Hurting the Poor

I don’t know how Tim Eller, spokesman for the state Department of Education, can keep a straight face when he talks to reporters. Again and again he declares that Governor Corbett “has increased state funding for public schools by $1.5 billion” over the past four years. [Post-Gazette, 8-28-14]

Anyone with half a brain or with a school age child can tell you that’s a load of hogwash. Sometimes having school age children makes us parents operate with only half a brain, but we can still tell you that Pennsylvania kids are sitting in larger classes, with fewer of their teachers, and missing critical books, supplies, academic courses, and programs.

Of course, what Mr. Eller means is that Gov. Corbett collapsed a bunch of line items into the Basic Education Funding portion of the budget, so that he could say that this single line item increased. Meanwhile, he decimated overall state funding for public schools. Gov. Corbett also likes to tout the additional dollars he put into pension payments (as required by state law) when he calculates that $1.5 billion figure, but will not account for the fact that he slashed charter school tuition reimbursements for districts, Accountability Block Grants, School Improvement Grants, or other programs such as the Education Assistance and High School Reform programs.

As the following graph clearly illustrates, even allowing for increased state contributions to pension payments, our schools are still not receiving the level of preK-12 funding that they were back in 2008-09! (In this chart the federal stimulus dollars are in yellow and pension dollars in light blue: check out the dark blue columns to see how our schools have been set back more than six years in budget cuts.)

But this is more than a rhetorical debate over which line items to count. Four years into this mess it is now clear that these historic budget cuts have hurt our poorest students the most. A new report out this week analyzes state funding per child and finds that budget cuts to the most impoverished school districts were more than three times as large on average as those made to the wealthiest districts. What’s more, using the state’s own data, the report demonstrates that class sizes increased more in high poverty districts and that reading and math scores declined the most for students living in poverty. [Budget cuts, student poverty, and test scores: Examining the evidence, PSEA August 2014] Look at the disparity in chart form:

[Source: PSEA, 8-25-14]

What does that look like here in Southwest Pennsylvania? Just look at the following table of the ten biggest losers in Allegheny County on a per-student basis. Pittsburgh tops the list of districts most harmed by budget cuts with an average per-child loss of $1,038, followed by a parade of high-poverty school districts. It’s worth noting the story of race here, too, as these districts have a large proportion of students of color. Compare these numbers to Fox Chapel, which has “only” lost $36 per student (no students should be losing money for their education), or Mt. Lebanon ($9), or my alma mater, Upper St. Clair, which has actually gained $4 on a per-student basis.

 

Perhaps Gov. Corbett should spend more time explaining why his policies are hurting poor kids than trying to convince us that he has increased spending on public education. We parents just aren’t that gullible.

New Year Cheer

It may be mid-January, but we have at least four more reasons to keep the New Year party going this week.

First, Governor Corbett is apparently getting ready to propose an increase to state funding for public education. Sources close to his office say that the new budget, which will be announced on February 4^th, will include $100 to $200 million more this year. [Philly.com, 1-16-14] That’s a good step in the right direction. But we’re still down $700 million in the annual budget from 2010-2011, with the cumulative loss for our schools now topping $2.4 billion. Any restoration of funds will be a win for our education justice movement, reflecting the enormous effort of grassroots advocates to keep the plight of public schools on the political agenda.

The governor is reportedly hoping to find at least some of the proposed money in pension reform, which is also desperately needed. Legislators on both sides of the aisle have been putting off that uncomfortable task for far too long. [See “Pension History 101”] However, reform needs to respect the educators who work with our children – which is clearly not the aim of those on the far right trying to make teachers and their unions public enemy #1. For example, last spring Senator Pat Toomey and the Commonwealth Foundation launched “Project Goliath” to “slay Pennsylvania’s Big Labor” – starting with teachers and their pensions. [The Nation, 4-23-13]

Fortunately, staff members familiar with the budget plan report, “It is unlikely that Corbett will link the funding increase for public schools to another policy item” that does not have widespread support. [Philly.com, 1-16-14] He tried that last year with the privatization of liquor stores. [See “Kids or Booze”]

In addition to a possible budget increase, public school advocates have reason to cheer a House bill that passed this week. After contentious debate on the house floor, legislators overwhelmingly approved HB 1738, which would create a commission to recommend a fair funding formula for the state. [Pennlive, 1-15-14] As you will recall, we already had such a formula, put in place by the legislature after its own 2006 costing-out study documented vast inequities in school funding across the state. But Governor Corbett eliminated that formula when he cut the budget. [“A Shameful Betrayal”] While any new spending formula would only apply to increases in the state budget, the House vote is also a step in the right direction.

