Philly School District Lays Off 3,783 Employees

Facing a budget deficit in excess of $300 million, the School District of Philadelphia has announced the layoff of nearly 3,800 people. The layoffs amount to about 20 percent of the roughly 19,000 total personnel on the district’s payroll.

Why the big deficit? Based on the district’s proposed budget, the two largest causes of the shortfall are a sharp drop in Federal grants and the deficit from last year that required borrowing to fill the gap-borrowing that cannot be repeated. Another problem that is developing to exacerbate the funding shortfall going forward is the hike in the amount the school district will have to contribute to pensions. Unless there is agreement on pension reform legislation, Philadelphia, as well as most school districts in Pennsylvania, face ruinous increases in pension funding. And that means higher city taxes, more layoffs or both. Philadelphia, like many other communities across the state, is not in any position to absorb higher taxes.

Serious pension reform is needed and teachers’ unions must consider the pain they themselves will suffer in the short run as evidenced by the layoffs already occurring across the state. Layoffs that will grow as the pension burden gets larger in the years ahead. Fighting common sense reforms that preserve benefits earned to date and ward off major tax hikes is a train wreck in the making for the unions.

Golden State Municipality Hopes Chapter 9 Brightens Future

Stockton, CA has a population of just over 291,000 people, making it slightly smaller than Pittsburgh. Located in the central part of the state, the city has just filed for Chapter 9 municipal bankruptcy. Unlike Pennsylvania, which has Act 47, oversight boards, and a receiver in the capital city of Harrisburg, California allows for bankruptcy filings without many conditions. California has a mediation process, and that is what just wrapped up for the City of Stockton.

Satisfying the various criteria to file (state has to explicitly authorize, filing must be done by a municipality, filing has to be voluntary, has to be insolvent, and has to have explored other options) Stockton has approved a "pendency plan" that describes how operations will continue during the filing. That plan states "…the city is insolvent. Now, only the difficult process of restructuring its long term financial obligations and personnel costs will enable the City Council to protect the community and make sure the City emerges from this financial crisis as a viable, sustainable institution".

Stockton has made significant reductions in headcount, with public safety employment falling 25% and non-public safety positions down 43%, bringing total general fund employment to 930, down from 1,350 in the 2008-09 fiscal year. In comparison, from the first Act 47 plan in 2004 to the revised plan in 2009, Pittsburgh’s headcount fell 10% (there were over 400 layoffs in 2003, prior to the Act 47 declaration).

Rally Participants Should Not Be Surprised

Nine community organizations joined together yesterday to rally for factors other than seniority to be considered when the Pittsburgh Public Schools takes action to reduce the employee headcount this fall, with at least 350 classroom teachers the initial estimate. Several advocacy groups said that the data is there to make a determination on effectiveness; the teachers’ union says seniority is the only fair way; the Board hopes to find a middle ground.

That the union is holding steadfast in its position on seniority should have come as no surprise: even as the District and the union worked on a pay for performance model and negotiated a five year contract in 2010 and there was a spirit of cooperation the documents applying for foundation money to support teacher effectiveness stated "…the [Pittsburgh Federation of Teachers] membership will be the final voice on collective bargaining issues" and "…the PFT membership will be the final voice on these initiatives [related to pay for performance]". The contract states that "system seniority shall be the sole applicable seniority criterion to be applied in the layoff of any teacher(s)". Even much of the contract language that implements the Teacher Effectiveness Plan contains special seniority provisions.

Government Relativity

A Wall Street Journal opinion piece pointed out that there are twice as many people working for the government than in manufacturing, a condition that was exactly the opposite in 1960. Only two states (Indiana and Wisconsin) defy the prevalent condition, which means Pennsylvania is among the larger group with more people working for the government than making things.

Just counting state and local employees-not people working for the Federal government in Pennsylvania-the Census Bureau’s Government Employment and Payroll Data shows 605,927 full time equivalents (FTE) in 2009. That’s up 6% from 2003, when Pennsylvania had 569,356 state and local FTE employees.

Measured against population in the Commonwealth (which is up 2% over the same 2003-2009 time frame) state and local employment per 10,000 people has grown 4% from 461 employees to 481 employees. The majority of the growth has come from local government, where the per 10,000 people headcount went from 332 to 351 (6%), and in 2009 Pennsylvania had 442,024 local employees, up from 409,893 in 2003. Remember that when thinking about the low productivity and lack of improvement in local services like education and public transit.

If state and local employment growth had been held to the change in population, the state would have about 20,000 fewer FTE in 2009 than it has now. That could mean a lot given the legacy cost troubles faced by many of the large population centers in the state and for taxpayers across the Commonwealth. It might have also encouraged governments to look at core services and see what could be better provided by the private and non-profit sectors.

Measuring Pittsburgh’s Financial Performance

Compared to our Benchmark City-an amalgamation of financial data from four U.S. regional hub cities that differ in geographic location, population, square mileage, and political environment-Pittsburgh spends more per resident, taxes more per resident, has more employees per 1000 people, and is far out of line on legacy costs related to pension health, debt load, and workers’ compensation expense.


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