Lebo School Board Updates

It has been my honor...

2010-12-15T21:52:00.000-05:00

I submitted my resignation to the Mt. Lebanon School Board early on Thursday morning.

Please read on at my new blog, http://jamesfraasch.blogspot.com

I will have every post from this site archived. With the move you will see some changes and also a broadening of topics covered in the new blog.

As always, thanks for reading. There will be no more posts on this blog.

The Joy of Stats

2010-12-03T08:04:00.003-05:00

I love to share great finds on statistics and especially free markets.

Check out this video from Hans Rosling. Hat tip CoyoteBlog.

Every one of Hans Rosling's videos is a must watch and the best source for them is www.ted.com

His focus is on any statistic that has to do with world population, poverty, and health.

Thanks for reading.

James

More PSERS Hope and Hype

2010-11-19T08:34:00.006-05:00

You may have heard recently that the Pennsylvania Senate passed HB2497. The PSBA recommended passage of the bill due to it reamortizing the liabilities of the PSERS system.

I linked to a great post on this bill back in June.

However, what you may have missed was why some of the opponents suggested voting against this bill.

Here is a snippet from The Pennsylvania Chamber of Business and Industry's John Callahan, Director of Government Relations:

Legislation to re-amortize both the Pennsylvania State Employee Retirement System’s (PSERS) and State Employee Retirement System’s (SERS) unfunded liability, allow for the smoothing of assets from 5 years to 10 years (PSERS only) and institute arbitrary collars on contribution rates was approved by the House Appropriations Committee on June 7, 2010. The PA Chamber believes this “reform” legislation would continue to defer already unaffordable costs and further underfund these plans leading to increased unfunded liabilities. According to a the Public Employee Retirement Commission (PERC) analysis this type of deferral will result in a $40 billion cost for PSERS and a $12 billion cost for SERS in order to ramp up the employer contributions over 10 years rather than over 3 years. This $52 billion burden on future generations and would do nothing to provide cost control, affordability or predictability to PSERS or SERS. Of significant note, these funding estimates are based upon the attainment of an 8% annual investment assumption.

The document with the above quote is worth a read. It makes some realistic, pragmatic suggestions for an actual fix to the current system. This house bill allows our government to continue to underfund liabilities therefore blowing a bigger bubble down the road that will be even more difficult to tackle. The frustrating thing is that in the near term, this will feel like somewhat of a fix to local taxpayers as the contribution rates to employers in the near term will be less than they need to be to fully fund the pension. This is "accomplished" at a significant cost, however. It's akin to putting a bandaid over a bullet hole.

Thanks for reading.

James

Quantitative Easing II and School Budgets

2010-11-04T07:35:00.002-04:00

As you may know, the Federal Reserve announced yesterday another round of Quantitative Easing (QE2). The point of this QE2 is to make another attempt at "fixing" the economy.

As I posted in September 2008, this was the path that the Fed knew it was going to take even back then. Ben Bernanke has used every tool in his shed to fight deflation. The only thing more he can do is MORE of whatever he has done.

Be clear that the purpose of the QE1 and QE2 has been to stimulate asset prices, more specifically, to stimulate the stock market. One should ask whether the Federal Reserve's job is to stimulate stock prices. Here is the relevant quote from Bernanke yesterday:

Federal Reserve Chairman Ben S. Bernanke said resuming large-scale asset purchases should boost economic growth through lower borrowing costs and higher stock prices and that concerns about the strategy are “overstated.”

That statement should concern everyone. Gaming stock prices is something that is far outside of the Federal Reserve's mandate.

Before I go too far off on a tangent, I want to bring this back to school budgeting. QE2 is supposed to have the effect of lowering interest rates to the point that businesses will want to go out and get a loan and expand business and hire employees.

School districts, and most other government entities, only invest their money in very safe government bonds. This means that our budget will take a hit on the revenue side since our revenues generated from our investments will go down (as it did last year).

However, if QE2 has the added effect of goosing stock prices, this could have a beneficial effect on PSERS. PSERS is counting on 8% returns in its portfolio. Any gains over 8% could have the effect of lowering future PSERS contribution rates.

It is important to note that there are a number of economists out there that are suggesting QE1 and QE2 simply are an attempt by the FED to blow another asset bubble. In this case, the bubble appears to be in commodity prices (not good for HS construction costs) and stocks (good for PSERS). The FED again is forcing people to choose between no return on safe assets or mild yield on risky assets. This necessarily punishes savers, retired folks on fixed income, and the middle-class. And when the asset-bubble bursts (think NASDAQ 2001, home prices 2007-2008) the consequences far outweigh the short-sighted, short-term benefits. As Ludvig Von Mises said:

Inflation and credit expansion, the preferred methods of present day government openhandedness, do not add anything to the amount of resources available. They make some people more prosperous, but only to the extent that they make others poorer

.

My educated guess is that QE2 will have no impact on unemployment or business activity. Money is already quite cheap. Businesses that wanted a loan, already got a loan.

Impacts on school district budgets will be difficult to judge in the near term. There will be some short term benefits (if stock prices remain elevated and that translates to lower PSERS contribution rates) but there will also be near term input price increases on raw materials (hurting us on the HS project).

The bigger problem here is the stubbornly high unemployment rate. The Federal Reserve has shot all its bullets and has not been able to make a dent in it. Until we can get people back to work, this economy will struggle through a quagmire for some time.

Thanks for reading.

James

Pittsburgh Pension Mess Makes Wall Street Journal

2010-10-23T10:20:00.004-04:00

PSERS is not the only pension system that is seeking solutions. The Wall Street Journal has this article about the mess that is the Pittsburgh City pension.

From the article:

Pittsburgh's city council nixed a deal this week to lease its parking assets to a consortium led by J.P. Morgan Chase & Co. Instead, the council is proposing that the city's parking authority issue a 30-year bond and pay it off with parking-rate increases. Part of the proceeds would go to the pension plan.

Taxpayers in Pittsburgh should be absolutely outraged at the possibility of this unsustainable plan. This would mean the City of Pittsburgh would be borrowing money to pay its pension obligations. In the short term this might seem like a solution, but in the long term it will bankrupt Pittsburgh, if Pittsburgh is not bankrupt already. Floating 30-year bonds to fund liabilities without addressing the true problem of actual pension obligations is fiscal insanity. Mayor Luke Ravenstahl thankfully seems to have his head screwed on straight on this issue as he has announced that he does not support this plan.

Thanks for reading.

James Fraasch

Rise in Unemployment Rate Likely

2010-10-20T09:13:00.003-04:00

A recent Gallup poll finds that the unemployment rate reported by the Federal Bureau of Labor and Statistics has been understating the unemployment rate. Gallup (and others) believe that shortly after the November mid-term elections the BLS will start to show the unemployment rate tick up. I am not at all suggesting this is some type of election year conspiracy, it's just that at some point the numbers cannot be managed anymore.

Please see the article by Gallup here. From the article:

Unemployment, as measured by Gallup without seasonal adjustment, increased to 10.1% in September -- up sharply from 9.3% in August and 8.9% in July. Much of this increase came during the second half of the month -- the unemployment rate was 9.4% in mid-September -- and therefore is unlikely to be picked up in the government's unemployment report on Friday.

-----------------
The government's final unemployment report before the midterm elections is based on job market conditions around mid-September. Gallup's modeling of the unemployment rate is consistent with Tuesday's ADP report of a decline of 39,000 private-sector jobs, and indicates that the government's national unemployment rate in September will be in the 9.6% to 9.8% range. This is based on Gallup's mid-September measurements and the continuing decline Gallup is seeing in the U.S. workforce during 2010.

It is interesting that both Gallup and ADP (which tracks only private company payroll data) see the same trends. Unfortunately, these trends are not picked up by the BLS and therefore the unemployment rate will most likely face a downward adjustment after the fact. This is standard operating procedure for the BLS. They revise their numbers every January and July.

This data from Gallup (and ADP for that matter) are just another way to suggest that this has been no ordinary recession. While the NBER has said the recession ended last summer (due largely to increased government intervention), the unemployment picture suggests we still have a long way to go.

It will be interesting to see how this chart from Calculated Risk changes in the coming months. I don't think we have seen the peak unemployment rate for this recession.

At last month's Audit Finance Committee meeting we looked at our Earned Income Receipts and they have been declining for two straight years. In addition to that worrisome development, we have seen a significant decline in Real Estate Transfer tax over the past 3-4 months. At Thursday's meeting we will go over the more recent Real Estate transfer tax receipts and talk about what, if anything, the trends mean.

Thanks for reading.

James

The Recession in Pittsburgh- Allegheny Institute Policy Brief

2010-10-06T10:44:00.005-04:00

I received this interesting update from the Allegheny Institute in my inbox this morning. It paints the current picture of the state of recession in Pittsburgh (posted with permission from the author).

Policy Brief

An electronic publication of

The Allegheny Institute for Public Policy

October 6, 2010 Volume 10, Number 55

Has Recession Loosened Its Grip on the Pittsburgh Region?

Is the recession loosening its grip on the Pittsburgh area? According to the latest payroll employment data for August, the answer may be “yes”. August marked the third straight month that total private jobs showed a year-over-year increase. The August 2010 figure of just over one million jobs bests the August 2009 figure of 994,300 by more than one-half percent. This follows on the heels of small year to year increases in June and July. While relatively miniscule, these gains represent the first positive upswing in the year-over-year payroll employment since October 2008.

The seven-county area showed an increase of 5,800 total private jobs from August 2009 to August 2010. Which sectors led the growth in jobs?

Leading the way, professional and business services posted a pickup of 3,800 jobs in the August year-over-year tally. The biggest gainer in this sector was administrative and support services with a rise of 2,900 jobs. These are clerical, security, and other office administration functions. Hiring support personnel might be a signal that companies see the end of the recession and are willing to hire support staff.

Construction is also notable for meaningful job improvement with 2,000 jobs added from August 2009 to August 2010. Considering that most major projects in the area—such as the new PNC Tower and Consol Energy Center—have been completed, this increase is somewhat unexpected. It’s possible that road and bridge projects are propping up construction employment. It could be also attributed in part to construction and site preparation of Marcellus Shale gas drilling sites that use construction companies to do some of the work. While these gas drilling sites are not common in Allegheny County, they are plentiful in Fayette, Washington, and Westmoreland Counties which are part of the Pittsburgh MSA.

Nonetheless, it is important to bear in mind that the 57,100 construction jobs in August are still seven percent below the 61,400 recorded in August 2008.

What has happened to jobs in the mining and logging sector of the economy? This sector, which includes coal mining as well as natural gas extraction, gained 400 jobs in August compared to the twelve month earlier level. Back in August 2005 there were 5,000 employees in this sector. By August 2010 jobs had risen by 900 —just under 20 percent. The Marcellus Shale gas formation may be a great source of employment in years to come, but the types of jobs created will be dispersed throughout various sectors such as construction, manufacturing and transportation as well as mining, making the jobs impact of the gas drilling hard to pin down with great accuracy.

Other sectors with large jumps in year-over-year employment include “retail trade” with 1,800 more jobs and “educational services” gaining 1,500. The “health care and social assistance” sector added another 1,000 people to payrolls led by 600 new jobs in “social services”. As we have mentioned in previous Policy Briefs, the social services subsector has been steadily adding jobs, growing more than 50 percent since 2000. But keep in mind that social services is very heavily dependent upon government spending and typically does not offer many high paying jobs—and therefore is not a good indicator of economic growth or labor market strength.

While some sectors showed year-over-year job gains, several sectors did not fare very well. Manufacturing continues to shed jobs as another 2,000 were lost between August 2009 and August 2010. The recent total of 84,900 manufacturing jobs is the lowest August count in at least two decades. Meantime, “financial activities” shed 1,700 jobs and the “government” sector lost 1,300 with local governmental education jobs dropping by 700.

Overall, payroll employment data seem to suggest the recession is loosening its grip on the Pittsburgh area—albeit very slowly and unevenly. Some sectors are showing signs of an upturn while others are still losing jobs or remaining flat—not an uncommon picture for the early stages of an economic recovery.

Clearly, the stability and recession resistance shown by education and health related jobs together with the huge decades long decline in the proportion of the area’s jobs in manufacturing and the absence of a housing boom have helped dampen the region’s employment losses during the current recession. Still, that is little consolation in light of the fact that employment remains well below levels reached in 2000.

More PSERS Pension Reform

2010-10-01T08:37:00.005-04:00

I check in on Paul Fisher's blog over at PrideandPromise.com from time to time. He has been terrific on giving updates on PSERS. I headed over there yesterday only to find out that he resigned his school director seat "To regain his first amendment rights". Good to know, however, that he intends to keep the site going.

He added a great article from CapitolWire that analyzes the latest attempts to reform the Pennsylvania State Employees Retirement System. There is still a lot of confusion about what is happening at this level. That article sort of sets the record straight. The fact is that there is still a lot of negotiating to get done. Some people want to pay what we owe sooner than others, but the thing to take away from the negotiations is that nobody thinks there is a magic bullet. The only thing that will significantly change the PSERS cost curve is significantly positive returns on the PSERS portfolio of stocks, bonds, real estate and other investments. PSERS projections are based on 7.5 or 8% annual returns in a diversified portfolio. Like I have said before, if someone ever promises you 8% annual returns, LOCK IT UP because it is almost impossible to do.

Thanks for reading and please be sure to check out the CapitolWire article. It is full of good info as well as all the names of the players in the PSERS reform game.

James

Taxing Something Doesn't Make it More Valuable

2010-09-24T09:55:00.004-04:00

From an article in the Wall Street Journal:

Last year, Congress sharply increased the federal excise tax on "little" cigars—filtered, often sweetly favored products that are similar in size and shape to cigarettes.
...
Sales of products listed as "little" cigars fell by 79%.

The projected increase in tax revenues generated by this tax increase on little cigars was supposed to be used to help finance the expansion of a children's health-insurance program backed by President Barack Obama. But with the decrease in sales, the money just wont be there.

This is just common sense. Taxes create market distortions because those who would otherwise pay the taxes have an opportunity to change their behavior by buying something else (a replacement without the tax- see the story about how consumers have changed their purchasing behavior) or somewhere else where the punitive tax does not apply.

Thanks for reading.

James

PlanConD Vote

2010-09-21T09:34:00.002-04:00

Last night I voted against accepting the Pennsylvania Department of Education's approval of PlanConD.

Part of the purpose of part D is to determine the ability of local taxpayers to actually be able to afford the debt payments associated with the construction project. Unfortunately, due to the inability of the PDE to update their forms, our PlanCon D documents reflect old and stale data. However, if we understand the intent of PlanCon D, then we should be able to roll numbers forward and come up with our own calculation of affordability.

As an example, let's say you want to buy a house for $187,000. The loan officer says it should be no problem to get the loan as long as your payment stays below 35% of your monthly income of $2000. At 5% interest, a $187,000 loan would be about $1,000 a month.

You knew going into it that it would be close, that it would be a stretch to your budget to try to afford this size and price of a home. But what the heck, why not aim for the fences.

You fill out all the paperwork and you get approval from the loan officer. However, when the documents get back you realize that something seems amiss. The documents given to you that outline your debt/income ratio do not reflect the payment on the house you are about to buy. The loan officer did a calculation on your debt/income ratio WITHOUT INCLUDING THE DEBT PAYMENT FROM THE HOME YOU ARE ABOUT TO BUY. So now, even though your debt payments will exceed the loan officers' 35% income limit, you still walk out of that office the owner of a new home.

How does this work? Well, the Pennsylvania Department of Education hasn't updated their PlanCon D forms for a number of years. That means that when the District fills out its forms, it is entering in income and debt payments from past years and these numbers DO NOT reflect the reality of the current project. In fact, the PDE even changed the numbers for us to reflect an Aid Ratio that is no longer relevant and skews the numbers even more to look like the District can afford this project.

When I asked in June to have the District prepare our documents to reflect the current known information, we were given information that created even more confusion when some numbers were changed and some stayed the same.

The information to fill our these forms does exist. but it is in many different places on the PDE website. Please see the link here for a copy of the form that was voted on last night. Page D-18 is the one that deals with affordability. Based on my own analysis of the numbers, I believe the District will be very close to or even exceed what the State says is the maximum allowable budgeted local effort for this project. When you look at D-18 note that the Market Value Aid Ratio has been changed by the PDE to .4154 instead of our current .49. This has the effect of reflecting an increased aid ratio from the State when this is not the reality.

Note also in Section B that the Budgeted Local effort for this project shows a big, fat $0 since we have no debt service payments for this project in 2009-2010 (our payments start in 2010-2011). The intent of the form was to look a few years out from the floating of bonds to determine whether the District is putting too much stress on local taxpayers.

When the PDE changes the form to reflect an incorrect and artificially inflated aid ratio and then ignores actual debt payments that will come due for the project they are supposed to be evaluating, I am not sure how one can realistically evaluate whether this form should be approved or not.

That being said, if the District had made a determined effort to reflect TRUE numbers and the TRUE local effort for this project, I would have been much more inclined to vote in favor of PlanCon D.

Thanks for reading.

James

Debt and Deflation

2010-09-16T10:48:00.002-04:00

I came across a terrific economics article written by Steve Keen at Steve Keen's Debt Watch website. The title of his article is, "What Bernanke Doesn't Understand About Deflation".

On this blog I have hit a number of times on the problem with having too much debt. On a national level people (Secretary of State Hillary Clinton for one) are even saying that our debt represents a national security threat. On an economic level, economists such as Steve Keen are making the argument that the deleveraging process following a borrowing and spending boom like the one we have witnessed from 1987 to 2009 will take years to play out.

Keen argues and illustrates that:

Debt reduction is now the real story of the American economy, just as a real story behind the apparent free lunch of the last two decades was rising debt. The secret that has completely eluded Bernanke is that aggregate demand is the sum of GDP plus the change in debt. So when debt is rising demand exceeds what it could be on the basis of earned incomes alone, and when debt is falling the opposite happens.

There are a number of charts and math involved that Steve uses to prove his point. And logically, it makes sense. When you borrow, you have to pay it back. If consumers have indeed increased borrowing over the last 22 years by $34 trillion and GDP has only grown by $9 trillion, then we are in for quite a period of economic staleness, especially if the deleveraging process continues. What happens when the consumer appetite for debt goes away? Surely the GDP growth cannot be sustained.

This is what part of last year's stimulus was intended to do; stimulate aggregate demand. Since consumers have clearly and demonstrably started to become net savers instead of net spenders, the government was looking for a way to increase GDP. Any kind of government spending will have a positive impact on GDP. As I have said many times before, the problem with debt is that it needs to be paid back at interest. This payment is a tax on future production and future spending.

When you max out the amount you can borrow, the consequences are long lasting and staggering. Other, normal expenses will come under stress while a less fool-hardy approach would have produced better long-term results.

Thanks for reading.

James

New Teacher Contract Approved

2010-08-26T10:56:00.003-04:00

The Mt Lebanon School Board last night approved a new 5-year contract with the Mt Lebanon Education Association.

Please see these links:

School District Press Release
Post-Gazette Article
Mt. Lebanon Education Association Information (information about the ratification procedure)

As I said at the meeting last night, this vote was a tough, tough call. I truly feel as if there are two realities in place at the moment. One reality is where private sector workers are doing whatever they can to remain employed. This may mean taking smaller pay increase, no increases, or reductions in pay. We are in an era of wage stagnation and teetering on wage deflation in the private sector. The reality in which our Board and negotiating team had to operate in negotiating the contract with the MLEA was one in which public sector unions have had more "traditional" wage increases. It's almost as if the recession has not hit home for these unions based on many recently settled contracts.

So how does one balance across this chasm between private and public sector union pay?

For me, it starts out by looking at the entire contract and not just the headline number. The headline number of 4.15% average wage increase per year for five years in today's economic environment seems unreasonable on the surface. And quite honestly, if it was just about this salary increase there is no way the contract would have had my support. It is beneath the surface where things start to get interesting. Here is my checklist of why I supported the contract:

1) No step or pay increase for a teacher that receives and "unsatisactory" rating. This puts us on a path to discussing merit pay, something that very few Districts across our State can say they have in their contracts. As a former union member/shop steward myself, I can tell you that this is a very significant gain for the District and a testament to the MLEA's willingness to do what's best for our students.

2) Healthcare contributions rise to 10% of total premium and employees will need to cover the difference if they choose the PPO plan (more expensive) over the HMO plan. The 10% number, while not large compared to the private sector, is towards the higher end of comparator school districts.

3) Two additional teacher days per year plus 15 minutes more per day of instructional time. The increase in instructional time will allow more teacher/student "face-time" and again shows the District's and MLEA's understanding that increased achievement should be a goal for both of us. I believe the added face time has the potential to help increase test and achievement scores and lead to better educational outcomes for all students.

4) The District has negotiated increased management rights in being able to have a say in Extra Duty Responsibilities. EDRs are an added cost to the District and being able to rein in some of the expense associated with the EDRs with result in a long-term net benefit to the District.

It is my opinion that in order to gain the rights/concessions outlined above as well as a number of other management rights throughout the contract, it was necessary to award a raise higher than I initially thought was my limit.

At the end of the day I had to ask myself whether our negotiating team did the best they possibly could at the table. Given recent arbitration awards and other recently settled teachers contracts, I do feel that this was the best we could do while maintaining a good labor relationship with the MLEA.

Thanks for reading.

James

The Higher Education Bubble

2010-08-09T12:07:00.004-04:00

I was referred to two opinion pieces in the Washington Times today. One was from back on June 6th and the other from August 8th. Writer Glenn Reynolds talks about what he thinks is the Higher Education Bubble and what will come next.

Mr. Reynolds is suggesting that higher education is in a bubble much like housing was in 2007. Glenn offers some advice to students (don't go into debt) and colleges (don't go on spending binges).

If true, the article also talks about some interesting ramifications when/if students get priced out of college.

...a college degree is an expensive way to get an entry-level credential. New approaches to credentialing, approaches that inform employers more reliably, while costing less than a college degree, are likely to become increasingly appealing over the coming decade.

To get an idea of how much out of whack college tuition has risen, please take a look at the following chart which compares CPI, Housing Prices, and Tuition.

Click on picture for larger image.

Relative to the housing bubble, that rise in tuition is something to behold.

Thanks for reading.

James

Parent Resource Network Evening Event

2010-07-29T10:33:00.003-04:00

As you probably already know, a passion I have outside of work/family/volunteering, is the work my wife and I do for the non-profit we started, Parent Resource Network, a 501(c)(3) non-profit company. Annually we hold a fundraiser where money raised goes directly to families with children born prematurely or with chronic illness and/or congenital disorders. This organization was founded after we had our daughter, Taylor, born 17 weeks prematurely. After spending nine full months in the Neonatal Intensive Care unit, my wife Kelly and I realized that there were a lot of families who needed a network of support to rely on during the trying time in the NICU and beyond. This is why we founded PRN in 2006; to provide direct services to families that need it. From simple things like GetGo gas cards that help with hospital commute costs to goody bags with snacks, PRN pitches in. We have also been successful in rolling out more involved programs like Bereavement Services and Palliative Care. Today we provide services to all of the hospitals in the Pittsburgh region operating a NICU.

On August 14th, Parent Resource Network will hold its annual fund raising event at the Smart House on Mt Washington. Cost to attend is only $40 and there will be a live band, silent auction items and live table games to win prizes. It is your support that keeps this organization going and allows us to have a tremendous positive impact on these families.

Please visit http://parentresourcenetwork.org for more information on the event.

If you are unable to attend but would still like to donate to our organization, please visit our website at http://parentresourcenetwork.org/giving and donate online. Your financial support would be greatly appreciated! Donation are tax-deductible.

Thanks for reading. Email me with any questions about the event.

James

July Update

2010-07-27T07:30:00.015-04:00

The question now on many people's minds is, "Now What". Our property taxes just increased over 10% in June. The High School Project is effectively stalled until Judge James renders his ruling. We just let the cat out of the bag on the deduct alternates. We will have no tennis courts for approximately 3 years at the high school in the current design. We were recently turned away by both the Zoning Hearing Board and the Planning Board. The Board recently passed a new policy requiring many documents in our packets to be released to the public only by a majority vote of the Board or after our voting meeting. We are also having discussions regarding posting information about who is requesting right-to-know requests on the District website.

Unfortunately, these are the issues that the Board is dealing with. Most, if not all, of them could have been avoided with the proper foresight, advice, and planning. I am going to comment on the issues one at a time while keeping in mind that there are some legal issues surrounding the Zoning Hearing Board.

First, I want to update you on where we are with our property taxes. As you know, taxes were increased for the 2010-2011 school year to help pay for the high school. We floated the bonds in October 2009 in order to try to take advantage of what were historically low interest rates. As you may know, interest rates have remained at about the same level as they were in October 2009. The District has paid hundreds of thousands of dollars in interest on these bonds. This is interest that was unnecessary as we had enough money in the bank to pay current bills for some time. Additionally, the bonds we floated were traditional municipal bonds and not the less expensive Build America Bonds. We floated the traditional bonds in order to "maximize bond proceeds" as opposed to trying to make the bond float more beneficial to the taxpayer. This was a decision I voted against as it was clear on the documentation we had on the night of the vote that the Build America Bonds would have saved our taxpayers over $2 million over the life of the bonds. Our bond advisor was given the instruction to maximize proceeds and we therefore were able to get a premium on the traditional bonds. The premium simply meant that the District was going to make payments on the bond that were higher than what the market was asking for at the time. In exchange for this higher coupon payment, bond buyers were willing to pay the District a little more (a premium) for our bonds. While this does mean we will borrow less in the second float of the bonds for the high school, this is only because we paid more than market coupon rates for the first float of bonds. These bonds accounted for a very large percentage of your recent tax hike.

Another factor in our latest budget is that it is another year in which we plan to have a reduction in students and another year in which we will not lose any staff to compensate for that reduction. You may remember from the passing of the 2008-2009 and 2009-2010 budgets that I advocated for reductions in staff to compensate for the reduction in student enrollment. In fact, in the 2009-2010 budget we planned to eliminate 3 positions partially to account for this reduction in students. However, every one of these positions was added back prior to the start of the school year. As I said last year, just as we would plan to increase staff when we have an increase in students, we need to figure out how to reduce staff when we have the trickle out of students that we have seen over the past 10 years. In a perfect world we would have been able to reduce staff to account for the reduced student population. This would have had the effect reducing the overall burden of the high school project on our residents. Unfortunately, there was not enough Board support to either reduce staff or programs to help offset the tax increase for the bonds floated for the high school (the budget passed 6-2).

Here is a table of our student population:

Year	Student Population
2001	5640
2002	5597
2003	5610
2004	5551
2005	5494
2006	5441
2007	5429
2008	5423

Over 200 students lost (and counting) and we have not reduced our staffing levels. Since staffing is the single largest expense in our budget, it is important that we stay on top of exactly what we need. Otherwise, we start to raise taxes at a rate far faster than the Districts that have the ability to adjust more readily to these types of changes.

Here is an updated graph comparing our millage (municipal and school district) to some other Districts throughout the County:

What this graph shows is exactly what I talked about in my White Paper in January. We are continuing on a path to taxing our residents at a much higher rate than school districts with which we compete. A continuation of this trend will no doubt lead to some serious consequences in Mt Lebanon. We cannot expect to charge a large premium to live in our community and avoid negative consequences. At what point that happens I don't know. But I have a feeling that the point is awful close.

As of the passage of school district 2010-2011 budgets, here is a list of the millage rates for the 25 highest taxed school districts in Allegheny County:

	School District	Millage
1	Fort Cherry	118.5
2	Wilkinsburg	35
3	Brentwood	28.27
4	Northgate	27.6
5	East Allegheny	27.54
6	Mt Lebanon	26.63
7	Deer Lakes	26.25
8	South Park	25.99
9	Woodland Hills	25.65
10	Shaler	25.63
11	Sto-Rox	25
12	South Fayette	24.88
13	Penn Hills	24.81
14	Bethel Park	24.56
15	Highlands	24.41
16	Carylton	24.15
17	Cornell	24.11
18	Steel Valley	24.07
19	Riverview	24.05
20	Elizabeth-Forward	23.51
21	Baldwin-Whitehall	23.5
22	Allegheny Valley	23.46
23	West Mifflin	22.992
24	Upper St Clair	22.29
25	Plum	22.2

There we are, sandwiched between Deer Lakes and East Allegheny. No disrespect to the other school districts, but what else do we have in common with them besides these millage rates? For a District and community that wants to compare itself to other peers like Upper St Clair, Fox Chapel, North Allegheny, Bethel Park and others, is this the position in which we want to find ourselves?

