Governor Holds Firm on PAT Funding

Governor Corbett has shown real grit in refusing to acquiesce to the entreaties by some and scurrilous name calling by others demanding that he come up with more funding for the Port Authority. In fact, his adamant unwillingness to capitulate to those demands is the only reason the transit unions have any motivation to even consider making any concessions on wages or benefits.

Enter the Post-Gazette editorial writers with specious arguments and adding their voice to the clamoring cries that the Governor act soon. First, they point out -again-that the Governor’s task force on transportation made recommendations several months ago and he has declined to say what, if anything he will support from the those recommendations. The ed writers might want to remember that Governor Rendell’s 2006 task force on transportation made many recommendations for PAT including a call to begin explore competitive contracting. Not a single route has been privatized.

Secondly, the P-G mentions that the unions made concessions totaling $93 million. What they don’t say is that those savings are spread over many years. That’s a start but not nearly enough in the face of the billion dollars in unfunded benefit liabilities facing the Port Authority. What PAT needs are savings in current outlays and those have been reduced only through laying off employees. And that requires serious cuts in wages as well as concessions by retirees. Until those are forthcoming PAT will continue to strangle on excessive pay and retiree benefits.

So, until PAT’s unions and retirees are willing to make some serious concessions the Governor is right to hold firm. Any indication from him that he might yield to the mounting pressure to come up with additional funding will only encourage the unions to back away from concessions. This is the game of chicken they have played for years and have won. They must not be allowed to win again.

Port Authority Staring into the Abyss—Again

In what is fast becoming an annual rite of fall, the Port Authority (PAT) has issued an advisory telling one and all that disastrous service reductions are coming unless state taxpayers come up with tens of millions of additional dollars to support its spendthrift ways. 


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Board Bemoans Pittsburgh Schools Job Cuts

With moans of regret and lamentations over the sadness they felt, members of the Pittsburgh School Board voted by an 8 to 1 margin to eliminate 217 positions from its horribly bloated payroll. Of that number 147 represents currently employed staff that will be laid off in the budget cutting measure that is expected to save $11.5 million.

Here’s the bad news for the board. Their budget cutting is just getting started. Last November the Allegheny Institute warned the school board of a gigantic impending financial crisis about to land on its doorstep. Despite sharply declining enrollment and falling real estate tax collections during the 2006 to 2010 period, school spending continued to rise as new non-teaching employees were added in a display of unbridled profligacy and irresponsibility. The burgeoning future budget shortfall was temporarily filled by jumps in state funding and Federal "stimulus" funds.

As we have pointed out for some time, the state would eventually have to rein in spending in the face of a $4 billion revenue shortfall and Federal funds would dry up as the Congress turns its attention to exploding deficits and economy corroding debt buildup. Now the wolf is at the school house door in Pittsburgh as a result of years of failed financial stewardship and failure to deliver schools capable of adequately educating students.

No amount of pointing out their highly visible shortcomings was ever enough. The board, the teachers’ union, the superintendents and too many politicians in thrall to the specious malarkey of educrats resisted any meaningful reforms, opting for gimmicks and ever more spending as the answer to the problem of delivering quality education.

One could hope that game is over. But in all likelihood, the board’s lachrymose caterwauling as they voted to cut 217 positions signals an unrepentant mentality that continues to believe that in a couple of years, things will get back to normal.

Given the prospects for further enrollment declines and a much tougher stance in Harrisburg with regard to the unproductive and wasteful use of education dollars in the City, the board’s hopes for a miracle on a white horse to ride in are wishful dreaming. It is a good time for the board to lay in a large supply of crying towels.

Angst over PAT Funding and Service

Downtown business and civic leaders are in a panic over the coming cuts in PAT bus service arising out of the transit agency’s near $50 million budget shortfall. The leaders are calling on Harrisburg to come up with money to fill the budget hole. Instead they should be asking why PAT has not asked for significant concessions from its employees. They should also ask why the Authority and Governor Rendell believed for three years that the Federal Transportation Administration would approve tolling I-80 when the plan presented by the state clearly did not meet Federal legal requirements.

The business and civic leaders might also ask why PAT diverted capital funds to the North Shore Connector that could now be used to shore up service temporarily. The leaders could also ask why PAT has felt compelled to keep building huge capital projects requiring large amounts of debt that now has to be paid back and is using up funds that could be used to fill to budget hole.

Months ago the Allegheny Institute proposed a plan under which the state would match each dollar in permanent compensation reductions PAT was able to achieve through wage and benefit concessions. Savings through layoffs-that led to service cuts-would not count. There has been no effort in that direction. PAT prefers to lay people off and the unions prefer to suffer layoffs rather than make any wage or benefit concessions. The senior employees are protected at the expense of the junior workers and transit system users.

But most despicable is that PAT and its unions will not allow private companies or other regional transit agencies to offer bus service to make up some or most of the service reductions stemming from the budget shortfall.

The fault lies not in Harrisburg’s inability or unwillingness to throw more money at the hugely expensive transit agency but in the agency, the unions and the local enablers who have failed over the years to demand accountability or work for changes that could have prevented this day from arriving. Plenty of earlier crises should have awakened them to the reality of transit agency that is financially out of control.