A third reason to keep celebrating: in a ruling filed this morning, Commonwealth Court Judge Bernard McGinley struck down the state’s new Voter ID law. Judge McGinley said the law poses “a substantial threat” to hundreds of thousands of qualified voters, explaining, “Voting laws are designed to assure a free and fair election; the Voter ID Law does not further this goal.” [Daily Kos, 1-17-14] Not only did that law fail to address any actual problem in the state, while interfering with a fundamental right, it was estimated to cost taxpayers $11 million to fully implement. [“There Goes $11 Million for Our Schools”] Rather than challenging this ruling, let’s hope Governor Corbett reallocates that money to public education.

Last but not least, three cheers for the hundreds of parents, students, teachers, and community members who gathered early this morning outside a Philadelphia high school where the governor was scheduled to make an appearance. It would have been his very first visit to a Philadelphia school since his budget slashing had such devastating effects in that district, and folks were none too pleased to have Gov. Corbett there to take credit for Central High School’s high rankings on the state’s new school performance profile system. But Gov. Corbett decided at the last minute to dodge the kids carrying signs, ditch the auditorium full of people waiting to hear him speak, and fled downtown to the Chamber of Commerce for a private press conference. [City Paper, 1-17-14]

Philadelphia parents, students, and community members gather …

Students protest Gov. Corbett’s budget cuts. [photos from: Philly Student Union]

As we celebrate Martin Luther King, Jr. this weekend, now would be a good time to remember his words:

“…we who engage in nonviolent direct action are not the creators of tension. We merely bring to the surface the hidden tension that is already alive. We bring it out in the open, where it can be seen and dealt with. Like a boil that can never be cured so long as it is covered up but must be opened with an its ugliness to the natural medicines of air and light, injustice must be exposed, with all the tension its exposure creates, to the light of human conscience and the air of national opinion before it can be cured.” [1963 Letter from Birmingham Jail]

Let’s hear it for our grassroots movement and education justice advocates everywhere. It is a new year and we have reasons to cheer!

Black Holes

Could someone fetch Rep. Daryl Metcalfe back from outer space? Earlier this week, the Cranberry Republican co-sponsored a bill in the state house to send the proceeds of liquor store privatization to infrastructure improvements, rather than to education, as Gov. Corbett had initially proposed. [See “Kids or Booze”] Pennsylvania certainly needs to support all of its public goods – including infrastructure – but what is appalling about Rep. Metcalfe’s bill is that it rests on a shameful disregard for public education.

At a news conference with several other Republican legislators, Rep. Metcalfe complained, “When you give the money to the education establishment like this, it’s like throwing it into a black hole.” Wow. This man thinks our children’s future is a black hole. He calls our schools “the education establishment” as if our kids are somehow the problem. Of course, what he really means is that our teachers are somehow the problem, as he makes clear in his next sentence: “All it will be used for is to drive those salaries up that are continuing to be one of the main drivers for our pension problem.” [Post-Gazette, 4-16-13]

Actually, we do have a pension problem – but the blame for that lies heavily with Pennsylvania legislators themselves who have kicked the can down the road to this point. [See our “Pension History 101” for an easy to read explanation of this important issue.] Rep. Metcalfe suggests that providing desperately needed funding to our schools will “drive those salaries up” – does he mean that districts will turn around and give raises to teachers? Highly unlikely when most schools are now struggling to even buy textbooks or chalk. Perhaps he is worried that school districts will hire back some of the 20,000 teachers our children have lost these past two years? Heaven forbid our kids get their art and music teachers back in their classrooms. Or that we will ever see full-time librarians again.

