















































More Trouble Ahead for Public School Finance


More Trouble Ahead for  
Public School Finance

The Implications of Generational Change  

in Pennsylvania

MAUREEN W. McCLURE
University of Pittsburgh

VERA KREKANOVA
University of Pittsburgh

Pennsylvania’s generational transitions will be rockier and more expensive for 
education finance than is publicly acknowledged. Debates over both the ne-
cessity for and the affordability of tax increases already frame state education 
budget debates. Education policy and planning data, especially at regional and 
local levels, tend to be isolated from other sector wide and cross-sectoral data. 
This study explores the examples of tax capacity and workforce quality data 
and concludes that two issues state, regional, and local education policymak-
ers can’t ignore are increased dependency ratios and a smaller workforce with 
fewer economic opportunities. Aging seniors increase dependency ratios, are less 
mobile, and enjoy lighter tax burdens, putting greater public responsibilities on 
the labor force. Younger, educated workers have heavier tax burdens and are 
more likely to leave for younger states with less heavy tax burdens.

For the last 30 years, education finance policies in Pennsylvania were 
framed largely in terms of battles over expenditures. This, for the most 
part, included resources related either to access (inequalities, needs, 

adequacy, etc.) or to choice (charters, accountability, etc.). In contrast, in more 
centralized education systems internationally, discussions about education’s 
contributions to provincial and national development and consequent rev-
enue generation were popular. In the much more decentralized United States, 

COMMONWEALTH, Volume 18, Issue 1 (June 2016). © 2016 The Pennsylvania Political Science Association. 
ISSN 2469-7672 (online). http://dx.doi.org/10.15367/cjppp.v18i1.84. All rights reserved.



50 MAUREEn W. McCLURE AnD VERA KREKAnoVA

development policy left education largely relegated to the margins. In the 
Commonwealth, some local school districts were highly engaged in regional 
workforce development issues, but over the last few decades, state interest in 
them has been limited. Education policies have focused instead on the con-
tributions of classroom instruction and the structures of its delivery systems.

Why then is regional workforce development so important now? Without 
sustainable growth in the state’s tax capacities, it will be difficult for Pennsylva-
nia to manage its growing problems of aging taxpayers, relatively poor youth, 
and pension obligations. One well-known concern is the threat to economic 
growth that may be presented by unprecedented shifts in the shapes of state 
populations. Florida’s population is growing. Pennsylvania’s is flatlined. Given 
the irreversibility of many of these demographic shifts, without offsetting eco-
nomic growth, these shifts are likely to threaten education’s revenue streams. 
The state’s shifts in the internal distributions of its age cohorts are linked to the 
stability of the education sector’s abilities to meet its future obligations.

The impacts of shifts in the state’s population shapes on its tax capacities 
have been more carefully considered in other sectors, such as rural and urban 
development. The education sector not only needs to integrate other sectors’ 
existing analyses and projections, it also must take greater responsibility for 
more transparent reporting of its contributions to development beyond the 
schoolhouse door. The reasons are clear. Growth is essential to offset increas-
ing demands for services. The education sector competes at the state level with 
other development sectors. Is the growth of populations with limited incomes 
making the state a more expensive and less competitive place to live? If so, 
how is education helping to mitigate these problems and promote growth? 
And how can these issues be more widely incorporated into local or state 
strategic planning for education and workforce development?

These shifts need more nuanced analyses when considering education 
finance policy. For example, what are the potential threats to workforce quantity 
and quality? In terms of quantity, baby-boom retirees have relatively few work-
ers in the taxpaying age cohorts just behind them. In terms of quality, many of 
today’s workers lack job stability, earn low wages, have few benefits, and face 
limited paths to upward mobility. The connections between education, develop-
ment, and growth are not easily measured. These relationships are instead both 
historically messy and wickedly contested. They cannot, however, be ignored. 

The state needs to better assist its Department of Education (PDE) in 
its efforts to provide better access to sector-wide, as well as cross-sector 
data and analyses. State, regional, higher education institutions (HEIs), and 
Local Education Agency (LEA) planning can benefit from this improved 
access.