Regardless of the tax hike to pay for it, the high school project itself is effectively stalled. It is public knowledge that the District went before the Mt Lebanon Zoning Hearing Board and requested two variances. One of the variances was for parking spaces and the other was for lot coverage. The Zoning Hearing Board voted unanimously against approving the variances to allow the project to move forward. The District has since appealed and is awaiting a ruling by Judge James about the status of the variance request. As I said before, there are some legal issues here that cannot be commented on until the case is over. The reality of the situation is that it is rather embarrassing for me to be in the position of suing my own Zoning Hearing Board. Both sides have "lawyered up" (the ZH Board attorney paid for by the Municipality) and we are now using tax dollars on both sides of the issue to fight a no-win situation in court.

Still sticking with the high school project, we have recently talked about a deduct alternate list. To be clear, there has already been some significant value engineering when it comes to using materials in the school. As an example, we are going to use a vinyl composite material for the flooring. This decision will result in savings based on the materials we had previously planned to use. There are a number of decisions like this that I consider to be part of the value engineering process. What the Board has started to consider on top of these types of changes is alterations to the design of the building itself. The architects and project manager are preparing more information for the Board regarding larger possible deductions to the project. These possible deductions include eliminating the second auxiliary gymnasium, altering the number of air handlers in the athletic wing, changing the scope of the renovations to the Little Theater and Auditorium, and moving the tennis courts off-site. There was even discussion about leaving some parts of these deducts alternates to be completed at a different time so as to reduce the overall cost and scope of the current project. The Board will decide in August which, if any, of the deduct alternates should be bid. Please be sure to give your feedback to the Board regarding these possible changes prior to August 9th.

Finally, there have been some recent policy changes and discussion that are of interest. In June, while I was away on business, the Board took up policy BBAA, Board Member Responsibility and Ethics. We added the following text to the policy:

Individual Board members shall refrain from publishing, distributing, releasing or disclosing any documents, records or information containing or reflecting the predecisional deliberation of the Board relating to matters such as budget recommendations, legislative proposals or any contemplated or proposed policy or course of action. This preclusion includes any research, memorandums or other documents used by the Board in its predecisional deliberations.

I would have voted against this policy. The thing is, this is how I do my job as a Director. When we get a packet that is filled with information and recommendations, it is important for me to try to understand each issue as best as I can. Often times I will seek advice outside of the District and central office when it comes to certain issues. One example would be the bond issue from October of 2009. After reviewing the information given to the Board from the central office and our bond advisor I decided to go outside of the District to get more information. I called other financial advisors to other school districts and I called friends of mine who work in the bond industry. It was these people who led me to ask our bond advisor to compare costs of both the Build America Bonds (part of the federal government stimulus package) and traditional municipal bonds. Prior to my research we had only been quoted information about traditional bonds. Armed with new information on Build America Bonds, I was able to get our financial advisor to present the BAB bonds and traditional bonds side by side for comparison purposes. The result was that the BAB bonds would have saved the District taxpayers over $2 million dollars. Unfortunately, as mentioned previously in this post, our bond advisor was ultimately given the advice to maximize the proceeds of our bond sale as opposed to maximizing the savings of the bond float to our taxpayers. The bond information that was given to the Board would have been classified as "predecisional" or possibly even "research". This means I would have been in violation of Board policy if I went outside of the Board and District to get additional information regarding items in my packet. I wholeheartedly disagree with this policy and I promise you that I will violate the policy at least once a month for the rest of my years on the Board. If I didn't then I wouldn't be doing my job as a Director. Think about this for a second. Two weeks ago we were given the State Auditor's report on the District. There was some interesting information in there on a number of topics. Our solicitor said in our discussion meeting that because we had not yet voted on the report, that it was considered pre-decisional. That means that I could technically not even talk to a neighbor about the auditor's findings about bus drivers or about the Marge Sable incident without violating board policy. I would have had to have waited until after the vote to make comment. If we withhold this type of information from the public prior to a vote, then how in the world can we expect our residents to come up to the microphone before a meeting and comment on any number of topics on the agenda? Is this the kind of board our residents expect?

The other policy that has been part of our discussions has been regarding right-to-know requests. Director Remely first suggested a few months back that we post the names of people making right to know requests on the District website. While we have had a number of right-to-know requests, I am not sure that the best way to deal with it is to post people's names online. The idea here should be figure out WHY we have so many requests and then address THAT issue. If we post the names of requesters then we are not addressing the issue, instead we are simply appearing as if we have something to hide. Posting names on the district website will end up having a "chilling effect" on our residents and may inhibit them from doing something that they would otherwise do quite freely. This action would only reinforce the idea that the Board and District is trying to hide something. Rather than taking this route it is my belief that the District and Board need to increase transparency in all things that we do. If the Board decides to follow through with this idea to post names of RTK requesters online, then it is only fair that the information requested in the RTK request also get posted online. If the District will not post this information on the District website itself, then the RTK information should get posted on a publicly available website open to all Mt Lebanon residents for review and inspection.

Thanks for reading.

James

Mt. Lebanon Real Estate Numbers

2010-07-17T08:43:00.004-04:00

One of the interesting things about our budget for fiscal year 2009-2010 was the fact that our Real Estate Transfer Tax continued to outperform every other line item in our budget. Clearly there was something different happening in 2009-2010 than happened in 2008-2009.

Without the data I have now, I hypothesized that the number of home sales had likely increased due to the $8000 homebuyer tax credit. This was not a hard guess to make as home sales around the country rebounded once the tax credit went into effect. What I didn't know was at what price the homes were selling for.

I was able to get a summary of all real estate sold in the 15228 zip code for FY 2008-2009 and for FY 2009-2010 until May of 2010.

Here is the data:

Fiscal Year Home Sales Through May
Month	FY 2008-2009	FY 2009-2010
July	35	31
Aug	23	31
Sept	21	18
Oct	12	27
Nov	8	18
Dec	14	23
Jan	10	13
Feb	9	9
Mar	8	14
Apr	19	19
May	21	25
Total	180	228

As you can see, starting in October 2010, home sales for every month in fiscal year 2009-2010 equaled or outpaced home sales in fiscal year 2008-2009. The Home Buyer Tax Credit I believe went into effect starting in January 2009 and expired April 30, 2010.

The above data is interesting in that it shows that the number of homes sold in Mt Lebanon during this period increased by 26.7%. That's quite the jump.

The other side of the coin to this is that the transfer tax is not based on just the number of homes sold but also on the price of the home. For instance, despite the increase in the number of sales, if the average sales price had fallen substantially, then we would not have seen the increase in transfer tax receipts. Luckily, I have the average sale price data for the same time period below:

Average Sold Price Through May
Month	FY 2008-2009	FY 2009-2010
July	$ 245	$ 233
Aug	$ 204	$ 248
Sept	$ 279	$ 261
Oct	$ 196	$ 188
Nov	$ 186	$ 226
Dec	$ 166	$ 238
Jan	$ 216	$ 224
Feb	$ 220	$ 160
Mar	$ 252	$ 258
Apr	$ 214	$ 268
May	$ 234	$ 232
Average	$ 219	$ 231

As you can see above, not only did the number of homes sold increase by 26.7% but the average price of the home sold increased by 5.5%. What I find interesting is that the increase in the average price was just above the $8,000 stimulus.

There are a lot of conflicting conclusions I can draw from the above information. Or maybe a better way to say it is that the above data begs a lot of questions. Did home prices actually go up in Mt. Lebanon during this time period? If so, was it short lived due to the stimulus money? Was it simply the effect of more expensive homes being listed on the market than the year before?

There is another set of data that can help answer that last question. Below is a chart showing the average list price of a home for each of the fiscal years:

Average Active Price Through May
Month	FY 2008-2009	FY 2009-2010
July	$ 268	$ 345
Aug	$ 267	$ 337
Sept	$ 268	$ 341
Oct	$ 277	$ 310
Nov	$ 292	$ 327
Dec	$ 294	$ 342
Jan	$ 290	$ 358
Feb	$ 287	$ 341
Mar	$ 331	$ 336
Apr	$ 339	$ 339
May	$ 356	$ 350
Average	$ 297	$ 339

As you can see, the average list price of the homes on the market increased by a whopping 14.1%. So, we had more expensive homes on the market and more sales of said homes.

So what does this mean for the 2010-2011 budget that we just passed? I would expect our transfer tax receipts to drop substantially from 2010-2011. The FY 2009-2010 increase was due mostly to a number of higher priced homes on the market and higher sales volume driven by the home buyers tax credit.

As is the case with most stimulus, what the tax credit did was move demand forward. I have heard from more than one Realtor that the real estate market is extremely quiet for this time of year (and that is not just in Mt Lebanon). Those people that had planned to perhaps wait an extra year to buy a home in 2011 simply accelerated their purchase to gain the $8000 tax credit to help them buy a home in early 2010. As with the "Cash for Clunkers" program, we will see demand for home purchases decline substantially once the stimulus is removed. How long it lasts is anyone's guess.

If anyone has any additional insight to the information presented above, I'd love to hear it. If enough people email me, I would be happy to provide an update or a different perspective.

Thanks for reading.

James

Jobs Still Scarce

2010-07-02T08:51:00.004-04:00

I came across an article at the Calculated Risk blog that I thought I would share. CR has been tracking employment during this recession and has an interesting graph when comparing unemployment for this recession to all other post World War II recessions.

Please see the chart below:

Click on image for larger view

From the CR blog:

For the current employment recession, employment peaked in December 2007, and this recession is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only early '80s recession with a peak of 10.8 percent was worse).

The decrease in the unemployment rate was because of a decline in the participation rate - and that is not good news. Although better than May, this is still a weak report.

This has been no ordinary recession.

The Daily Kos has the following tidbit (I just realized they copied the same graph I have above):

About 14.6 million Americans remain unemployed.
45.5% the unemployed, or 6.8 million Americas, have been out of work for 27 weeks or more. The ranks of these long-term unemployed remains at a post-Depression record.
There are now 7.9 million more Americans out of work than when the recession began in December 2007. (Roughly 15 million more are underemployed or have dropped out of the labor force -- and thus the statistical calculations).

Pennsylvania's unemployment rate (8.5% in May 2010) trails the national unemployment rate of 9.5%. Mt. Lebanon's unemployment rate has risen to 6% (May 2010) from 5.5% in April (see the excel sheet in this link). This is up from 4.9% in May 2009 (again in the excel sheet in this link).

While our rate is lower than the national and state averages, our trends are very much the same. The scary thing about this is that the national unemployment rate continues to decline not because jobs are being created but because people are simply giving up looking for work. Not a good sign at all.

Thanks for reading.

James

Terrific Post on the PSERS Crisis

2010-06-30T07:53:00.007-04:00

A school board member in Northwestern Lehigh School District runs his own blog, Pride and Promise. I was going to do a lengthy post on the House Bill that is set to address the PSERS issue but this blog beat me to it. I don't think I could have done a better job explaining this myself.

Please check out Paul Fischer's post on the PSERS crisis here:

http://prideandpromise.com/2010/06/11/the-psers-crisis-kicking-the-can-further-down-the-road-with-hb-2497/

The idea here is that the HB actually kicks the can down the road again. It has the short term effect of slightly lowering employer contributions but in the long term it will cost taxpayers billions ($52 billion according to some)more than simply sticking with the bad plan we already have.

Thanks for reading.

James

Rising Government Debt is a Ponzi Scheme

2010-06-29T08:05:00.005-04:00

The Economist magazine has a terrific article titled, "Repent at Leisure". It's important because it is the first mainstream article in The Economist that I have read which takes on the problem of increasing government debt in order to stimulate the economy. I wrote way back in January 2009 about the Aftermath of Financial Crises and was hopeful that this day would come. Here is a quick snippet:

The point of this is to say that the large majority of economists that are prominent today come from the Keynesian school of economic thought. When we hear people talk about a huge majority of advisers and academia folks agreeing on the best way to get us out of whatever malaise we are in, it is because most are believers in the Keynesian school of thought. Those that follow the Austrian school of economic thought were proven to be correct about a lot of the causes of the Depression. Those that are Keynesians believe that we can stimulate demand (and therefore employment and production) by embarking on massive government spending programs. While these programs may make us feel good in the near term because we can see that our government is trying to do something, the long-term consequences of such programs is astounding.

I am hopeful that the Austrian school of economic thought will start to make its way into the mainstream in 2009.

It took a little longer than I had hoped but it seems like the mainstream media is now starting to focus on the effect that deficits have on future production. That The Economist magazine has printed an article about the downfalls of Krugman/Keynesian fiscal stimulus and debt is no small deal.

Here is a piece of the article:

Rising government debt is a Ponzi scheme that requires an ever-growing population to assume the burden—unless some deus ex machina, such as a technological breakthrough, can boost growth. As Roland Nash, head of research at Renaissance Capital, an investment bank, puts it: “Can the West, with its regulated industry, uncompetitive labour and large government, afford its borrowing-funded living standards and increasingly expensive public sectors?”

The problem with debt, of course, is that it needs to be paid back.

The Wall Street Journal also just published this editorial titled, "The Keynesian Dead End". Here is an excerpt:

The larger lesson here is about policy. The original sin—and it was nearly global—was to revive the Keynesian economic model that had last cracked up in the 1970s, while forgetting the lessons of the long prosperity from 1982 through 2007. The Reagan and Clinton-Gingrich booms were fostered by a policy environment for most of that era of lower taxes, spending restraint and sound money. The spending restraint began to end in the late 1990s, sound money vanished earlier this decade, and now Democrats are promising a series of enormous tax increases.

One of my favorite economists is Ludvig Von Mises (1881-1973). Here is a pertinent quote from him:

There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.

Kudos to The Economist and WSJ for letting these articles fly.

Thanks for reading.

James

State Budget Update

2010-06-28T12:09:00.004-04:00

After a long trip to China, its good to be back and have access to Blogspot. The government in China chooses to block access to a number of sites- hence the long break between my blog posts. Scribd and Blogspot being sites I use quite often, it was frustrating trying to keep up on things back home through other sites.

On to the post...

I received an email from the PSBA today with a rather bleak assessment of where we are with the Commonwealth's budget.

Full text of the email is below:

State Budget Update: Chances Growing Dim for Agreement by July 1

Going into this past weekend, optimism was high that a budget agreement could be reached by the June 30 deadline. However, following a weekend of meetings among the four legislative caucuses and Gov. Edward Rendell, it appears that an agreement will not be in place by the deadline. Instead, Senate Republicans will likely present a budget plan that $27.8 billion budget and take a floor vote on Tuesday or Wednesday of this week. Meanwhile, the other three legislative caucuses appear to have an informal agreement on a budget that is closer to $28 billion.

Meetings last week and through the weekend appeared to be productive in all sides moving closer towards agreement on an approximately $28 billion budget proposal. Budget negotiations on Sunday were expected to determine how much of an increase the agreed-upon budget would provide for basic education funding. However, issues such as a proposed Marcellus Shale extraction tax and continued funding for the Department of Community and Economic Development prevented an agreement from taking place.

Additionally, as part of the original conditional agreement, House and Senate Republicans agreed to consider a Marcellus Shale extraction tax by Oct. 1 if a budget is enacted by the June 30, 2010 deadline. Although the details of that tax have yet to be negotiated, PSBA has continued to work to secure a portion of an oil and gas severance tax to be dedicated to local school districts.

Another issue is what to do if federal legislation on Medicare payments is not passed. The failure of that measure would be mean an $850 million hole for the commonwealth's budget and would all but eliminate any increase in education funding and create additional layoffs both on the state and school district levels. Reportedly, the sides are discussing who gets to make the additional cuts and how they are agreed upon.

Caucus leaders and the governor are meeting this morning to see if the budget can be put back on track. Regardless of the results of those discussions, education funding is in dire trouble and legislators need to be reminded of its importance in the 2010-11 fiscal year. Please contact your members of the Senate and House of Representatives now to express to them the importance of basic education funding. Here are talking points you can use:

-- As a result of Pennsylvania's commitment and investment in basic education, students in the commonwealth have demonstrated academic gains. Nearly 75% of Pennsylvania students are testing on grade level in reading and math, an increase over the more than 50% who were performing on grade level in 2002.

-- It is vital to the future of Pennsylvania's students to maintain the state's commitment to the basic education funding formula, as established in Act 61 of 2008.

-- Almost all school district expenses continue to increase. Therefore, the difference between state funding and increased costs must be made up by increasing property taxes or slashing programs and services to students, neither of which are acceptable.

-- The PA School Funding Campaign, which includes PSBA as a member, recently released detailed information on the cuts being made by school districts statewide. The coalition reported that almost a quarter of districts have already approved cutbacks in teaching positions, transportation, technology, and extra-curricular activities. Funds for full-day kindergarten, special education services, foreign languages and alternative education programs also are being cut. Further cuts to state funding will only require deeper cuts on the local level. Click here for details on cuts being made by districts around the state.
Thank you for your continued advocacy efforts that will help to ensure Pennsylvania's commitment to adequate and equitable education funding for our school districts. Please call your legislators today!

Note two things. First, the PSBA points out that in order to close a budget gap there are only two alternatives. Slash programs or raise taxes. The PSBA thinks neither of these alternatives is good. Second, note that there is no promise that the Federal government will pass another stimulus for this budget year. This action (or non-action) would likely result in a further $850 million hit to the state budget. The PSBA believes that if another stimulus does not pass then the basic education subsidy provided by Pennsylvania to local school districts will not be able to grow. Is it sacrilege for me to tell the Feds to keep their money?

It is the season for belt tightening all across this country. State budgets are in shambles. Borrowing and spending money has done nothing but put our budgets further in a hole than anyone ever imagined. It's time to get real and cut costs so that government (local, state, and federal) budgets can all live within their means.

Thanks for reading.

James

Eyeing the 2012 Allegheny County Reassessments

2010-05-30T07:15:00.004-04:00

One of the things that has many homeowners on edge here in Mt Lebanon and all around Allegheny County is the 2012 Reassessment. In an effort to have our residents better understand what this will mean to them, I decided to try to tackle the topic at the May 27th Audit Finance Committee Meeting.

Perhaps the most important take away from the analysis is to understand that just because your assessment increases, your taxes do not necessarily increase along with it. As you will see in the Powerpoint slides below (or available here), how the reassessment impacts you will be determined by how much your reassessment changes in relation to the Mt. Lebanon mean change.

Here is the presentation (click here if the presentation below does not show):

Basically, here are some highlights:

Slide 2- The Allegheny County real estate tax system is based on a 100% of assessed value model. Other counties determine market value and then base their assessed value on some ratio of the market value (Washington County does this). There is no inherent advantage or disadvantage to using any particular method. Personally I prefer the Allegheny County system since there is no calculating ratios to figure out what it is you owe. The thing that made Allegheny County out of compliance with the Pennsylvania Constitution was the "Base Year" Model. Tying market values to what your home would have been worth in 2002 meant that, as a home on one side of town appreciated in value and a similar home on another side of town depreciated in value, after ten years these homes would still have the same tax. That is a violation of the Commonwealth's Uniformity Clause and is what is forcing the 2012 reassessment.

Slide 3- There will be a parcel by parcel reassessment in 2012. The plan for reassessment uses County employees to perform the reassessment.

Slide 4- The Anti-Windfall provisions from Act 1 restrict school districts and municipalities from gaining any revenue due to reassessment over and above Act 1 limits. Act 1 limits have been very small the last few years due to very small CPI increases. As long as CPI stays in check, the maximum increase in revenue to the school district will be less than 3%. The school board will have an opportunity to determine whether they want to gain any additional revenue or not.

Slide 5 and 6- These slides try to mathematically show the impact on real estate taxes for fiction town. The important thing to realize here is that in the two slides you see that the revenue to the town is the SAME before and after the reassessment. This is because the millage rate is lowered to compensate for any increased assessments. The other point to take away is that homes that have their assessment increases more than the average for the community will have their taxes increase. Homes that have their assessment increased less than the community average will have their taxes decrease. And homes that have their assessed values increased the same as the community average will see no change in tax.

To further understand this point, let's look at a Mt. Lebanon home assessed at $120,000. This same home was purchased in 2009 for $180,000. If collectively assessments in Mt Lebanon increase by 50%, then in theory this home should have the same exact tax as before the reassessment. If instead the collective reassessed values of all properties in Mt Lebanon increase by less than 50%, then this home will have increased taxes due to reassessment.

The problem here is that nobody will know how much assessments will change until they actually happen. Suffice it to say that any home that has had significant upgrades to it that has not been reassessed recently will have an increase in taxes. Since the school district cannot see an increase in revenue due to reassessment (or a very small increase) this necessarily means that some other home will have their tax bill reduced.

In conclusion, the reassessment is an attempt to more fairly assess homes across Allegheny County. This will most definitely mean a change in the tax bill makeup of Mt Lebanon. There will be some homeowners that will be shocked to see their new tax bill and this shock will be from both those that have an increased tax bill and a decreased tax bill. The best way to determine the reassessment impact on your individual home is try to think about how your home value has changed versus the rest of the homes in Mt Lebanon since 2002.

The last page of the presentation has the sources I used for the meeting. They are listed below:
* http://www.youcontrolyourmoney.org/ (search for “real estate assessment process”)
* http://money.cnn.com/magazines/moneymag/bplive/2007/snapshots/PL4251704.html
* http://pubs.cas.psu.edu/FreePubs/pdfs/ua308.pdf
* http://www.alleghenycounty.us/munimap/profile.asp?muni=73
* http://www.klgates.com/newsstand/Detail.aspx?publication=5381
* http://www.post-gazette.com/pg/09339/1018698-455.stm
* http://www2.county.allegheny.pa.us/realestate/Search.aspx
* http://www.city-data.com/housing/houses-Mount-Lebanon-Pennsylvania.html

Please take a look at some of the links above. The PSU document is a great one and is where much of the information for my presentation came from.

Thanks for reading.

James

Budgets and Lancings

2010-05-28T09:46:00.003-04:00

Lance: To Mt. Lebanon. Its school board approved a staggering 10.5 percent increase in taxes this week. That's to pay for a poorly executed high school renovation project and to cover teacher pensions. And, apparently, there's a little something in there for a new contract with teachers, now being negotiated. The school tax bill on a $200,000 home will soar to more than $5,300 a year. And that great sucking you're soon to hear won't be the straw at the bottom of an empty cold coffee.

This is at least the third lance Mt Lebanon has received due to the tax increase. We got lanced when we passed our preliminary budget, we got lanced when we passed the $113 spend limit on the high school, and now we get lanced after we pass the final budget.

I can't say I disagree with the lances. It's unfortunate that for years this Board has known the day would come when taxes would skyrocket up in order to pay for the high school. Since the first day I sat down on this Board, I asked how we were planning to pay for it. The answer became so clear on Monday night. We decided to increase taxes to pay for 100% of the cost of the first set of bonds for the project.

I have been convinced over the last few years that it wasn't so much the renovation to the high school that was the problem, instead it was the way in which the District was planning to increase taxes to pay for it. This belief has been verified by the fact that there is a petition circulating the community asking the Board to cap a project at $75 million. Almost 4000 signatures later, it is clear that a we have a large contingent of this community fed up with the taxes the school board is asking them to pay. Our residents understand that the high school needs something done to it. But as they realize Bethel Park barely increased taxes to pay for their high school (3.5% increase in millage from 09-10 to 10-11) and Penn Hills will actually LOWER taxes when they are done with their project, the frustration with how we have managed the tax impact of this project only grows.

Knocking on doors in 2007 in my run for the Board, I met with thousands of residents who at the time said they were taxed enough already. The thought of a 15-20% millage increase for a $120 million new school (the idea out at the time) incensed them. This was before we knew about the tax nightmare that would be PSERS. Upon getting on the Board in late 2007, I worked with a number of members of the community and Board to come up with an alternative plan to fund the high school. It was a plan that would have paid down some of our outstanding debt and put us in position to better afford a project of this exact same size and scope. It called for delaying construction while building up a stockpile of money to move forward with a sizable down payment for a project. The more money we saved to put towards the project, the less our residents would pay in interest on any loan, and the better off they would be in the long run. There were other aspects of this plan that included using the Commonwealth's GESP (Guaranteed Energy Savings Program) and initiating a Community wide fund-raising campaign to go after private dollars from residents and alumni. Unfortunately, this plan received only tepid support from the Board. It was the strength of the message from our residents that convinced me supporting a $120 million project would be detrimental to the long term health of our community. It is the reason I ran a campaign steadfastly opposed to such a large expense.

After it was clear the plan was not going to get traction with the Board, four of us Board members got together to try to figure out how to pay for this thing. After long discussions, I was convinced that the Board majority would take action to reduce the budget in order to offset to some degree the increase in taxes that would be required to pay for the high school. Unfortunately, those reductions to the budget never materialized. Two of us on the Board kept sounding the alarm saying loudly that when this day comes, when we decide to raise taxes to the degree we just have, that it would have devastating consequences to our community. That is the "great sucking sound" referred to in the Lance in today's Trib.

You see, the tax increase we just passed is NOT $18 a month as some people would have you believe. The school district tax bill for a $200,000 home in Mt Lebanon is now $5326 per year or $444 per month. On that same $200,000 home we just increased your taxes $504 per year or $42 per month. That's not chump change. That $42 is a night out at at a restaurant for my family of four each and every month. It's a night at the movies. It's two piano lessons. Measuring the local economic impact of the extraction of more than $5 million additional dollars annually from the pockets of our residents and the private economy will be an interesting exercise. How do we measure it? Number of home sales? Businesses closing? Earned income tax receipts? We won't know the impact until it is too late.

The problem here is that we are not done. There will be a second bond float. We don't know what size it will be yet but we know it will be there. We have PSERS which is scheduled to hit in 2012 unless the state legislature does something about it.

With earned income receipts to the municipality and school district stagnant, our residents will collectively have to either dip into savings to pay for the increase in taxes or they will have to reduce expenditures in some other part of their budget. Well, I guess there is a third option. They could just decide not to pay. They would do this by putting their house on the market and getting out of Dodge before more tax trouble brews.

Thanks for reading.

James

Commonwealth School Funding for 2010-2011

2010-05-24T10:13:00.005-04:00

As I mentioned in a post a few weeks back, school districts across the State received a letter from Senate President Joseph Scarnati, Senate Majority Leader Dominic Pileggi, Senate Appropriations Chairman Jake Corman, and Senate Education Committee Chairman Jeffrey Piccola. The letter starts out as follows:

We are writing to advise you that the Commonwealth's financial position has changed significantly since the Governor announced his FY 2010-2011 budget proposal on February 9. Therfore, we urge you to be very cautious when preparing your FY 2010-2011 budget.

They are sounding the alarm. They go on to describe some of the details:

Specifically, the Commonwealth's estimated revenue shortfall for FY 2009-2010 has grown from $450 million to an estimated $1 billion. The Federal Department of Transportation ruled earlier this month against the state's plan to toll I-80, which resulted in a $450 million annual loss to the Motor License Fund for important road and bridge repair projects. Commonwealth Court recently ruled $800 million used in the current year budget must be returned to the MCARE Fund an Healthcare Provider Retention Account. In addition, there is no guarantee the Commonwealth will receive nearly $850 million in enhanced Federal matching funds to support welfare programs, which was assumed in the Governor's budget.

For the reason mentioned above, please understand there is no guaranteed level of funding for school districts or any other entity in the Commonwealth in the 2010-2011 budget.

As I said in my post linked above, a freeze at last year's level of funding would result in a $120,000 hit to our budget. The larger fear is that this year starts the PSERS increases for every school district across the state. The Commonwealth is on the hook for 50% of all of the increases for every school district. It will be no small sum of money.

For a more thorough analysis on the problem, please see this article.

From that article is a terrific quote:

The first thing [school boards] should do,” said Mr. Arneson, “is to look at ways to reduce costs; not to see increases in taxes as the first step, but to reduce cost as the first step. It’s something that will probably be different in each of the 500 school districts because they all have different programs, different salaries, materials, space, and maintenance. It’s unique to each school district.” Mr. Allwein said school districts are also cost-cutting through natural attrition, by not hiring when staff and faculty leave.

Don't forget that our 2010-2011 budget vote is tonight. I expect that this Board will approve the motion to increase millage rates by 10.5%.

Thanks for reading.

James

PSERS Presentation

2010-05-19T11:42:00.002-04:00

I was doing some research and came across this presentation from PSERS. This was a presentation given to Upper St Clair School District in late March.

It is long and detailed but if you have the time, it may be worth it to page through the 60 page presentation. The conclusion is that there is no silver bullet that will stop the PSERS rate spikes. There are some possible options to limit the rate spikes, but nobody knows for sure what will happen.

Here you go:

http://www.uscsd.k12.pa.us/psers

Dealing with Decline

2010-05-10T11:50:00.002-04:00

This title was the name of an article in the American School Board Journal. In it, the author interviews a number of people across the country who are dealing with school district budget crises in their own way.

From the article:

“It’s too bad it take something like this to make us look at all of our options ... closing schools, reopening negotiations, canceling contracts,” he says. “Those are not easy things to do. But [times] are bad, and they’re going to get worse. ... Now is the best time to push through change.”

