitutional. At that point, how does it get to be enforced? Will the Legislature write another law saying it is alright to ignore the new court rulings? Or will the county leaders go merrily on their way ignoring the court orders to reassess? If the courts acquiesce and yield to this assault on their power, they will have effectively neutered themselves as the citizens’ best hope for protection of liberty and property and relinquished those powers to a Legislature, which, by virtue of passing court crippling legislation, has shown itself to be unfettered by the Constitution or its oath to obey and defend the Constitution. This bill and its probable aftermath will make Pennsylvania the laughing stock of the nation.

The asininity of the situation is more clearly seen in the fact that the Legislature has had years to write assessment laws that would conform to and show for respect for the Constitution House members have sworn to obey. In their fear of property owners whose properties are grotesquely under assessed they have chosen not to risk the ire of those voters by passing needed reforms that would bring Pennsylvania into the 20th century, let alone the 21st century. In so doing they have allowed horrendous inequities to develop in property assessments for which only the courts can offer a remedy to property owners forced to pay far more than their fair share of taxes.

Now the courts come with orders to fix the problem as mandated by the Constitution’s requirement of uniformity of taxation and the Legislature has chosen to attempt to block the only avenue open to taxpayers seeking correction of illegal and inequitable treatment.

If the Legislature wishes to do something that shows their true colors and would be helpful to their cause, it could pass an amendment to the Constitution that removes the uniformity clause. Or if they cannot muster the political courage to do that they could pass an amendment forbidding the taxation of property.

But they will do neither. It is easier to pass bills that flout the Constitution and the rule of law. Better to stay in good stead with those getting enormous and illegal advantages in their tax bills than to deal with the problem of their own making through the years of unwillingness to tackle what has been staring them in the face. We are witnessing self-government at its most feeble.

Solving PAT’s Financial Woes: State Problem or Local Issue?

The ongoing saga of the financial morass at the Port Authority (PAT) has developed an interesting twist.  Governor Corbett, through a spokesperson, has responded to PAT’s entreaties for a hefty boost in money from the Commonwealth to cover an impending $64 million deficit by telling PAT that, “they should look to their own resources to come up with a solution.” 


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County Exec Asking Legislature for Increased PAT Funding

The newly installed County Exec, after declaring he would be leading the charge in PAT labor negotiations, has made his way to Harrisburg to lobby for more funds for all but bankrupt Port Authority. He will argue that the looming $64 million deficit and the cuts in service it will require could have serious negative effects on the region’s economy.

What he will not tell the legislators about is the lack of progress by PAT in getting any meaningful concessions from the transit unions or retirees. Therein lies the principal root of PAT’s financial problems but nothing significant ever gets done to lower immediate cost other than lay off employees and cut bus service. The Exec has not once indicated he will press for major concessions by the retirees or union members. Hence the legislators should politely indicate the way out of their offices to the Exec.

More money for PAT now will only beget the cries for more money next year.

Really hard to enact bills need to be passed by the state government to address PAT’s fiscal situation. We have outlined those on many occasions. Eliminate transit workers’ right to strike, eliminate PAT’s monopoly in Allegheny County, and amend state law to allow PAT to declare bankruptcy. There is no other way to reduce the enormous burden of legacy costs that are driving the Authority into the ground.

The question is, do the Governor and the General Assembly have the intestinal fortitude to face down the Exec and the unions and do what needs to be done?

PAT Retiree and Employee Concessions Are Critical

Right on cue, the Port Authority has rolled out the latest doomsday scenario of service cuts and layoffs. No doubt the huge projected budget shortfall, if unaddressed, will require enormous cutbacks. But as sure as robins returning in the spring, there is no talk of addressing the underlying causes of the financial disaster that PAT has become.

Whipping up rider and business sentiment in an effort to persuade Harrisburg to increase its subsidy-despite the looming $700 million state revenue shortfall for the current budget year-is the overused and cynical modus operandi. Where are the brave elected leader voices demanding that retirees with their enormous legacy costs and current employees with their $25 per hourjobs with Cadillac benefits and efficiency killing work rules make some sacrifice to save jobs and bus service?