More Trouble Ahead for Public School Finance  51

Prologue

Pennsylvania’s generational transitions will be rockier and more expensive 
for education finance than is publicly acknowledged. Debates over both 
the necessity for and the affordability of tax increases already frame state 
education budget debates. State policy’s costing, data collection and analy-
sis capabilities, however, have not yet been either well integrated or broadly 
disseminated for use in strategic planning across the education sector. This 
includes the PDE, HEIs, and LEAs. In Pennsylvania, LEAs include: career and 
technical centers, charter schools, intermediate units, school districts, special 
program jointures, and state juvenile correctional institutions 

PDE’s data collection and access capacities have greatly improved over 
the years. The department has come a long way from compliance data tapes 
sitting in isolated offices to online, multiyear data that are easily download-
ed from their website. Education’s contribution to revenue generation and 
development issues (tax capacities, workforce quantity and quality, economic 
growth, quality of life, etc.) are, however, only marginally referenced.

Currently, PDE has only limited requirements for data related to cost-
ing, revenue generation, tax burden, or contributions to community stability, 
growth, and workforce development in their mandated strategic planning for 
school districts. Consequently, PDE access to multisector data and analyses 
in these areas have not yet been made easily available, visible, or deeply inte-
grated within the education sector and across other sectors.

Demographic concerns are central. They can be framed as the problems 
of growing dependencies. As the state’s dependency ratios rise, so do the risks 
for the state’s tax capacities, perhaps especially for the education sector.

Total dependency ratios very roughly compare  
the economically active and inactive.

Dependency Ratio = 65+ years old + 14 years or  
younger ÷ Total working age population (15–64).

Young-age and old-age ratios are also popular.

The scale and rate of population aging have been triggering anxieties among 
policy makers (and the public) about the financial capacity of societies with 
populations over 65 surpassing the populations under 15 (Beard et al. 2011).
Dependency ratios can only be rough measures, as population behaviors are, 
of course, much more complicated. For example, the intensity of the depen-



52 MAUREEn W. McCLURE AnD VERA KREKAnoVA

dency is not measured (many 65+ work, many of working age can’t, etc.), but 
these issues can be addressed elsewhere by workforce quality data.

Data are available to help refine dependency ratios and their consequences 
for shifting tax capacities and workforce development. Given rising costs and 
riskier returns, the education sector increasingly needs to more visibly justify 
public investments in it. One way is to demonstrate the sector’s connections to 
Pennsylvania’s growth risks, tax, and workforce capacities. To what extent are 
the state’s fewer young families both poorer and less prepared for higher edu-
cation, and thus educationally more expensive than their parents’ generation?

Pennsylvania’s major sectors such as education, health, and infrastructure 
need to make their contributions to state and local development much more 
visible for two reasons. First, as a direct contributions, education prepares the 
next generation for the inheritance of civil society. It is essential. Second, as 
far as indirect contributions, the generational security required for econom-
ic growth can often be overlooked. Public education not only grapples with 
problems of student achievement, it also supports families’ and communities’ 
efforts to raise children who can govern civil societies and make their way in 
changing economies.

These cooperative, generational efforts reach beyond the important needs 
for standards and accountability. A larger generational question is what ethi-
cal roles and responsibilities Pennsylvania has in helping students, families, 
and communities consider what it means to be a U.S. citizen in an increas-
ingly complex international political economy. A smaller generational ques-
tion is what are the ethical roles and responsibilities of schools in avoiding 
misaligned regional and state workforce quality.

Workforce quality, as it is used here, refers to

• levels of employment (full-time, part-time, etc.)

• levels of workforce capital (human, social, and cultural)

• levels of income

As workforce quality shifts and enrollments decline for a while statewide, it 
cannot be business as usual for education planning and funding policies.

The state’s education funding policies and practices need to begin to 
reflect a more nuanced understanding of the state’s taxpayers. While state 
public policy debates have acknowledged the growing impacts of generational 
transitions on tax bases, greater support is needed not only for local analysis, 



More Trouble Ahead for Public School Finance  53

planning, and management, but also for greater public visibility for these criti-
cal issues. As the Commonwealth’s shifting population reshapes its political 
economy, it creates problems that are both too difficult to be easily solved and 
too important to be ignored.

Education: Losing Its Fan Base? 