I had a conversation with the Mt Lebanon Treasurer over the weekend and he did say that collections for earned income this year are coming in at about the same as they were last year for Mt. Lebanon. As I pointed out in a post last week, this does not seem to be the case at the State level. In fact, the District was sent a letter by members of the State Legislature telling us that they do not know what to expect with the basic education subsidy funding this year. If the State were to hold our subsidy even on the year, it would result in about a $120,000 hit to our projected budget.

To be fair, the new Education Secretary says that his priority is to maintain the basic education subsidy increase.

Our former superintendent has been doing some budget reductions with the help of the community in Wichita.

Please take a look at the article I linked to at the top of this post. I have been arguing for some time that our expenses need to be reduced. It seems that many other Districts around the country have had to reduce their budgets in these hard economic times.

Reductions in budgets are never easy. They are not supposed to be. But many times they are necessary to stay competitive in the long run.

Thanks for reading.

James

Commonwealth April Tax Collections Almost 12% Below Estimates

2010-05-03T15:46:00.005-04:00

The Pennsylvania Department of Revenue released its April report on receipts. Governor Rendell had been holding out hope that April would fill the large gap that had rolled up so far in this fiscal year. Unfortunately, April collections widened that gap even further.

From the report:

Secretary of Revenue C. Daniel Hassell today reported that Pennsylvania collected $2.9 billion in General Fund revenue in April, which was $390 million, or 11.8 percent, less than anticipated. Fiscal year-to-date General Fund collections total $22.8 billion, which is $1.1 billion, or 4.6 percent, below estimate.

“Revenues continued to deteriorate during the major tax collection month of April. We will have to develop options to address the shortfall to be able to enact a balanced budget for FY2010-11. It will require difficult choices by all involved in state government,” said Budget Secretary Mary Soderberg.

It will be interesting to see if Mt. Lebanon tax receipts mirror this development. Being 12% behind in your biggest month of collection is no small deal.

With an expected $1 billion 2009-2010 budget shortfall, the Governor and the legislature are going to have to make some very difficult decisions.

Much of the rest of the report shows a mixed bag of good news (PIT withholding for April was above estimates) mixed with bad news (corporate tax collections took a big hit).

Thanks for reading.

James

Priced Out of Public Schools

2010-04-29T13:52:00.004-04:00

The title is taken from an article written by Laura Rawley from Yahoo! Finance.

The author is confirming what many of us in Mt. Lebanon already know. We receive a premium on our home values because of our school district's reputation.

The question, then, is how much?

From the article:

While neighborhood amenities and a close commute to downtown may also skew prices higher, academic studies controlling for those issues still find a significant school premium for both test scores and state rankings. David Figlio, professor of education, social policy, and economics at Northwestern University, looked at what happened to home prices in Florida in 1999, when the state launched its School Accountability System that ranked schools from best ("A") to worst ("F").
Figlio examined prices in 199 subdivisions and 20 elementary school zones in Gainesville before and after the grades were announced. Families were willing to pay 9 percent more to be in an "A" school vs. a "B" school and about the same amount more to be in "B" school vs. a "C" school. "Importantly that's over and above the amount people were willing to pay for test scores," Figlio says. "People would pay more to be in an "A" school with higher test scores than an "A" school with lower test scores."

The article goes on to document what some parents will do in order ensure their kids get to good schools.

Ms. Rawley also maintains a blog where she wrote a post titled, "Tips for Home-Buyers Researching Schools" which is worth a read as well. The post hits on a lot of things my family did before moving here in 2004.

Thanks for reading.

James

Zoning Hearing Board Findings

2010-04-27T11:10:00.002-04:00

The School Board has received scores of emails regarding the outcome of the Zoning Hearing Board decision from last month.

I provide the link below as a public service. I have to reserve comment for a later date as the Board is currently considering its options with regard to the variance denials.

The full Zoning Board Findings can be found here.

Usually I would say to contact me with any questions but in this case, don't. The findings are pretty self-explanatory.

Thanks for reading.

James

2010-2011 Budget Vote

2010-04-20T08:51:00.006-04:00

Last night the school board passed its preliminary budget with a 6-3 vote. The budget includes an increase in millage from 24.11 to 26.69 and represents a 10.7% increase in school district real estate property tax.

I was one of the "no" votes. The comment I made was with regard to questioning where people were going to find this money. In the past, the earnings of our residents would have been able to cover some of this kind of tax hike. But in the times we have today, people will be forced to cut expenditures in other areas of their lives in order to make things work out.

How do I know this? Our state income tax receipts are down this year. This is a reflection of lower earnings throughout the Commonwealth. Additionally, according to the Census Bureau, real median income has been declining the last few years.

The other comment I made was that the tax hike we are seeing now was predictable. I don't even know how many posts I have on this blog with regards to this, but there are quite a few. If this Board was serious about reducing the base budget in an effort to lessen the impact of this tax increase on our residents, we certainly had enough time to make serious changes. Unfortunately, these changes have not taken place.

This is the first of many tax increases coming your way. We borrowed approximately 2/3rds of the money we will need to complete the high school project. The next bond float is still a few years away. The PSERS spike will have a massive impact on us in 2012-2013. Again, these are expenses we know are coming. Without making significant adjustments to the base budget to lessen the impact these events will have on our taxpayers, I cannot support this budget.

Finally, I have updated my chart from the white paper I put out there in January. It is my opinion that these tax increases will put us in a difficult competitive situation with other school districts with which we like to compare ourselves. Below is a graph showing the combined historical school district and municipal millage rates from 2002-2009:

The chart above does not include the projected 2010-2011 school district tax increases.

While many people like to say that Bethel Park and Penn Hills are embarking on similar high school projects, the one major difference is that neither one of those school districts need to raise taxes to pay for their schools.

From the Penn Hills Website:

What This Means to the Taxpayers
The proposed budget presented in April and tentatively scheduled for passage in June maintains the real estate millage in the District at its current rate of 24.81. The purpose of this plan is to provide the best facilities for our children while allowing Penn Hills to be a more affordable place to live. The District is planning on accomplishing this without raising taxes, calculating that properly done and well-thought-out consolidation can reduce the District’s overall operating costs in order to offset the bond issue planned for the new construction/renovation.

As for Bethel Park, they made sure that their construction project coincided with the pay off of bonds. They collected money from taxpayers for a year (maybe two) without lowering their millage in order to build up a fund to help pay for their school. The new debt taken on to pay for the new building was similar in size to what they had been paying for the old, retired bond.

While Mt Lebanon will certainly see some savings due to more energy efficiencies (a good thing), we will most certainly be distancing ourselves from other school districts in the total tax department as long as we make no meaningful adjustments to the base budget.

Keeping a Tally

2010-04-10T07:57:00.005-04:00

As many of you know, the Act 34 hearing for the High School project closed last Monday. The Board will be asked to vote on the submission of these documents to PDE. While I do not know if anyone will actually make a count of the documents and how many were in favor of or opposed to the project, I do know that there was a ton of material submitted. I will be stopping by the office next week to review what I can.

The close of the Act 34 comment period, as well as a comment made by our Board President last week, got me to thinking. Everyone on the Board has talked to many, many people and heard many, many opinions regarding the high school project and its affordability. The comment that caught my attention on Monday night was the one where it was said that the community is evenly divided on this project. My recollection of emails and phone conversations was much different but without the facts before me at the time, I decided not to comment.

I went back and spent some time this week counting up all the emails the Board has received since January 1, 2010. This count has been double checked with duplicate emails from residents who voiced their opinion multiple times discarded so as not to slant in favor of any one person.

I have put together a spreadsheet and present its results below:

Total/Against/ For
411/ 308/ 103
100%/ 75%/ 25%

I have broken down the list of emails by date and removed the names from the list that I used to verify duplicates.

Quite honestly, one of the reasons I put that white paper together in January was because a Board member told me that the community was evenly split. This has never been the case for this level of spending. The Republican Committee of Mt Lebanon did its own survey that showed 70% against a $114 million spend. This Board member at the time already knew about the RCML survey but chose to believe that the community was still split. My time knocking on doors in each of the past three summers had already convinced me of what these surveys proved. This is why I put out my own proposal for addressing the High School- because I didn't think we had an option on the table that adequately addressed the concerns of the majority of our residents. For me, my focus has become trying to figure out ways to save money on the existing design which is why I mentioned last Monday that we ought to consider moving the Central Office staff away from the high school in order to reduce the total square footage of the project.

I point these numbers out because this is honesty. This is transparency. Truth and transparency are sometimes inconvenient.

Thanks for reading.

James

I-80 Toll Denial

2010-04-08T14:38:00.004-04:00

I received an email from the PSBA regarding the recent denial of the I-80 Toll.

Governor calls special session to address transportation funding

This week Gov. Edward Rendell said he will call a special session of the General Assembly to address transportation funding following the federal government's recent decision to again deny Pennsylvania's application to toll Interstate 80.

Act 44 of 2007 called for the tolling of I-80 and additional revenue from the Pennsylvania Turnpike to provide funding for road and bridge repairs and for public transit agencies across the state. However, the U.S. Department of Transportation in rejecting the application said that plan would violate federal law that requires money from tolls to be used only for the roadway that is being tolled, not on transportation initiatives statewide.

Rendell had included projected revenue from I-80 tolls in his 2010-11 state budget proposal, and without it said the state now faces a $472 million gap in transportation funding.

"We have to deal with the fallout of this decision; there is no way that we can just do nothing," Rendell said. "I'm going to call a special session of the legislature to address our transportation challenges. We'll look at every option on the table. This is a dire situation with significant consequences."

A factor to consider is how this gap will impact the 2010-11 state budget for all programs, including education. A date for the special legislative session has not yet been set.

There is now a large hole in the State budget. Add declining state income tax revenues to the mix and we are trying to fill and ever increasing hole in the budget.

Rendell has thus far kept his promise of increasing the basic education subsidy to all districts across the state. Mt Lebanon is scheduled to receive a 2% increase in its subsidy this year. The 2009-2010 Basic Education Subsidy provided to Mt Lebanon was $5,584,093. Right now we are budgeting for an increase from that level. The reality is that, right or wrong, the decision to deny the toll road will put much more pressure on the Governor and Legislature to reduce costs elsewhere in the budget.

The denial leaves an additional $472 million hole in the 2010-2011 Commonwealth budget. This does not include the $719.6 million that the State is already missing due to declining tax collections for the entire budget year. From the above link:

Acting Secretary of Revenue C. Daniel Hassell today reported that Pennsylvania collected $3.9 billion in General Fund revenue in March, which was $243 million, or 5.9 percent, less than anticipated. Fiscal year-to-date General Fund collections total $19.9 billion, which is $719.6 million, or 3.5 percent, below estimate.

The Governor is hoping the month of April brings a windfall of tax collections which will help balance the 2009-2010 budget.

Thanks for reading.

James

National School Climate Survey

2010-04-07T20:29:00.004-04:00

I received the email below in my inbox today. It is interesting timing as I remember Obama and Arne Duncan speaking recently of realigning No Child Left Behind to include the measurement of school "climate" as part of the grading process. I will admit right off the bat that I am at a loss for what the term "climate" means in this sense. I am working on getting to the bottom of it.

I invite you to help me get a handle on this climate survey that comes around every two years. School climate could be interpreted many ways (including literally) and I would like to figure out exactly what the Department of Education is up to. I have found some links but am reluctant to come to an immediate conclusion as to what this means. Let me know what you find out.

TEACHERS COLLEGE

COLUMBIA UNIVERSITY

DEPARTMENT OF ORGANIZATION AND LEADERSHIP

April 6, 2010

Dear NSBA National Affiliate School Board Members and Superintendents:

I am writing to ask for your school district’s participation in the National School Climate Survey 2010. This study, planned to be the largest in the history of public education, will solicit responses and reactions from teachers, students, administrators and parents from urban, suburban and rural schools throughout the United States. In January, the National School Boards Association’s (NSBA) Board of Directors endorsed this study and agreed to provide support in the recruitment process. You may recall the series of studies that I conducted on urban school climate in conjunction with the NSBA’s Council of Urban Boards of Education a few years ago. These groundbreaking studies received incredible coverage from the national news media and have been well-received in academic and practitioner circles since publication. We learned a great deal about perceptions of urban schools and continue to process that data even to this day.

The new study, combined with Census data collected this year, promises to provide even more insight on the day to day lives and perceptions held by those closest to the education process. This time, I am soliciting the views and perceptions of the entire spectrum of schools and individuals represented in the American education system. Views on safety, respect, bullying and parental involvement are just a few that will be investigated in this study. The impact of school climate on student achievement is quickly being recognized as an important dimension to consider when designing programs aimed to improved student outcomes.

We need you and your district to participate this year. We are recruiting districts from all fifty states between now and September 1. There is no cost to your district. For each school that participates, the school board will receive a brief report with the school-level results that will assist in your policy decisions regarding the improvement of school climate. The survey takes less than 10 minutes to administer and is done completely online with exception of the parental surveys. We plan to have well over 100,000 respondents to this truly historic survey and hope that your state will be included in that number.

If you are interested in participating and for more information, please feel free to email or call at bp58@columbia.edu or 203.660.8406.

Sincerely,

Brian K. Perkins, Ed. D.
Principal Investigator
National School Climate Survey 2010

Click here to unsubscribe

1680 Duke Street, Alexandria, VA 22314

Thanks for reading.

James

Pennsylvania State Employee Retirement System Riskiest in the Country

2010-03-29T09:21:00.005-04:00

This headline was a story reported on NPR on March 23rd.

Is this what happens when your pension gets underfunded? How does a pension fund try to game returns back into its favor? There are two answers: First, you can increase risk. Second, you can increase leverage.

PSERS is banking on better than 8% returns going forward to meet its obligations. With just 13% of its funds in bonds and cash, this is a portfolio allocation better suited for a 20-something whippersnapper, not a system that is expected to pay out billions of dollars of pension payments for generations! When your investment returns (or lack thereof) are guaranteed by taxpayers, why not leverage everything? Essentially, the system is one which encourages risky behavior because the pension obligations are backed by the Commonwealth (that's me an you).

To see how we got here, please take a look at this article from Mainline Media News. It presents a good history of the situation and also walks through the PSBA and Rendell proposals about how to "fix" the problem. This article points out that there is no easy solution.

See this post from 2008 on how PSERS had changed its investment philosophy to favor more private investment placements (hedge funds and real estate development).

The Day of Reckoning (see the article in that link) for the Pennsylvania plan is 2023. This is when the pension payments are scheduled to run out. From the article:

If we are going to keep providing generous pensions to state workers, taxes will have to rise dramatically in the near future to pay for them. Alternatively, public employee benefits could be limited to the extent possible under the law, and other spending could be cut. The most equitable solution is probably one in which both taxpayers and public employees share in the pain to some extent. One thing is for certain: to continue ignoring the problem until states run bankrupt is not in anyone’s interest.

This is why I asked the Board to pass a resolution urging the PA House and Senate to get pension reform on the front burner now.

Thanks for reading.

James

2010-2011 Budget Update

2010-03-28T07:27:00.008-04:00

Update: Copy of Latest 2010-2011 Draft Budget Page 1 and Page 2
________________________________________________

The Audit Finance Committee met last Thursday night and went over the latest draft of the 2010-2011 budget. The Administration has been working to bring down the increase in taxes from the 14% increase outlined in the preliminary budget that was passed in January. This 2010-2011 draft budget now reflects an increase of 10.83% or an increase of 2.61 mills on top of the 24.11 mills from the 2009-2010 budget.

The largest reduction in expenditures to date has been 13 teacher retirements. The average salary savings realized this year for teacher retirements is $42,572 per teacher. This savings is realized when we replace an experienced teacher at the upper range of our pay scales with a less experienced teacher towards the bottom of our pay scales. The total savings for the 2010-2011 budget for these retirements is $553,432 or .26 mills. The District is also planning to pay for $542,444 in textbooks and program change proposals by using our Capital Budget. If this money was to be spent from our General Fund then the District would need to allocate money in the budget (and an additional .26 mills) for the expenses.

The largest increase in expenses is for the first payment of the High School Project bonds that were floated in October. There is a 109.5% increase in debt service to pay for the first set of high school project bonds. The total increase in debt service this year is $5,224,989 or 2.61 mills. There will be another round of bonds floated for the high school project in a few years. The PSERS increase for this year amounts to .37 mills or $767,891.

According to Dr. Steinhauer, this budget is the budget that maintains our existing programs. However, the Administration did create a Concept List for Possible Cost Reduction. I won't go through the entire list here but to give you a feel for it, there are potential reductions on there as small as charging fees for student parking. There are some rather big ideas as well, including pursuing a multi-community merger. I expect that there will be much discussion on this topic at our special budget meeting on April 5th.

Email me with any questions.

Thanks for reading.

James

The Most Daring Education Reform of All

2010-03-26T07:27:00.003-04:00

I just got done reading a terrific, thought provoking essay by Diana Senechal in the latest American Educator magazine. I urge everyone to give it a read.

Here is one paragraph from the article:

The classroom that the 21st-century-skills proponents envision-a place where students are collaborating, creating, and critiquing- may not be as promising as it seems. A video by the George Lucas Educational Foundation shows middle school students comparing two magazine photos in light of gender roles; other students filming a poetry project; third-graders watching a nature film and learning how the film was made; fourth-graders making animated short videos; seventh-graders analyzing newspaper photos of the war in Iraq; and other lessons and activities. These examples are supposed to show what students should be doing in class: discussing important issues, analyzing the information around them, and creating things. Near the end of the video, the narrator comments: "As courses and projects featuring elements of media literacy find their way into more and more classrooms, writing English might become just one of several forms of expression, along with graphics, cinema, and music, to be taught in a basic course called communication". This is where the losses begin.

The article dives deep into the realm of what is needed for all of our students. It's not just about the skill's that are being taught. We are not here to meet the "demands of the day" but of all time. Teaching one how to blog, how to edit video, and the like, do not make for better learners. Indeed, the fact that teaching these skills necessarily takes time away from core subjects means there is less of a focus on what it is that can truly make students successful.

The article goes on:

When the frenzy over 21st century skills passes—and it will—students will see that their opportunities depend largely on their knowledge. Many will graduate with blogging experience, but those who can write a strong essay on a Supreme Court case will be better prepared to enter the fields of history, law, or journalism. Many will have online science portfolios, but those who have studied calculus, read parts of Newton’s Principia, and can prove Kepler’s second law (for example) will be much better prepared to study physics at an advanced level. …The ability to make a YouTube video or podcast will mean little in the long run, if the other things are absent. Moreover, those technologies may be obsolete in another few years, but literature, science, languages, mathematics, history, music, art, and drama will stay.

Mediocre creativity abounds, as does false innovation. Creativity and innovation require knowledge and practice. If you do not teach the latter, you will not get great results in the former.

So what is the most daring education reform of all? I will encourage you to read the entire essay to find out.

Thanks for reading.

James

Real Estate's Next Big Thing: Walkable Communities

2010-03-22T15:32:00.003-04:00

I took the title of this post from Minyanville, a finance oriented website. The author, John Wasik argues that demographics will drive growth of walkable communities. Looks like Mt Lebanon might already be ahead of the curve. You can check out your Walkscore (the walkability of your individual address) here. I scored an 80 for my house on Academy Ave.

See the article here. Below is the text in full:

To be a savvy investor in US real estate these days, you need to look beyond the business news headlines and target human-scale developments that will grow because of long-term demographic trends.

Human-scale homes and communities feature amenities that you can walk, bike, or take public transit to without getting in a car. I live in such a development in Grayslake, Illinois, where I can walk or ride to Starbucks, the supermarket, bank, dry cleaner, library, and hardware store. I wouldn't want to live anywhere else right now.

You won’t generally find human-scale communities in sprawling urban areas dominated by highways, or what I call “spurbs.” Investing in human-scale development is a relatively new and enlightened way of buying real estate. You may be able to profit in real-estate investment trusts, or REITs, or find communities that feature this kind of construction.

Christopher Leinberger, a research fellow at the Brookings Institution and real-estate developer, says human-scale or "walkable" communities command a premium of 40% to 200 % in cost per square foot over properties in car-centric neighborhoods.

Demographics is destiny when defining the growth of human-scale developments.

Places with sidewalks, bike paths, trails, and public transit will continue to prosper while spurbs will wither. That's because millions of empty nesters among the Baby Boomers -- born from 1946 to 1964 -- are selling their large, four-bedroom-plus suburban family homes and downsizing to condos, town homes, co-ops, and apartments half the size.

While the majority of Baby Boomers won't abandon their suburban enclaves quite yet, their sheer numbers will ensure significant migration to more pedestrian-friendly areas.

There were 52 million Baby Boomers aged 55 or older in 1990. By the end of this year, that number is forecast to grow to about 77 million and to 85 million in 2014, according to the National Association of Homebuilders, a Washington-based trade group.

Empty nesters are often moving to urban enclaves in Brooklyn, Philadelphia, Chicago, Seattle, and Portland, Oregon.

In his research on this subject, Leinberger has found that the supply for these kinds of neighborhoods lags the demand in major cities. Leinberger estimates that the New York City metro region, with about 20 million people in four states, should have 80 walkable neighborhoods, but only has 21. He said the area could use more areas like downtown Princeton, New Jersey, Washington DC’s DuPont Circle, or Chicago’s Lincoln Park.

Not only do human-scale neighborhoods help you build equity over time, they're better for your health and have lower carbon footprints. Because you're walking or biking to your destinations -- usually within a mile of your home -- you’re getting more exercise and polluting less.

When investing in human-scale areas, it’s not as simple as looking at listings and prices. Urban planners from the “New Urbanist” movement, who focus on building human-scale communities, examine “vehicle miles traveled.” The fewer number of miles you need to spend in a car, the higher the walkability.

One useful human-scale gauge is provided by WalkScore, a service that measures relative walkability (Leinberger is an adviser to the firm). In the New York metro area, for example, the highest-scoring neighborhoods were Tribeca, Little Italy, and Soho. The lowest were Howland Hook, Ardon Heights, and Woodrow.

How can an investor play this next big thing in real estate? One strategy is to buy REITs that favor human-scale developers. While these publicly traded funds of real-estate companies in general have been taking a beating in recent years, they're worth a look.

Buying REITs right now is probably the most challenging play because the market is still troubled. With the industry going through a recession plagued by ballooning foreclosures, a commercial property slump, and tight credit, it’s not known when it will recover, so consider any REIT buy a risky long-term buy and hold. Only invest a small portion of your portfolio in this vehicle -- less than 10% of your holdings.

REITs worth considering include Federal Realty (FRT) and Post Properties (PPS), according to Leinberger.

Looking to relocate? Be prepared to pay a premium for human-scale neighborhoods. While places like Soho and San Francisco’s Chinatown have a high desirability factor, you’ll find few bargains there.

Email me your walkscore. Note that I am not giving investment advice with this post. I just found it interesting.

Thanks for reading.

James

Too Many Towns, Too Much Debt

2010-03-21T13:31:00.004-04:00

A loyal reader forwarded an article my way from today's Post-Gazette that has the title, "Too Many Towns, Too Much Debt: Welcome to Pennsylvania".

From the article:

A train wreck is coming, and, because of my position, I think it's my duty to alert people," said George Cornelius, secretary of the state Department of Economic and Community Development. "Some of these municipalities may get into a situation where they have no choice; bankruptcy is the only option left.

The article takes a look at some others states and how many townships/municipalities they have. The authors are not-too-subtly suggesting that Pennsylvania has far too many municipalities to be efficient and that at some point, a point just before or after bankruptcy, municipalities will be forced to merge in order to gain efficiencies. For an even lengthier explanation of Chapter 9 filings, see this article.

This is not too different an argument than the one made by Governor Rendell when he suggested that there are too many school districts in the Commonwealth. I posted about plan here and here. It has since died down but we must not think that it will go away. With Harrisburg about ready to file for Chapter 9 protection (along with many other municipalities across this country), we may be looking at the beginning of a move to consolidate services not just in Pennsylvania, but across the country as well. In April of 2009 I raised the alarm when Vallejo, CA decided to file for bankruptcy protection. Vallejo was granted bankruptcy protection and as a result was able to get out from under its existing union contracts.

How much longer before we see towns follow Harrisburg's lead. Too much debt has officially become too big a problem.

Thanks for reading.

James

March News and Meeting Roundup

2010-03-17T22:04:00.006-04:00

There have been a number of newspaper clippings worthy of mention and comment.

First, let's start with the Zoning Hearing Board which ruled against the District's application for variance from two ordinances regarding total lot coverage and acceptable number of parking spaces. Below is a short excerpt from the article in the Almanac:

As for the board's next step, Kubit said, "We don't know just yet. We're still waiting on the written opinion from the zoning board and after that, we could, really I don't know and I hesitate to give an answer. We could appeal or change the design, that depends on legal counsel. We thought we had a very good case for requesting the variances."

Right now the options for the District are as Mr. Kubit suggested. Either we can appeal to Common Pleas Court or we can change the design so that it does not violate the ordinances. Personally, I have made the comment that the Board must be made aware of potential costs of any and all remedies (appeal or optional redesigns) before we make a decision on where to take this next.

For more information regarding variances, please see this document on the Municipal website. It should give you some good insight into what the Zoning Hearing Board needs to see in order to grant a variance. I do look forward to reviewing the entire transcript of the meeting and reading the full decision of the Zoning Hearing Board. That written decision should be available within 45 days.

The second clip I want to link to has to do with the high school project and is a Letter to the Editor in this weeks Almanac. The letter is written by Mt Lebanon resident Dirk Taylor. Below is an excerpt:

The current $113 million plan would be totally irresponsible in any economic environment, let alone the current recession. It will break the record for most expensive public school project in western Pennsylvania history by more than $30 million. Each of our neighboring communities have completed major high school renovation/new construction projects in recent years with the highest cost coming in at under $38,000 per student. The reconstruction plan sought by Mt. Lebanon's School Board will "raise that bar" to a preposterous $55,000 per student. And to make matters even worse, the current design is greatly flawed.

I urge you to read the entire letter as Mr. Taylor has been involved with the project quite intimately for some time. He was a member of the CAC and has done work for the District as a structural engineer. I point out this letter not because I want to revisit any of our past votes (you can review my blog for that), but because Mr. Taylor's sentiment on how this Board has acted is shared by a number of people in our community. There is a level of trust that is missing and must be rebuilt.

Speaking of trust that must be rebuilt, there has been recent discussion of Right to Know requests. There was an article in the Post-Gazette regarding some issues that Mt Lebanon has had with regards to requests. Please see the article here. Below are two short excerpts:

Under the new Right to Know law, signed by Gov. Ed Rendell on Feb. 14, 2008 and effective Jan. 1, 2009, the burden is on the government agency to explain why a document should not be released. The burden was formerly on the requester to explain why the information should be public.
...
At this week's meeting, school board member Daniel Remely suggested the district make the names of the requestors and the costs of performing the requests available for public review.

Really, that first paragraph is the important one. We are buying hardware in order for us to more easily comply with the Right to Know law signed in 2008. The hardware should reduce the time it takes to search for information requested from residents. According to our Director of Technology, other school districts in Allegheny County are also shelling out money to help them comply with the RTK changes from 2008.

I made two points on Monday night related to RTK requests. First, if the District wants to reduce the amount of RTK requests then it needs to have a focus on being as transparent as possible with all business before the Board. Decisions like ending a superintendent's contract without explanation, early bird teacher contracts, cost overruns on elementary school renovations, high school project reimbursement amounts reduced by 50% just weeks before Act 34 hearing, high school project costs less than 2% below referendum levels, and claims that 20-year enrollment figures were used to justify a HS project when such 20-year enrollment figures do not even exist, do not facilitate the kind of trust that the Board needs to have in order to reduce the amount of RTK requests. It is incumbent upon each board member and the administration to do what they can to keep the entire District on the correct open, honest, and transparent path. We have a pretty bad history and it is up to us to start to make changes. We must not view the RTK requests as nuisances but instead as opportunities to improve our communication with our residents.

The second point I made at the meeting was in relation to the comment made above by another board member. The only reason someone might want to publish the names and costs of RTK requests is if that person wanted to try to make people think twice about making those requests. If the Board was to follow this to its ultimate conclusion, then it would most likely have a "chilling effect" on people who would otherwise make a RTK request. This is not the type of District I want to be. My suggestion would be that if the Board makes the names and costs of requests public then it ought to make the information that was requested public as well. My hope would be that the empowerment felt by getting the information published online for all to see would neutralize the chilling effect mentioned earlier. Quite honestly, if the Board decided to move in the direction of publishing names and costs of RTK requests, I would most likely make this blog available to those residents that wish to publish the information gathered by their request.

There is no such thing as one-way transparency.

Thanks for reading.

