Education Funding for Successful Generational Transitions in Pennsylvania: Not Easy

1. Education Funding for Successful Generational Transitions in Pennsylvania: Not Easy Maureen W. McClure Vera Krekanova University of Pittsburgh October 3, 2014

2. Education is a Core Purpose of the State: Protects Generations as They Transition from Youth to Old Age McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 In Pennsylvania, we can no longer take this for granted PA is a rapidly aging state and taxes little retirement income, while more younger people need extra help in school Will the growing generational dependencies of the young and the old contribute to instability in school districts and regional economies? Perhaps Need to start a conversation about them

3. We Need to Better Understand District and Taxpayer Burdens as Populations Shift McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 We need to better understand and assess the consequences of generational shifts, and how they will affect regional economies, districts and taxpayers…e.g., Will it mean slower economic growth? Data analyses of Pennsylvania’s demographic shifts and associated costs are already available, but are not yet well coordinated when considering education funding and strategic planning either at the state or local levels It is time to examine funding indicators and how demographic shifts will affect taxpayers

4. State Has a Limited Capacity to Protect Education Funding from Generational Shifts McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 • This could lead to trouble : • Two types of shifts in dependencies: Demographic and Economic • Demographic dependencies (children and aging populations) • Rapidly growing populations of retirees offset by • Rapid declines in numbers of taxpaying age groups with career high incomes • Economic dependencies (people unable to work in any age group) • Unemployed, not in labor force, and those with disabilities • All limit the state’s capacities to produce income

5. Generational Shifts are Politically and Economically Destabilizing McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 • For example, the state’s regulation of county level property assessments has been weak and unfair for many decades…yet shifts to income or sales taxes may make things even worse (see other Consortium papers) • Aging taxpayers often want to stay in their homes for as long as they can, but rising school district property taxes threaten some • In the past seniors have tended to support education, but moving forward, that can’t be taken for granted

6. And…the 65+ Generation VotesMore Often… • Than other age groups… McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014

7. How Big a Problem is it for School Tax Bases? McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014

8. Education is Dependent on All Ages McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 The shape of a population can be important for government policy and planning because it forces us to think across generations and their dependencies Education is not an isolated sector – Need to look at the whole population over time First, we will examine demographic dependency ratios - These measures indicate the number of people who are too young or too old to work, relative to the number of people of working age Second, we will examine economic dependency ratios -These measures indicate the employment status of those who are, who are not, and who are unable to be employed

9. First, How to Read a Population Pyramid McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 Pyramids are a good way to show the shape of a population Age groups broken out by Males on the left and Females on the right- Youngest at the bottom, oldest at top Traditionally this looked like a pyramid, but that started changing about fifty years ago, especially in developed countries Let’s start with Mexico- It is a transitioning country so notice the rounding at the base as parents are having fewer children – but still looks fairly traditional – notice no baby boom

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11. What Do You Think PA’s Pyramid Looks Like? McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 Take a guess – Mexico’s median age is about 26 -PA is over 40 –Afghanistan’s is about 18 Pennsylvanians are living longer – must be a great place to live We know baby boomers are already affecting school district funding as they leave taxpaying jobs and move into tax exempt retirement incomes We also know about one half of children born today are to single mothers – many with limited resources- extra costs for school districts in aging state with shifting policy priorities So, did you think it would look like this?

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13. What Do You See? McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 Baby Boom pushing the edges, followed by a rapid decline, followed by growth created by their children, the “Echo” generation Declining numbers of births again in recent years This in contrast with growing numbers of competing charter schools, cyber-schools and schools of faith Top heavy, a little unstable? Too soon to tell?

14. Quick Look at Demographic Dependencies Around the State McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 First, my home borough, Oakmont Then my school district, Riverview, where I am on the school board – emphasis on the population over 80, more likely to have disabilities, still vote Next at the county level which indicates a larger economy than a school district – and has elected officials who make economic development policies that affect the region Finally, return to the Pittsburgh MSA regional economy as a case that examines the economic dependencies created by employment opportunities

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17. How Will These Changes Affect School Districts? McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 • Scale problems - Districts may be more prone to financial instability because most are relatively small • Even “gated” districts may be vulnerable because they are still nested inside larger regional economies • Elderly may support education, but they may need to shift it to a lower priority as taxes increase • Poorer districts are likely to take the biggest hit because: • Aging populations are likely to be women who have limited access to Social Security because they weren’t in the workforce • If they were in the workforce, they generally made less money than men and will have more limited access to pensions…they live longer, and they vote…