That’s not how the game is played in Pennsylvania. Rather, it’s lobby for more money to feed the voracious maw of employees, past and present. And when Governors and County Execs manage to get more money from the state as happened so many times in the past, especially under the previous Governor, what is the lesson learned by employees and retirees? Hold out, make no concessions, more money will be coming from the state or Feds. If the state blinks in the current round, the unions will have their convictions reinforced and the game of chicken will be repeated next year.

The state should set an amount of subsidy per rider, adjusted for inflation of no more than the 2011 level and keep it there permanently.

On the other hand, the state shares a lot of responsibility for PAT’s financial condition by caving in to union demands in the past, by refusing to eliminate the right to strike and being far too deferential to requests for funding for money pits such as the North Shore Connector and by permitting the monopoly status of PAT to continue when competition was sorely needed. It can begin to take some responsibility for its failure to prevent the problems that have being brewing for years. Change the law so the Port Authority can declare bankruptcy-the only way it can deal with its massive and growing legacy costs. Appoint an independent board including several non-Allegheny County members to oversee the organization. Remove the monopoly to allow other carriers access to the County and eliminate the transit workers right to strike.

In the meantime, concessions must be forthcoming and permanent. Some additional monetary help might be granted on a temporary basis if the retirees and employees make a strong, good faith effort. But the additional help must be accompanied by other legislative actions including those recommended above. The Commonwealth needs to take bold steps to deal with PAT and not kick this can down the road again.

What Will Come of Assessment Meeting?

On Thursday the County and Common Pleas Court Judge Wettick are to meet to discuss the progress toward the 2012 reassessment. As we pointed out in a recent Brief, things were on track based on the statements of County officials all the way back to December of 2009 when the reassessment timeline was established. The Manager, Solicitor, and acting head of the Assessment Department indicated as much. Now the timeline indicates that values might not be ready until next spring.

The County was long holding out hope that the state would pass a moratorium on court-ordered reassessments. The Legislature did at the end of June, but the legislative process reduced it down to apply only to Washington County. The Governor vetoed the bill, and as of this writing there is not going to be an override of the veto. That takes away some of belief by County officials that they are being singled out by the specter of property assessments. It gets the focus back on the matter at hand in Allegheny County.

So what happens Thursday? Perhaps the Judge will recall his opinion from May of 2005 (on the County’s cap system plan) when he wrote "it is the responsibility of the County to promptly make available to the office of Property Assessments and the Chief Assessment Officer whatever resources are needed to improve the process".

Will State Hear County’s Pleas?

This week the Governor and 31 state legislators have been invited to County Council’s chambers to discuss "PA Assessment Law and the 2012 Court Ordered Allegheny County Reassessment". The topic could more appropriately be titled "Please Act on Our Moratorium Request". Council, by a 13-2 vote, recently passed a resolution asking the General Assembly to pass a bill circumventing the decision of the state Supreme Court that ordered a reassessment based on the uniformity violations in the County’s base year plan.

As we have pointed out before, the serious consequences of a legislative action that would try to nullify a Supreme Court decision cannot be understated. The County Executive and Council members in support of the base year and now the moratorium say they want predictability and stability. However, the status quo is in clear violation of the state Constitution’s uniformity clause.

From the perspective of the Council the upside of the moratorium is that it will give the General Assembly "suitable time to study Pennsylvania’s current property tax system and to enact legislation of uniform, equitable, and statewide effect…" The problem is that one, the Legislative Budget and Finance Committee released such a study in July of 2010 and two, the state has known for a long time with or without studies that the property tax system is outmoded and has acted at the margins (lottery, slot machines, homestead exemptions, etc.) to "solve" the problem.

A sure sign of how seriously legislators from the County take the Council’s request will be reflected by how many show up to the meeting.