Three Teacher Strikes Open the Year

Residents in the Allegheny County school district Shaler Area had a strong inkling back in June that there would likely be a teacher strike if negotiations did not produce a new contract. We suggested that teachers demonstrate over the summer to show they were serious: it is doubtful that they actually did that, but today the picket lines were manned and the start of school delayed. The issues related to education, pay, benefits, whether or not Pennsylvania should allow strikes, replacement teachers, etc., etc., arise again after a relatively quiet year on the labor front and those in the district and others in southwestern Pennsylvania are going to hear a lot about it in the media.

Based on data from the Pennsylvania School Boards Association-who collects and disseminates data on strikes in the state which we used to produce our most recent report on the topic-Shaler teachers last went on strike in the 1997-98 school year for three days.

While the Shaler strike is obviously dominating the news locally, there are other strikes that are occurring in northeastern Pennsylvania to start the school year. Teachers in the Wyoming Area District and the Old Forge District have walked off the job this week.

Pension Obligations Are Taxing Property Owners

Pension problems facing school districts have come home to roost.  As we wrote in a recent blog: “Unless there is agreement on pension reform legislation…most school districts in Pennsylvania face ruinous increases in pension funding.”  To handle this increase, districts will have to raise taxes, lay off personnel, or both.  And while the Commonwealth, through Act 1 of 2006, restricts a district’s ability to raise property tax rates, in Allegheny County eleven school districts, 25 percent of the total, have petitioned for an exception to this law meaning they now have permission to increase property tax rates above the Department of Education’s prescribed limit.

 

 

Briefly, Act 1 of 2006 charges the Department of Education (PDE) with setting an inflation index each year that serves as a cap on each school district’s allowable millage increase.  Anything above this cap has to be granted an exception or go before the voters in a referendum.  There are only three allowable reasons for an exception-school construction (grandfathered debt), special education expenditures and pension obligations.  In 2012 the index was calculated to be 1.7 percent for the upcoming school year (2013-14).  Any increases over 1.7 percent, as stated above, require either a voter referendum or an exception from the PDE. 

 

As we had written about in a previous Policy Brief (Volume 12, Number 8), the fact that this is a reassessment year (or the year the reassessments are implemented) in Allegheny County, muddies the water a little bit.  As we stated then, “The act contained a section on property tax limits on reassessment and noted ‘notwithstanding any other provision of law’ that a school board ‘shall…reduce its tax rate, if necessary, for the purpose of having the percentage increase in taxes levied for that year…be less than or equal to the index for the preceding year.’ That does not mean revenue neutral, but within the index determining how much school taxes can increase under the statute.”  Thus school districts in Allegheny County have to roll back their millages to comply with Act 1 by using the index for the 2012-2013 school year (calculated in 2011 which was also 1.7 percent).  If they need to increase beyond the index, they must go before voters or apply for an exception. 

 

For the upcoming school year, 186 school districts across Pennsylvania (of 500) adopted preliminary budgets indicating that they were going to seek millage increases.  171 are seeking exceptions as their desired increase, based on their preliminary budget, exceeds the index while the remaining 15 are holding increases to within the index.  The PDE released a “Report on Referendum Exceptions for School Year 2013-2014” which provides details of the requests.  Eleven Allegheny County school districts made such a request:  Avonworth, Bethel Park, Brentwood, Clairton, Keystone Oaks, Mt. Lebanon, North Allegheny, Pine-Richland, Riverview, South Fayette, and West Allegheny. 

 

All eleven districts cited pension obligations as reasons for petitioning for the exception with three-North Allegheny, Riverview, and West Allegheny-also citing special education expenditures.  In fact statewide, 169 of 171 school districts (98.8 percent) seeking exceptions did so based on the grounds of pension obligations.  Seventy five also asked for an exception for special education expenses (44 percent) and eleven (6.4 percent) for school construction (grandfathered debt).  Clearly pension obligations, the contribution rate for the retirement system was raised from 12.36 percent to 16.93 percent, are straining school district budgets and many are looking to the taxpayers to pick up the tab. 

 

For the eleven Allegheny County school districts, a total of approximately $5.36 million additional tax revenue was being sought to pay for pension obligations.  The requests ranged from $115,200 (Clairton) to $1.38 million (North Allegheny) with an average of just over $487,000.  The PDE approved nearly all of the requests (Brentwood and Clairton were approved but for less than they requested) for an eleven district total approved exception of $5.23 million.  The PDE also has given approval for millage hikes to cover the amounts approved for each school district.  The range covers a low of 0.1987 mills (Keystone Oaks) to a high of 0.3811 (Riverview).  Clairton, which has a separate rate for buildings and land, was approved for an increase of 1.3384 mills on the buildings and 3.9359 on land. 