It is already well known that the baby-boom cohort (born about 1946–1964) 
is leaving the workforce for retirement, placing new fiscal burdens on the 
state in two ways. First, they visibly place demands on state expenditures. 
This burden comes primarily in terms of health care and public pension 
payouts. There are not only more of them; they are living longer. Without 
sufficient economic growth, the additional payouts needed to cover these 
retiree costs may threaten education budgets. Second, retirees in Penn-
sylvania don’t pay income taxes on their pensions. This places downward 
pressure on tax capacities at the very time demands on it are increasing. It 
also puts pressure on economic growth to offset this downward pressure. 
Third, the baby-boom generation is creating scale problems because as they 
leave income tax generating jobs for retirement, they are being replaced by 
cohorts of fewer people.

In addition, the Generation X cohort (born about 1965–1980) may not 
generate as much in income taxes, not only because there are fewer of them, 
but also because many of the jobs held by those retiring, including higher pay-
ing ones, are being eliminated (Newhook 2015; Powell 2013).

Younger cohorts, Generation X, millennials (also known as Generation 
Y or the Echo Generation, born about 1981–1995), and Generation Z (born 
about 1996–2015), have grown, or are growing into, labor markets more chal-
lenging for many than the ones their parents faced when they were young 
(Carnevale, Hanson, and Gulish 2013; Taylor 2014).

The growing state impacts of generational transitions on tax bases are bet-
ter known in Harrisburg than in LEAs and HEIs. This means creating more 
public fora for education and development debates on the consequences of 
shifting population shapes. For example, it seems unlikely that most school 
districts have incorporated the Independent Fiscal Office (IFO) reports into 
their state-mandated strategic plans. Nor have many conducted a nuanced 
analysis of the tax capacity consequences of changing demographics within 
their own districts. The Commonwealth’s shifting population shapes and ris-
ing dependency rates are creating problems for the education sector that are 
too difficult to respond to in a sector-isolated approach (McClure, Sabina, and 
Krekanova 2016).



54 MAUREEn W. McCLURE AnD VERA KREKAnoVA

Historically Unique

What is raising the urgency levels for local, regional, and state education 
policy makers now? Two things: uniqueness and complexity. First, the scale 
of population shifts in many developed countries is historically unique. The 
baby boom began in the aftermath of World War II and ended roughly with 
the widespread availability of reliable birth control measures in the early 
1960s. This generational cohort was not only much larger than those before; it 
was also living longer. A major event such as the baby boom is a “black swan,” 
meaning it has high historical impact and is without precedent (Taleb 2010). 
This means approaches to strategic planning designed in the late 20th century 
no longer hold as well as they did before. For example, a needs-based focus on 
access to and quality of resource expenditures may overlook a capacity-based 
analysis of revenue generation projections.

Current population shapes in the United States and other nations are 
already radically different from more traditional images of population pyra-
mids still present in countries such as Mexico. In comparison, the U.S. popu-
lation pyramid, has for some time looked a little more like a lumpy rectangle 
(see Figure 1). The lumps were created by the aging boom and its echo genera-
tion. In a larger sense, these problems are only temporary, as the population is 

Mexico - 2015 Population 

75+ 2.3% 2.8%

65 - 74 3.9% 4.4%

55 - 64 6.7% 7.6%

45 - 54 10.3% 11.3%

35 - 44 13.5% 14.0%

25 - 34 16.1% 15.8%

15 - 24 18.5% 17.4%

< 14 28.8% 26.5%

Males

Females

USA - 2015 Population 

75+ 5.2% 7.4%

65 - 74 8.2% 9.0%

55 - 64 12.5% 13.0%

45 - 54 13.4% 13.4%

35 - 44 12.7% 12.4%

25 - 34 14.1% 13.4%

15 - 24 14.2% 13.1%

< 14 19.6% 18.3%

Males

Females

USA - 2015 Population 

Figure 1. Population Pyramids. (Data Source: U.S. Census Bureau, 2015.) 



More Trouble Ahead for Public School Finance  55

already shifting again. Temporary, however, as it is used here, is measured in 
decades. These shifts have significant consequences for both educational rev-
enues and expenditures and will last for some time. This is not news. Neither 
is its absence from education sector planning.

Pennsylvania today is wealthier in data than in strategy. The state has 
already aged. Aging means rising interest in sectors other than education. It 
also means there are large numbers of taxpayers and voters who are currently 
leaving the labor force and perhaps leaving behind a degree of interest in vot-
ing for and ability to pay for increased taxes for education.