James Fraasch

Municipal Zoning Hearing Board Tonight

2010-03-11T11:56:00.003-05:00

One of the next steps in the process for the high school is to request and receive a variance from the Municipality for various out-of-compliance construction items for the high school. This is not atypical of many large construction projects.

To that end there will be a Zoning Hearing Board meeting tonight at the Municipal Building at 7:30pm to address these variances.

Please see the agenda on the Mt Lebanon Municipal Website here:

Teacher Quality- Some Perspective

2010-03-09T08:04:00.003-05:00

There was an interesting post on The Core Knowledge blog which I wanted to share regarding teacher quality and the current focus on it as the saving grace of the education system.

Title: Teacher Quality: The New Magic Bullet

It’s official. Forget accountability. Forget choice and charters. Forget mayoral control, standards, class size and universal pre-K. Teacher quality has now been annointed The Answer for what ails American education.

Those who pay attention to the life cycles of ideas will note that the tipping point occurred on or about March 8, 2010 when the New York Times Magazine and Newsweek simultaneously devoted their covers to teacher quality–guaranteeing that the issue has achieved escape velocity, breaking out of the education bubble and into the mainstream. Elizabeth Green’s “Building a Better Teacher” is a lengthy article about efforts to describe and quantify what makes good teachers effective, and it’s unfair to compare it to Newsweek’s cover story, which is classic example of the newsmagazine formula: take bits of data and pieces of string that have been rattling around — the bit about how “2, 3, or 4″ (which is it?) good teachers in a row close the achievement gap; the bit about how teachers come from the bottom third of students – and combine them into a single piece of received wisdom. Newsweek’s cover pronounces in stentorian tones: “We must fire bad teachers.” Lest the point be lost, the magazine tells us in bright yellow letters that this is “The Key to Saving American Education.” And that’s subtle compared to the article itself which declares: ”The problem with education is teachers.”

Well, thanks for clearing that up.

“Getting rid of bad teachers and hiring good ones is the solution to turning around failing urban schools,” Newsweek tells us. Note the definite article. Not “a” solution, but “the” solution. The Answer. The Way. The True and Only Heaven. Cue choirs of seraphim and cherubim. No more calls, we have a winner. If we want to fix schools we must fire bad teachers. That’s it. Period. Full stop.

Let me say this clearly: teacher quality matters. I’ll say it again. Teacher quality matters. Did I mention that teacher quality matters? Because it’s really true. Teacher. Quality. Matters. Are we clear?

But let’s be clear on something else. The very worst phenomenon in education is the True and Only anything. Pondiscio’s First Law states there is no good idea in education that doesn’t become a bad idea the moment in hardens into orthodoxy. And teacher quality now threatens to become the latest good idea that we will follow off a cliff.

Curriculum? Doesn’t mean a thing without a great teacher. School leadership. Sure. That’s how we hire great teachers. Testing? That’s how we identify great teachers. Merit pay? We need to compensate great teachers for delivering results. Class size? A great teacher can handle 50 kids more effectively than a mediocre one can teach five. Choice? Parental support? What part of great teacher do you not understand?

But enough of all that. We now know — we know — what it will take to fix education. Great teachers.

And only 3.2 million of them.

I love this blog because its authors often challenge the conventional wisdom when it comes to fixing the national education system. The above post certainly does that.

The author of the above post is suggesting that simply having great teachers does not equal great test scores or a great education. The content of what is taught is quite important as well.

Thanks for reading.

James

School Board Meeting Agenda for March 8 2010

2010-03-08T10:06:00.002-05:00

We have some interesting items on the agenda for tonight's meeting. You can find the agenda in full here. Below are some topics that might generate some thoughts:

1) Revisions to the 2009-2010 Calendar- We have had a ton of snow days this year. So many so that we are going to have to eat away at some future school days that we would normally have had off. It is inconvenient, but necessary, to make the changes to the school calendar. I would urge any parents/students that may be affected by the changes to the schedule to reach out to their teachers as soon as possible to figure out how best to move forward through any scheduling conflicts.

2) Resolution on PSERS Projected Rate Increases- As you may know, the Pennsylvania State Employees Retirement System is projecting tremendous increases in expenses going forward. While Governor Rendell has presented in his budget a way to reduce the immediate impact of these increases in the very near term, his budget would make later year increases worse than current projections. In the Audit/Finance Committee I made the recommendation that we pass a resolution urging the State Legislature to pass meaningful and lasting pension reform that would lessen the projected tax impact on local school districts. The wording of this proposal before the Board does not advocate for a particular type of reform, but instead asks more generally for the State to address the issue soon. Any suggestion of a particular type of reform (such as the PSBA recommendations) has the potential to create conflict with with our teachers union, and quite frankly, the PSBA solution may not be the best solution out there. I don't know what the right solution is, but what I do know is that the projected tax increases will bankrupt a number of Districts statewide.

3) Turf replacement- Since we received word that the District was to get almost $2.5 million in liened taxes from the sale of the Covenant, the Audit Finance Committee recommended that some of that money be used to replace the stadium turf. We budgeted $750,000 just last month for this replacement. Bids came back in at $432,900.

4) Single Prime Mandate Waiver- The school board is asking for a waiver from using multiple prime contractors for the high school project. This has the potential to save money on the high school project. Actual dollars will be hard to quantify.

That's all for now. Sorry about the long delay between posts. I went on a trip that threw off my schedule a little bit.

Thanks for reading.

James

Allegheny Institute for Public Policy Brief

2010-02-17T07:57:00.004-05:00

The Allegheny Institute for Public Policy has released its latest policy brief. The brief, "Mt Lebanon Schools Becoming a Taxpayer Nightmare", takes a critical look at Mt Lebanon taxes and calls the coming tax increases a perfect storm. From the brief:

The projected budget scenario is not a sustainable situation. Note that over the period 2000 to 2015, the total level of real estate taxes collected based on budget forecast figures will rise over 100 percent. However, the earned income tax collections-a fairly good indicator of income growth-over the same period will have risen only 45 percent, assuming the budget forecast is anywhere close to accurate. In short, the expanding burden on property taxpayers is far outstripping the ability of taxpayers to pay.* As a result, the impact of the tax hikes will begin to have detrimental consequences for the housing market in Mt. Lebanon.

It's a point that I have made many times. It's a point that is shared by many residents in Mt Lebanon.

The brief concludes with this salient point:

In a word, a perfect storm is developing for some Mt. Lebanon property owners. And it is too late to do anything about it, unless the school board starts to make significant spending cuts, and soon.

The brief is right on target. It is the perfect storm and this Board needs to do what it can to get ahead of it.

When you layer the national tax issues on top of what is happening at the local level, things start to look even more troublesome. From the ABC News article, National Debt, Budget Deficit: A Scary Forecast for Taxpayers:

...now the problem of mounting national debt is worse than it ever has been before with potentially dire consequences for taxpayers, according to a report by the nonpartisan Peterson-Pew Commission on Budget Reform.

Two comments on this. First, looking at future obligations is the reason we do out-year budget forecasts. Anyone who says a five-year forecast (or longer) is worth less than the paper it is printed on clearly will have no success in running a business or government entity. You cannot make decisions today without thinking hard about what their impact will be years from now. Second, the alarm has been sounded at both the local and national level. Tax hikes and budget cuts will be coming from all sides. You could use quotes from the Allegheny Institute brief and they would aptly describe the national situation as well as they do the Mt Lebanon one.

Thanks for reading.

James

High School Project Act 34 Hearing Information

2010-02-11T10:27:00.002-05:00

The District has posted on its website the relevant information regarding Act 34. I will post that text in full below, but first, you need to know two things.

First, any email comments you wish to make regarding Act 34 should be sent to the Board Secretary and NOT to the school board. Emails sent to the Board will not be submitted to the Pennsylvania Department of Education. Please email your comments to boardsecretary@mtlsd.net

For those without email access, written comments can also be mailed to the District at:

Mt Lebanon School District
Board Secretary
7 Horsman Drive
Mt Lebanon, PA 15228

Second, if you wish to reserve some time to speak at the meeting then you will need to stop by the District offices in order to get your name on the agenda.

The full text of the announcement is below:

MT LEBANON SCHOOL DISTRICT
NOTICE OF PUBLIC HEARING
TO ALL RESIDENTS OF THE MT LEBANON SCHOOL DISTRICT AND ALL OTHER INTERESTED PERSONS AND PARTIES TAKE NOTICE that the Board of School Directors of the Mt Lebanon School District has scheduled a public hearing in the AUDITORIUM (my edit: changed from Fine Arts Theatre) located at the High School, 7 Horsman Drive, Pittsburgh, Pennsylvania 15228, on February 22, 2010 at 7:00 o’clock P.M. The purpose of this hearing is to review the proposed renovation and addition to the High School and to receive public comments.

The public hearing is to be held pursuant to the requirements of the Pennsylvania Public School Code of 1949, approved March 10, 1949, as amended, including amendments made pursuant to Act No. 34 of the Session of 1973 of the General Assembly.

The Board has approved and adopted a maximum building construction cost of $44,977,920 and a maximum project cost of $113,274,765 for the renovation and addition to the High School Building.

Description of the project, including facts with respect to educational, physical, administrative, budgetary and fiscal matters related to the projects, will be available on January 28, 2010, and may be obtained weekdays between 8:00 A.M. and 4:00 P.M. at the Mt Lebanon School District Administration Office, 7 Horsman Drive, Pittsburgh, PA 15228. The booklet and the facts contained therein will also be available and presented at such public hearing.

All residents of the School District are invited to attend and may gain agenda time by signing to speak by 4:00 P.M., February 17, 2010 in the District Administration Offices. Written testimony may be submitted to the Board Secretary prior to the hearing. Testimony and questions by citizens who have signed to speak at the hearing shall be limited to four (4) minutes.

Written comments will also be received by the Board Secretary until 12:00 o’clock Noon on April 5, 2010 at the Administration Offices, 7 Horsman Drive, Pittsburgh, PA 15228.

MT LEBANON SCHOOL DISTRICT
Janice Klein, Secretary
Mt Lebanon Board of School Directors

PSBA Analysis of Governor Rendell Education Budget

2010-02-10T15:38:00.002-05:00

I received an email today from PSBA's Office of Governmental and Member Relation in regards to the Governor Rendell's budget announcement yesterday. The information below is available on the PSBA website. Full text of the announcement is below:

Rendell presents $29 billion state budget for 2010-11

This week Gov. Edward Rendell presented his $29 billion 2010-11state budget plan to the General Assembly that contains a 6.42% increase in the basic education subsidy and holds most other education programs at level funding or decreased amounts. The governor also proposed a plan to address the expected spike in employer contributions to the pension system, and to create a new reserve fund to be used when the federal stimulus money has ended. In addition, Rendell once again pitched his proposal for a system of statewide healthcare for school employees.

Under the governor's proposal, the Basic Education Subsidy would receive $5.8 billion, an increase of $354.8 million, or 6.42%, over 2009-10. In doing so, Rendell called for the third-year investment in his school funding formula that was developed in response to the state Costing-out Study. The funding formula establishes an adequacy target for each school district and compares the target to each district's actual spending in order to determine the district's adequacy gap. The formula calculates the state share needed to help close that gap in each district.

Most, but not all, other programs under the education portion of the budget plan are level-funded or have a decrease in funding. Here are some of the programs, their proposed funding amounts and how that compares to the current budget:

Special Education: $1 billion (level)
School Employees Retirement: $399.7 million (19.51% increase)
Accountability Block Grants: $271.4 million (level)
Reimbursement of Charter Schools: $226.9 million (level)
Early Intervention: $186.1 million (7.23% increase)
Pre-K Counts: $85.9 million (.55% decrease)
Career and Technical Education: $62 million (level)
Educational Assistance Program: $55.3 million (6.43% decrease)
PA Assessment: $37.6 million (1% decrease)
School Improvement Grants: $11.3 million (1% decrease)
Science: It's Elementary: $13.5 million (1% decrease)
Dual Enrollment Programs: $8 million (level)
High School Reform: $3.6 million (1% decrease)

The governor acknowledged the impending crisis in the employer contribution rates for the state and school employees pensions systems (SERS and PSERS) that will occur in 2012-13. For PSERS, the state contribution is projected to increase from $758 million in 2011-12 to $1.88 billion in 2012-13. that represents a single-year increase of $1.13 billion. School district contribution costs will spike from $658 million to $1.86 billion.

Rendell has offered a plan that contains two components. The first is "fresh start" that would reamortize liabilities over 30 years. In conjunction with that effort, the state would require an incremental phase-in to higher contributions. Under the plan, in 2010-11, the commonwealth and school district employers would begin to fund the step-up in pension costs by increasing employer contribution rates to PSERS by 1% of payroll. According to the governor's office, this represents an additional employer investment of $200 million, or 24%, over 2009-10 levels. Thereafter, contribution amounts would be scheduled to increase annually by a maximum of 3% of payroll. Any increase of benefits, such as cost-of-living adjustments, would add to the unfunded liability and therefore require additional employer contributions.

The governor noted that no new revenue is required to balance the 2010-11 budget. However, he cautioned that in fiscal year 2012, federal funding totaling more than $2.3 billion will disappear. To address future budgetary challenges, Rendell proposed the creation of a new Stimulus Transition Reserve Fund. All new revenues generated during 2010-11 would be deposited into the new fund to help balance the 2011-12 budget.

To do so, Rendell is calling for a reduction in the Sales and Use Tax rate from 6% to 4%, and the elimination of 74 exemptions for items that currently are not subject to sales tax. The 1% vendor sales tax discount would be eliminated, and tobacco taxes would be extended to include cigars and smokeless tobacco. In addition, the state would institute a new severance tax on natural gas extraction.

The important thing to note here is that the Governor has outlined his plan to address the PSERs funding crisis. He proposes to increase the employer contribution by 1% of payroll in 2010-2011 with increases of up to 3% of payroll thereafter until the pension is fully funded. This stepped approach to funding PSERS would have the effect of pushing out the year that PSERS is fully funded.

This is the accounting magic I wrote about on Tuesday morning. The above approach is not currently allowed but if it is adopted by the Legislature then you can bet it will become legal.

Thanks for reading.

James

Commonwealth's Revenue Shortfall Silver Lining

2010-02-09T08:06:00.003-05:00

In preparation for Governor Rendell's budget speech today, I spent some time looking up recent articles on the state of the Commonwealth's finances. It looks like we are ahead of where we were last year (in reference to the budget deficit) but revenues still continue to decline monthly on a year over year analysis.

According to The Pennsylvania Budget and Policy Center (a non-partisan think tank) January revenues to the State came in $120 million below expectations with 85% of that drop due to lower than expected revenues from income taxes and sales taxes. This is an issue because it was just in December that the Governor suggested the 2009-2010 budget gap might be $450 million. With the unexpected slump in revenues, Rendell's projection will most likely prove to be off the mark. From the article linked above:

Sales tax collections, which are normally the highest of the fiscal year in January (due to holiday shopping), missed their monthly target by $50 million, or 5.9%. For the fiscal year, sales tax collections are $231 million, or 4.6%, lower than expected. Sales tax collections have fallen short of estimate every month of 2009-10 – indicative of a slower-than-expected economy and weaker-than-anticipated consumer confidence.

The problem here is not just on the revenue side. Expenses are proving to be a problem as well. The Commonwealth has had to borrow $2.25 billion from the Federal Government in order to pay unemployment compensation. From the article above:

Pennsylvania's efforts to keep its nearly 560,000 unemployed workers' heads above water is causing the ship of state itself to sink deeper in a sea of debt. The state's Unemployment Compensation and Rainy Day funds, intended for down times, ran out of money in March.

But wait, it's not all gloom and doom. The fact that the State budget is so far in the hole means that the likelihood of an immediate solution to the PSERS pension crisis increases. Think about it for a second. For every school district in the state that has to raise taxes to pay for PSERS, the Commonwealth needs to come up with half that. With 501 school districts across the state, the Commonwealth share of this contribution spike will be enormous. Plus:

The Senate has contracted with Price Waterhouse to review the pension issue, not only to value the assets that are there, but to make specific recommendations

Nothing a little accounting magic can't cure...again (Pennsylvania did the accounting trick previously in 2002/2003 I believe).

When doing a little searching I also came across an article from the PSEA with the headline, "PSERS is Sound". From the article:

Warnings of a “spike” in the employer contribution rate in 2012-2013 are proving to be overrated. Originally projected to rise to 27.73%, projections in September 2007 now put the increase at less than 12%.

This had to be written in late 2007/early 2008. The PSERS Rate Spike is now projected to be up to 10.59 in 2012. Then it jumps to 29.22 in 2013 and 32.09 for 2014 before it starts to level off.

Again, the sheer magnitude of this spike means that the State is more likely to act. The question is, given the increases outlined in the chart above, will it act for 2010-2011 or will it wait for a future year? With no money to spend, the State will be forced to address the pension issue through accounting measures thereby masking the true cost of the pension plan. Let's hope that the Commonwealth doesn't simply stop at masking the problem but instead go all the way with a much needed reform to the unsustainable pension system.

I am not a fan of accounting "magic" to make liabilities disappear, however, in this case I may have to make an exception. Let's all just wait and see what the Governor says today.

Thanks for reading.

James

The Blitz is On

2010-02-06T07:30:00.004-05:00

There sure is a big effort out there to get all the facts to folks regarding the High School project. From PTA newsletters that went out last week to District mailings, to other director blogs, the blitz is on. I figure I would add my two cents. You see, the devil is in the details and it is not always about what someone says, it is sometimes about what they are NOT saying.

All of the information that went out in the last week or two is not incorrect. It's focus, however, has been solely on the cost of the High School Project. Now, when you look at your budget and try to figure out what you can afford, do you just look at the cost of a car you are going to buy? Or do you take a look at your entire budget, including all KNOWN future expenses and then figure out how that car is going to fit into your budget given what you already now? My guess is that you don't just look at the car in a vacuum. You will look at all your expenses in order to figure out what your budget should be for your car. And then you will make your car purchase accordingly.

With that in mind, I post for your information the new and improved (from 2/3/2010) Mt Lebanon School District Forecast of Budgeted Expenditures.

Click on image for larger view

You may remember that I linked to the 2009 version of this in my whitepaper last month. I had already asked for an update at the time and after a few false starts (the version from the 1/28 Audit/Finance Committee meeting had some errors in it), this is the final version we will see for 2010.

Let me make a points about this forecast:

1) It's a forecast and is based on the best information available at the time
2) 2.5% increase in salaries (historical average is 2.79)
3) High School Debt will be a total of $113 million (actual debt will be a number less than this and will depend on where bids for the project end up)
4) Healthcare will increase at 5%/yr
5) PSERS increases will go according to the PSERS Projected Schedule
6) Earned Income Tax receipts increase at 2.5% in 2010-2011 and 3% thereafter (the Municipality is forecasting flat EIT)
6) State Subsidies increase at 2% per year (right now we are looking at 0% increase)
7) Investment rates going up to 3.25% (historically this is a good number but right now we are under 1%)
8) There are no increases in the 2010-2011 preliminary budget outside of PSERS, High School Debt Service, and salaries. Increases in future years for the "other" items are kept at a very low rate.
9) There are no program changes included in the budget. Dr Steinhauer said at the Audit/Finance meeting that he would find funding for these changes in other parts of the budget.

Now, when I said above that the whole picture isn't getting shown, this is why. This five-year forecast includes ALL expenses such as PSERS and base budget increases. The information released by the District only shows High School expenses. My frustration for some time has been that there has not been enough focus on the ENTIRE picture instead of on just the High School. So when you see people say that the high school might mean a 14% increase in taxes (from this years 24.11 mills) and that's the "Bottom Line", it kind of misses the point entirely. The Bottom Line isn't just a single expense. The Bottom Line is the forecast we received last Thursday. And that Bottom Line is ugly! From 2009-2010 to 2014-2015 the millage is projected/estimated to rise from 24.11 to 33.31, a 38.15% increase in taxes.

There are some opportunities for improvements to this forecast. Here are just a few:
1) Bids for the HS project might come in under $113.3. This would reduce our debt service
2) There could be a solution to the PSERS Funding Crisis
3) Salaries could come in less than the net 2.5% increases projected
4) There may be opportunities for base budget reductions in staffing and/or programs.
5) Retirements could be a big expense reducer especially in 2010-2011 (the 2.5% salary number is net of retirements)

There are also some risks to this forecast:
1) Salaries could come in greater than the 2.5% increases projected (come on, we just started negotiations. I couldn't put salaries in one or the other!)
2) EIT growth could be less than 3% (Municipality is projecting flat revenues from EIT)
3) State reimbursements may not be 2% (no increase seems to be the case for 2010-2011 at least)
4) Interest rates on the second float of bonds unknown (to be floated in 2013-2014 three years away)
6) Funding for our OPEB liabilities (approx $600,000) is not taken into account for years after 2012-2013.

Retirements going forward will have a huge impact on the 2010-2011 budget and beyond. We will have a good idea later in February and a great idea in March about what our numbers will be for this year.

Now this forecast is not a worst case scenario. Granted there are a few areas that we are likely to improve (let's all hope HS bids come in low) but there are some significant risks as well. The greatest chance we have of seeing these numbers come down is if there is something done at the Commonwealth level to address PSERS. There are long-term solutions in front of the Legislature right now but there are no short-term ones. Something can still be done, but please contact Senator John Pippy and Representative Matt Smith and let them know that they have a role in this. They know it already, but it is always good when they hear it from their constituents.

That's all for now. I am working on something with regards to the reassessments. I will probably address it at the February Audit/Finance Committee meeting. If you are a property owner then you most likely received a letter in the mail this week regarding your property. I expect there will be a number of questions regarding this in the coming weeks and months.

Thanks for reading.

James

Almanac Editorial

2010-02-05T15:47:00.009-05:00

In this week's Almanac the editor weighs in on Mt Lebanon's High School Project. Excerpts are below with some comments:

$113 million is a whole lot of money. A whole lot of taxpayers' dollars. One hundred and thirteen million dollars could build more than 226 new homes valued at $500,000, or 452 $250,000 residences.

That is a way to think about it that I hadn't come across before. Of course, finding $113 million to build homes that were then occupied by buyers would, in the long run, return a net benefit to our tax revenues.

Considered basically landlocked when it comes to new development, the tax base in Mt. Lebanon is not expected to expand as it is in neighboring communities like South Fayette, Peters, North Strabane and Cecil townships. No expanding development, no growing tax base.

The fact about the stagnant tax base is a big one. We do not have a lot of space for more development. We will have a new hotel downtown at some point and their is the possibility that we get some development done in a few years with air rights over the T stop. Outside of that, there is not much more happening.

Food, utilities, clothing, you name it, are increasing faster than most people can keep up. It's a shame to think some residents are going to do without the absolute necessities of life to pay their school taxes.

More likely, those that would otherwise have to do without, will simply move someplace where they won't be forced to do without.

Want more proof that higher taxes lead to people simply up and leave? Check out this study done by the New Jersey Chamber of Commerce at www.nj.com:

The study – the first on interstate wealth migration in the country — noted the state actually saw an influx of $98 billion in the five years preceding 2004. The exodus of wealth, then, local experts and economists concluded, was a reaction to a series of changes in the state’s tax structure — including increases in the income, sales, property and “millionaire” taxes.

“This study makes it crystal clear that New Jersey’s tax policies are resulting in a significant decline in the state’s wealth,” said Dennis Bone, chairman of the New Jersey Chamber of Commerce and president of Verizon New Jersey.

Please see the article for more interesting information on the study and the effects that tax policy has had on the wealth of New Jersey as a whole.

Thanks for reading.

James

Timely Repost #2

2010-01-31T09:15:00.003-05:00

I put together this blogpost in March of last year when looking at the 2009-2010 preliminary budget.

We have to continue looking for solutions to the coming tax increases. If not through reducing the size and scope of the high school project, than by some other means.

This is why I recommended the Finance Committee endorse a resolution addressed to our Legislators asking them to find a solution to the immediate need for real local property tax relief. I have asked our Board President to add this to our February meeting agenda.

Timely repost below:

The Audit/Finance Committee continued its meetings about the 09-10 budget this past Monday. The process is a bit different than you may have seen in the past and I do like it better than how we approached the budget last year. Just in case you don't get enough of us on the Board, the Committee meetings are now being televised. This will continue to be the case until we pass the budget.

Most of the budget documents from Monday's meeting can be found at the District website at http://www.mtlsd.org/district/budget/budgetmeetingdocuments.asp. If you are going to read through this post then I would suggest having a window open with the 5-Year forecast of budgeted expenditures. To me, this is the place we need to start. As I have said in the past, I am not a fan of budgeting only for THIS year. We need to budget for this year while seeing what kind of impact the budget will have on taxpayers in future years. In some instances, having a zero mill increase today will result in a much higher mill increase in a future budget. In fact, in this budget I can already see some discussion happening with how to approach the looming teacher pension problem and I believe that there will be some disagreement on how to plan for that huge spike in expense.

In February, I had put together my own five year projection and it was good to see some of the numbers confirmed by finance director Jan Klein's forecast. For example, in my budget for 2012-2013 I had a $46,437,088 expense line for teacher salaries. Ms. Klein shows $46,647,820. I hadn't talked to Ms. Klein about salary growth rates but understanding what our teacher contract looks like and what our other obligations are, there are some numbers that just make sense. Teacher salaries expense is one such number and since it makes up more than 50% of our total expenditures, its an important number to get a handle on.

I want to take a broad view of the forecast for now. You can see on the five year forecast what assumptions are being made. They include the following:

1) Salary expense increases of 3.4% per year with no changes in staffing levels. This makes sense in that our teacher contract dictates what future obligations we have with regard to salaries. I am certain this Board will take up the issue of staffing levels before this budget passes.
2) 8% increases in medical expenses- Given historical patterns this makes sense. However, it is a good idea to keep on your radar the idea of a statewide teacher health insurance program. Governor Rendell has talked about that for awhile. At best it will reduce healthcare costs and not eliminate them.
3) No money set aside for retiree health care. You may remember last year that we took some surplus money and decided to allocate it towards funding an OPEB trust. This trust was to put aside some money to address a large retiree health care liability that the District has. Deciding not to set more money aside now means that it will simply be pushed to the future.
4) No change in real estate assessments. Honestly, if you have any idea whatsoever what our assessed valuations will be over the next 3-5 years, please let me know. What I do know is that when we changed the way we taxed people in 2002 to be for the full home value as opposed to a percentage value, the District was forced to change millage in kind so as not to receive a windfall of property tax revenues. My best guess says that this will again be the case. No matter what the assessed valuation changes to, the District will again be asked not to make a mint off that change. In both Ms. Klein's forecast and the one I put together, we kept the assessed valuation the same for the length of the forecast.
5) $117 Million for High School Construction.
6) 30% loss in PSERS investments for 2008-2009. This expense right here is the one that has me scared the most. I posted about the 250% increase in PSERS contribution rates i n December. Since then, the contribution rate has jumped even further due to stock market losses. PSERS right now is projecting a 30% loss on investments for 2008-2009 (their year end is June 30, 2009). They are then projecting 8% returns (down from 8.5%) in future years. Listen, if you could guarantee me 8% returns for the rest of my life, sign me up. Having been a financial planner, I know good numbers when I see them. How many of you would ditch your 401k investments today for an 8% return going forward? How does PSERS expect to do this with a 10-year average return of 4.5%, a 5 year return of 3.88%, and a 1 year return of -1.88%? Understanding that past performance is no indication of future results, banking on an 8% return in an environment like this is probably not the right thing to do.

Given all the above information and seeing that our revenues (which the Committee went over last month) are largely driven by our millage rate, state reimbursement rates, and earned income taxes, the five-year forecast show some interesting things.

First, the high school project in this forecast is phased in over a few years. This results in millage increases in 2010-2011 (2.68 mills), 2011-2012 (1.59), and 2012-2013 (about 4.17). These millage increases are not due entirely to the project but are largely a result of the debt needed to finance the project. You can see on the Transfer-Debt Svs/Capital Fund line how the debt service number keeps creeping up until 2012-2013.

Second, the pension obligations rear their head in 2012-2013. This is illustrated by the almost $10,000,000 increase in the Fringe Benefits section of the budget. Given that 1 mill equals about $2 million in revenue, this spike alone will result in a significant millage increase for the District. Under current law, the State reimuburses us for half of our pension contribution payments. This is why you see the revenue from the state increase the same year by $4.5 million. Between the pension spike and the high school debt, the 2012-2013 budget is projected to result in a 4.17 mill increase.

In the end, you can see that the millage is forecast to be 37.13 in 2014-2015. Today your millage rate is 24.81. This forecast shows what might shape up to be a near 50% increase in property taxes.