Perhaps Rep. Metcalfe needs to actually talk to the families he represents, where kids are now missing over $6 MILLION from their schools. Here’s a breakdown of the cuts since 2010-2011 to the five school districts in his 12^th PA congressional district. [Data from Save Pennsylvania Schools]

Butler Area School District	$2,723,093
Freeport Area School District	$728,596
Mars Area School District	$514,272
Seneca Valley School District	$1,270,871
South Butler County School District	$1,011,179
Total:	$6,248,011

One of those districts, Seneca Valley, was trying to figure out how to keep its Junior ROTC program alive last year with all the budget cuts – a program you might think a former Army man like Daryl Metcalfe would appreciate. At the time, Seneca Valley was also discussing “closing the pool and cutting the swim program, reducing Title I reading programs or further reduction of elementary school staff.” At that point, the superintendent warned that, “elementary class sizes already are larger than best practice recommendations.” [Post-Gazette, 4-12-13] The district wound up being forced to cut 14 positions – 11 of them teachers, including “one art teacher, two math teachers, one social studies teacher, two science teachers, two English teachers, a Spanish teacher and two health/physical education teachers.” [Post-Gazette, 4-17-12] Yes, this is the “education establishment” that Rep. Metcalfe is so worried about. To him, social studies, science, and English teachers are black holes. Or perhaps dark matter.

How does he explain his outer space theory to his representatives in the Mars Area School District, which debated cutting all art, music and physical education in its elementary schools last year? The district wound up having to cut its Kindergarten and first grade art teacher, cut back on art classes at the High School level to four days per week, eliminated two guidance counselors and two technology teachers, and did not replace four retiring teachers, “two in art, one in health and one in foreign languages.” [Post-Gazette, 5-10-12] It looks like art got sucked into a gravitational budget hole in Mars.

Last spring, students in Mars stood on the sidewalk holding signs imploring board members to “Save Our Specials.” Perhaps they could help us tell Rep. Metcalfe that their education is not a black hole but rather a bright shining star. It’s time to go super nova on Rep. Metcalfe and his fellow Pennsylvania legislators and demand real pension reform that protects taxpayers, teachers, and our schools. And we must insist on adequate, equitable, and sustainable public funding for public education – so that we are nurturing the astrophysicists of tomorrow who will study the real black holes.

Education Victories

We had several significant election wins for public education in Southwest PA last night. And it’s a good thing, because we just got more dire school budget news, meaning these folks are going to have their work cut out for them. But first the good news.

Congratulations to Erin Molchany, a Democrat in State House District 22, which is largely in Pittsburgh’s South Hills. She said the key issues in her race were “reliable public transit… And of course public education.” Molchany is connected to our Yinzercation networks and I had the pleasure of sitting on a Town Hall panel with her last month at the Pittsburgh Public Theater. Last night she noted, “There’s a very evident commitment to public education in the district and beyond.” [Post-Gazette, 11-7-12] We look forward to working with Rep. Molchany and having another strong voice for public education in the legislature.

Also in the South Hills, Democrat Matt Smith is moving from the House to the District 37 Senate seat. Smith has been very vocal about public education, calling Governor Corbett’s budget cuts “draconian,” and when he was in the House, “he introduced legislation that would increase funding for full-day kindergarten.” [Post-Gazette, 11-7-12] Smith has also met with Yinzercation parents multiple times and issued a detailed public statement last spring about the impact of state budget cuts on our schools. Both Smith and Molchany were endorsed by Education Voters PA. (For details on other EdVoter endorsed candidates across the state, see the rundown put together by the Keystone State Education Coalition.)

Back in the State House, we are glad to see public education stalwart Dan Frankel, who ran unopposed in this election for his District 23 seat. As minority caucus leader, Frankel is a crucial leader in our state, and has met numerous times this past year with our grassroots movement. Frankel also lent a hand to first-time candidate Susan Spicka, a public education grassroots organizer from the middle part of the state, who put up a spectacular fight in the 89^th House District. [The Sentinel, 11-7-12] Spicka had an incredible turn out, and we hope she runs again. She will have lots of support from her public education allies in Southwest PA.

Our schools are going to need all the supporters they can get in Harrisburg this year as the pension crisis looms, threatening district budgets everywhere. For a quick tutorial on this critical topic, please be sure you have read our “Pension History 101.” The Pittsburgh Public School District announced Monday night that it would be broke by 2015. While it has slashed its spending and laid off a historic number of teachers, the district is already in deficit – plunged there in no small part because of state budget cuts – and has been spending down its reserve account. Those reserves will be gone by 2015, at which point the deficit is forecast to grow to $42.78 million. And these projections assume no further budget cuts from the state. [Post-Gazette, 11-6-12]

The pension crisis is a massive threat to public education in our state and will require a serious bi-partisan effort to address. Our job in the grassroots will be to insist that our legislators get started, and that they take every step with the assumption that public schools are a public good worth saving. Dr. Linda Lane, Pittsburgh Public Schools Superintendent, noted that every district in the state is affected by growing pension contributions, but said, “I don’t see a miracle out there to solve it other than money from school districts.” [Post-Gazette, 11-6-12] If local school districts are forced to substantially increase property taxes to compensate for the pension spike, it will only further solidify inequities in our public schools. This is one issue that we must insist that our state legislators have the courage to address.