More Limited Pathways for the Young

As boomers retire, many jobs are either disappearing or will not be filled 
because of a “skills gap” some young people face as they are unprepared for 
high skill, high wage jobs (Schleicher 2013; Symonds, Schwartz, and Ferguson 
2011). In the past, young workers with limited educations could informally 
develop skills through experience on the shop floor. This allowed them to work 
their way up from a working-class existence to a more stable middle-class life. 
Today, however, there are fewer shop floors to create the informal education 
paths needed for upward mobility. There are instead many more dead-end, 
low-skill, low-wage jobs with limited access to paths leading to middle-skill, 
middle-wage jobs (Center for Workforce Information and Analysis 2015).

Can Pennsylvania Eschew Perverse Incentives?

Today’s younger citizens are poorer, needier, and may be more likely to be 
thought of as “other,” not us. For example, more than 40% (approximately 
362,000) of Pennsylvania’s young children live in low-income families.1 
Despite sincere efforts to legislate better access to better education, the conse-
quences of large inequalities remain to be overcome. How will elected officials 
balance investments in the young, who are less likely to vote, against seniors, 
who are more likely to show up at the polls? Will teachers’ unions be able to 
offset senior voters? The voting rates among 25 to 44 year olds are below 50%, 
but almost 70% among those over age 65 (File 2014).

Pennsylvania continues to focus its investments on K–12 classroom 
instruction under an assumption that it will translate into a future func-
tioning labor market. This may or may not be true. Largely absent is 
attention to tax base stability. Where are the critical public and private 
investments needed both for labor market access and for the continu-
ous, active workforce “up-skilling” to meet the demands of a 21st-century 



56 MAUREEn W. McCLURE AnD VERA KREKAnoVA

political economy (and state budgets) (Carnevale, Hanson, and Gulish 
2013; Mérette 2007)?

Unfortunately, by the time problems created by weak education-sector 
investments in local and state growth and development rise to critical visibility, 
it may be too late to mitigate the damage created. Too often the more complex 
the problem, the more likely policymakers are to mandate policies with visible, 
accountable short-term returns, even when longer-term investments in develop-
ment and economic sustainability may be more valuable (Levin et al. 2009). As a 
state with rapid aging and limited growth, the education sector in Pennsylvania 
has to help generate growth and development that can be highly competitive not 
only in attracting and starting businesses but also in competing to attract and 
keep highly mobile young families with middle- to high-skilled labor.

As we begin to look at Pennsylvania’s population dynamics, we can only 
scratch the surface. The provision of public education to ensure opportunity 
for the next generation is part of our social contract. The private sector can do 
its part and make critical contributions, but it cannot take responsibility for 
the security of generational transitions. The next decades will test our social 
contract. The education sector can no longer simply contend over expendi-
tures on the basis of need. It also has to show the current generation’s resourc-
es are being invested well in the next. We need to batten down the hatches so 
the state can better weather this passing storm.

Generational Threat to Revenue Stability

How big is the problem? In Pennsylvania, never before did the number of 
older people surpass the share of population below the age of 15. Today, how-
ever, the cohorts of 65 and over, and 0–14 are almost equal (see Figure 2). In 
five years, the share of older people will outweigh the share of children by 2.4 

Share of Population by Age Cohorts (PA 2001-2040)

23.5%23.1% 23.1%
21.5%

19.5% 19.3% 19.1% 18.9% 19.2%18.6% 18.4% 18.3% 18.1% 18.0% 17.9% 17.7% 17.6% 17.5% 17.5% 17.6%
16.4% 16.7% 16.8% 16.7% 16.8% 16.7% 16.6%16.0% 16.2%

15.5% 15.4% 15.3% 15.2% 15.5%15.2% 15.1% 15.2% 15.3% 15.4% 15.4%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 2025 2030 2035 2040

Population 65+ Population 0-14

Figure 2. Aging Trend. (Data Source: U.S. Census Bureau, 2015; Pennsylvania State Data Center/
Center for Rural Pennsylvania, 2015.) 



More Trouble Ahead for Public School Finance  57

percentage points. In 10 years the difference grows to 4.8 percentage points, 
and in 20 years the gap grows to 6.8.

