Wednesday, March 21, 2012

Allegheny Institute examines Mt. Lebanon School District's fiscal predicament

The Allegheny Institute released a new policy brief today. The subject? The fiscal woes of the Mt. Lebanon School District: School District Seeks Answers.

Since the brief looks into a subject both important and interesting to Mt. Lebanon residents, I'm going to reprint it below (courtesy Allegheny Institute).

Allegheny Institute for Public Policy

March 21, 2012
Policy Brief: Volume 12, Number 16

School District Seeks Answers

(March 21, 2012) — Cut personnel, raise taxes, or dip into the savings account. Those are the choices facing one of the largest school districts in Allegheny County. As the 2012-13 fiscal year approaches, Mt. Lebanon is grappling with the question of how to deal with a $2 million deficit. The deficit could increase to $3 million depending on the ruling on a grievance filed by teachers regarding retroactive benefits for substitutes who become full time teachers.

With the level of state education funding stalled, the past few years of rapidly rising costs have caught up with the District – a scenario that is likely developing in many districts. In Mt. Lebanon the trends in several key measures have definitely been unfavorable over the last ten years. Enrollment is down while employee benefits and property tax levies are up substantially.

Based on the audited financial report available on the District’s website, from 2002 through 2011 enrollment fell from 5,616 to 5,268 (-6%). Over the same period full-time equivalent employee headcount rose 3.5 percent. The categories of supervisory and student services personnel were both up 16 percent while instruction and support/administration are up 2.5 percent and 1.6 percent, respectively.

Astonishingly, the audited data show fringe benefits have jumped from $6.4 million to $13.9 million (114%) during the 2002-11 period, pushing the ratio of fringe benefits to salaries in the District from 20 percent to 34 percent in 2011. If the $1 million grievance settlement is awarded the fringe benefits to salaries ratio will almost certainly rise even further. Total outlays climbed 42 percent over the period, boosting per pupil expenditures by 52 percent. Note that from 2006 to 2011, SAT scores were flat, although still well above state and national averages.

Will the District raise property taxes? Been there and done that. Notwithstanding the County assessment freeze that was touted as a way to curb property tax increases, audited financial data show that after reducing the property tax rate from 20.76 mills to 18.12 in the 2002-03 year, Mt. Lebanon school tax millage rate was raised every fiscal year since except for 2007-08 and 2011-12. For 2011-12 the tax rate is set at 26.63 mills, almost 50 percent higher than the 2002-03 rate. By comparison, the average Allegheny County school district rate for this year is just over 23 mills according to the Pennsylvania Department of Education.

Since there was no reassessment during the period, the change in the adjusted net property tax levy – from $38.8 million in 2002 to $55.8 million in 2011 – is largely accounted for by the millage change. Meanwhile, the Municipality of Mt. Lebanon (which is geographically the same as the School District) raised its millage and the County rate was left unchanged. Thus, the property taxes paid to the District by Mt. Lebanon property owners climbed much faster than the taxes paid to the municipality or County.

To cover a $3 million shortfall, the Mt. Lebanon Board would have to raise millage by 5.4 percent on current assessed valuations, well above what is allowed by the Act 1 index. However, the reassessment coming in 2013 makes the situation more complicated. Due to the reassessment, the total assessed valuations in the District are expected to rise by 30 percent next year. Thus, the District must roll back the millage rate to hold the total tax collections at the increase allowed by Act 1 index – either 1.4 percent or 1.7 percent, depending on which index the Department of Education determines the District will use to comply with Act 1. Nothing precludes the District from raising taxes up to that index and it can seek an exception from the Department of Education to raise the millage higher. It can also place a referendum on the ballot asking voters to approve a larger rate hike. In light of all the tax increases in recent years, raising the millage any amount is highly questionable, but to ask for 5 percent higher taxes by a filing for an exception or using a referendum could ignite a firestorm of protests, especially from owners whose property assessments go up by well over the 30 percent average increase in the District.

Clearly the District is at a point of having to make some hard decisions, a situation similar to the ones facing other schools and local governments as they seek to balance the interests of taxpayers, students, and employees. That’s the Board’s job. The present situation should not come as a surprise. We noted in a Policy Brief over two years ago (Volume 10, Number 9): fringe benefits and debt service were projected to rise in a budget forecast, and taxes would rise as well. The forecast projected that state assistance would rise to more than $21 million by 2015: the preliminary budget for 2012-13 anticipates $14 million in state sources. That means state appropriations to the District would have to rise 50 percent in two years to meet the forecast from two years ago. That is quite unlikely given the state’s fiscal situation. It is possible some additional funding will be coming with much of that going to the school employees’ pension fund.

The District is hiring a consultant to look for a way to raise revenue other than from taxes. The Board might want to work with other districts to change the retirement system to a defined contribution system for new hires or unvested employees. Cutting costs should be a top priority. There is always a way to find cost reductions if one looks hard enough. Granted, union contracts and state laws can make that difficult in some areas, but if a 4 percent spending reduction cannot be found, then the Board is not trying very hard.

Jake Haulk, Ph.D., President
Eric Montarti, Senior Policy Analyst

Policy Briefs may be reprinted as long as proper attribution is given. For more information about this and other topics, please visit our website:

If you wish to support our efforts please consider becoming a donor to the Allegheny Institute. The Allegheny Institute is a 501(c)(3) non-profit organization and all contributions are tax deductible. Please mail your contribution to:

The Allegheny Institute
305 Mt. Lebanon Boulevard
Suite 208
Pittsburgh, PA15234

Labels: , ,

Bookmark and Share


Anonymous David Brown said...

Will the District raise property taxes? Been there and done that.

Conversational style reads like a bar argument, not a serious analysis, and is a good indicator of what this "Institute" really amounts to. Pseudo-academic drapery does not add substance to the opinions expressed and once exposed actually detracts. An editorial promoting fiscal responsibility is good enough by itself that it doesn't need to be ginned up as a "Policy Brief" by one's pals and then reported as if it is now news.

The Board might want to work with other districts to change the retirement system to a defined contribution system for new hires or unvested employees.

I actually agree with that. The rest of the world has to cope with retirement uncertainties so why should public employees get guarantees? But that goes for all public employees, not just teachers. Are our conservative pundits prepared to give our new police hires the same deal?

If you wish to support our efforts please consider becoming a donor to the Allegheny Institute...

Where did this come from? It's not part of the linked policy brief yet it's included in the indented text as if quoted from the original. When did BlogLebo become a shill for Allegheny Institute? Obvious echo chamber is obvious.

March 22, 2012 12:21 AM  
Blogger Tom Moertel said...


Do you have any substantive criticisms of the Allegheny Institute piece – some reason to believe that its claims are actually wrong, for example – or are you just doing a drive-by to take a shot at the Allegheny Institute and to suggest that we at Blog-Lebo are shills?

Are you at all concerned about whether the gist of the Allegheny Institute piece is true?


P.S. The bit about donations came from the emailed version of the brief, which is what I quoted the bulk of the text from. (Its formatting was better.) I linked to the PDF version, however, because that’s easier for readers to print.

March 22, 2012 12:59 AM  
Anonymous Anonymous said...

Considering the "light" that the Allegheny Institute brings to the county and Mt. Lebanon more people should support their efforts.
Joe Wertheim

March 22, 2012 4:49 PM  

Post a Comment

<< Home