The good news is that the overwhelming majority of public school families believe strongly in their schools. In a report released this week, the Pittsburgh Public School District found that two-thirds of parents surveyed would recommend their child’s school to a friend. The most enthusiastic support came from parents with children in early childhood centers, where 85% would recommend the school, and in K-5 schools, where 74% would recommend the school. Sixty-seven percent of respondents felt that teaching quality is improving in the district. [Post-Gazette, 11-6-12] These results reflect national trends, as Americans are giving their local public schools the highest ratings in twenty years. Nationally, when asked about the school their oldest child attends, over three quarters of those polled – 77% – gave their school an A or B (and only 6% gave it a D or F). [Phi Delta Kappa/Gallup poll, 8-20-12] (For more on this survey and its results, see “What the Polls Say.”)

In other words, Americans may feel there is a general public education crisis, but when you ask them about the actual schools in their own backyards, they are quite positive about them. Our grassroots movement needs to tap into this overwhelming majority that supports their local public schools. This is truly the “silent majority” that we must give voice to – our work is to amplify those voices so that they can be heard all the way in Harrisburg by our newly elected legislators.

Facts vs. Truth

Facts lie. And as Mark Twain said, there are three kinds of lies: lies, damned lies, and statistics. Tim Eller, Press Secretary for the PA Department of Education, was feeling defensive in a letter to the editor on Sunday, writing, “Let’s face it, the media’s attacks on the governor’s budget are nothing more than a call for higher taxes. Facts seem to be ignored when the argument is made that more money is needed.” [Penn Live, 6-17-12]

Actually, the Governor’s austerity budget is forcing school districts across the state to increase local property taxes, but there are many places Pennsylvania could be looking for money for public education – and a lot of them won’t cost taxpayers a dime. (See “Pizza and Silver Bullets” for our latest list of suggestions.) What Eller really wanted to do with his letter was to declare the following five “facts,” which practically beg for a little truth telling:

“Fact” #1: “In the 2010-11 school year — state, federal and local taxes combined — Pennsylvanians invested more than $26.5 billion into pre-K-12 education — an increase of $6 billion since 2004-05.”

Eller has been throwing around that large-sounding $26 billion figure for several months now – and this is actually the first time he has qualified it to show that he is really talking about federal, state, and local taxes combined. (See “The Accountability Hoax.”) To be clear: the state proposes to spend $10.6 billion next year on education – and this includes early childhood, K-12, the state higher education system, and our public libraries combined. [2012-2013 projected budget] Let’s put this in context: Pennsylvania ranks in the bottom ten out of all fifty states in spending on public education. And the PA legislature appropriates almost $500 per student per year less than the national average, and less than all of our contiguous states. (See “A New Mantra” for details.)

“Fact” #2: “Since 2004-05, the number of public school students dropped nearly 63,000, while the number of public school professionals increased by 9,500.”

Public school enrollments have declined – but not evenly or in all places. Some urban and poor districts have lost population, but have legacy costs of older buildings and fixed costs such as utility bills that do not decline. Places like Pittsburgh have to make hard decisions to close schools, but places like Duquesne are being forced to close up shop altogether and send their kids to neighboring districts – not because there aren’t students, but because of historical inequity in state funding that has compounded the crisis.

Last year Pennsylvania lost over 14,000 educators due to the state budget cuts, and thousands more teachers are losing their jobs this year. (See “No More Teachers, No More Books.”) And what about other school employees? Take Philadelphia, where every single bus driver, janitor, and maintenance worker got a pink slip this year – 1,400 members in all of the Service Employees International Union (SEIU). [Philadelphia Inquirer, 1-3-12] If the state really has seen an increase in public school professionals, perhaps it is due to all those charter and cyber charter schools the Governor and his allies have been approving. We certainly haven’t seen an influx of teachers around here – just the opposite – ask the kids who will be sitting in classrooms with 30, 35, even 40 students next year. (See “Shifting Blame, A Shifty Trick” for examples.)