Aging and its impact on education finance is not only an issue of a rapid 
increase in the number of older people; there are also amplifying trends with 
complex economic, political, and social implications for families and com-
munities. As more and more older people continue to live longer, as in the rest 
of the United States, Pennsylvanians’ lifespans are becoming extended by an 
entire extra generation. Consequently, family composition, housing arrange-
ments, and lifestyles now need to change to accommodate a four-generation 
society with an unprecedented number of middle-aged adults with living par-
ents (Findsen and Formosa 2011; Taylor 2014).

Pennsylvania as Canary: Already Older

Pennsylvania already ranks 4th in the United States for the percentage of those 
65 and over (U.S. Census Bureau 2014). Indeed, all age cohorts over 45 are sig-
nificantly larger in Pennsylvania than in the rest of the nation (see Figure 3). 
The 80–84 cohort is 23% larger than the national average, and the 85+ cohort 
is 34% larger.

To compound the problem, younger cohorts, for the time being, are small-
er in Pennsylvania than in the rest of the United States. The state’s highest 
gap is among those 0–5. The 0–5 cohort is 10%, and the 5–10 cohort is 9%, 
smaller than the national benchmark. The entire older half of Pennsylvania’s 
population (> 45 years old) is larger (by 9%), and the entire younger half  
(< 45 years old) is smaller (by 7%), than the same groups on the national level. 
This substantial 16% gap leaves the state with fewer people to carry heavier 
demographic burdens than those in other states.

PA Population Compared to U.S. Population by Share of Age Cohorts (2015) 

Positive numbers denote higher than national average concentration of population within a particular age cohort; 
negative numbers denote lower than national average concentration of population within a particular age cohort.

34%

23%

13%
9% 10%9% 9%

6% 1% 0%

-5% -7% -6% -3% -3%
-8% -8% -9% -10%

85
+

84
 

79
 

74
 

69
 

64
 

59
 

54
 

49
 

44
 

39
 

34
 

29
 

24
 

19
 

10
-1

4 9 <55-

80
 -

75
 -

70
 -

65
 -

60
 -

55
 -

50
 -

45
 -

40
 -

35
 -

30
 -

25
 -

20
 -

15
 -

Figure 3. Pennsylvania Population Deficit. (Data Source: U.S. Census Bureau, 2015.)



58 MAUREEn W. McCLURE AnD VERA KREKAnoVA

This demographic deficit problem is even more urgent when we consid-
er troubling high school and college dropout rates, persistent child poverty 
rates, and youth unemployment. All of these shrink the size of the workforce 
available to support growing dependency ratios. Thus policymakers need to 
start addressing outmigration issues now by planning how to attract and keep 
younger cohorts. 

Those who are most able, however, are also often the most mobile. They 
can take their families and leave for less expensive states with more job 
opportunities, younger populations, and lighter tax burdens. Better assess-
ments of this potential problem and other disruptive possibilities and their 
consequences for the education sector are needed. Developments in big data 
analytics may now allow for superior multisectoral analyses to better inform 
decision support and planning across a wide range of related issues.

Population Shifts and the Hiccup Problem

Pennsylvania’s future is now (see Figure 4). In 2001, the population over 45 
was already estimated to be 39%. In 2015, the estimate had grown to 45%. In 
contrast, the under-25 cohort accounted for only 33% in 2001, and by 2015, 
even less, 31%.

What about the core of working-age adults in the middle? Over the last 15 
years, the core of Pennsylvania’s population shifted from a 35–54 cohort to a 
45–64 cohort. During this time the youngest cohort shrank noticeably. These 
shifts are likely to have consequences for the state’s tax base.

Today’s population pyramids look significantly different than 15 years 
ago and they continue to morph. In 2040, about the time many children born 