Before you step to the edge of that cliff or put your home on the market, please understand that there are Districts across this state that will be in a very similar boat to Mt Lebanon. The pension liability problem is about as big a financial problem as we can have. Other districts are dealing with it in their own ways. Upper St Clair has made their financial forecast available to its residents. Since it is a public document and was forwarded to me by a resident of USC, I have posted a link to it here. Their forecast is not quite as dire as ours but I do not believe at the time it was published that it included the new renovations they are now talking about. At least those renovations are not included in the expense assumptions outlined in the presentation.

This forecast, and the one I had in mind last year, are what convinced me that moving ahead with a high school project in this environment would not be the most fiscally sound decision. Until we can put a five year forecast in place that does not result in such a large financial burden being pushed onto our taxpayers, I am reluctant to spend anywhere near $100 million. Our budget is not just about the high school project. It is about how we educate our kids, how we prioritize the use of taxpayers funds, and how we plan for our future. We don't have the ability to run a deficit budget to "invest" in things by borrowing money like our federal government does (nor do I want that ability). Every taxpayer dollar matters. A potential 50% increase in property taxes over five years should give everyone pause.

I'll post more next week.

Thanks for reading.

James

January Audit/Finance

2010-01-29T22:26:00.003-05:00

We had our monthly Audit/Finance committee meeting last night.

We first talked about the current year budget and where our revenues and expenses are today compared to where they should be. We are currently expecting a significant surplus due to liened taxes collected last year.

We also talked about our latest five year budget forecast. I am waiting for an explanation on a few items before commenting fully on it. The forecast is still grim due to PSERS, high school construction and base budget increases. When compared to last years estimated projection (and focus on the word ESTIMATED as we were reminded by our finance manager last night) there is a slight improvement (7% lower) from last year's headline 45% increase over five years number. However, like I mentioned above, there seemed to be a few errors that either need fixed or further explanation. Once I have it, I will be sure to post it here. Director Posti did post more information on her blog and I will direct you over there for her take on the meeting. Again, I will have more, but I am not comfortable presenting the full budget without an explanation or correction to the document.

The PSERS pension issue was another topic up for discussion. I talked about the current legislation being discussed in the House. Most of the information I pulled can be found at the Pennsylvania School Board Association website here. While there is current legislation meandering through the House, the legislation only deals with a long term fix the pension problem. It would create a dual-enrollment system where future employees would be part defined benefit and part defined contribution. While this may end up being a solution adopted by the Commonwealth, it does not address the immediate need for local property tax relief from the PSERS funding crisis.

As part of the PSERS discussion I asked that members of the committee recommend that the board adopt a resolution urging the legislature figure out a way to fix the immediate effects of the PSERS funding spike.

That's all for now. Congrats to the Mt Lebanon boy's basketball team for their victory over Baldwin. It was the first game I had attended this year.

Thanks for reading.

James

Response to a Request for Clarification

2010-01-27T20:12:00.008-05:00

I received an email from a fellow Board member who asked me to make corrections to my white paper. I asked this individual if I could be given permission to publish the full email (without edits) on my website so that it could not be taken out of context. Unfortunately, I was not given permission to post the email in full. Instead, I will respond here to the general questions/corrections that I was asked to make.

Issue #1: The $117 million dollar number used in the "worst-case" scenario budget will NOT be the case since we voted to cap the project at $113 million.

First, the Act 34 maximum project cost is set at $113 million. Act 34 clearly states that, "A second Act 34 hearing is required if specified costs based on bids exceed by eight percent or greater those costs based on estimates". In reality, bids can exceed $113 million and the Board can still go forward- unless that number is over the referendum limit in which case we would have to stop everything and figure out the next step. Act 34 applies to new construction and allows us to exceed the maximum spend number on new construction by 8% before having to either change the Act 34 document to match the bids or to make adjustments to the design to have the next round of bids come in less than 8% over the Act 34 maximum spend number.

I know members of the Board last Monday said they expect bids would come in 17-25% below the estimates. The Board President was even confident enough of this to post it on his FAQ (which is apparently being mailed to you at taxpayer expense). Given that I appear to still be in the minority on this, I truly hope the bids DO come in 25% below PJ Dick's estimate. However, I have asked PJ Dick on more than one occasion if their estimate reflects the construction bids received by Bethel Park and Upper St Clair (both of their bids came in under budget). On these occasions PJ Dick has responded that their estimates DO include those reduced bids. Additionally, I asked PJ Dick in December what the variance might be from their $113 estimate. Their response was "plus or minus 5%". Please review the tapes from October, November, and December to verify that these questions were asked and were responded to as I describe above. Who is right on this? I hope its the Board President..

Finally, we found out recently that our reimbursement from the Commonwealth (known as the Commonwealth' share of the project) was going to be 8% instead of the 15% we were told previously. This was a loss of almost $600,000 a year in revenue to the District which was not accounted for in that long-term budget.

So yes, I used the "worse-case" scenario budget because it was the MOST ACCURATE. The other two possible budgets were not even in the same neighborhood because of their assumptions. Given that PSERS returns were -26% (the budget was based on -30%) and the construction budget was based on $117 million (and we are very much in that neighborhood) and that the reimbursement rate was reduced by almost $600,000/yr, that budget remains the most accurate of the three presented at the time. We should have an updated five-year budget available on Thursday night. You can be sure I will go through it with a fine tooth comb and I will post it here when it is available online.

Issue #2: The email took issue with the following statement from my recent blogpost: The FACT is that if we tried to borrow all of the money for this project at the same time we would HAVE to go to referendum. By splitting the bond floats into two different years we avoid it altogether

The email goes on to suggest that we DO have the ability right now to borrow all the money we need for this project. The email also suggests that we did not split the bond float into two separate floats in order to avoid a referendum.

First, no, we cannot borrow $113 million right now for this project. We have TOO MUCH DEBT already. The most we can borrow is $93,106,575. How do I know this? I have a copy of our 2008-2009 Comprehensive Annual Financial Report sitting right next to me (the link is broken on the District website and brings you to the 2008 CAFR otherwise I would link it). On pages 105 and 106 the calculation of Nonelectoral Debt (total debt we can take on without going to referendum) is done TWICE. Additionally, I asked this very question about how much we would be able to borrow "right now" late last year in a public meeting and the response from our Finance Manager was a number very much in line with the $93 million number above. This number has since been reduced because of the $69 million float for this project in October.

Second, we absolutely split this bond float into separate issues in order to avoid a referendum. In fact, a previous Board (circa 2006) approved a resolution to allow the issuance of $69 million in bonds prior to Act 1 passing in order to specifically avoid an Act 1 referendum. By approving the resolution before the passing of Act 1, the debt service required to pay for the bonds is not subject to Act 1 limits. By splitting the bond floats you allow your revenues to increase due to increased taxes which in turn increases your debt limits. So in essence, as you borrow more, you get to borrow even more because of the increased revenues/taxes required to service the new debt.

So, to sum up, we avoided a referendum by:
1) Approving the issuance of $69 million worth of bonds prior to Act 1 passing
2) Splitting the project bond floats into multiple floats (there was a scenario at one point where we were going to do three separate bond floats to avoid a referendum)
3) Approving an Act 34 project cost about 2% under our Nonelectoral Debt Limit

Issue #3- Cost Per Household

The argument is made in this email about the cost per household being an inaccurate way to measure the cost of this project. In retrospect, there were perhaps better ways to show the impact on the taxpayers. The cost per household number does NOT include the businesses in Mt Lebanon. This is true. So while it is true that if you divide the total project cost (approximately $160,000,000 with principal and interest and after reimbursement) by the number of household units, the total cost per household unit is more than $10,000, that is not the best way to measure the increase in debt since there are businesses that the debt will be spread across as well.

The impact on business in Mt Lebanon is not something I focused on in that paper. I could have spent more time on it but it was long enough as it was. Let's take Mt Lebanon's largest taxpayer as a case study. The Galleria is currently assessed at $30,400,000 (again from the 2009 CAFR which has a list of the Principal Real Estate Taxpayers). The Galleria makes up 1.4% of our total assessed value. An increase in taxes of just 30% would increase their taxes by almost $285,000 annually ($949,934 to $1,234,914). How is the Galleria going to pay for this? They certainly will have to figure out if they will cut staff, increase lease rates, or do something else to make their budget work. What impact will their decision have on other businesses that lease space from them? How will they pay for any increased lease costs? These are the questions that need to be answered before we commit ourselves to a $113 million project. Every business in Mt Lebanon will have to make the same kind of choice that the Galleria does but on a smaller level.

I used the Galleria above as a case study because it does point out the mathematical error of simply spreading new debt costs across only housing units. While the calculation was not wrong, I can see how some might see it as misleading since we have some significant businesses (like the Galleria) in Mt Lebanon. But does this change the argument at all? You make that call.

Issue #4- Why 50%

In my paper I used a range for the tax increases projected as between 45-50%. I believe the actual number from 2008-2009 to 2014-2015 was in line with a 47% increase. Last I checked, that number was firmly planted between 45% and 50%.

Issue #5- Emails about people calling for my resignation

This was an interesting addition to the email. The emails started rolling in while I was in Washington, DC this weekend. There were a bit more than a handful that asked for a resignation, censure, or outright censorship of me. By the time I returned home, I had received more than a few phone calls from people asking me if I had heard about the efforts to get me to resign. Mt Lebanon is a small place. News travels fast. One person overheard a conversation in a coffee shop about this movement. Another said they had received an email from someone saying that this was happening and they called to make sure I was prepared for it. This doesn't mean that there was a "leak" of an email at all. Like I said, news travels fast- especially in emails.

I hope this information clears some things up for everyone.

As always, feel free to email me with any questions.

Thanks for reading.

James Fraasch

A Timely Repost

2010-01-27T14:18:00.005-05:00

I wanted to take a moment to look back while we are all looking forward to the Act 34 hearings in February.

In May 2009 I posted the following regarding my no vote for the 2009-2010 budget:

I've posted a number of times about the budget, about voting "no", about the high school, and many other topics under sun. There are people out there that get what I am saying. I am not on this Board for my own glorification. If I was, boy did I ever pick the wrong venue for that. I don't vote no just because I like to go against the grain. Honestly, it's not easy to vote against something. It is much easier to be FOR something. I don't take these votes lightly, however, I think many people do.

Take the budget for one example. Are you prepared to have your taxes raised 30-50% over the next five years? Think about that for a second. Our budget puts us on a path to increase taxes from 23.81 (last year) to 34.98 in 2014-2015. That increase depends on what rate we get on our high school bonds, the cost of the high school project (this number is based on $100 million) and what return the PSERS investments get. The increase may get bigger or it may come down if the stars align. As an example, if you own a $200,000 house in Mt Lebanon, your taxes are projected to go from $4,762 all the way to $6,996. A $400,000 home will go from $9,524 to $13,992.

Ask yourself if you really think those tax increases are going to attract young families to Mt Lebanon. When I moved here in 2004 and looked at competing school districts, communities, and places to raise my kids, Mt Lebanon was one of three places I thought would work. And I was right about that. My family loves it here. We are proud when we escort our out-of-town relatives to the different places in Mt Lebanon that make it unique. We go to the parks, Beverly, Washington Rd, our beautifully restored elementary schools, and the list goes on and on. People moving to Pittsburgh all do what I did. They look at the overall quality of life in any prospective community.

When I vote on that budget, I don't just look at what is happening this year (a .30 mill increase) because honestly, what happens on a year to year basis fluctuates so much. But when you see the impact that your decision is going to have on future families that are evaluating Mt Lebanon much the way my family and I did in 2004, you have to have a bit of perspective. The impact the Board will have TODAY on the decisions made by unknown families five years from now is staggering. After talking with a few Board member off-the-record, I know that there are more people on the Board that get the fact that putting us on the course to a possible 50% tax increase makes this budget unsustainable. But there is a bit of a fear of inevitability. That we can't actually avoid those increase. I completely disagree with that assessment. As a Board we hardly looked deep into the budget to find cost savings. We never did sit down and prioritize our budget objectives. We never did implement a process to start a zer0-based budget and we never did get the programmatic budget that was asked for after last years budget passed.

Until we can sit down and look at our expenses based on programs and until we can sit down and start every budget year over at a zero number, then I fear this Board will not have the ability to avoid the large tax increases coming.

We hear every day in the news today about school districts cutting staff (see Sto-Rox), cutting classes, closing schools (see City of Pittsburgh), asking teachers to forgo raises, etc. Mt Lebanon has largely been able to avoid most of that economic fallout. It is for this reason that I believe the community thinks things are fine- that the District has sounded an "all-clear" signal that those types of things simply won't fall on us. People by their very nature are optimistic for the most part- this is very much the same as what I said earlier, that people want to be FOR something and not against something. I don't know at what point residents in Mt Lebanon will start to figure out that 50% in property tax increases will start to erode their everyday lives, but it will happen. I might not be on the school board at that point but I will proudly say that I voted against these budgets and that I was unwilling to sit idly by and say nothing while it all happened.

A couple of problems I have with the budget this year:

1) Last year you may remember that I said we should try to maintain current teacher/student ratios. For the 2008-2009 budget we projected a drop in student population of 63. Well, it turns out that we were wildly inaccurate. We actually dropped 122 students or almost 100% more than projected. Last year we attritioned four teaching positions partly due to this enrollment issue. This next year we are again looking at a student population decline of about 35, however, we are not projected to lose any staffing positions. This is 157 students lost in 2 years and we are only losing 4 positions- all last year. There is something very wrong with this. Granted there are some issues with where the retirements are coming from this year and with only a handful of retirements throughout the District, it is hard to find efficiencies. But we MUST find them. That is our job and the job of the administration.

2) Funding of a PSERs Rate Spike Stabilization Fund- We are taking $500,000 of taxpayer money and putting it aside so that taxpayers will not get hit with the full one-year impact of the PSERS increase in 2012 (see story here). To me, this is the height of wasteful use of money. Setting this money aside does nothing to reduce future millage increases, it simply defers when you will see it. If we were to take this money, have it sit in a money market fund at .5% interest, it would be more beneficial over the long-term to our taxpayers than to use it to manufacture a level increases in taxes for PSERS. With the high school project staring us straight in the face, it makes all the sense in the world to use this money to INVEST in the high school project to reduce how much we will pay in debt service for the next 3o years. You take this money, you take the $175,000 we have saved in our latest capital projects (from bids coming in under estimate) and you start to invest all that money into a project that is going to be around a while- just like the high school. Heck, aren't we having issues with just a six-lane pool being installed at the new athletic wing? I wonder if half a million dollars would get us an extra couple lanes? I wonder if half a million dollars would allow us to expand that building a bit to build a stretch pool? I wonder what half a million dollars would do for our science wing? For our language arts classrooms? For turfing a field? For putting lights at Mellon? Any and all of these ideas are a better use of $500,000 than to level out a millage increase in my opinion.

3) Zero-based/Program Based Budget- We are still not looking at a budget that starts from scratch every year. Any time you get a base budget and increase items by a percentage every year (yes this is a simplistic way to explain it but is largely true) then you run the risk of a budget that gets out of control much like the Federal Government. We need to find a way to priortize every expense and we can only do this if we know the cost of everything in our budget.

Those are the reasons I voted against this budget. I don't feel comfortable approving a budget that sets us on a path to tax people out of Mt Lebanon or to tax so much that young families refuse to relocate here. We can do better than this and I think we owe it to our taxpayers to do better than this.

---------end of repost

The situation we find ourselves in now was not hard to see coming. Unfortunately, we took no action to avoid it.

Thanks for reading.

James

Playing Some Defense

2010-01-25T12:29:00.005-05:00

It's been a week since we saw over 100 people attend the school board meeting to set the Act 34 number and hearing date. That date will be February 22nd, by the way. The vote passed 6-3.

It was a whirlwind of a few days heading into that meeting after releasing the white paper that outlined some of the coming tax increases. That paper generated a significant amount of interest both by our local taxpayers and by the local media. Many members of the local media are residents of Mt Lebanon and therefore have significant interest in the happenings in Mt Lebanon with regards to this project. The school board received over 350 emails between Wednesday afternoon and Monday's school board meeting. That is a TON of emails and they are still coming in. I would like to personally thank everyone that expressed their opinion on setting the cost of this project.

Please be sure to again make your voice heard as part of the Act 34 hearing. I will post information on the ground rules for that hearing shortly.

I have often said that there is room to disagree on this project. While I expected significant blow back on the release of that paper, it did not really gather steam until this weekend. Some people even suggested that I "made-up" the numbers. Sorry, but that is just not the case. The biggest counter-argument I hear to that paper is that I used a "worst-case" scenario budget that was provided by our finance director from April 2009. Understand that there were three scenarios that were provided:

1) A five year projection that did not include either a high school project or increases in pension contributions
2) A five year projection that did not include any increases in pension contributions but DID include a high school project
3) A five year projection that included both a $117 million high school and increased pension contributions (based on a loss of 30% in PSERS investments- PSERS actually lost more than 26%)

Only one of those three scenarios was due to come true. We KNEW we had a HS project and we could have prepared as if the State would not be able to do anything with PSERS. Honestly, I was one of those that was hopeful they would do something, anything to ease the burden on local taxpayers. While there is some legislation pending, I am unsure how it will impact the immediate and real need for relief from local property taxes. The fact remains that the worst-case scenario budget was (and remains) the most likely of the three scenarios to come true.

As for the 5-year projections, add in the fact that our state reimbursement for the project was incorrectly projected to be close to 15% instead of the 8% we are actually getting (a difference of almost $14 million or approximately $600,000/yr over the 25 year bond) and you have yourself a pretty tough situation. Now, to be fair, we did secure bonds at very low rates which should reduce somewhat the millage required by the high school project. Additionally, we all hope that we will not have to borrow all the way to $117 million for this project. There were promises by Board members last Monday to bring the project costs under $95 million. I hope they are right and I hope they don't do this by reducing building material quality substantially, but that still will not be enough to avoid significant increases in millage.

That paper I put together is something that should have been done two years ago. There has never been a publicly available analysis done that puts into perspective what everything is going to cost us going forward. The point was that we cannot do the HS project in a vacuum. What we can afford has to be calculated by looking at ALL of our obligations, not just what the cost of only the high school will mean to our taxpayers and not just based on what the Commonwealth allows us to borrow before going to referendum. The FACT is that if we tried to borrow all of the money for this project at the same time we would HAVE to go to referendum. By splitting the bond floats into two different years we avoid it altogether.

In 2007 when I ran for this position I knocked on literally thousands of doors. At the time there was a project on the table that included a possible $120 million high school project. Even then many taxpayers said they could not afford the increase that a project of that size and scope would bring. This was BEFORE the market crashed, before 401k's got wiped out, before unemployment jumped to over 10%, before home prices stagnated, and before there was any real idea about the coming PSERS pension crisis. To think that today we can afford the same or similar project cost as something we would have had to stretch to achieve 2-3 years ago is the wrong way to think about this. We are in a different reality financially than we were in 2007. When running for election I said I was going to fight against spending anywhere near $120 million on this project and I will keep that promise until the battle is lost.

Lastly, I want to thank the people who have stopped me and expressed their gratitude for putting this project and our coming tax increases in perspective. I have maintained this blog for almost two years now and I have said repeatedly that a budget like the one we are looking at for 2010-2011 was going to be the norm going forward. Go back to the archives and see why I voted no on each of the last two budgets. The white paper I put out there was mostly a regurgitation of the information I have put on this blog for the last two years. When you put it all together like I did in that paper it just makes one heck of a case for us to step back and reconsider how much to spend on bricks and mortar.

To the handful of you out there sending emails to the Board asking for my head on a platter and for some public "censure", I'm not sure what to say about that. The last thing I would ever want to see happen is for someone's freedom of speech to be trampled on. Because I am a Board member do I give up my right to say publicly what I believe to be true? Do I automatically have LESS ability to express my opinions because I am an elected official? To some of you that is exactly what you believe to be the case. If you are simply suggesting that I am going outside of our Board Operating Procedures then I would suggest you apply those principles equally to those members of the Board who spoke negatively of other Board members at our reorg meeting in December. Please email them to tell them how upset you are with their conduct as well. I will wait to be copied on that email. Note that nothing I said was a surprise to anyone on this Board. In fact, in January of 2009 I gave a presentation to the Board and the community that had much of the same information found in my white paper. Quite honestly, the passion on both sides of this issue is a reason I love this town. People are genuinely involved and interested in local government more so than in any other place I have lived.

Mt Lebanon is a tremendous town. I don't want to lose what we have collectively built over generations of hard-working people being in this town. We have great people, we have great culture, and we have great schools. I am willing to pay a bit of a premium to live in this community for a long time. My fear is that as we raise taxes more and more, then those people that make this town great will find it less attractive. I will continue to fight for the future of Mt Lebanon every day I am on the Board.

Thanks for reading and stay tuned for an Act 34 hearing update in the coming days.

James

Quick Note

2010-01-19T08:05:00.002-05:00

I'll post more regarding last night's vote. I am still going through emails from residents at the moment and trying to respond to them.

I wanted to take a moment to correct the record on some of the publicity surrounding yesterday's meeting. This topic brought many interests to the forefront and the media was one interest that does follow my blogs and the local blogs in Mt Lebanon. Many reporters live here as residents in Mt Lebanon. I was contacted by KDKA's Marty Griffin. The media contacting our home is not unusual. KDKA ended up coming out to my work and I was interviewed during my lunch hour. Unfortunately the evening news showed a portion of an interview where I was relaying a common thread from emails received from a community members, but it appears to many (myself included) that I am saying I am moving from Mt Lebanon if this high school project proceeds as planned. We are not moving. We have no intention to leave the area and as I often say, If I were to win the lottery tomorrow, I would stay in the same house I am in now. Our family does have to make some adjustments in saving, as do most families to their personal budgets, when this tax increase occurs. My family and I did move into a lower-assessed value home over the Summer in order to better prepare ourselves for a very long stay in Mt Lebanon. We have absolutely no intent to leave the area.

Thanks for listening. I plan on setting the record straight on some of the accusations that came up last night. That will have to wait until another day.

But, I want to thank EVERYONE who voiced their opinions last night. With the public advertisements for the Act 34 hearing ready to go out shortly, I expect the February 22nd meeting to have even more people attend than did last night.
James

Citations for Your Schools, Your Taxes, Your Community and Your Child's Education,

2010-01-15T12:07:00.002-05:00

A person who received the document asked for citations for the data. No problem and apologies for not including these in my last post.

The five-year projected budget prepared by our finance director can be found here:

http://www.mtlsd.org/district/budget/stuff/budgetforecastspsersandhsdebtapril16%202009.pdf

The statistics on revenues, expenditures, and debt levels for all school districts in the Commonwealth can be found here:

http://www.portal.state.pa.us/portal/server.pt/community/summaries_of_annual_financial_report_data/7673/afr_other_financial_information/509049

Statistics on enrollments and projected enrollments can be found here:

http://www.portal.state.pa.us/portal/server.pt/community/pre_k-12_schools_statistics/8775/home

Allegheny County Millage Statistics are available at the Allegheny County Treasurer's website here:

http://www.alleghenycounty.us/treasure/millsd.asp

Information about other high school projects in our area was done via Google searches using school district name and including the term "high school". There were multiple newspaper and/or professional organization references to these projects.

Thanks for reading.

James Fraasch

Your Schools, Your Taxes, Your Community, and Your Child's Education

2010-01-14T20:18:00.002-05:00

Since we are so close to passing the Act 34 resolution next week, I put together a paper that describes what it means to move towards a project costing $113 million.

Please see this link. It is about seven pages and is intended for folks who may not have been following this project very closely. I hope it puts things in perspective.

Thanks to Tom Moertel and Joe Polk over at BlogLebo for the link.

Thanks for reading.

James

January 11th Meeting Summary

2010-01-12T22:30:00.005-05:00

********Update made to calculation of State Reimbursement below*******

The meeting last night was a long one. If you were there or watched the entire thing on TV today, major kudos to you. Below is a summary of some of the more interesting points taken up last night:

1) Approval of Act 34 Document- There was a lot of discussion about this as it was a first review of the Act 34 documents as required by the Pennsylvania Department of Education. I brought up a number of points about clarifying what was in the document. Some of the information regarding costs and financing could have been made much clearer. Additionally, there was a major change to the project when we found out that our reimbursement rate will be around 8% instead of the 15% we had been told it would be for the last few years. What does that difference mean to you? I have asked for our staff to get back to us about the impact it will have. See this link from PDE on how to calculate the reimbursement rate. It goes something like this: First calculate the total project cost, then calculate how much of that project cost is reimbursable by the state, then multiply your annual debt service payment (both principal and interest) by the reimbursable rate calculated above and then multiply that by your aid ratio. Make sense? Basically, we need to first figure out how much of this project is reimbursable by the state before we can figure out why our reimbursement rate went down from the expected amount. One of the design criteria was to maximize state reimbursement and in this case it certainly does not appear to have happened.

2) Policy JKF, Non-School Related Drug and Alcohol Violations- We had a good discussion on this possible change to our policy. It was really an extension of the conversation the Board held at the last Policy Committee meeting a few weeks ago. I have issues with the policy and its ramifications. In my opinion it is an overstepping of our duties as a Board. Our job is to educate students, not to police and punish off-campus actions for which there is already a system of justice in place. Our current policy applies to students who sign a code of conduct that states they will not take drugs or alcohol. A violation of that code of conduct could lead to serious consequences. That current policy is not very clear but it is there. A re-write of this policy to make it more clear would be a route I would be willing to explore. The new proposed policy would impact every student without them signing a code of conduct like we have now. Besides the legal ramifications of this possible change (check out this ACLU lawsuit here) I am reluctant to have the Board take on a role that I strongly believe should belong to parents and law enforcement.

3) Preliminary Budget- The Board got its first glimpse at a possible budget for 2010-2011. Right now we are looking at a 3.41 mill increase for next year. This would be about a 14% increase in property tax. And yes, we still have to float more bonds and incur more increases for PSERS in the coming years. This is not new news to the Board. It is something that I have been talking about since I was elected to the Board. These increases are the reason I have voted against the last two budgets. We have not put ourselves in a good enough position to weather these increases. Unfortunately, as we learn more about the true budget numbers, we are going to have to have very serious discussions about what is important to us as a District and a community.

That's all for now. I'll update the Act 34 information as I find out more.

Thanks for reading.

James

On Character Education

2010-01-11T10:30:00.002-05:00

There was an interesting article in Milwaukee-Wisconsin Journal Sentinel over the weekend. Check out this op-ed piece (excerpt below):

To people who run companies, honesty and punctuality are as important as computer literacy. Traits such as these are about respect for ourselves and others; they make up our character. Without character, quality work is almost impossible to produce no matter the number of employee incentives.

This is why we believe in character education. Starting in primary schools, we are advocating for a culture of character, one where we respect each other and are willing to sacrifice some personal pleasure for the greater good. It pays in more ways than one.

This piece was written by three people including the CEO of Harley-Davidson.

It feels good to know we do a lot of things right.

Thanks for reading.

James

Closing the achievement gap

2009-12-31T08:55:00.003-05:00

One of the the things No Child Left Behind has brought us is the idea of the achievement gap. Districts all across the country are trying to close it.

I found two interesting articles regarding this gap.

First is this article from Jay Matthews at the Washington Post about the whole concept of the achievement gap and why it is faulty. The title of the article is "Class Struggle" but it can be applied to socioeconomic status, income status, or even individual student achievement status. If everyone improves but the achievement gap between students still grows, why is that a bad thing?

The second article is from Berkeley, CA. In an effort to help their struggling students, Berkeley High School is contemplating cutting its science labs and the teachers who teach them. This would have the effect of dumbing down the highest-achieving students in order to close the achievement gap. From the article:

The proposal to put the science-lab cuts on the table was approved recently by Berkeley High's School Governance Council, a body of teachers, parents, and students who oversee a plan to change the structure of the high school to address Berkeley's dismal racial achievement gap, where white students are doing far better than the state average while black and Latino students are doing worse.

Paul Gibson, an alternate parent representative on the School Governance Council, said that information presented at council meetings suggests that the science labs were largely classes for white students. He said the decision to consider cutting the labs in order to redirect resources to underperforming students was virtually unanimous.

So there you have it. Not letting the best and brightest among us reach their potential is certainly one way to narrow an achievement gap.

James

CAC Documents Available Online

2009-12-17T14:15:00.002-05:00

The District has made the CAC presentation available on the district website at:

http://www.mtlsd.org/highschoolrenovation/cacdocuments.asp

Please take some time to review these documents and tell the Board what you think.

I am taking a few more days to review and talk to people about the ideas to see where to take this from here. Please be sure to contact me and the Board with your thoughts.

James

On 21st Century Education

2009-12-15T08:24:00.002-05:00

For a bit of a departure from the numbers and specifications we have collectively been viewing, I took a moment to read some material on 21st Century Education.

The Center for Public Education produced this report that details some of the trends in 21st century learning. What I like about this document is that much of it is based on Core Knowledge which is an idea that I first read about from E.D. Hirsch.