“Fact” #3: “In 2004-05, taxpayers contributed $228 million to the Public School Employees’ Retirement System. In 2012-13, this will jump more than 300 percent to $916 million.”

Yep. The state has been under-funding the pension system for twenty years, despite numerous warnings, through Democratic and Republican administrations alike. It’s important to understand this issue, because it plays a huge role in the looming crisis for our public schools. (Please read “Pension History 101,” if you haven’t already.) But Eller seems to use this data here to suggest that public education itself is too costly. Get real. We absolutely must deal with the pension crisis, but we must also properly fund our public schools.

“Fact” #4: “In 2004-05, salaries and benefits paid by public schools totaled $12.8 billion. This increased 30 percent to $16.7 billion in 2010-11.”

Here’s another attempt to portray public education as too expensive. (As Pennsylvania native turned Harvard President Derek Bok famously said, “If you think education is expensive, try ignorance.”) But what this “fact” really attempts, in combination with the one above, is to portray teachers as the problem. Specifically their salaries and benefits. Did Governor Corbett work for free that one year he taught high school? I rather doubt it. Nor should he. Our teachers are professionals and deserve to earn reasonable middle-class wages for their work. And benefits. You know, those cushy things like health insurance so their kids can see doctors.

Sure, school districts and teachers unions need to work together to look at appropriate salary ladders. But portraying our educators as overpaid at the expense of taxpayers plays right into the broader attack on public workers that we are seeing across the country. And we need public workers. As we talked about yesterday, the vast majority of government workers are really teachers, firefighters, and police officers – and cutting those jobs has actually hurt the economy. (See “Economics 101.”)

“Fact” #5: “Gov. Corbett’s first two budgets will invest an additional $828 million in state support of public schools. It’s not that more money is needed. The public education system needs to refocus its efforts to ensure that students remain the No. 1 priority.”

Now that’s a whopper. Governor Corbett’s first two budgets actually slash $1 BILLION from public schools. Eller and his colleagues are usually very careful when they make this claim to say that they have increased funding for “basic education” – which is only one line item in the budget, while they have actually cut funding overall for schools. (See “Dishonesty Disguised as Generosity.”) But here he leaves out that caveat altogether. Where is he seeing an “additional $828 million in state support”? Governor Corbett actually allocated $372 million LESS last year alone for PK-12 education than the state spent in 2008-09, the year before federal stimulus dollars kicked in. (See “The Truth About the Numbers.”)

You can decide for yourself if Eller’s “facts” are lies, damned lies, or statistics. But to quote another well-known writer: the “truth will out.” (William Shakespeare, Merchant of Venice, for those of you keeping track of today’s literary references.)

Pension History 101

Grab a cup of coffee – you want to be wide-awake for this class. It’s time to delve into the history of the “pension crisis” that is now upon us. As you have no doubt noticed, pensions have become a key issue in the education funding debate, with Gov. Corbett arguing that he has increased funding to school districts by increasing the state’s share of pension contributions. Since school districts by law must match those contributions, as they increase their own pension payments they are seeing an actual depletion of funds available for educational purposes; districts argue that, combined with the state’s other cuts to public education, schools are really millions in the hole.

However you want to slice that debate, we need to understand more about how pensions are paid and who makes those decisions to fully appreciate the magnitude of the current problem. Stick with us, this is really important stuff. For today’s history lesson, we turn to the inestimable work of Paul Foster, a Yinzer Nation parent with a penchant for numbers and government policy.

The state operates two pension funds: the State Employee Retirement System (SERS) and the Public School Employee Retirement System (PSERS). Each fund is separate, with its own board and regulations, and each fund sets its contribution mandate (how much and who has to pay into the system) based on actuarial forecasts and following laws passed by the State Legislature. From here forward we will just look at PSERS, since that is the system most directly affecting public K-12 education funding.

In addition to the state, school districts and employees must also make contributions to the fund. School districts are the “employers” here, but by law, the state shares the employer burden 50-50. However, the state alone decides what that total burden will be. Starting in 1995, Pennsylvania began decreasing the amount it contributed to PSERS. The following chart indicates the trend for PSERS by graphing the history of total contributions to PSERS from all sources (state, school district, and employee):

From 1999-2010, the Legislature implemented a variety of changes to the fund: increasing the benefits paid out, changing the rules for employer (school district/state) contributions to reduce the employer (school district/state) burden, and altering the rules for smoothing the variation in contributions due to the variations in the fund’s stock market performance.