18. Counties: Building Regional Economic Growth McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 Counties are likely to face problems as the costs of generational transitions rise with aging populations Older workers retiring later out of concerns for economic stability… Are they shutting out younger workers? Younger workers with education debt and limited access to jobs may leave Let’s look at counties around the state with some growth potential: Allegheny County, Pike (rapid growth), Bucks (wealthy suburban) and Lycoming (Marcellus Shale)- Do they face generational issues? If so, are they enough to limit capacities for additional taxation to share with other, poorer counties?

19. Allegheny County A little less stable than the state McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014

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21. Pike County What happened? Hollow core…. McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014

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23. Bucks County Now too expensive for young people to move in? McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014

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25. Lycoming County Marcellus Shale country… Notice skewed growth of young males McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014

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27. The Future Is Here …Now… McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014

28. Pittsburgh MSA Region as a Case McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 Regional cases are also important to understanding education tax capacities because economies are regional Not all those of employable age….are…. Different age cohorts have different combinations of workers and non-workers –Need to look at employment status, compensation and disabilities

29. Look at Four EconomicDependency Indicators McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 Unemployed Low-wage employed Not in labor force People with disabilities

30. Employment Status by Age Male Female McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014

31. Employed: Hourly Wages McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014

32. Disabilities Can Also Limit Ability to Pay Taxes McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014

33. And Then There Is This One Other Thing …Time Shifts… McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014

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35. Significant Population Shape Shifts in Only Five Years McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 Baby boomers moving into retirement age and out of higher earning tax brackets Shortfall in number of eligible taxpayers in higher earning age groups Baby boom “echo” showing similar disruptions Need to better account for the shape of taxpayer populations

36. So What Does This Mean? McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 “Shape shifting” generational cohorts matter to the state’s education funding and strategic planning functions Rising dependency rates may financially destabilize some school districts – gain of elderly + loss of income earners Seniors should be at the table now – because they will vote later We also need to attract and retain younger cohorts so they don’t leave – build on strengths of higher education in PA We need a broader conversation about trans-generational education funding policies

37. Should Demographic and Economic Dependency Ratios Be Part Of The Education Funding Solution? McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 Yes. Need better indicators of the roles of generational shifts in education funding today Can dependency ratios used in other sectors be adapted to meet educational needs? Worth a try Need for generational fairness on all sides to avoid competing interests

38. Education is An Essential Solution To the Rapidly Growing Complex and “Wicked” Problems of Successful Generational Transitions McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014

39. Thank You McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 Maureen W. McClure Associate Professor Administrative and Policy Studies School of Education University of Pittsburgh Pittsburgh, PA 15260 Phone: 412.648.7114 E-mail: mmcclure@pitt.edu Data Sources: US Census Summary File 1: QT-P1, Three Rivers Workforce Investment Board, and The Center for Rural Pennsylvania

40. APPENDIX McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014

41. Education for Whom? McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 • What kinds of jobs does the next generation need to be successful? • PA business is not a monolith and education funding policies need to better recognize these differences • PA has different kinds of industries with different kinds of jobs • High Wage – High Employment/ High Wage – Low Employment • Low Wage – High Employment/ Low Wage – Low Employment • Will older workers with good jobs be replaced by younger workers? Or will many current good jobs disappear? • Not only a “skills gap,” also a “good jobs gap”

42. Good Jobs Aging Out? About 1/5 on high wage jobs will age out soon McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014

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44. Good Jobs Gap Many young people in low wage industries… how many will be able to overcome “skills gap” and make the leap to higher paying industries? McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014

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46. Generational Transition Problems are “Super Wicked” McClure and Krekanova, School of Education, University of Pittsburgh, University Consortium to Improve Public School Finance and Promote Economic Growth, October 3, 2014 Defined as a mega-wicked problem where in addition to being wicked (can’t be “solved,” but must be dealt with)… Time is running out Weak or no central authority Those seeking solutions are causing the problem Policies discount the future irrationally (Levin et al 2012)