The report details not just education trends but describes how they fit into occupational trends in a increasingly globalized world.

It's rather long but very informative. Happy reading.

James

PSERS Rate Spike Set for 2010-2011

2009-12-13T21:03:00.004-05:00

Hopefully the recently announced PSERS rates spike does not catch anyone by surprise. It's been a topic talked about on this blog many times and has been statewide news for the past two years.

Next year we can expect our PSERS contribution to increase by over 70%. However, that is not even the bad news. Please see the excerpt from this article below:

State and local education officials said the worst part is that next year's increase is just a fraction of an anticipated leap to record public contributions by 2012, when the state and local tab is projected to exceed $4 billion.

Tomorrow we are set to hear updated cost figures from our architects for the high school project. When deciding how much we have to spend on this project we must consider what the rate increases in PSERS will do to our overall budget.

I have said a number of times on this blog that we have not yet had to make tough decisions. I believe the tough decisions start now.

Thanks for reading.

James

Mammoth Monday Meeting

2009-12-12T06:50:00.003-05:00

We had a bit of a lull there in November with a slow agenda. There will be no such lull in the foreseeable future. Starting on Monday, December 14th, we are jam packed.

Below are some of the agenda items from the upcoming meeting:

1) 2010 Mt Lebanon School Board meeting schedule- For the past two years I have asked about these meetings moving to the 1st and 3rd Monday's of each months so that we would a) not conflict with the commission, and b) have an extra week to get questions answered about information in our packets. I asked last week at the Reorganization meeting that we consider changing the meetings to the 2nd and 4th Mondays. I still like the extra week between discussion/regular meetings and now that the commission will start televising their meetings our residents will have the opportunity to view all local government meetings. Personally, I think the extra week will become extremely important as we begin to review numerous documents regarding the high school and contract negotiations. Any feedback from residents regarding this change in schedule would be appreciated at schoolboard@mtlsd.org.

2) Report from Community Advisory Committee- I posted about the formation of the CAB here. I have very high hopes for the CAB and think/hope that their work will become a huge contributor to the high school project. The Board received in its packet on Thursday some of the material that will be presented on Monday. The Board also received in its packet the latest Design Development cost updates. The CAB report could not have come at a better time. I will post more on their report after Monday's meeting.

3) Act 34 Material- Any time there is a large construction project like we are undertaking with out high school the State requires an Act 34 hearing for public comments. The Board will present to the public the information required by the State and there will be a public meeting to discuss it. I write up more on this after Mondays meeting. There is a certain significance to this meeting that I do not want to understate.

4) Recommendation Regarding Replacement of Stadium Turf- We recently came into some unbudgeted money with the sale of a large property in Mt Lebanon and subsequent receipt of back taxes for that property. The result was over $2 million in revenues. At recent Audit/Finance Committee meetings, Mr. Kubit and I made the recommendation that we take some of those funds and direct them towards the replacement of our high school stadium turf. This turf has seen better days and has reached the end of its useful life. I look forward to the presentation scheduled to be given by our athletic department. This is another item on which I would like to get community feedback. Please view/ask about the presentation on Monday and let the board know your thoughts. Other than having played on artificial turf, I don't know much about it. I will rely heavily on the administration and public input when casting my vote.

I think that's it for Monday. It should be a bit of a long meeting but it is packed full of good information.

Thanks for reading.

James

Proud No More

2009-12-08T05:28:00.005-05:00

Last night was the the reorganization meeting for your Mt Lebanon School Board. Typically, this type of meeting does not amount to much more than a procedural meeting with Board members simply casting their votes for who their want their next leadership team to be. Last night was different.

When I was younger and played sports in high school and then in college, it was always a given that every member of the team was to be on their best behavior at all times. When we traveled we would wear ties and when we stayed in hotels our coaches would even check our hotel rooms before we checked out to make sure we cleaned them up. We were part of a team and when you are part of your team your actions are a reflection of the entire team. When even a single teammate out of 40 would leave his hotel room a mess he is implying that the entire team is a mess. All the players understood this simple lesson. Unfortunately, last night we had far too many board members leave their hotel room a mess.

Its been kind of a running joke in my house the last two years that the first words out of my mouth when I would meet someone were, "Hi, I'm James Fraasch and I am on your Mt Lebanon School Board". And honestly, in some respects this is true. I do this because I have always been proud to be on the board and more than that, I have been proud of the trust that was given to me by the community when they voted me into office in 2007. Being a board member is not a responsibility I take lightly. Heck, I even changed jobs in 2008 to allow me more time for school board related activities. Every board member spends far too many nights away from kids and family while attending committee meetings, high school meetings, community forums, and regular and discussion meetings to not take this position seriously.

The Board is not a reality TV game show. It should not be a place where board members decide to publicly air their dirty laundry about their gripes and grievances against other board members. It should not be place where board members can publicly make up unfounded accusations and level them against other board members. It should not be a place where parents have to put their hands over their kids eyes and ears because some of the behavior that goes on is so reprehensible and distasteful that the parent just doesn't want their child to see that adults can behave this way.

Over the course of the last few weeks leading up to last night's meeting I have received phone calls and emails from just about every member of the board. These phone calls and emails always were invariably about how each of these individual members wanted to build trust amongst board members, how they wanted to reach across the divide, how they wanted to bring honesty and integrity to the board, and how they wanted to get the community to trust the board. There were literally dozens of emails and phone calls and hours and hours of conversation regarding these topics.

I ask you with all sincerity whether after watching that meeting you felt any of the ideas mentioned in the above paragraph actually were reflected in the meeting. Watch the meeting and see for yourself who and what is causing the divide.

I woke early this morning hoping that I would feel different about the meeting than I did six hours ago. But I don't. I am embarrassed that the meeting last night is a reflection on all of Mt Lebanon and that I was a member of a team that had individuals leave their room a mess.

The behavior displayed last night by your board is not what the voters of Mt Lebanon expect from their elected leaders.

James

December Update

2009-12-06T07:07:00.003-05:00

Sorry about the long break between posts. Been a bit preoccupied with some other priorities. Hopefully this post will be an interesting one. In this post I will hit on three things; recent school board activities, economics, and curriculum. Hey, just because I haven't posted in a few weeks doesn't mean I have stopped trying to educate myself.

First, the Board itself has had a three week break between meetings. It's next meeting will be Monday December 7th at 7:30pm. This meeting is the Reorganization meeting where we will swear in the newly elected members of the Board and then elect the 2010 President and Vice-President. There are a few action items for the Board, one of which is to approve the Board meeting calendar for 2010.

As for the November meeting, one of the agenda items voted on was for the Districts graduation requirements. As many of you know, our students are required to do a project on a health topic in order to graduate. I suggested that we investigate what it would take to expand that project beyond just the health class. There are many reasons for this, not the least of which is that it would allow our students to shine with their creativity. I would not want to get rid of the health topic, but simply see what other possibilities there might be. Peter's Township recently approved a similar graduation requirement to what we have. See this article here from the Post-Gazette.

Now, on to economics. At last Thursday's Audit/Finance Committee meeting we talked a bit about the ARRA (ie, stimulus) and what it means for our district. The committee was unanimous in saying that we did not want any of this funding directed towards activities that might become perpetual in nature. It would be a mistake to take that money, start new programs or hire new staff, only to have that funding not be available to us a year from now. That would only result in a need to raise taxes or cut programs/staff down the road when the stimulus funding ended. What I found most interesting was a conversation regarding how the District was counting the "Jobs Saved/Jobs Created" numbers with regard to the ARRA. My understanding was that if we used the money to pay for staff raises, then that counts as a job saved. It is somewhat more complicated than that, but essentially, it boils down to being comical. Mind you, this is nothing that has to do with how WE do this, it has to do with how the federal government is asking us how to report the numbers. See the Wall Street Journal article on this ridiculousness here. Jobs saved is a number that does not and cannot exist. It reminded me of an essay written by an economist sometime back.

Frederic Bastiat was a French Economist in the 1800's. He wrote an essay called "That Which is Seen, and That Which Is Not Seen". He is the one that came up with the "Broken Glass" theory that explores whether breaking glass to create work for the person who repairs the glass is good for the economy. His conclusion is that if the shopkeeper whose glass was broken has to pay money to fix the glass, that is money that he cannot deploy elsewhere. It destroys economic activity that is not seen and cannot be measured. He further goes on to write:

"When an official spends for his own profit an extra hundred sous, it implies that a taxpayer spends for his profit a hundred sous less. But the expense of the official is seen, because the act is performed, while that of the tax-payer is not seen, because, alas! he is prevented from performing it...The State opens a road, builds a palace, straightens a street, cuts a canal; and so gives work to certain workmen - this is what is seen: but it deprives certain other workmen of work, and this is what is not seen."

This is very much in accordance with the idea I espoused on my blog earlier when I wrote about the Aftermath of Financial Crises. The government wants to appear as if it is helping even when doing so results in the delaying of true economic recovery. Call it Bond Illusion or whatever you like, the fact is, the money we borrow today has to be paid back and it has to be paid back with interest. The hope of the politicians that keep borrowing this money is that by stimulating the economy we will simply grow by more than what we owe-that our revenues will continually expand beyond our expenses. At some point (Japan has been here for 30 years), the debt becomes so burdensome and so much of your budget goes to pay debt that there can be no more stimulating. So yes, while we can see the big highway signs that say "This Project Brought To You By ARRA Funds", we should wonder what economic activity and what other jobs were destroyed because our politicians decided to deploy capital in this manner.

Finally, I wanted to share an article I read on curriculum. This doesn't have to do specifically with Mt Lebanon but it was something that gave me a bit of perspective on how curriculum is done on a national level. Please see this article from the City Journal titled, "Who Needs Mathematicians for Math, Anyway?" I don't know how much I agree with the conclusions of the article (that we have purposely dumbed down our math for PC reasons) but I very much enjoyed the passion of the author and thought the article gave a ton of good information on things outside of just the curriculum process.

Happy Holiday, Merry Christmas, and thanks for reading.

James

Who Needs Math Anyway?

2009-11-17T12:54:00.002-05:00

I ran across what I found to be a interesting article not just on math curriculum, but on the problem of nationalized standards. With the recent passage of the Keystone Exams, this might be a glimpse into our future.

Please see the article titled "Who Needs Mathematicians for Math Anyway" from the City Journal published by the Manhattan Institute.

Here is a quick excerpt that should catch your attention:

As part of his education-reform plan, President Obama wants to “make math and science education a top priority” and ensure that children have access to strong math and science curricula “at all grade levels.” But the president’s worthy aims won’t be reached so long as assessment experts, technology salesmen, and math educators—the professors, usually with education degrees, who teach prospective teachers of math from K–12—dominate the development of the content of school curricula and determine the pedagogy used, into which they’ve brought theories lacking any evidence of success and that emphasize political and social ends, not mastery of mathematics.

Understand that this is not a hit-piece on Obama, the author is simply critical of a process that was started before the current administration was in place. The article takes a general look at some of the current curriculum out there and how it came to pass. She suggests that a study done by the National Council of Teacher's of Mathematics in 1989 was influential in "dumbing down" math curriculum across the country by putting social goals above academic ones.

I am not claiming the article is right, but it is most definitely worth a read. I am still digesting some of the ideas and wondering if what the author suggests is actually happening and whether it did happen in Pennsylvania. For me, the article begs the question of whether or not our educational system has been taken over by bureaucrats and, if so, whether or not that has led to the overall decline of the US student achievement when compared to the rest of the world (another topic the article addresses briefly).

Regardless, the articles at the Manhattan Institute have earned a bookmark from me.

Thanks for reading.

James

State Budgets Facing Financial Peril

2009-11-11T22:50:00.003-05:00

I took this headline right from a CNN article. Many of these states are different than what I posted about just last month here. As I have stated on many occasions, state budgets lag the overall economy by at least year, usually two. This was a lesson learned in California where I worked for a County government and layoffs typically followed recession by 18-24 months. Governments can typically fill one or sometimes even two-year budget gaps using stopgap measures like borrowing money or pushing out expenses to a future date. Spread budget problems out to three years or more and things really start to pile up.

Why is this a big deal? Well, projected cuts to state budgets to make ends meet could lead to a loss of almost 900,000 jobs. These layoffs would begin next fiscal year which starts in July in most states.

It is absolutely amazing to me that there is a recognized economist in this article that is saying that there needs to be MORE federal stimulus to fill budget gaps in state budgets for 2011. Stimulus simply is a way to borrow against future production. It's really that simple. The solution to a spending problem isn't borrowing money to continue spending too much. The solution to a spending problem is to spend less.

I do agree with the economist that "budget cuts and tax increases will be a serious drag on the economy at just the wrong time".

My belief is that creative destruction needs to take place. This will mean a painful adjustment for some, however, it is the right path and it needs to take place in order for us to go through this. One of my favorite investment/economics writes often, "In order to get through this, we need to go through this." We are in for years of high unemployment. It will be the new normal. Central Bank economists are predicting that unemployment will continue to remain high for "years to come".

The last Pennsylvania budget gap was filled by federal fiscal stimulus funds. We are already $3 billion behind heading into the 2010-2011 budget. How that gets filled is anyone's guess. This kind of fiscal problem is going to trickle down to our District budget at some point. While Mt. Lebanon gets a huge majority of its funding from local tax dollars, even a reduction of 5% of state funding would be significant.

There is no easy way out of this for states or, eventually, for local governments. Belt tightening will have to take place at some point. The hope I have is that we make decisions that make the most long-term sense. If we can focus our decisions on future government entities and the impact our decisions today will have on these entities five and even ten (or longer) years down the road, then we can start to lay in stone a path for financial stability.

Thanks for reading.

James

Educational Videos

2009-11-08T12:34:00.004-05:00

Every once in awhile I come across some videos that I think are worth sharing.

I was sent an interesting video the other day by another Mt Lebanon resident. Its a video that puts out some information that most people will find fascinating.

Here is another video regarding the education of leaders in our world and why it matters:

Enjoy!

James

High School Community Advisory Board Approved

2009-10-31T06:38:00.004-04:00

The School Board held a meeting on Thursday night to finish the discussion involving the formation of the Community Advisory Board. The motion passed 5-3.

There is a great discussion amongst community members regarding the pros and cons of the idea happening over at BlogLebo and I suggest that you get involved in the comments thread over there if you have anything to add (or subtract as the case may be).

The thing I will take issue with on that comment page is the unfair characterization of the meeting on Thursday night. This meeting was a continuation of the meeting from October 19th. Our Board President made a judgment call on the 19th and determined that the Board as a whole was not prepared to vote for the motion that was before it. Before bringing that meeting to a close he was clear to the members of the Board what he expected to happen prior to the reconvening of the meeting on Thursday night. He did a couple of things:

1) In anticipation of the motion passing on the 29th, he directed Dr. Steinhauer to advertise to the community that we would be accepting letter's of interest to be a part of this Community Advisory Board.

2) He asked all Board members to submit any changes they wanted to see to the motion in writing to the Superintendent prior to this Thursday's meeting so that those changes could all be seen and reviewed by Board members prior to the meeting. This was done in order to avoid to kind of confusion that happened at the October 19th meeting when some members of the Board made a number of motions to amend the original motion on the table.

3) He directed the solicitor to review our contract with the architect to determine if the amount that was being charged by Celli-Flynn was reasonable. At the time, Celli-Flynn was going to charge more than $30,000 for the first meeting and upwards of $20,000 for each meeting after that (see story here). This resulted in our architect substantially reducing the charges associated with this process.

When Board members received their weekly packet, it contained in it all the changes that were requested by each individual Board member. In the end, the President and Superintendent included in the final motion those changes that they thought the majority of the Board would support. For example, the two changes I requested were that, 1) the CAB have access to all previous project documentation (this was not made clear in the original motion) and, 2) that the CAB be able to continue their work if their suggestions were taken under consideration by the Board (the original motion simply said the CAB was disbanded after their December presentation). These changes along with the changes requested by a few other Board members were added to the resolution seen on Thursday night.

Some change requests were not added to the resolution. however, Board members were given the opportunity on Thursday night to get those changes in if they so desired. If you watch the meeting you will see that one of board member Sue Rose's recommendations did not make the resolution that was shown to the public. She requested at the meeting that her change be added to the motion. It did not get the votes required to become a part of the final motion. That process is good board leadership (setting expectations as was done at the Oct 19th meeting so that all Board members may be aware of changes that might be requested) and good board membership (following board procedure to get your requests heard and considered by the board). You can read the final motion at the District website here.

There are some things that I have disagreed with the Board president about in the past, however, in the case, he got it absolutely right.

My hope for the CAB is that the group will do what its purpose in the resolution says it should do:

1) Review the design according to the design criteria established by the Dejong group
2) Make recommendations to the Board that will save money (I am not talking about changing paint schemes here)
3) Determine if there was anything overlooked by the process that has been followed by the Board thus far that could potentially be costing us money

Contrary to what was said by some members of the public at the meeting, there is not a single board member who wants to start this group in order to delay the progress of the high school project. Accusations like that are just absurd. There is community buy-in on a high school project. This is something I have learned since I first got on the Board. We simply need to make sure we are collectively buying-in to the right project.

Thanks for reading.

James

Keystone Exams a done deal

2009-10-24T10:44:00.005-04:00

UPDATE---

In my review of some of the posts on my blog, I realized that I have very little on what the actual Keystone Exams do to our graduation requirements. For that review I have found a great Pennsylvania School Board Association Document that can be found here.

Some highlights
-Keystone Exams will replace the 11th grade PSSA's. This was a development in July. Many people raised the concern of simply adding an additional standardized tests for our students. This was addressed by eliminating the 11th grade PSSA tests.

-Keystone Exams will be developed in literature, English composition, algebra I, geometry, algebra II, biology, American history, civics and government, chemistry, and world history

-Students will be offered remediation courses and alternative means of proving graduation readiness if they fail

- School districts will be given an opt-out provision that needs to be reviewed and approved by a 12 member board composed of people from the PDE, State Board of Education, PSBA, and other appointed board members as chosen by the PDE, State Board of Education, and PSBA

-Costs for validation will be split between the state and local government. If the state government is unwilling or unable to pay for their share, the local school district requirements will be deemed valid by default.

-Successful completion of an Advanced Placement course and test may be used in lieu of one of the courses required for graduation without the student having to take the Keystone Exam. International Baccalaureate classes will be treated the same way.

-Alternate measures of graduation readiness will be available for those students with Individualized Education Plans (IEP)

-In sum, the new graduation requirements for the class of 2014-2015 and beyond will include a combination of course completion and grades, graduation project, demonstration of proficiency as determined by the District, assessment requirements chosen by the school board in the form of Keystone Exams, validated local assessments, or AP/IB exams.

END UPDATE------

There was a big vote yesterday from the State Review Board regarding the Keystone Exams. In a 4-1 vote they approved the use of the exams in school districts across the states. Please see this article from the Philadelphia Enquirer.

I have talked about these exams from time to time on my blog. My issue, along with countless others, has always been that Pennsylvania has typically allowed local control of curriculum and graduation requirements. This exam, even while having an "opt-out" option will turn that control over to the State. The exams will be based on the graduation requirements by the State. Again, there is an opt-out provision but any school district that opts out has to have its requirements reviewed and approved by the state.

For the other side of the story, please see this op-ed from Joe Torsella, Chairman of the State Board of Education:

Strong Pennsylvania high school graduation requirements would pay off in long run
By Patriot-News Op-Ed
October 22, 2009, 1:59PM

by Joe Torsella

For almost two years, Pennsylvania has been engaged in spirited debate about the academic expectations we hold for our young people. In public hearings, the halls of the Capitol and newspaper editorial pages, there has been sharp disagreement about whether Pennsylvania should strengthen its high school graduation requirements.
grad hat.JPG
On the surface, this shouldn’t be a controversial question: Today’s high school graduates are entering the worst economy of our lifetimes, and our increasingly mobile society adds complexity and competition to their postsecondary plans. Nor is the state board’s proposal to strengthen graduation requirements a radical one.

Under the plan, students will have several options to meet graduation standards. The state will couple the reform with new resources, and no student will be denied a diploma based on test scores alone. The proposal will eliminate the 11th-grade state tests currently used to comply with No Child Left Behind and replace them with a series of standard course finals — a step that will make the state assessment more relevant to students and reduce testing time.

The proposal isn’t perfect — some business and postsecondary leaders advocated for higher standards. Others claim the regulation is too complicated and will present implementation challenges. But these qualms don’t explain away the fervor of the opposition — and that got me thinking.

In significant ways, I believe the debate around graduation requirements has become a proxy fight for broader policy questions buffeting public schools — and Pennsylvania.

For example, the emerging conversation about a voluntary national “common core” of academic standards might be seen by some as a threat to Pennsylvania’s tradition of local control of education decision-making and the power of school boards. Meanwhile, the weak economy might exacerbate worries among parents and educators that higher expectations will increase dropout rates, making the search for good jobs even more challenging for disadvantaged students.

On the issue of local control, let me be clear: School districts will decide how their students meet graduation requirements, and districts that want to set higher standards may do so. In addition, education stakeholders, and especially teachers, will have a significant role and voice in implementing the new policy.

Regarding dropout rates, there is no correlation between higher academic expectations and students leaving school. In fact, an absence of challenging curriculum is the more likely culprit along with systemic issues such as school safety.

While it’s worth remembering that assessments will be just one part of one pathway to meeting graduation requirements, results released last month by the Maryland Department of Education should help ease these concerns: only 11 of about 60,000 Maryland high school seniors did not graduate in 2009 solely because they failed the state’s exams.

Indeed, evidence from other high-performing states suggests that stronger graduation requirements are a powerful reform lever. Since instituting new graduation requirements, Virginia has seen significant achievement gains in every subject. Pittsburgh Public Schools Superintendent Mark Roosevelt, a former Massachusetts legislator and co-author of that state’s Education Reform Act, calls strong graduation requirements the “single most significant act in catalyzing Massachusetts’s phenomenal growth in student achievement.”

For Pennsylvania, the question now is whether to go forward or stand still. State-level education reforms — sustained across multiple administrations — have produced significant achievements, including some of the nation’s most rigorous academic standards. And during the last seven years, Harrisburg has made a commitment to dramatic increases in state funding for public education. Even this year’s budget, with billions in cuts to worthy programs, provides a $300 million increase for K-12 education.
torsella
These efforts have led to achievement gains across Pennsylvania and among all groups of students. But we have more work to do — especially for our high schools when more than 40 percent of graduates cannot demonstrate grade-level mastery of reading and math.

We have today a proposal that reflects input from thousands of Pennsylvanians and diverse stakeholders.

The proposal has been strengthened thanks to study by legislative leaders — especially Sens. Jeffrey Piccola and Andrew Dinniman and Rep. James Roebuck.

The regulation borrows from strategies in the nation’s best-performing public education systems. And it finds balance between rigorous expectations for every student and flexibility that respects individual learning needs.

For all of these reasons, it’s time to move ahead.

Thanks for reading.

James

Updated: State Revenues

2009-10-18T06:21:00.004-04:00

Regular readers of this blog may remember an article I linked to back in June. It was a report from the Rockefeller Institute that discussed how State revenues were declining and predicted that states would end up having to again raise revenues and cut costs in the 2010-2011 budgets. I also posted my thoughts of the possibility of this happening last week.

Bloomberg has picked up the latest update from Rockefeller Institute and has this article:

State Revenue Falls Most Since 1963 on Incomes, Sales (Update2)

By Jerry Hart and William Selway

Oct. 15 (Bloomberg) -- U.S. state tax collections tumbled the most in almost half a century in the second quarter as the economic recession curbed levies on incomes and sales.

The 16.6 percent plunge was the biggest since at least 1963, the Nelson A. Rockefeller Institute of Government said today. For the 12 months to June 30, the fiscal year for most states, revenue declined 8.2 percent, or $63 billion, about twice what states got from the $787 billion U.S. economic stimulus package, the institute said.

State revenue has dwindled for two straight quarters and continued to decline in July and August, the Albany-based research organization said. Budgets for the year that began July 1 already face $26 billion of deficits, the Washington, D.C.- based Center on Budget and Policy Priorities said Aug. 12, forcing state lawmakers to confront additional spending cuts.

“We’re looking at a multiyear problem hitting essentially every state,” Robert Ward, the institute’s deputy director, told reporters. “It has happened during recessions before, but the depth of this decline is unprecedented in modern times.”

Collections dropped in 49 states in the second quarter as sales and personal-income taxes slid for the third consecutive period, the institute said. Income tax was down 27.5 percent and sales tax fell down 9.5 percent, its study said. Both categories fell by the most in 45 years.

“Many economists believe that the national recession has ended and that a tepid recovery is now underway,” Rockefeller analysts Lucy Dadayan and Donald J. Boyd wrote. “Unfortunately for states, an emerging economic recovery does not spell instant budget relief.”

‘Considerably More’

Figures for July and August for 36 early-reporting states showed tax collections down 8 percent, the Rockefeller Institute said. At least 17 states have announced budget shortfalls since July, with “considerably more” expected, Boyd said.

New York’s tax revenue from April 1 to Sept. 15 was $634.5 million below projections and $3.6 billion less than a year ago, Comptroller Thomas DiNapoli said yesterday. California reported last week that revenue trailed a forecast made less than three months earlier by $1.1 billion, or 5.3 percent.

States are anticipating more cuts to current-year budgets, already pared once to bring them into balance. Mississippi Governor Haley Barbour told managers on Oct. 13 to cut spending 5 percent because tax collections in the first three months of fiscal 2010 were 7.7 percent below estimates. Florida Governor Charlie Crist told department heads on Oct. 12 not to request more money for next year, when the state faces a $2.6 billion deficit.

“It’s clear that when governors propose their budgets in January, the vast preponderance will be looking for more spending cuts and tax increases,” Boyd said.

'Housing Market'

The main driver for the second-quarter decline was lower income-tax collections, Boyd said on a conference call, “most likely due to lower capital gains from market declines in 2008 and the bursting real estate bubble.”

Payroll-tax withholding fell 4 percent from a year earlier and estimated-tax payments made in the quarter fell 32 percent in the median state, he said.

“Real wages take 13 to 17 quarters to recover from the end of a recession,” he said. “It will take several years for states to bring spending into line with incomes.”

The study’s retail-sales index showed an 11 percent decline since the start of the recession in December 2007, he said. The second quarter’s 9.5 percent decline in sales taxes followed an 8.3 percent decline in the first quarter, he said.

Alaska’s tax income declined the most of any state, the study said, with an 86.5 percent drop because of lower oil prices. Vermont fared the best, with a 2.2 percent gain because of a one-time estate-tax settlement.

Local tax collections declined by 2.8 percent in the second quarter, the Rockefeller study said. That’s less severe than the state slowdown because municipalities rely more on property taxes, which rose “a surprising” 3.1 percent in the quarter, the report said.

Still, 88 percent of local finance officers said in a September poll by the National League of Cities that they’re less able to cover expenses than in the year before.

To contact the reporters on this story: Jerry Hart in Miami at jhart@bloomberg.net; William Selway in San Francisco at wselway@bloomberg.net.

A couple of points struck me. First, the fall in state revenues is of record proportions. However, while state revenues collectively declined 16.6%, local government tax revenues declined by only 2.8%. This disparity is due in large part to local governments being dependent upon local real estate taxes as opposed to income and sales tax. See the following chart from the Rockefeller Institute Report that depicts this:

Click on image to enlarge

Also from the report is the following statement:

Unfortunately for states, an emerging economic
recovery does not spell instant budget relief. As we have noted
previously, some elements of the economy that are very important
to state finances — particularly employment and wages — are
likely to recover more slowly than gross domestic product. In addition,
state tax revenue, when it does begin to recover, will be below
its earlier peak for at least several years and will not be
sufficient to support spending commitments that are now in
place. Despite the recovery, most states will face budget gaps this
fiscal year and next, and probably for at least one to two
additional years.

When I say state budgets are based on the past, this is exactly why. It is always a game of playing catch-up. Spending every dime in good economic times leads to the severe cuts we are seeing now.

If you like tables and charts and graphs, the Rockefeller Report is really a revelation. It contains a ton of information on every state comparing revenues, changes, and the effect of recent legislation.

One more point I need to make on this, and I did not see this in the Rockefeller Report, is that many states, if not most of them, used the Federal Stimulus funds to balance their budgets this year. I believe Pennsylvania used $3 billion to do just that. What this means is that every one of these states was already in a structural deficit before the new fiscal year began. Many states used that money as a one-time fill for their budget gap. The problem is, this is not a one-time revenue shortcoming. Tough decisions are going to have to be made.

Thanks for reading.