The state contribution became variable – if the fund’s investments in the stock market did well, the state’s contribution could shrink. If the fund’s performance was poor, the state stretched out the smoothing period over which the market loss would be covered by increased contributions. The following chart shows the state’s contribution to the pension fund compared to total contributions:

Note that during this period, the employee contribution burden either remained steady or increased. All of the declines in contributions were due to declining state contributions. State contributions began to decline under Gov. Casey, continued to drop under Gov. Ridge, and almost hit zero under Gov. Schweiker. In addition, the state raised payout benefits in 2001 but made no provision for additional contributions to fund the additional benefits. Although the employer contributions (paid by school districts and the state) rose again slightly under Gov. Rendell, the contribution level never recovered to the level it had maintained in previous decades.

Remember, local school boards are required to match state contributions dollar for dollar. When the state contribution was lowered, each local school board automatically saw a budget windfall from its decreased obligation. Some of those windfalls were better spent than others. Most boards used the windfalls to support increasing costs in programs without being forced to raise taxes. Given the quality of financial data they were supplied, most boards undoubtedly believed they were spending prudently.

But as Paul Foster says, here’s where you better sit down. By 2001, we had a recipe for disaster with more retired schoolteachers in the pension system than actual teachers working. Pennsylvania started seeing a dramatic spike in payouts to beneficiaries compared to actual employer and employee contributions. As you can see from the following graph, employee contributions (listed as “Member Contributions”) have increased steadily for the past thirty years, and since 2000, have actually exceeded employer contributions.

Note that these are dollar amounts with the last 3 zeros missing, so 500,000 is $500 million, and the number that looks like $5 million at the top is $5 billion.

Here’s the kicker: all of this was foreseeable, and was foreseen. Pension funds routinely hire actuaries and accountants to make forecasts on payouts. The fund supplies these experts with the age and earning history of their members along with the contributions and rules by which each member’s pension will be calculated on retirement. The actuaries then use mortality statistics, census numbers, demographics trends, and expected retirement dates to calculate a payout stream for each cohort of retirees. The work is tedious, but especially for public employees, who overwhelmingly tend to stay with one employer throughout their career (or at most switch schools within the state), the predictions are very accurate.

Starting in 2003 and continuing through 2010, the independent audit reports and actuarial projections for the fund began to forecast an upcoming funding crisis: the 2013 “pension spike.” Within three years, every single school district in the state will be paying 25% of its payroll to the pension fund. To put that in perspective, a few years ago, we were only paying about 5% of payroll to the fund. That twenty percentage point increase is the equivalent of eliminating a fifth of your teachers – 1 in every 5!

Every action passed by the Legislature during the past decade made the total cost of the pension spike worse. In fact, it’s no longer a “spike,” which implies a sharp though temporary increase, but rather a tall mountain of burden school districts must climb, only to find a high plateau waiting for them. In other words, this problem isn’t going away, and this is only the beginning. The state has been under-funding the pension system for twenty years, despite numerous warnings, through Democratic and Republican administrations alike.

The only way off this mountain will be through exceptional bi-partisan effort. The good news is that people in every corner of our state care about their schools. We can all agree that well-educated students are critical to Pennsylvania’s future. It’s time for our legislators to get a backbone and dig into the hard work of finding bi-partisan solutions. Because we’re all in this together and we can’t stop until we have secured sustainable and equitable state funding for public education.

Seniors, Schools and Taxes

Here’s a thought-provoking idea, suggested by Kirk Savage in the Post-Gazette’s feature Op-Ed piece yesterday: start taxing pensions so that Pennsylvania has the money to support things like public education. It turns out nearly every other state in the country does just that. What Pennsylvania does instead is to rely disproportionately on local property taxes: In Pennsylvania, schools receive almost half of their budgets – 43% on average – from local taxes (the national average is only 28%).[Data from Ron Cowell, EPLC]

Savage’s piece is being, well, savaged in the Post-Gazette’s on-line comments section. People are angry about any proposed tax hikes on retirees. But seniors are about to see huge increases in their property taxes, as the Governor’s massive budget cuts push responsibility for school funding down on local districts. School districts are already cutting educational programs to the bone, but have no revenue alternatives other than raising local property taxes – which will take a big bite out of all those home-owning retirees. At least Savage proposes “more generous tax forgiveness for those at the bottom of the income scale” in his pension-tax model, something that can’t be taken into account when raising old folks’ property taxes.