Pennsylvania - 2001 Population 

75+ 2.81% 5.01%

65 - 74 3.43% 4.27%

55 - 64 4.48% 4.90%

45 - 54 7.10% 7.33%

35 - 44 7.70% 7.92%

25 - 34 6.13% 6.18%

15 - 24 6.70% 6.55%

< 14 9.99% 9.51%

Females
Males

Pennsylvania - 2015 Population 

75+ 2.90% 4.57%

65 - 74 4.30% 4.92%

55 - 64 6.85% 7.24%

45 - 54 6.89% 7.06%

35 - 44 5.81% 5.83%

25 - 34 6.46% 6.35%

15 - 24 6.75% 6.51%

< 14 8.97% 8.58%

Females
Males

Pennsylvania - 2040 Population 

75+ 5.60% 7.78%

65 - 74 4.57% 5.16%

55 - 64 5.06% 5.35%

45 - 54 6.07% 5.90%

35 - 44 6.45% 6.21%

25 - 34 6.18% 5.89%

15 - 24 6.72% 6.50%

< 14 8.47% 8.09%

Females
Males

Figure 4. Pennsylvania Population Pyramids. (Data Source: U.S. Census Bureau, 2015;  
Pennsylvania State Data Center/Center for Rural Pennsylvania, 2015.) 



More Trouble Ahead for Public School Finance  59

today will have graduated from college and will be getting married, start-
ing families, and buying homes, significant changes to the Pennsylvania 
population composition will have occurred. In terms of relative size, there 
will be a much narrower difference between the age cohorts (see Figure 4). 
The 65+ population will have grown 71% from 1.9 million to 3.3 million. 
Within this group, those 85+ will have grown 152%, from 242,000 in 2001 to 
about 610,000. Meanwhile, the population of children aged 0–14 is expected 
to decline about 2% from 2.4 million to 2.34 million. Additionally, over 40% 
of these children are likely to be raised in low-income families, communities, 
and school districts. Many of these children are not likely to be well prepared 
for higher education success.

Growing Risks for Education Policy:  
Generational Dependency Issues

Also, perhaps because these problems have little historical context, they lack 
a policy infrastructure to manage them. There are few lobbyists either for the 
development contributions of the education sector or for a generational inter-
est in successful transitions.  

In Pennsylvania, the current overall dependency ratio is 34.2%. This is 
slightly lower than the 35% in 2001.2 Even small, one tenth of a point shifts, 
however, can be significant. This decrease, however, is only temporary. By 
2020, this dependency ratio is estimated to be 35.9% and by 2040, 39.7% 
(Tucker 2012). Aging will drive all of the increases in dependency ratios (see 
Figure 5). These rapidly growing old-age dependency ratios are signaling 
major issues for public policies that include education (Rudawska 2010).

45% Dependency Ratio (per 100 working age persons); PA 2001-2040
23.5%

40% 15.5%
16.7%

35%

30%

25%

20%
19.5%15% 16.7%16.8%

10%

5%

0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 2025 2030 2035 2040

Young-Age Ratio Old-Age Ratio

Figure 5. Dependency Ratio. (Data Source: U.S. Census Bureau, 2015; Pennsylvanis State Data 
Center/Center for Rural Pennsylvania, 2015.) 



60 MAUREEn W. McCLURE AnD VERA KREKAnoVA

Pensions: Who Will Be Able to Pay in the Future?

Very visible in the media is the state’s chronic issue of public pensions. How 
can Pennsylvania meet its constitutional obligations without compromising 
the quality of life of the rest of its citizens (Beard et al. 2011)? It may already 
be too late to avoid problems. Voters from the private sector with fewer retire-
ment benefits are likely to be both reluctant and unable to pay increasingly 
higher taxes to fund public pensioners, even though they are currently obli-
gated to do so by the state constitution as it has been interpreted by the courts.

Some state and LEA policymakers claim limited future problems because 
the marginal increases in local pension contributions start to decline in a cou-
ple of years. In 2001, however, there was one pensioner for every four workers 
in Pennsylvania. Soon there will be only three. Without major in-migration, 
within a generation only 2.5 Pennsylvanian workers will be available to sup-
port one pensioner. Those 2.5 workers will also be likely to be caring for their 
families, worrying about housing costs and health care, and/or paying off col-
lege loans (Tucker 2012). With over 40% of these 2.5 workers now growing up 
under low-income conditions, what will be their opportunities? What kind of 
education investment do they need today, and what kind of jobs will they need 
tomorrow so they can manage these future complex fiscal responsibilities?

Generational Security and a Fraying Social Contract

Generational security is a slowly growing issue. For many decades, there was 
the assumption of a social contract that justified transfers of public funds 
to the young and elderly on the basis of solidarity among the generations 
(Samorodov 1999; Taylor 2014). A generational solidarity principle anticipated 
that those participating in the labor market would contribute a share of their 
gross salary toward the income of retirees in exchange for a promise that the 
next generation would do the same. Today’s changing demographics raise the 
potential for political conflict among current generations who find themselves 
in very different predicaments in the solidarity arrangement.