City Staffing Numbers: A Recent History

The Mayor took to the local airwaves this morning to explain the fallback provisions of the garage lease deal: a property tax increase, a wage tax increase, or a reduction of 400 police officers (as of 2009 audited numbers there are 1,116 people in the police department and the Act 47 plan counts 850 as sworn officers).

The Mayor went on to say, in effect, that cuts won’t work because the City is down 1,000 employees from where it was in 2002. That, on paper as audited, is accurate: in 2002 there were 4,352 City employees and in 2009 the count was 3,310. In that time frame the City has had only two periods where its employee count fell in the hundreds: 2003-04 (down 637) and 2005-06 (down 321). The biggest drop in the police department came in 2003-04 when the headcount fell 237.

But here’s the key: even with the decline since 2002 the City is still staffed, on a per 1,000 person basis, at a rate higher than other U.S. cities. This was true overall (40% higher) as well as for police (24% higher), which, incidentally, was supposed to be the department where emphasis was placed on moving more civilians into roles in order to allow for more officers on the street.

Mayor’s False Choice Scare Tactics over Pensions

In an effort to promote his plans to lease the Parking Authority facilities, Pittsburgh’s Mayor claims the City will have to take draconian measures if the lease deal is not done. To generate the $30 million the state will require the City to put into pension funds, he says there will 400 police layoffs or massive increases in taxes. On the other hand if the lease is done, parking costs at the Parking Authority facilties will double or more in some cases.

But as we noted in last week’s Brief the Mayor is presenting a false choice. There is a less costly approach but to be sure there will be some pain to the City. There is no free lunch.

Here is a better alternative. Cut the parking tax rate from 40 to 20 percent. That will allow the lease to go forward with parking cost hikes at the lessee’s spaces in the 40 percent range, which would put those parking costs close to privately owned facilities. To make up the lost revenue from the parking tax cut would require a savings of $20 million or less. That could be done with a 5 percent reduction in general fund spending. Outsourcing measures, hiring freezes and productivity enhancements could easily generate 5 percent if Council and the Mayor want to do it and have the will to do it.

An added benefit would be less upward pressure on parking rates due to the tax rate reduction. Private garages might even lower their rates a bit or earn enough profits to warrant building new facilities, something the Downtown area desperately needs.

Governor Gets It Terribly Wrong on Education Spending

Speaking to group of Pennsylvania teachers on June 22, Governor Rendell tried to make the case for asking the Legislature to approve an additional $355 million in education spending in the 2010-2011 budget.  In his remarks he said school district budget cuts are hurting schools across the state. To illustrate this claim he pointed to Penn Hills where 49 teachers have been furloughed.  Too bad the Governor’s aides had not read the news accounts regarding the furloughs.

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Teacher Union President Needs Some Education

In an opinion piece earlier this week the president of the Pennsylvania State Education Association set out the teachers’ association position on the impending requirement for massive contribution increases to the Public School Employees Retirement System (PSERS). Those increases will almost certainly necessitate hikes in state and school district taxes. Basically, teachers will help craft a solution to the pension funding crisis as long as they are not required to shoulder any of the burden.  That is to say, the unions will strongly oppose any reduction in future retirement benefits and any efforts to shift to a defined contribution system such as 401(k)s. So much for any real assistance. 


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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.

As Leaves Fall so do Gaming Revenues

Pennsylvania’s slots parlors are now deep into gambling’s fall slow season. This coupled with the impacts of a national recession has caused one area casino to announce that up to 100 employees will be laid off. Instead of the beleaguered Rivers Casino laying off workers as might have been expected, it was its southern neighbor, the Meadows.

That the Meadows Casino made the announcement came as a bit of a surprise. Their Gross Terminal Revenues (GTR) to date had been well above expectations-they are averaging $5.9 million per week since the beginning of June which gives them a pace of more than $307 million. Even though wagering and GTR at the Meadows had declined slightly with the opening of Pittsburgh’s casino, they should easily beat their initial forecast of $236 million in annual revenues.

Compare these results with those of the Rivers Casino. Since opening to much fanfare in August, the Rivers is averaging just more than $4 million for annual pace of $210 million-well below their projections of $427 million. Their performance to date has been so worrisome that they renegotiated their annual payment for the new hockey arena when it was clear they would be unable to pay the full $7.5 million by the end of October. Instead they made a partial payment of $2.35 million with the balance due in April. (It’s worth noting that the Meadows’ has no such community benefits obligation.) Standard and Poor’s also lowered the Rivers’ credit rating from a B to a B-. It’s fair to say that things are not working as the owners (and politicians) had imagined through the first few months.

However, true to their all-is-well mentality, management at the Rivers insists everything is fine. In fact they claim to be in hiring mode to staff their newest restaurant with several more open positions at the facility. Is this whistling past the graveyard or do they expect activity to pick up? As we noted in a recent Policy Brief (Vol. 9, No. 52), the fall season has typically been low for Pennsylvania’s casinos and activity remains low through early spring.