This is not a zero-sum game of pension taxes vs. property taxes. Both of these options hit seniors particularly hard and there are certainly other revenue sources the Governor has been so far unwilling to consider. It’s time to engage more of the A.A.R.P.-set in the movement for sustainable and equitable funding for public education – because without adequate resources from the state, those over 65 are going to see their homes taxed at an increasingly higher rate. And because seniors have a vested interest in a well-educated population: 85% of Pennsylvania’s students are educated in public schools. Those are the doctors, nurses, and others who will take care of all of us in our golden years.

Pennsylvania Should Tax Pensions
Kirk Savage

I recently learned a curious fact: Pennsylvania is one of only a small handful of states that does not tax any pension income. I discovered this by chance.

Last summer my wife and I moved her elderly mother into our own home. She brought with her a generous federal pension from her late husband’s long service as a diplomat. In Virginia — hardly a hotbed of tax-and-spend liberalism — most of her pension was fully taxed. In Pittsburgh, she happened to land in a state where all of a sudden her income tax bill dropped to zero.

Of course we benefit personally from this windfall. The tax savings give us more money to spend on her care or to set aside for a rainy day. But we already own a nice home, and our combined household income is certainly comfortable by most people’s standards.

Is this fair?

The simple answer is no, and for the same reason that it is unfair to give Mitt Romney a lower tax rate for “carried interest”: Income is income. There is no reason under the sun that working families struggling with multiple jobs to make ends meet should pay a 3 percent state tax on all their income while affluent pensioners pay none.

I know that most elderly people on pensions or Social Security are not affluent. Many are struggling terribly. But so are low-income wage earners who are fully taxed. The solution is not to favor one struggling group over another; this is both socially divisive and morally unjust.

The solution is to end the pension exemption and tax all income at the same rate, helping those who most need the help by expanding the state’s tax forgiveness provisions for low-income taxpayers. That way low-income households — whatever the source of their income — will get the relief they need, while more financially secure pensioners like my mother-in-law will pay a fair share, exactly the same as all other Pennsylvania residents.

We need to pursue this reform now because there is more than tax fairness at issue. We also face the problem of balancing Pennsylvania’s budget. Due to revenue shortfalls, Gov. Tom Corbett has proposed cuts that will devastate public education, public transit and the safety net for low-income families. Yet Pennsylvania’s pension exemption takes away more than $2 billion in tax revenue every single year, more than enough to cover the entire 2012 budget shortfall.

So far, the groups and programs most hurt by Gov. Corbett’s budget policies are fighting for their own individual interests, like dogs scrambling for scraps. Every dollar won for a worthy cause, such as public higher education (which includes my own employer), usually comes at the expense of something equally necessary, such as public transit or health care for the disabled.

It is high time for all these important constituencies to make common cause and find a solution that shares the burden equally while providing services that benefit everyone. Taxing pension income is exactly that sort of solution. It would provide significant funding for all these priorities, even when combined with more generous tax forgiveness for those at the bottom of the income scale.

Finally, taxing pensions would help solve a looming fiscal problem caused by pensions themselves. According to the governor’s own projections, public pension obligations will put more and more stress on state and local budgets, particularly on education budgets. Last year pension funding amounted to 3 percent of the state’s K-12 education budget; in just four years it will be 22 percent.

By law, the state’s obligation to fund these pensions must be matched dollar for dollar by local school districts, which means a lot less money to pay for teachers still working in classrooms. Though we can all agree that this is unsustainable, we are legally and morally obligated to pay these pensions.

Taxing pension income is a win-win-win solution. It would erase the budget deficit in the short term. In the long term it would fund much of our future pension liabilities. Again, though, this must be done fairly. It would be grossly unfair, as well as unconstitutional, to single out teacher pensions or state employee pensions and leave private pensions or federal pensions like my mother-in-law’s untouched.

All pension income is income, and should be taxed as such. If we couple the tax on pension income with expanded tax forgiveness for low-income households, then we can save public education and other worthy programs while honoring our commitments to public pensioners and creating a more equitable tax system in the process.

The solution to our budget woes is not to draw lines in the sand about taxing or spending. The solution starts with fairness — plain, ordinary, everyday fairness.