James

State Budgets Across the Country Struggle

2009-10-11T07:15:00.005-04:00

First, let me explain a little about State budgets. All state government budgets are unique in this way; government budgets are based on the past. That is, they are based on past tax collections on transactions that took place even farther in the past- especially income tax collections. This isn't like a real estate tax where one can predict every day what kind of revenues are going to come in. This is why you see state and federal government revenue collections struggle 1-2 years after economies start to struggle. The first budget that was passed in good times typically can be adjusted to make ends meet. But the second budget where the full force of the economic downturn has finally had its impact and revenue collection, states have a difficult time closing gaps. As time goes on and short-term budget gap solutions have been exhausted, each successive budget gets more and more difficult to balance.

Pennsylvania passed its budget the other night. There is a good, quick summary of the roundabout way we got the the budget we did over at the Post-Gazette. There are many who say we did not cut spending enough. The problem is that the impetus to cut spending just wasn't there. The budget wasn't bad enough for lawmakers to have make those kind of very difficult decisions. However, in other states, lawmakers are struggling with budgets that are under water mere months after passing.

Let's take a look at California. Once the worlds seventh largest economy on its own, California has struggled the past two years to figure out a way to cut programs and raise revenues. Even with $32 billion in budget cuts and efforts to raise almost $17 billion in new revenue, California is still in the red. From this article at Bloomberg you can see that things in California are still dire.

Next, let's take a look at New York. You may remember back in April/May that New York planned on implementing a 30% increase in taxes on the wealthy. They saw it as an easy way to close their budget gap. The income tax increased 3.45 percentage points to 10.4% on people earning greater than $250,000- one of the highest rates in the nation. Other states across the country waited to see what the outcome of this taxation would be. Well, here in this article from Miami (Florida was apparently one of the states watching) New York Governor David Patterson admits that the higher tax rates have "yielded lower than expected state wealth". Twenty-percent lower to be more exact.

Ok, so those are two of the larger states in the Country. Surely the smaller states are in better financial condition. Well, not exactly.

Indiana- Continuing Plunge in Revenue Alarms Governor Daniels- State revenue for the last three months is almost 10% less than projected just a few months ago.

Kentucky- State Revenues Plunge in First Quarter- General Fund revenue has dropped 10% from last year.

Iowa- Tax Collections forecast to drop 7.1%; steep budget cuts expected- "Today's news is that plunging tax revenues have knocked the state budget severely out of balance just three months into the budget year."

Texas- State sales tax collections down for 8th month in a row- In Texas they expect this will continue through the end of the year.

Georgia- State Tax Collections Drop Sharply- Georgia's collections are down over 16% year over year.

A lot of states made some tough decisions last year in cutting workers and making serious budget cuts. Look for round two of these cuts to start heating up early in the new year.

There are a couple of lessons to be learned here. First, committing future budget dollars to perpetual programs based on the tax collections obtained in good economic times only leads to the pain that many of these states are feeling today. If the states had budgeted within their means and had sufficient reserves then some programs would not have been started in the first place. Unfortunately, most governments budget to the last dollar leaving insufficient dollars for the lean times. Pennsylvania has a "rainy day" fund and they have tapped that fund the last two years to help make ends meet- this is why we didn't have as severe cuts as other states. The second lesson to be learned (thanks to New York) is that increasing taxes on the wealthy will only make the wealthy leave. There were some high profile defections from New York from Rush Limbaugh to Tom Golisano (owner of the Buffalo Sabres) to Nancy Bell (a manufacturer who moved her facility to Florida). All three of these people moved their residences to Florida to avoid the higher taxes. The fact is, you need the wealthy. You need them to stay and invest and employ people.

There is a lot of uncertainty out there at the moment. People are talking about a "V" shaped recession where we get out of the thing as fast as we got into it. Others suggest "W"s or "U"s or even "L"s. No matter what letter you choose, unemployment is expected to rise past 10% and continue rising into next year. If George W. Bush had the "jobless economic expansion" then this is turning into the "jobless economic recovery". Income tax and sales tax revenues to governments will not recover until employment recovers. This means we have at least two more years of state and federal budget cuts coming.

Thanks for reading.

Keystone Exams 2.0 Update

2009-10-08T11:22:00.005-04:00

There is currently some wrangling on the Keystone Exams going on in the PA Legislature. There is a bill out there that was co-sponsored by a majority of legislators that would have required legislature approval for Pennsylvania Department of Education and Governor Rendell to adopt the Keystone Exams. That fight is apparently ongoing and I will update when I find out more. The introduction of the resolution of PA House Resolution 456 is below:

A Concurrent Resolution urging Governor Edward G. Rendell to cease funding of implementation of high school graduation requirements until the General Assembly establishes a policy by legislation, requesting the Governor to impress upon his cabinet officials involved in educational policy to regard the desires of the citizens of Pennsylvania, recognizing that actions by public officials that impede the democratic process will be considered as actions in disregard of the officials' assigned constitutional and statutory duties and in disregard of the honor which their constituents have called these officials to uphold, and asking the Independent Regulatory Review Commission to consider whether proposed high school graduation requirements have been given due consideration by the General Assembly and by the Governor, in accordance with the Regulatory Review Act, before a decision is made on final-form regulation of high school graduation requirements.

Full text of the bill can be found here. State Representative Matt Smith is a co-signer of the above resolution. In fact, 161 of the 200 members of the House have supported the bill.

Today I came across this article from the Times-Herald that talks about some of the pros and cons of the current Keystone Exam proposal as well as many of the parties involved in the discussion:

By GARY PULEO
Times Herald Staff

WORCESTER — Earning passing grades is not necessarily assurance of obtaining a high school diploma for many U.S. public school students anymore.

A growing number of states now require high school students to pass an exit exam before that diploma is handed over,

With opposition from many education officials, Pennsylvania’s own version of the assessment, the Keystone Exams, has overcome several stumbling blocks. But the test is no less controversial as it awaits review by Senate and House committees and final approval by the IRRC next month.

The State Board of Education voted earlier this year (14-2) to adopt the final regulation for implementing the new statewide standard for the 2010-2011 school year. Schools will have the choice of putting the Keystone Exams into service or local assessments that conform to Pennsylvania standards that are validated by the state.

Many local educators have concerns with the Keystone Exams, including Methacton Area School District superintendent Timothy Quinn, who worries that having the test count for one-third of a student’s final grade puts too much emphasis on it and takes away from other course work students do.

“In its current form, the exams for 12th graders will constitute 33 percent of their final course grades,” Quinn noted. “Any student falling below basics on that exam will get a zero on that test. If they get a zero on 33 percent of their test, you can imagine what that’s going to do. We can have students failing because they’re bad test takers or just having a bad day, or any other reason.

“A student could get 100 percent on all other tests, but if I get a zero on the Keystone test, I now get a 66 for the course and have now failed it. So that’s pretty serious stuff. Mathematically, it lowers the grade point average of a student who does well. They can do all sorts of things that are showing they’re good students, but now one test could erode their grade point average and really cause our students harm whether it be getting into college or something else. So that shouldn’t be taken lightly.”

While Quinn said he supports holding students to higher academic standards, he doesn’t support the Keystone program in its current form.

“There has been serious discussion with educators who are coming out in droves against it and there are a lot more conversations that have to occur about the ramifications and consequences,” he said. The directives imposed by the Keystone Exams will unequivocally destroy any control at the local level, he added.

“Right now, it all comes under teachers, school boards and principals how grading works. I think the state needs to make more clear the precise purpose of the Keystone Exams. Are we looking to prepare a student for the world of work, or are we preparing students for the world of college or other possibilities after high school graduation?

“Is it supported by clear research and data that their success in college and/or the work world will go up? I think as part of the review process they should be looking at other states and see if it has had a positive effect.”

According to www.greatschools.net, 26 states either currently have a high school exit exam or plan to adopt one. Given the number of high school students in those states, more than two-thirds of the nation’s public high school students are affected by the exams. The exams vary from state to state in terms of content and opportunities for students who do not pass to retake the test and prove their competency.

Most states test students on their reading, writing and math skills as part of the high school exit exams. Nine states use end-of-course tests on specific classes, such as English, rather than specific grade-level tests, which allows students to take the test for a particular subject after they have completed the course rather than taking the test at a designated grade level.

Remediation classes and opportunities to take the test again are offered by most states.

Jane Callahan, Upper Merion Area School District assistant superintendent said she would reserve judgment on the Keystone Exams until she saw “a final picture of exactly what it’s going to look like. The Pennsylvania School Board Association has been following it very carefully and they just put out an update where they said at this time they don’t support it, so I’m following all of that very closely.

“We get regular updates from the Legislature, so we know what’s going on and where things are in the process,” she added. “Like every other school district, we’re paying close attention to the discussions that are taking place. Nothing is finalized yet so until then I don’t think the districts know clearly what the options will wind up being.”

The possibilities that have been discussed include allowing the exams to cover specific disciplines, Callahan noted.

Four states currently use end-of-course exams. By 2015, 11 states will rely on end-of-course tests to determine if a student receives a high school diploma, while others will have a dual testing system in place that includes the high school exit exam and end-of-course exams. The 14 states that will use end-of-course exams by 2015 are: Arkansas, Indiana, Maryland, Massachusetts, Mississippi, North Carolina, New Jersey, New York, Oklahoma, South Carolina, Tennessee, Texas, Virginia, and Washington.

“Another possible option would be local assessment which would have to be verified by an outside provider.”

According to www.stateline.org, five companies are responsible for producing the majority of state tests currently in use: CTB/McGraw-Hill, Educational Testing Service, Harcourt Assessment, Pearson Educational Measurement and Riverside Publishing. Together, they own about 90 percent of the state-testing business, which has blossomed into a $1.1 billion industry since passage of the federal No Child Left Behind Act in 2001. The law, which took effect in January 2002, requires states to give annual reading and math tests to third through eighth graders, and to re-test students in those subjects in high school.

On Sept. 21 the Keystone exams were formally submitted to the IRRC legislative committee, as well as the House and Senate Education Committee

“Text of the regulations is not yet posted but will be eventually, along with the required regulatory analysis document sometime soon,” Callahan said. “Without the text being published, it’s difficult to know what it’s going to say.”

IRRC will meet in Harrisburg on Oct. 22.

The House and Senate Education Committee have until 24 hours before the meeting to take action on the regulations, she allowed.

Testimony of Secretary of Education Gerald L. Zahorchak before the Senate Education Committee in June — available at www.edweek.org — supported the case for stronger high school graduation requirements.

“Let me underscore why business leaders statewide, the State Board of Education, and many of our educational leaders believe there is such a sense of urgency in addressing the need to better prepare our students for college and the workforce,” Zahorchak said, as he made the following points: Approximately 50,000 students graduate each year from a Pennsylvania public high school without demonstrating proficiency on the PSSAs.

A 2009 study by Penn State’s College of Education revealed that only 18 of Pennsylvania’s 500 school districts — making up less than 3 percent of the state’s total public school enrollment — appropriately measure whether their students can read and do math at the 12th grade level in order to award high school diplomas, according to a February 2009 study.

Zahorchak also noted that in 2007-08, 20,394 public high school graduates who enrolled in a public higher education institution required some form of remediation, with a total cost to taxpayers, students, and parents in excess of $26 million.

Finally, it was revealed that 66 percent of business leaders surveyed considered it a high priority that new employees be able to demonstrate that they have the basic skills to enter the workforce.

Colonial School District superintendent Vince Cotter regards the Keystone Exams as a burdensome mandate.

“It’s being imposed on school districts like Colonial that have made AYP (Adequate Yearly Progress) consistently,” Cotter said. “Additionally, it appears to structurally and financially penalize the districts that have previously invested heavily in the development of final exams that are aligned with state and national standards.

“From a practical perspective, the Keystone Exams’ percentage calculated into a student’s final grade appears to be too heavily weighted and further undermines a rigorous curriculum already designed to address national and state standards,” he added.

“Finally, at a time when additional state funding for a district like Colonial is virtually non-existent and local revenues have diminished due to the downturn in the economy along with previously established financial limitations through Act 1, the development of a state testing program that would literally cost millions of dollars should be reconsidered in this current economic environment.”

Gary Puleo can be reached at 610-272-2500, ext. 205, or gpuleo@timesherald.com.

This is definitely something that can change at any moment. Legislators are dealing with this and the budget at the same time.

Thanks for reading.

James

Message from Dr Steinhauer on H1N1

2009-10-01T11:51:00.001-04:00

I think this is important to share.

October 1, 2009

Dear Mt. Lebanon School District Parents and Guardians:

This letter is to inform you that our first case of the H1N1 influenza virus has been confirmed in the High School. We are working in consultation with the Allegheny County Health Department to manage this flu season with the least disruption for our students and staff while maintaining a healthy school environment. We will continue to monitor the situation, and at this time, schools will remain open and operating normally.

Please continue to follow the guidelines established by the Centers for Disease Control by keeping your child home from school if he or she shows any flu symptoms including fever (100 degrees and above) severe cough, sore throat, body aches, headache, chills, fatigue, diarrhea, and/or vomiting. Students who come to school with flu symptoms will be evaluated by our nursing staff, and in some cases, you may be called to pick your child up from school. Students with the flu should stay home until at least 24 hours after they no longer have a fever, or signs of a fever, without the use of fever-reducing medicines.

Children experiencing flu symptoms who have chronic health conditions like asthma, diabetes, heart problems or who have immune systems that are compromised or suppressed should contact their family doctor for advice. These conditions can result in more severe illness from influenza, including the new H1N1 virus.

The best way to reduce the spread of H1N1 or any other virus is to maintain good hygiene practices. I encourage you to teach your children to wash their hands often, keep their hands away from their eyes, nose, and mouth, and cover coughs and sneezes with their sleeve or a tissue. I have directed our staff to reinforce these skills with all of our students. For more prevention tips, see the back of this letter.

To learn more about the precautions our schools are taking, visit http://www.mtlsd.org/healthservices. For more information about H1N1 and seasonal flu viruses, visit http://www.dsf.health.state.pa.us and http://www.cdc.gov/h1n1flu.

Let me assure you that the health and well being of our students is our top priority. We will inform you of any changes to our District’s strategy to prevent or reduce the spread of the flu via email or phone alerts. To receive Mt. Lebanon School District emails, please make sure you register your email address on the Dashboard.

Please contact your school nurse or family health care provider if you have any questions or concerns.

Sincerely,

Dr. Timothy Steinhauer
Superintendent

Shaky Ground

2009-09-21T23:53:00.008-04:00

It’s a position that should be non-partisan. People have said that. I have maintained for the last three years that there was a place for political parties at the school board level. This high school project was to me the perfect opportunity to be able to demonstrate the kind of unity and communication that can come from being part of a Board majority . For me, one of my most important guiding principles has been fiscal responsibility. I have tried to demonstrate this principle and vote this idea with every opportunity I have on the Board. Being fiscally responsible doesn't mean cutting programs, cutting staff, and cutting everything. It is about maximizing efficiencies and, most importantly, making long-term financial decisions that will put this Board on better financial footing in the future. These ideas to me have represented the best of what the Republican Party has to offer.

Understand that this Board is on shaky ground. One could legitimately argue that the next few years and their forthcoming tax increases will define the next generation of our residents. Under the school board’s current path the high school construction project will raise taxes between 15-20% alone. When looking out a bit further we can see more tax increases for PSERS, staff salaries, health benefits, and more. This will be coupled with possible lower revenues from earned income taxes and investments income. An unconstitutional real estate tax system here in Allegheny County only adds to the uncertainty of future taxes in Mt Lebanon. Add to all this an article by the City Manager down in Johnstown, PA where he points out that more than 50% of the municipalities in the 10 county Pittsburgh region have experienced structural deficits between the years of 2000 and 2005 and you can see that the financial footing out there is rather treacherous.

I have posted before regarding some of the effects of higher taxes here and here. I have posted on the options that potential residents have (here and here) when comparing tax rates of similar communities. The fact is that people have choices. I WANT people to choose to live here. We have a lot to like. Mike Madison over at BlogLebo has posts about what he loves about Mt Lebanon. I'd encourage people to go over there and post what they love about Mt Lebanon as well. The tree-lined streets aren't going anywhere. Snow being off the road about five minutes after it hits the ground will most likely stay as well. Hopefully, we can maintain and even increase the achievement levels of our students here in Mt Lebanon. I think we have the right superintendent in place to make this happen. Mt Lebanon is a great place to live. Will it still be that kind of place when folks are paying $7000 a year in real estate tax on a $200,000 home and 1.9% in income tax in three years? My fear is that people in Mt Lebanon and beyond will soon come to realize that living in another community with half the taxes and a similar educational experience will allow them to save enough tax money to pay for their child's college education. There are great things about Mt Lebanon but every current and potential family must weigh those positives against a tax structure that penalizes residents more than surrounding communities.

We have seen communities fall. The City of Pittsburgh has tried for years to tax its way to prosperity and to what avail? From the same article listed above there is the following line:

All the research shows a majority of the municipalities in Pennsylvania are on a path to fiscal distress, with many already there. Currently, 18 municipalities in Pennsylvania are in Act 47 status and an additional 39 in the Early Intervention Program, which means they qualify for Act 47 status but haven’t yet officially entered the program.

The City of Pittsburgh has had to resort to gimmicks like forgoing real estate tax receipts for a number of years to new homebuyers in the City to attract people back to the downtown real estate market. However, the never ending cycle of tax increases to fill budget gaps simply pushed more and more people away from downtown and out to the suburbs. The result has been a net population decrease for the Pittsburgh region that was second only to New Orleans between 2000 and 2006. The point is this; the road to prosperity for Mt Lebanon does not include spending as much as possible on a high school and asking our taxpayers to pick up the bill. Not when we are already taxed at a high rate. Not when there are options on the table that would cost significantly less and give us the same student outcomes. And especially not in an economic environment that is so severely disrupted.

These last points are the ideas that I have brought to my fellow Republicans on the Board. I have brought these ideas to them thinking that if nothing else, as Republicans they would have to agree that being fiscally responsible does not include proposing and approving a project that is less than 1% under a voter referendum limit. Instead, that is exactly what has happened. I had conversations with my Republican colleagues on the Board prior to this past budget to suggest ways to improve the budget in order to offset part of the cost of the high school project. Instead there were no changes. I had hoped that at least my Republican colleagues on the Board would agree with me when I suggested this past spring to invest all our surplus from the 2008-2009 budget into the high school project so as to avoid interest expense on 25 years of borrowing that same amount later. Instead, we set aside less. To me these suggestions were mostly common sense. It is quite possible that I am the worst salesman for my own ideas but for each of these suggestions I always had at least one other Board member who was right there with me.

I am not so sure why my expectations were much different on Monday night. But, I showed up on Monday hoping to have a good discussion about why floating the $69 million worth of bonds right now doesn't make sense. I was also willing to compromise and try to find a way to come to the middle with the rest of the Board if they could meet me in the middle on some issues as well. Instead, I got more of the same. I was against spending almost $1 million in interest on bonds that would be floated months before we actually needed the proceeds. It had previously been suggested by members of the Board that floating the bonds now would allow us to pre-buy things that we need anyway. This idea was shot down by our construction manager who suggested that doing the project this way would instead add cost. I was against floating bonds for a project that did not yet have a firm budget associated with it. I was also hoping that the Board would finally adopt a "not to exceed" number on this project. This point became particularly important as we found out that we would be able to borrow over and above the $115 million debt limit that had been previously established. The idea of setting a firm budget did not gain traction. Unfortunately, each of these ideas was shot down by the majority of the Board. In fact, tonight, not only did we vote to begin funding the project with $69 million worth of bonds, but the majority of the Board voted in favor of issuing bonds that in the long run allow us to borrow even more money (scope creep) and will cost us at least $3 million more in principal and interest payments. Between floating the bonds months before we need them and approving the sale of the premium structure of tax-exempt bonds, we just passed $4 million in additional expense on to the taxpayers that will result in absolutely no net benefit to them. I was willing to give on floating bonds earlier than we needed them but I at least would have liked to see the Board take advantage of the Build America Bond program to reduce future tax strain on our residents.

What I don't think has gotten through to some in the party is that one of the reasons Republican's were so resoundingly thrown out of office in 2006 and 2008 is because people absolutely do not trust elected officials who spend tax money recklessly. The Democrats picked up so many seats that they now control both houses of Congress and the Presidency. I, and many of my fiscally conservative friends, could not tell the difference anymore between the elected Republicans of the early 2000’s and the “tax and spend” Democrats that were the nemesis to Reagan when I was growing up. So at this point I have to say I have had enough of the party politics. If the Republican leadership on the Board cannot find a way reduce costs on this project or is unwilling to do so, then any possible argument for party membership is lost.

With that said, I will be leaving the Republican Party and joining a growing number of Independent voters in this country. It is from this position that I will bring my fiscally conservative principles to the Board and will try to govern in a party-neutral manner. This has been a difficult decision for me with the more recent actions of the GOP finally pushing me over the edge. The high school project and the inability to form a cost-saving consensus even among Republicans over the last two years has been frustrating and started this ball rolling. The straw that broke the camel’s back was the nationwide Republican political opposition to the President of the United States giving a speech to our school children about the importance of staying in school and working hard. I will never understand why there was an organized email campaign against this speech and its supposed “indoctrination”. We have ONE President folks and he has earned the right to address our children. If you don’t like what he says then you have the other 23 hours and 40 minutes of the day to “unindoctrinate” your kids. I disagree with our President as much as the next person, but I also respect his office.

Thanks for reading.

James

Keystone Exams Update

2009-09-18T06:12:00.003-04:00

There have been a lot of twists and turns to this story. After the PA legislature voted not to fund the exams last year, the Governor and Secretary of Education went ahead with their planning anyway. There is no question that the majority of the legislature does not want these exams to go any further as evidenced by 145 of 203 house members that have signed onto a bill asking that the plans be stopped.

Please see the article below from PennLive.com:

Move to stall Keystone Exams faces uphill fight
House education chairman says he has no plans to take up a resolution to hold off high school graduation testing.
Thursday, September 17, 2009
BY JAN MURPHY jmurphy@patriot-news.com

The proposal to attach tests to high school graduation continues to stir controversy in the state Capitol.

A House resolution introduced this week calls for slowing the plan's approval and requiring it to gain House and Senate approval before any more money is spent on it. The resolution has the backing of 145 of the 203 House members.

Rep. Paul Clymer, R-Bucks, who sponsored the resolution to slow the plan, said the strong backing of Republican and Democratic House members reflects widespread opposition to moving ahead with the initiative. The state plans to invest $18.3 million this year to implement the initiative, and $176 million through the next five years.
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"We need to take another look before the Keystone Exams" are approved, Clymer said.

The State Board of Education approved the statewide graduation requirements last month to ensure graduates leave high school with skills needed in college or the workplace. It requires students pass either state exams, advanced placement or international baccalaureate exams, or a state-approved local assessment in four core subjects to graduate. Students who fail can complete a project instead.

The plan is now making its way through the state's regulatory approval process, which does not include a vote by the full House or Senate. The Senate Education Committee endorsed the plan last month.

In his resolution, Clymer cites education groups that oppose the plan or have withdrawn their support. It also mentions the Pennsylvania State Conference of the NAACP's position that the change could lead to higher dropout rates and increase the prison population.

At a Wednesday meeting, Clymer informed the State Board of Education of his resolution and asked for a response. Board Chairman Joseph Torsella, who led the effort to strike a compromise with education groups and legislators on the initiative, said the resolution raises no new issues.

The resolution has been sent to the House Education Committee for consideration. That committee's chairman, Rep. James Roebuck, D-Philadelphia, said he supports the Keystone Exams and at this point, has no intention of bringing the resolution to a vote

"I'm not quite certain what the intent of the resolution is," Roebuck said.

He noted Clymer did not participate in conversations that Torsella orchestrated to address concerns about the plan. Furthermore, Roebuck said he told Clymer that he would consider having the committee discuss the resolution after the 2009-10 state budget is finalized.

House Republican spokesman Steve Miskin said that timing makes no sense because funding for the initiative is part of the budget discussion.

Clymer and Rep. Rosita Youngblood, D-Philadelphia, sent a letter Wednesday to Roebuck asking him to reconsider his position on taking up the resolution.

"With overwhelming support for our resolution, we hope that you will allow the committee to act on this legislation and provide answers and accountability to the people of this state," it states.

Given how this process has gone so far, I am not optimistic about this move working. There has been widespread opposition to these exams from the outset and somehow the Governor and a few members of the legislature have been able to shield these exams from being shut down.

Please consider giving your state representative a call to voice your opinion on the matter. State Representative Matt Smith is a co-sponsor of the current bill (HR 456) that would prevent any further tax dollars from going to these new high school graduation requirements.

Thanks for reading.

James

Tax Rates and the Local Economy

2009-08-31T20:58:00.006-04:00

Some of the issues I pound on when it comes to the school board have to do with fiscal responsibility. With that comes the desire to reduce or lessen the growth of the tax burden on members of our community. That is not to say that the Board has the ability to reduce property taxes, I would never make that promise- not in an environment where property assessments are frozen at 2002 levels and where the District has contracts that increase every year. When I look out 2-5 years it is pretty easy to see what is coming down the pike. When you look at the more than $100 million high school, PSERs (which I will give an update on soon), and the contracts mentioned above, it is easy to see larger than 30% increases in property taxes here in Mt Lebanon. The only reason I say it probably won't be more than that is that I expect the State legislature will come up with a solution to address much of the PSERS expenses coming due in 2012. Call it wishful thinking if you like, but elected officials are in the business of getting re-elected and if they can't come to a solution on that single issue, there won't be many people getting re-elected in 2012. On many occasions I have opined about the coming tax increases and how we will compare to other Districts across the State. I have only touched on what the implications of such high taxes will be. It is those implications that I wish to address here.

To that end, I came across a speech given by Calvin Coolidge on February 12, 1924 in front of the National Republican Club. I don't know if I have ever read a speech by a President that so clearly illustrated the effects of high taxes on economic activity. While President Coolidge's speech was addressing the national economy, the effect of high taxes is the same whether at the federal level or local level. Below are some excerpts with my comments on sections that I think need highlighting:

In time of war, finances, like all else, must yield to national defense and preservation. In time of peace finances, like all else, should minister to the general welfare. Immediately upon my taking office it was determined after conference with Secretary Mellon that the Treasury Department should study the possibility of tax reduction for the purpose of securing relief to all taxpayers of the country and emancipating business from unreasonable and hampering exactions. The result was the proposed bill, which is now pending before the Congress. It is doubtful if any measure ever received more generous testimony of approval. Opposition has appeared to some of its details, but to the policy of immediate and drastic reduction of taxes, so arranged as to benefit all classes and all kinds of business, there has been the most general approbation. These recommendations have been made by the Treasury as the expert financial adviser of the Government. They follow, in their main principle of a decrease in high surtaxes, which is only another name for war taxes, the views of the two preceding Secretaries of the Treasury, both of them Democrats of pronounced ability. They are nonpartisan, well thought out, and sound. They carry out the policy of reducing the taxes of everybody, especially people of moderate income. They give to the country almost a million dollars every working day.

During World War I, taxes were raised to help fund the war effort. The United States still ended up borrowing billions of dollars to help fight the war, and we were also a major credit provider for our allies in that war. However, after the war ended, tax rates were not reduced to pre-war levels. President Coolidge in this speech is essentially calling for a return to the normalization of pre-WWI tax rates. As he said in his opening, he had no problem with financing a war with higher taxes, but in times of peace, he felt differently.

The proposed bill maintains the fixed policy of rates graduated in proportion to ability to pay. That policy has received almost universal sanction. It is sustained by sound arguments based on economic, social, and moral grounds. But in taxation, like everything else, it is necessary to test a theory by practical results. The first object of taxation is to secure revenue. When the taxation of large incomes is approached with that in view, the problem is to find a rate which will produce the largest returns. Experience does not show that the higher rate produces the larger revenue. Experience is all in the other way. When the surtax rate on incomes of $300,000 and over was but 10 per cent, the revenue was about the same as when it was at 65 per cent. There is no escaping the fact that when the taxation of large incomes is excessive, they tend to disappear. In 1916 there were 206 incomes of $1,000,000 or more. Then the high tax rate went into effect.

The next year there were only 141, and in 1918 but 67. In 1919 the number declined to 65. In 1920 it fell to 33, and in 1921 it was further reduced to 21. I am not making any argument with the man who believes that 55 per cent ought to be taken away from the man with $1,000,000 income, or 68 per cent from a $5,000,000 income; but when it is considered that in the effort to get these amounts we are rapidly approaching the point of getting nothing at all, it is necessary to look for a more practical method. That can be done only by a reduction of the high surtaxes when viewed solely as a revenue proposition, to about 25 percent.

I agree perfectly with those who wish to relieve the small taxpayer by getting the largest possible contribution from the people with large incomes. But if the rates on large incomes are so high that they disappear, the small taxpayer will be left to bear the entire burden. If, on the other hand, the rates are placed where they will produce the most revenue from large incomes, then the small taxpayer will be relieved. The experience of the Treasury Department and the opinion of the best experts place the rate which will collect most from the people of great wealth, thus giving the largest relief to people of moderate wealth, at not over 25 per cent.