The large cohort of older workers who dutifully contributed to the pen-
sions of the previous generation is becoming dependent on the contributions 
of a much smaller younger, poorer, and less well-educated generation. For 
example, since 2000, the earnings of Pennsylvania’s youngest cohorts grew by 
about 30%. In contrast, the earnings of the state’s oldest cohorts grew by more 
than 50% over the same period, also starting from a larger base. Some but 
not all of the following is to be expected because of experience. The current 
average earnings of those 25–34 are 34% smaller than the earnings of those 



More Trouble Ahead for Public School Finance  61

35–44, and 41% smaller than the earnings of those 45–54. This of course may 
shift with age, but in the meantime, it may crimp spending on large ticket 
items such as housing.

Disparate Economic Power within and across Groups 

In addition to the political economy tensions across generational cohorts, 
there is also the issue of disparate economic power both within and across 
groups. For example, dependency ratios are based solely on age. Age cohorts 
are assumed to be monolithic consumers of public services. First, they assume 
both similar levels of needs within and across dependent groups (children and 
the elderly). Second, they assume similar earning abilities within the work-
ing age population. These cohort numbers generally don’t incorporate other 
mitigating factors such as gender, disabilities, and poverty.

To understand the more complex tax capacity risks created by the shifting 
demographics of Pennsylvania, it is important to consider additional vari-
ables such as gender in the policy mix. For example, the number of females in 
Pennsylvania surpasses the number of males in every age category above 35. 
Among the population of 85+, there are more than twice as many women as 
men. Women also account for 60% of the 80–84 cohort, and 56% of the 75–79 
cohort. This trend and its effects on revenue generation is likely to become 
more pronounced the older the population grows.

Women not only live longer, they tend to have less financial security due 
to a lifetime of unequal and inadequate access to education and economic par-
ticipation (Beard et al. 2011). This compounding effect may reduce tax capaci-
ties while increasing demands and costs for services. For example, many want 
to stay in their homes longer but lack resources for property tax increases to 
support schools. So they vote to keep school taxes down.

Education Can’t Ignore Workforce Quality

Dependency ratio growth, therefore, has significant consequences for educa-
tion, both for the competition for expenditures and the stability of tax capaci-
ties. It is important to consider not only the size of dependencies but also the 
quality of workforces. Dependency ratios alone can’t account for workforce 
quality. How many people may have full-time jobs with little pay? How many 
are discouraged, disabled, or stay at home by choice? While a range of descrip-
tive data is widely available (Independent Fiscal Office 2016; Pennsylvania 
State Data Center/Center for Rural Pennsylvania 2015), their use in state, 
regional, HEI, and LEA education policy and planning remains limited.



62 MAUREEn W. McCLURE AnD VERA KREKAnoVA

Workforce Quality: Employed, Unemployed, Discouraged, 
and Not in the Labor Force (Voluntary and Involuntary)

Workforce quality indicators are often overlooked as a measure of return to 
public investments in education, despite their availability. For example, as of 
December 2015, there were approximately 6,140,000 employed and 306,000 
(4.8%) unemployed adults in Pennsylvania (Center for Workforce Information 
and Analysis 2015). The current labor force participation rate in Pennsylvania 
is only 62.5%, about the same as in the United States generally (Bureau of 
Labor Statistics 2016; Center for Workforce Information and Analysis 2015).

The four largest sectors employed about one half of available jobs: Health 
Care and Social Assistance sector (17%), Government (12%), Retail Trade 
(11%), and Manufacturing (10%). It is important that the pipeline of younger 
workers under 25 is only about one-half of the size of those 55+ (Center for 
Workforce Information and Analysis 2015). Almost 47% of Pennsylvania’s 
employed workforce is now 45 or older, a significant increase from 37% in 
2001 (see Figure 6). The 25–44 cohort of employed workers accounted for 
only 40%, and only 13% were under 24. In only the last 15 years the share 
of the state’s active workforce who are 65+ almost doubled, while the size of 
the three youngest cohorts each decreased by 2%. Traditional assumptions of 
generational replacement simply no longer hold. These dynamic changes have 
consequences for revenue generation.