The Fiction of Flexibility

When Governor Corbett proposed collapsing several educational budget items into the Basic Education Funding line, he championed it as a move towards “greater flexibility” for schools. But school districts here in Yinzer Nation are finding that flexibility is fiction: a nice story, but in the end, just that.

According to Corbett’s flexibility story, districts would no longer have to spend, say, their state allocations for salaries or transportation on those things; if they found a way to save money on teachers or school buses, under the proposed system, they could spend that money elsewhere. Flexibility sounds good. Who doesn’t like flexibility? School officials in West Mifflin, Sto-Rox, Penn Hills, McKeesport, and the North Hills all spoke with the Post-Gazette this week to explain the problem.

As the Post-Gazette reports today, “district officials said it’s nearly impossible for them to reduce salary and transportation costs as most salaries in the district are dictated by contractual agreements, and transportation costs continue to increase, in many cases, because more students are choosing to attend charter schools and their home districts are required to transport them to distances up to 10 miles.”

The West Mifflin school district has already made huge cuts to its transportation system, and can’t imagine where it’s supposed to find additional savings. A new charter school in Penn Hills has increased transportation costs for that school district and also nearly doubled its charter school tuition payments, from $4.2 to $8 million. Penn Hills, McKeesport, and Sto-Rox all stand to lose their funding for full-day Kindergarten programs with Corbett’s elimination of accountability block grants. “Flexibility” isn’t going to pay for any of these things: school districts can’t rob Peter to pay Paul because they’re both broke.

What’s worse, the Post-Gazette reports that business managers in these school districts “fear the reason Mr. Corbett lumped much of the school funding … is to eliminate the formulas previously used to fund items such as transportation and Social Security subsidies.” David Hall, director of finance for the North Hills School District, explained, “Right now, both the [Social Security] and transportation subsidy are formula driven and when they are increased, the state automatically increased their subsidy to match. By putting it into a block grant, I’m guessing there won’t be any increases in the future. It will no longer be formula based,” Mr. Hall said.

In other words, where school districts used to be able to count on formula-based increases for things like transportation costs, now they can expect no increases at all, even as costs continue to rise. This isn’t flexibility – it’s a fairytale.

Huge Cuts Hiding in “Budget Increase”

Hiding in Governor Corbett’s proposed slight increase to the Basic Education Funding line item is the fact that schools will actually lose more money because of pension obligations. Here’s a closer look at pension payments and the way that Corbett’s allegedly “flat seven year budget” for public education actually translates into enormous cuts for schools across Pennsylvania. (Many thanks to Paul Foster for digging through 500 pages of budget numbers to help explain this to all of us.)

As we noted in “Corbett Blames … Us,” the proposed budget eliminates many line items and collapses several others into the Basic Education Funding (BEF) line item. Corbett likes to claim that he has increased BEF spending, but overall, he slashed funding for public education. And what’s more, the increase to BEF is almost entirely to cover state mandated pension payments. In Corbett’s budget projects for the next four years, the only line item that grows is “School Employees Retirement.” (See page E.15.13, or PDF page 497, of the proposed PA budget.)

Back in 2010, Pennsylvania passed reform measures to meet national standards for pension funding. As a result, all of the money that the state sends to school districts for pension funds has to be matched, dollar for dollar, by those districts. That money comes out of each school district’s own budget, further reducing what is available to spend on educating students. As Paul explains, “the increased funding and the growth in that line item actually represents an additional burden placed on school districts by the state. It’s a HUGE burden.”

As you can see from the following table, in four years we will be spending over eight times as much on pensions as we spent last year, or $2.5 billion in 2016-17. Paul has calculated that “pensions will grow from 3% of the state K-12 education budget last year to 22% in 4 years.”

School    Amount      Dollar    Percentage
Year      Budgeted    Growth    Growth 
          (in millions of $)
2010-11   287,562    
2011-12   600,172      312,610    109%
2012-13   916,052      315,880    53%
2013-14   1,318,254    402,202    44%
2014-15   1,775,622    457,368    35%
2015-16   2,262,031    486,409    27%
2016-17   2,532,755    270,724    12%
Cumulative           2,245,193    781%

The bottom line? Governor Corbett’s proposed slight increase to Basic Education Funding actually yields an overall cut to public schools, and because that slight increase is dedicated to pension obligations, the cumulative effect on Pennsylvania’s schools is tremendous. Flat state budgets wind up meaning further huge cuts to our students.