This part of his speech perfectly illustrates the soundness of the Laffer Curve which was "discovered" in the 1970's by economist Arthur Laffer. The Laffer Curve suggests that there are two tax rates that will produce the exact same revenue. Think about it this way, at 0% tax, the government realizes no revenue and at 100% tax, there is no incentive to work and therefore the government again realizes no tax revenue. At various points along the graph coming down from 100% and up from 0%, there are points at which government can realize the same revenue. This is illustrated perfectly when Coolidge points out that tax receipts at the 65% tax rate were the same as when tax rates were at 10%.

A very important social and economic question is also involved in high rates. That is the result taxation has upon national development. Our progress in that direction depends upon two factors; personal ability and surplus income. An expanding prosperity requires that the largest possible amount of surplus income should be invested in productive enterprise under the direction of the best personal ability. This will not be done if the rewards of such action are very largely taken away by taxation. If we had a tax whereby on the first working day the Government took 5 percent of your wages, on the second day 10 per cent, on the third day 20 per cent, on the fourth day 30 percent, on the fifth day 50 per cent, and on the sixth day 60 percent, how many of you would continue to work on the last two days of the week? It is the same with capital. Surplus income will go into tax-exempt securities. It will refuse to take the risk incidental to embarking in business. This will raise the rate which established business will have to pay for new capital, and result in a marked increase in the cost of living. If new capital will not flow into competing enterprise the present concerns tend toward monopoly, increasing again the prices which the people must pay.

Taken altogether, I think it is easy enough to see that I wish to include in the program a reduction in the high surtax rates, not that small incomes may be required to pay more and large incomes be required to pay less, but that more revenue may be secured from large incomes and taxes on small incomes may be reduced; not because I wish to relieve the wealthy, but because I wish to relieve the country.

President Coolidge here is suggesting that allowing people to keep their surplus capital (and not the government) will lead to better economic growth. People will employ this capital in the most efficient way possible, in a way that gets them a return on their investment. His stated goal is to secure the largest possible amount of revenue to the federal government but not at the expense of stifling production. His plan to do this, under the guidance of Treasury Secretary Mellon, is to reduce the top marginal tax rates to 25%.

This legislation was past shortly after this speech and so began the "Roaring 20's". There were tremendous increases in overall GNP from just under $70 billion to over $103 billion in just over five years. And this happened without a jump in inflation, indeed, prices actually went down while GNP increased.

The point of this is to say that for decades (perhaps more) we have seen the impact that high taxes have on consumption and production. Many of those in favor of a large high school project here in Mt Lebanon like to say that an extra $60 per month is just a cup of coffee a day, or that its just one less dinner out per month. If that is the case then let me ask the obvious question. What if this actually turned out to be true? What if the residents of Mt Lebanon decided to give up their morning cup of joe or their monthly night out at dinner? What is the impact of that decision? How many people from Mt Lebanon do you think go to Aldo's or the Uptown each morning for coffee? How many people hit one of the restaurants on Washington Road or Beverly Road once a month or even once a week? What happens if all of these people actually DO reduce how much coffee they drink or how often they eat out? An increase of $60 a month in tax has the potential to take money directly from the productive part of our local economy (the coffee shops, the florists, the restaurants) and places it directly in the non-production part of local economy (debt service for a high school construction project).

This money will not go to hire more teachers to reduce class sizes. It won't expand programs. It won't make the District magically find ways to become more efficient. There most likely will not be an increase in student achievement and/or test scores due to a newly renovated building- although with our new Superintendent I hope this will happen anyway. The fact is that research does not show that constructing a new building will add anything to our ability to ready our kids for college and life after school. Isn't that what this should be all about?

The question that needs to be addressed has to do with how best to prepare our students for a constantly changing and ever more demanding future. Spending $100 million on bricks and mortar does not seem to be the best answer.

Thanks for reading.

James

August 10 Meeting Summary

2009-08-11T19:56:00.003-04:00

There were a few interesting topics discussed at last night's board meeting. The Board was given some high school financing options and we also discussed the possibilities of relocating the 6 tennis courts that will be displaced.

During the architects update we were given a presentation on the Mechanical, Plumbing, Fire Protection, and Electrical Systems. You can find that document here. There was some good information in this presentation regarding some of the technologies we are expecting to use. Other than that, it was a nuts and bolts type presentation.

We were also presented with four options to relocate the tennis courts that will be displaced by the current design. You can view the entire document here. There are good pros and cons presented for each option. Please look through that link yourself and think of what you would prioritize. For me, the top three priorities are to 1) keep the courts on the high school campus, 2)keep the courts together as a unit, and 3) to have parking spaces next to what should be the main building entrance on Horsman.

Option One separates the courts on either side of Horsman Drive and does not allow for much parking near the new main entrance on Horsman. Option two keeps the courts together but has them facing a non-optimal direction while eliminating all parking near the main entrance. Option 3 keeps the courts on campus by moving them behind the rockpile and also allows for maximum parking spaces near the main entrance. However, this does eliminate a number of parking spaces and potentially reduces the area in which our marching band practices. Option 4 relocates the courts to Markham Elementary school.

Given the above options I would choose option 3. If this is the option chosen then I would expect that we are early enough into the design process to figure out a way to add back as many parking spaces as possible through this project while also figuring out an alternative practice space for our marching band. The combination of having parking where we need it (near the main entrance), having the tennis courts all together, and keeping the courts on campus make me believe that this option is the best one. During the meeting last night I asked Dr. Steinhauer to take the lead in figuring out alternative practice spaces for our teams during the construction phase of this project. Hopefully we will have some options shortly.

The other topic of interest was the financing options for the high school project. You can view the presentation here. As you may know, this project is too large to fit under our current debt limit. This requires us to do two floats of bonds to fund this project. In 2006 prior to Act 1, the Board passed a resolution to allow for the floating of $69 million of pre-Act 1 Debt. This means that when that bond is floated, the millage increase required to pay for that debt will not be counted against our Act 1 maximum allowable millage increase (which has been about 4% per year). The structure and payment of those bonds has already been set. The only thing about those bonds not set is what interest rate we would get when we go to auction.

The second set of bonds is where things get a little trickier. The presentation linked to above really is a discussion of the options regarding floating these bonds at a level payment (like your mortgage) versus a wrapped issuance (like an interest only loan for the first number of years). It has been my contention from the start that we ought to have a level payment of the debt. Pushing out the principal payments simply burdens taxpayers with $10 million in additional interest payments (see page 5) and burdens future boards with lowered borrowing capacity since the debt would be repaid at a slower rate.

Having the bonds wrapped simply puts us in the same position where we are now. In 2005 we wrapped the $55 million in elementary school construction bonds. To this date we have paid down very little in principal on those bonds. If memory serves me correctly we still have almost $54 million in outstanding debt on those bond floated back in 2005. This means that our current borrowing ability has been restricted by that wrapped bond schedule. It also means that our taxpayers will be paying excessive interest on those bonds because the principal has been pushed back to the later years of the debt service. As long as we keep wrapping bonds, the district will continue to burden taxpayers with millions of dollars of unnecessary interest costs.

While I have no doubt that we will have the ability to go to the market for the first $69 million in bonds and also the second $47 million, I do have concerns about the Act 1 limitations on the second bond issuance. As I mentioned before, the first bond float is exempt from Act 1. Even if millage needs to increase above an Act 1 limit, we will not be forced to referendum. However, with the second float, that might not be the case. If we did a straight float at $47 million that resulted in over a 1 mill increase, then along with any other kind of budget changes, I would expect that our 2011-2012 budget would be over the Act 1 millage increase limit. It would be the worst of all scenarios to have to go to referendum at that point in the high school project to get the final $47 million to complete a two-thirds completed project. I did ask our financial adviser about this and he admitted that it "could" be an issue. But he also said that there are ways around this. Essentially, what he said is that there are ways to avoid the Act 1 referendum at that point which would include structuring the bonds in such a way that they have minimal up-front impact on millage- essentially recommending that if we were expected to exceed Act 1 limits then we should just wrap the bonds to avoid a referendum.

Why are we trying so hard to avoid a referendum every time we turn around? It seems to me that if we know that the taxpayers would vote down a project of this size (or $500,000 more), then we ought to be planning to do a project of significantly less size and scope.

More on that in a future post.

Thanks for reading.

James

Response to Constituent Email

2009-08-04T23:25:00.007-04:00

First, let me take a moment to thank all my friends around the area that helped with a job search that was recently completed. Losing a job is a humbling experience, however, the compassion and willingness to help shown by my friends and neighbors was even more humbling. This experience has forever changed me for the better. On to the blog.

As has been recently blogged on BlogLebo, there is much public discussion about an analysis of the Mt Lebanon High School project that was done by structural engineer and Mt Lebanon resident Dirk Taylor. The documents have been posted by BlogLebo on the link provided above.

As one of the two members of this Board that have over the last year been consistently voicing a dissenting opinion in the pursuit of such an expensive and questionable project, I have been silent about the Taylor Report in the hopes that other Board members would take the opportunity to publicly respond to its content and questions. Perhaps other members will choose to respond at a Board meeting, perhaps they will respond later, or perhaps they will not respond at all. I will take this opportunity to give some feedback on the report. As always, the opinions are mine and may not reflect the opinions of others on the Board.

First, it is important to understand who the author of these documents is. Dirk Taylor is not just a regular structural engineer that happens to live and work in Mt Lebanon. Mr. Taylor has done extensive work for the District over the last number of years. He understands the needs of the District and more importantly understands the architecture and the guts of our buildings. I believe he fully understands the risk he has taken in putting this type of a report out into the hands of the public.

On the functionality of the School:
Mr. Taylor points out some of the biggest misconceptions that I believe the public has had regarding the need for this project. Information has been given to the public that says that our high school buildings are falling down creating a safety issue for our kids and that our current building is not able to adequately educate our students. On both counts I agree with Mr. Taylor. One cannot prove that these statements are true. The public has been shown pictures of broken pipes and has been given tours of the building that show where water has been leaking and where ceiling tiles are missing and these visual anecdotes are used to convince the public that the need for new construction and huge expense is great. However, our architects came back and said that they were perfectly willing to renovate Building B at an EXTREMELY reasonable cost of about $14 million. B Building is the second oldest building at the high school and is also the building that contained some of the oldest plant (water and electric) in the complex. With proper repair and maintenance over the years we might not have some of the issues that are presented as being dire today. Despite its age and its antiquated plant, we have been assured that this building will be renovated in a “like-new” fashion that will better prepare our students for the future at a cost that is far less than construction/renovation at any of the other buildings. Think about this renovation of B Building the same way we thought about renovating our elementary schools a few years back. As for how well our students are performing in our existing buildings, what more do we need to look at than our test scores. We have consistently been comparable to other high-performing districts in both SAT and state standardized tests. While we do have room to improve in areas, I have complete confidence in our new superintendent to take us in the right direction on this front no matter what decision is made with the high school construction project.

On Travel Distance:
I went through the most current drawings and tried to figure out exactly where this design criteria has been met. I didn’t see it and this topic makes for a great question to present to the architects.

On Classroom Size:
Pennsylvania Department of Education says that a classroom needs a minimum of 25 sq ft per student. That is their standard. Apparently the renovation of B Building will meet this standard. Mr. Taylor’s description of how the walls are reconfigurable in C Building is new to me. If I did hear it before, I didn’t put much thought into it. Mr. Taylor’s description of how things can be reconfigured in this building to meet PDE standards is very intriguing and has the potential to significantly impact this project in my opinion. Mr. Taylor does address the issue of asbestos later in his report and I think it important to get the facts on what condition ALL of C Building is in from our current architects. I think many in the public and on the Board have been convinced by the architects that C Building needed to be torn down because it has too much asbestos and because it would be more expensive to renovate than it would be to simply replace it with a new academic wing. Mr. Taylor’s report at the very least raises some good questions that ought to be asked of our current architects with regards to the possible re-use of C Building.

On Building Size:
What more can I add? The building size we are being shown today is much larger than other area projects at Bethel Park and Baldwin despite us not having many more students. It is much larger than what has been recommended for the number of students we have. I have pointed this out on my blog on more than one occasion. Mr. Taylor’s comments regarding ways to manage the construction of a renovation project using underused or unused space seems very logical to me. Since eliminating temporary classrooms has been a top priority of the design team to this point, perhaps there is a way to incorporate Mr. Taylor’s suggestion into the renovation of the building.

On the Sports Facility:
There is a pedestrian walkway connecting the new academic wing to the sports wing because the property is zoned for a single building. I know, a pedestrian walkway doesn’t seem to be part of a contiguous building but according to the law it is. It is my understanding that without the pedestrian walkway the sports facility would be in violation of current zoning laws. But, that is small potatoes. Mr. Taylor’s suggestion about re-orienting the pool and then building additional levels for wrestling and fitness on top of the extended pool complex seems very well thought out. Can it be done? It’s another great question for our current architects. If by chance this solution is selected, we cannot ignore the need to then do upgrades and/or expansions to the current field house and locker rooms. I understand the design team is working on figuring out where to put the two displaced tennis courts under the current design. I have not seen if there was a similar effort underway for the softball field. If you have followed the Board and Commission closely, you know that we already have a rather serious issue with having enough field space for our athletes. Removing another practice field from the mix will simply complicate things further.

On LEED:
Again, great points on destroying a perfectly good building to build another like-use building. I can see how that defeats the spirit of LEED/Reusable design.

On Some Omissions:
One omission was mentioned above. What the new athletic complex would have given us is some new locker rooms and space that would have taken the place of the field house. Without that complex we would then need to do something with our existing field house and locker rooms. This work could end up being significant. The second difficulty is figuring out how to improve band/music instruction in the building under Mr. Taylor’s solution. While our current staff and students seem to make the current environment work, I wonder if there is any way to improve it outside of a simple stale renovation of existing space

Conclusion:
All in all I find the report very helpful in trying to determine what direction to take the high school project. The report confirms some of the concerns I have had for some time. I trust Mr. Taylor’s experience and insight and hope the rest of the Board will not take this analysis as simply another email from a disgruntled resident.

Thanks for reading.

James

Summer Break

2009-07-09T10:06:00.001-04:00

I am taking a little break from blogging for awhile. I am focusing on a job search at the moment. Please still feel free to email me with questions and concerns as I am continuing to check email.

Have a great summer.

James

State Revenues from Income Taxes Declining

2009-06-18T08:24:00.003-04:00

The Nelson Rockefeller Institute of Government released a report the other day that shows states across the country are losing revenue from income taxes at an alarming rate.

Some of the conclusions in the report include:

-The sharp declines in personal income tax collections will punch still deeper holes in the budgets of many states. This increases the risk that state budget agreements for 2009-10 will not close budget gaps completely, and that states will need to make midyear budget cuts.

-These new data on income-tax revenues also make it likely that states will be forced to consider further spending and revenue actions in 2010, and will confront large budget gaps when federal stimulus assistance ends in 2011.

Pennsylvania experienced a 26% decline in Personal Income Tax between January and April of 2009. Because Personal Income Taxes make up 32% of our budget, you can see that being 26% short on 32% of your budget will have a significant impact on budget shortfalls. However, we are not as bad off as some other states. Arizona is seeing a 55% decrease in PIT. PIT makes up 25% of the Arizona budget. California was 34% lower in PIT revenues this year and PIT revenues make up almost 48% of their budget.

Something to remember about government budgets is that the revenues always lag. State and local budgets are set one year in advance and are based on the best projections available at the time. Last July, Harrisburg had no idea what the economy would be doing in April of 2009. They budgeted with their best guess. Now that best guess is going to be off by over 25%.

Each state will handle these shortfalls in their own way. Most will end up doing a combination of things including laying off workers, unallotments (as they are doing in Minnesota), tax increases, etc.

What I can say with confidence is that this recession is not over, especially when talking about the actions various states will be forced to take in June and July of this year (this is when budgets are typically passed). Pennsylvania is weathering this storm better than half of the other states but we will still be impacted. The 2009-2010 budget will be a tough one to pass, but it will be easy compared to what happens in 2010-2011.

The report concludes with this bit:

-It (the PIT situation) raises the risk that the newly adopted budget will take an optimistic view of the year ahead and may unravel as the year progresses, requiring midyear cuts. And because those solutions that are adopted may be nonrecurring in nature, it raises the risk that states will face larger gaps for 2010-11 when such non recurring resources go away

Thanks for reading.

James

Message from Senator Orie on Keystone Exams

2009-06-13T06:41:00.005-04:00

***
Edit-

I forgot to mention that our State Senator John Pippy is a co-sponsor of Senator Orie's legislation. Thanks to Senator Pippy for stepping up on this issue as well.

***

I received a message from State Senator Jane Orie yesterday regarding her attempts to curb the PDE's ability to unilaterally implement Keystone Exams. The message provides a great summary of how we got to where we are today and what is happening at the legislative level. Please see the full message below:

Dear Friend:

Thank you for your recent correspondence stating your opposition to the Rendell administration’s graduation competency assessment (“GCA”) scheme as well as conveying your support for Senate Bill 281, which would expressly prohibit any further movement on GCA’s without the express approval of the General Assembly.

In 2008, the State Board of Education included GCA’s as part of its proposed changed to their Academic Standards regulations. Under the proposal, all high school seniors would be required to pass a series of standardized exit exams in order to graduate. After receiving a tremendous flood of criticism against such a plan from citizens, school administrators, and educational experts statewide, the Pennsylvania Senate and House of Representatives passed a moratorium last July through Act 61 of 2008 that expressly forbid any further action on the GCA for one year.

Despite this clear directive to cease any and all activity related to GCA’s, the Department of Education began to solicit bid proposals for the development of these high school exits exams in the fall of 2008. Faced with the Department’s blatant disregard for the Act 61 ban, it became abundantly clear that this matter must be addressed with legislation conclusively banning any further movement on GCA’s. As such, I promptly introduced SB 281 in February.

SB 281 would bar any direct or indirect advancement of the GCA agenda by the Department. More importantly, the legislation would instruct the Pennsylvania Treasury not to expend funding related in any way to graduation standards unless specifically authorized to do so by the General Assembly. The crucial need for SB 281 was once more sharply reiterated when the Department recently executed a $202 million contract for the development of GCA’s. I would also note, that confronted with a projected deficit of over $3 billion, fiscal prudence demands that we not allow limited resources to be expended on new and unproven initiatives like the GCA’s when many other worthy current programs cannot be funded. Put simply, the Department’s actions in plain disregard to the Act 61 prohibition and our economic circumstances compel an immediate legislative response as embodied in SB 281.

Presented with this difficult situation, I am pleased to report that SB 281 overwhelmingly passed the Senate on June 10th with nearly unanimous bipartisan support (48-1). The bill now proceeds to the House and I urge my colleagues to act swiftly and curb any further action or spending towards the GCA initiative. To this end, you are encouraged to contact your own representative and convey your support for SB 281. Should you require any assistance in doing so, please do not hesitate to contact my offices at your convenience.

Once again, thank you for your contacting me and voicing your thoughts about such a significant issue. Your staunch advocacy is also most appreciated on behalf of all Pennsylvania students who could be considerably harmed by the hasty and irresponsible implementation of graduation tests. Please feel free to contact me whenever you have any other state-related concerns.

Sincerely,

JANE C. ORIE
Majority Whip
40th Senatorial District

Thanks to Senator Orie for taking a leadership role on this legislation.

Thanks for reading.

James

Senate Education Committee Votes to Stop Keystone Exam Funding

2009-06-05T10:28:00.003-04:00

In a bi-partisan effort to stop the Governor from unilaterally implementing the Keystone Exam/GCAs, the Senate Education Committee voted unanimously to block the contract that was awarded to the company that was designing the tests.

From the Pittsburgh Trib:

Senate Education Committee votes to block contract with testing company

HARRISBURG — A high school graduation exam drew fierce opposition Tuesday from members of the Senate Education Committee, who voted unanimously to block a $201 million contract with a Minnesota testing company.
For almost two hours, senators from both parties skewered Education Secretary Gerald Zahorchak for proceeding with a seven-year contract without legislative approval at a time when Pennsylvania faces a $3.2 billion deficit.

Even members of Democratic Gov. Ed Rendell's party, especially Sen. Anthony Williams of Philadelphia, criticized the contract.

"The reason why we're having the hearing today is because every time we ask a question, the response is sort of condescending," Williams told Zahorchak. "You sort of act like, 'What right do you have to ask a question?' I'm concerned about how we arrive at moments like this, which are embarrassing to all of us."

The committee approved a bill by Senate Majority Whip Jane Orie, R-McCandless, requiring that any graduation exam be approved by the General Assembly. Orie, calling the Rendell administration's action "unconscionable," predicted the bill would move through both chambers with a veto-proof majority.

Orie said the bill would negate the contract signed last month with Data Recognition Corp. for the tests. She said the contract is flexible enough that the state would not owe the company money for canceling.

Rendell fired back hours later: "If it becomes law, I will veto it." He said states surrounding Pennsylvania have such exams.

"Do you think all the states have it wrong and we have it right?" Rendell said business leaders across the state back the exams. The opposition was driven by a "special interest," the Pennsylvania State Education Association, the state's largest teachers union, the governor said.

"The fact other states might be doing it doesn't mean Pennsylvania should do it," PSEA spokesman Wythe Keever said. He said 23 organizations across the state oppose the exams, ranging from the NAACP to the Disability Rights Network of Pennsylvania.

The opposition had less to do with the tests than a perception by senators that Rendell's office was dictating education policy without legislative input.

Deeming the situation a "corruption of the legislative process," Sen. Mary Jo White, R-Venango, said, "It is not the Department of Education's job to determine education policy for the entire state."

Zahorchak said the $8 million included in this budget and $20 million next year for the contract are a fraction of the $10 billion the state spends on education. He said it is important to measure students' competency before they go out in the work force.

Committee Chair Jeffrey Piccola, R-Dauphin, supports the idea behind graduation tests but said he is disappointed by the Education Department's "absolutely miserable job" of communicating with the Legislature.

"You're asking us to kill a mosquito with a sledgehammer," Piccola said.

"You can use the sledgehammer, but its not me who will be punished by it," Zahorchak said. "It's generations of kids."

Michael Hauser, principal at Moon Area Senior High School, supports the idea behind the so-called Keystone exams but believes Rendell rushed the issue.

"Ultimately, having some type of standardized assessment of what kids are learning across the commonwealth is not a bad thing, but we need to move forward at a reasonable pace," Hauser said.

Erin Vecchio, a Democratic committeewoman and school board member with two children at Penn Hills High School, does not support the standardized exams. She fears the tests would cause teachers to change the way they teach students.

"It doesn't mean that anyone is going to be educated unless you're going to teach them the test," Vecchio said. "You're teaching the kids how to do the test instead of teaching them how to learn. What good does that do?"

Thank you Senator Orie for stepping up and getting this done.

Thanks for reading.

James

High School Project Update and Thoughts

2009-06-03T09:20:00.003-04:00

On Monday, June 1, the Board held a special meeting regarding the high school project. We went over the revised design and had the opportunity to ask questions of the architect. Please refer to the documents from the presentation here.

As I mentioned in my last post on this topic, I do like how much better the outside look of the building has improved from the original curved design presented months ago. However, over the past two weeks there have been a number of questions from the public and the Board that needed to be answered on Monday.

Let me list them in no particular order of importance:

1) Question: Did the architects plan for the moving of large musical instruments from the current pool area all the way over to the Auditorium/Little Theater Area? Did they allow for the fact that when there are performances in these areas that the students involved in these activities will need places to change and places to store equipment/clothes/personal item?

Answer: On the first question the architects responded that they will be building a large ("as large as we need it") freight elevator to move the instruments. On the second question...I don't remember hearing an answer. If someone else did, please let me know. The current spaces used as storage/changing spaces for performances are scheduled to be used as Applied Arts classroom space (see page 16 on the presentation). Is this an irreconcilable difference? Tough to tell. I have received numerous emails from parents stating that this is unacceptable and one email from a parent saying this is no big deal- that instruments are moved all the time. We do have a convoluted way of moving our instruments from one place to another now. Is it just that there was an expectation that this would be improved in this design or is this a matter that is a showstopper? I'd like some more feedback on this.

2) Question: What's up with the tennis courts?

Answer: The architects have vowed to find space for a total of 6 tennis courts. As pointed out by an experienced coach, we need to ensure that the 6 courts are located together and not across the street from one another. Having four on one side of Horsman Drive and two courts on the other would not be conducive to coaching a varsity tennis team.

3) Has there been a traffic study done on Horsman Drive to ensure that it can be a 2-way road?

Answer: No, but we expect to have one soon. For me, there is no doubt that Horsman can be made into a two way street. There is certainly space for it. But my concern is not so much for Horsman as it is for Lebanon Ave and Hollycrest Drive. Lebanon is pretty narrow at the top of the hill and I suspect that making Horsman a two way street would require the widening of Lebanon Ave from the top of the hill down to the stoplight. Hollycrest is also a very narrow residential street and one where the residents probably do not expect to have a serious increase in traffic by people/students going up their street to take a right on Horsman to drop off/pick up/park, etc. Maybe this is a municpal issue but it is a pretty serious one given the debate about traffic calming measures that have been taken by the sitting commissioners. Is this a dealbreaker? I'm not sure I can vote for this plan without a traffic study/commission meeting that says they will allow the extra traffic on those streets. Additionally, if we do need to widen the road at the top of the hill, who pays for that? If it is the District, then that cost is not included in our most recent documents.

4) What is the deal with the pool?

Answer: It appears that the Board is willing to increase the size of the pool from 6 to 8 lanes. The pool is a different animal than most of the other aspects of the school in that it is perhaps the most widely used community asset the high school has. Setting this pool up for more community use makes sense. Simply repeating the issues we have with the current pool would be a mistake. I am hopeful that the architects will take up a resident's recommendation to contact USA Swimming and talk about a design that works not only for our swim team, but for the community as well. There are plenty of examples out there of good combination community/school use pools. I believe there will be ways to reduce the cost of the pool while also building one that is a better fit for the community. Please see this link for a possible alternative. This link has also been given to our architects and design team. Here is a picture of what a possible "stretch" pool might look like. This design would not be exceptionally larger than what is currently planned.

5) Will the athletic spaces meet Title IX requirements for our student athletes?

Answer: The architects said that they would. There is a concern that, given how many student athletes we have, we would be cramming them all into small locker rooms. This is borne out by the evidence gathered by two different studies, one by Dejong and the other by RSH Architects (who were hired on behalf of the Blue Devil Club). If we are to remove the field house, we would eliminate over 20,000 square feet of field sports facility space. The new design does not make up any lack of existing space, it simply builds a newer space.

6) How much is it costing us to have a design criteria that says we are not to use temporary classrooms?

Answer: Noone knows. Director Hart first asked this question. Due to a lack of any clarity on the answer, I asked it again. I received the same answer. The architects cannot quantify how much this is costing. What is clear is that the design of this building (the "Z" shape) is predicated on not demolishing building C until the new academic wing is built. We need that classroom space if we are not to use temporary classrooms. This is the reason why the length of the building is barely shortened (another design criteria that apparently is only being mildly met by about 45 feet from one end of B Building to the far end of G Building). What would happen if we took out this single criteria? I get that there are a lot of people against temporary classrooms. Apparently people here have had negative experiences with them. As someone who grew up in temporary classrooms from 3rd grade through high school due to increasing student population and therefore demand for inexpensive additional classroom space, I can say that I really didn't care much if my class was in a well ventilated air-conditioned temporary classroom or in the main building. On hot days, it was always much better to be in the temporary room. I get that there is serious sentiment against using these classrooms here, but at what cost? The architect said that he was told to avoid temporary classrooms "at all costs". Surely, that is not a good way to think about this. At a $1 million cost? What about $5 million? What about $10 million?

To me, not knowing what "at all costs" is actually costing us is one of the reasons I am leaning towards voting against this footprint design.

As a final note, some will remember way back in January that I proposed we invest some money in the school now, pay down some debt, and plan for a major renovation/construction project for 2016-2017. I was told, as was the public, that the costs of renovating B Building alone would make this plan cost-prohibitive. In the latest architect costs, please note that B Building in now the LEAST expensive building to renovate at $127 sq/ft. Total cost of renovation of B Building is sitting at $14 million. This is much less than the $20-30 million number that was given as a deterrent to such a plan back in January.

That $14 million number is very well within the range of what I thought we could afford to do. I suggested in January that we use the Guaranteed Energy Savings Plan to invest in the existing school building which would cut the costs of this plan possibly in half and leave us with a viable option for a future new building in a few years.

Thanks for reading and please give the Board any feedback before Monday's meeting.

James