 

That is not to say that these districts will use their exceptions, but they have permission to do so-after all these calculations were based on preliminary budgets.  In many cases final budgets are still being worked out and may not be approved until the State budget is set at the end of June.  And of course the other districts not filing for an exception can still raise millages, they just have to do so within the parameters of Act 1. 

 

Pension obligations are straining district budgets and there are basically only two options to deal with shortfalls-eliminate programs/staff positions or pass the higher spending onto the backs of taxpayers.  Taxpayers have certainly borne the rising spending burden for a long time but now are pushing back.  How many teachers would have to be laid off to close the budget gaps caused by the increase to pension contributions?  North Allegheny’s shortfall of $1.38 million suggests that dozens of teachers would be on the block. 

 

It’s time for the state to address the issue by allowing some common sense solutions such as allowing districts to lay off teachers for economic reasons and eliminating the teachers’ right to strike.  Likewise teachers need to realize what is at stake and come to the table willing to accept needed reforms of the pension plans to save teaching jobs.

Measuring the Changes in Certified Assessed Values

Prior to Christmas and New Year’s Day, back on December 20th, Allegheny County certified assessed values for 2013. It will take until the end of January for local governments operating on a calendar year for their fiscal year to finalize millage rates for 2013 tax bills. School districts, with the exception of the Pittsburgh Public Schools, operate on a July-June fiscal year but with Act 1 governing budget development that process will begin rather soon.

Appeals of initial values have adjusted the aggregate changes for the County, municipalities, and school districts. As reported after the certification, the County as a whole will see values rise 32%, from $64.1 billion to $84.5 billion. Earlier in 2012 it was projected that the County would rise to $86.8 billion, a 35% increase.

A quick look at values sorted by school district (there are 43 in Allegheny County) shows a few with what could be considered sizeable drops in the initial projections of assessment changes. Pittsburgh (Pittsburgh and Mt. Oliver) was initially projected to increase 55%; now it will rise 48% under certified numbers; Cornell (Coraopolis and Neville) was initially set to rise 42%; now values are expected to rise 26.7% (in initial 2012 numbers Neville Township was projected to rise 95%, and now the certified numbers show the municipality’s values climbing 56%); Wilkinsburg, Allegheny Valley, McKeesport Area, and Quaker Valley are others that will see somewhat significant drops in what was originally projected to be their assessed value increases.

Only one district, Steel Valley (Homestead, Munhall, and West Homestead) saw even the slightest uptick in values from initial to certified, rising from 25.4% early in 2012 to 25.5% in the certified numbers.

On the Whole, Would We Rather Be Philadelphia?

School closings, teacher contract concessions, and "difficult choices", many of them related to the loss of students to charter schools and a failure to rightsize operations. Oh, and a $300 million borrowing just to keep the schools operating. And that is with a School Reform Commission running the show for the Philadelphia School District. This year the District will spend $2.5 billion on educating 146,000 K-12 students, and just under half of that budget comes from the state.

The fiscal situation in Philly is pointed out, not only for the implications it has on statewide taxpayers, but because one member of the state’s second largest district, Pittsburgh, recently opined that "bigger must be better" and suggested that there be a merger of the 43 districts in Allegheny County since "We’re working on an agrarian model that’s so out of date it’s not funny." A consolidated Allegheny County district would have roughly the same enrollment as Philadelphia’s school district, based on calculations of PA Department of Education data.

Unless the state were to just consolidate the districts in Allegheny County, which is doubtful since school districts are not governed according to county borders, or the board member goes back to the Nordenberg report that suggested consolidating only the County and the City and leaving the other municipalities and the school districts in the County alone and amends it to gain some interest nearly five years later, the cast a wider net approach so we can spread financial problems over a larger area is a non-starter.

There has been one merged district, Central Valley, in the last five years and that came as a voluntary arrangement. It was upheld as a model when the previous gubernatorial administration pushed the idea of cutting the number of districts from 500 to 100 in order to reduce "back office" costs and improve educational offerings. But our work found that the largest district in Allegheny County, Pittsburgh, had more "non-teachers" per 1000 students than a sample of other districts in the County, the exact opposite situation one would expect to see.

Pennsylvania has largely trended the way the U.S. has with the number of school districts: much of the consolidation came in the 1950s and 1960s; by 1972, according to the Census of Local Governments, the significant drops in numbers of districts had stopped and this year the totals in PA and the country are slightly smaller than where they were nearly four decades ago.

Predictable Knee Jerk Reaction to Governor’s Voucher Plan

Hot on the heels of the Pennsylvania School Boards Association’s attack on Governor Corbett’s plan to improve educational opportunities for poor students in the state’s weakest performing districts comes a negative editorial in a Pittsburgh newspaper.  The op-ed demonstrates the thinking of those who remain stubbornly committed to the status quo public monopoly schools regardless of massive failures in many districts across the state.

 

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Sales Down in Some Districts

In last week’s Brief we delved into the issue of the upcoming reassessment and how a sample of two months of home sales compared to the assessed values on those sales. With more than 1,600 sales, the cumulative sales prices exceeded the cumulative assessed values by 22 percent. That countywide sales/assessed gap can be used as a barometer for individual sales, sales by municipality, and sales by school districts to see how County taxes might be affected.

There are 43 school districts in the County: twelve of them contain one municipality (so the population and tax base of the municipality and the district are essentially identical) and the remainder is multi-municipal. There were a few communities that reported no sales in the months we considered, but there was at least one sale in every one of the 43 school districts.

Eight school districts ended up in the position of having their cumulative sales end up lower than the cumulative assessed values on those sales. This ranged from 0.20% lower in Clairton to 17% lower in Cornell. The largest district in this group of eight was Penn Hills (one of the twelve sole municipal school districts) where cumulative sales were 8% lower than the cumulative assessed values on those sales.

The list of districts comprises much of Mon Valley with Clairton, West Mifflin (-2%), McKeesport (-4%), and South Allegheny (-14%) all registering a negative sales/assessed gap.

Freeze Resistance Starting to Thaw?

In a previous blog entry we noted that the Pennsylvania School Boards Association is keeping a running tally of the school districts that have negotiated wage freezes for personnel in light of the 2011-12 budget and the changes to education funding.

At the time (early April) 38 districts across the state had enacted some type of pay freeze: involving administration, teachers, and staff either in stand-alone fashion (meaning the freeze applied only to administrators, for instance) or in a combination (administrators and teachers, teachers and staff, etc.). Only two districts in the five-county Pittsburgh region (Counties of Allegheny, Beaver, Butler, Washington, and Westmoreland) had enacted a freeze in some form.

The tally has now grown to 107 districts, one-fifth of all in the state. Here is how the distributions breaks down:

  • District-wide (teachers, administration, and staff)-24 (22%), none in the region
  • Administrators and teachers-13 (12%), none in region
  • Administrators and staff-14 (13%), districts of Belle Vernon (Westmoreland) and Cornell (Allegheny) listed here
  • Teachers-4 (4%), Bentworth (Washington) is one
  • Administrators-52 (49%), five in the region with Northgate (Allegheny), Seneca Valley and Slippery Rock (Butler), Kiski and Ligonier Valley (Westmoreland).

Four other districts, none in the region, have approved wage freezes for a year other than the upcoming fiscal year.

Merger Math

Take two Allegheny County school districts, each comprising three separate municipalities within them, one that voted to consolidate elementary schools and one that discussed the idea but tabled it, add in a combined decrease of close to $1.5 million in decreased state subsidies, the suggestion of a pay freeze for employees, and the statement from the Governor on his tour of Allegheny County that "…I think school districts around the state are going to have to start looking at can they continue to exist, that there should be a consolidation or a merger somewhere" and you have the present case of Carlynton and Keystone Oaks.

The former district opened the idea of approaching three nearby districts with the idea of consolidating; one said no, one is largely leaning toward no, and KOSD’s superintendent stated "I’ve not been given specific directions, but I think the board is willing to have informal conversations."

Both districts have about the same enrollments (Carlynton with 1,460, KO with 2,050) and if a merger would be successful it would be the first one since the creation of Central Valley a few years ago. Apparently all talk of school consolidation within each district will be delayed while there is a discussion of the merger idea.

District Confronts Declining Enrollment

If demographic projections come to pass, the Keystone Oaks School District (based in the South Hills and comprising the communities of Castle Shannon, Dormont, and Greentree) will lose 17% of its current enrollment (2,231) in ten years. Those projections are a bit sunnier than the Department of Education’s numbers (a 20% loss in 10 years) but not by much. Since its early 1970s high point of an enrollment of 5,459 in nine school buildings, a fall to 1,881 by 2018 would represent a 65% loss over the last thirty years.

In comparison to other districts that loss is likely worse than some, better than others.

Now armed with the numbers, the school district will have to address what to do with its five current buildings (three elementary schools, one in each community, a middle school and a high school) almost as if it were the Base Realignment Commission. The consultants and architects for the district present no less than 17 recommendations for what to do with the buildings and how to distribute the student population. Everything from school closings (the district has reduced the number of buildings from 9 to 5 over the last three decades) to classroom additions and more specialization (K-4 or K-5) are on the table. The board now has to set a timeline on what they want to do (the board president noted that "The board wants to take our time on this") all the time realizing that 80% of the district’s residents do not have children in the school system.