In August 2015 Pennsylvania ranked 31st in national unemployment at 
5.4% (Center for Workforce Information and Analysis 2015). Unemployment 
was higher for males (5.7%) than females (4.6%). The youngest workers expe-
rienced the highest unemployment rates—11.8% for those 16–19 and 10.5% for 

Distribution of Jobs by Age Cohorts (PA, 2001-2015)

65+ 3.2%
5.6%

55-64 10.7%
18.2%

45-54 22.8%
23.2%

35-44 26.7%
20.1%

25-34 22.1%
20.5%

22-24 5.6%
6.0%

19-21 5.2%
4.4%

< 18 3.7%
2.1%

2001 Jobs 2015 Jobs

Figure 6. Age and Jobs. (Data Source: U.S. Bureau of Labor Statistics, Quarterly Census of 
Employment and Wages; EMSI, 2015.)



More Trouble Ahead for Public School Finance  63

those 20–24. In contrast, the unemployment rate of workers 55 and over was 
only 3.7%. The average length of unemployment among all dislocated work-
ers was 31 weeks. One-third of the unemployed, approximately 107,000, were 
considered long-term unemployed (they had been out of work for more than 
26 weeks) (Center for Workforce Information and Analysis 2015).

Discouraged Workers. Employment and unemployment are not the only 
two variables, as there are many people who do not participate in the cur-
rent labor force. Discouraged workers, for example, are those who both want 
and are available for work but haven’t found it. They have looked for work 
during the past year, but not in the last four weeks. There are approximately 
28,000 discouraged workers in Pennsylvania, or about twice the 2007 prere-
cession level. Almost 60% of the discouraged workers are males, and 40% are 
between the ages of 25–54 (Center for Workforce Information and Analysis 
2015).

Not in the Labor Force: People with Disabilities. Those who are volun-
tarily not in the labor force include those under 65 who are retired, stay-at-
home parents, caregivers, etc. Those who are involuntarily not in the labor 
force include the disabled, as well as those who are institutionalized.3

Approximately 820,000 working age Pennsylvanians (11.2%) are classi-
fied as having one or more disabilities. The employment rate of people with 
disabilities in Pennsylvania is only 33.6% and only about 20% of them are 
working full-time. An additional 11% of people with disabilities are actively 
looking for work (Erickson, Lee, and Von Schrader 2014).

The problem, therefore, is more complicated than it may appear to be at 
first. The working age population that is unemployed or unable to sustain 
participation in the labor market quietly adds to the dependency levels. In 
other words, it increases the pressure on the state’s expenditure and weakens 
its revenue base. The resulting employment to total population ratio in Penn-
sylvania is currently 59.2%. For every 10 people who are working there are six 
who are not (Center for Workforce Information and Analysis 2015). Further, 
not all of those who are working have good jobs.

Workforce Quality: Compensation

The average annual wage in Pennsylvania in 2015 was $63,000 (United States 
was $72,641), but the median is only $43,400 (United States was $53,657).4 
More than one-half of Pennsylvanians (52%) are employed in industries 
with average wages below even the $63,000 benchmark. Without access to 
manufacturing and other middle-skill, middle-wage jobs, today’s younger 
workers (< 25) are significantly more concentrated in the low-wage indus-



64 MAUREEn W. McCLURE AnD VERA KREKAnoVA

try sectors with limited upward mobility, such as accommodation and food 
services, retail, or arts, entertainment, and recreation. These younger work-
ers are under-represented in the high-wage industry sectors such as utilities, 
mining, even information. Older workers (55+), on the other hand, are more 
concentrated in the high-wage industry sectors than in the low-wage sectors 
(see Figure 7).

Workforce Quality: Part-Time Work 

In addition to those who aren’t working and those in low paying jobs, approxi-
mately 279,000 Pennsylvanians are working part-time for economic reasons. 
Economic reasons mean they have stated they would prefer full-time work 
and are working part-time only because full-time jobs are not available. This 
alone represents between 4.5% and 5% of the employed. Prior to the recession, 
people working part-time for economic reasons comprised between 2.5% and 
3.0% of the state’s employed. Women working part-time for economic rea-
sons have historically been about one-half percentage point higher than men 
(Center for Workforce Information and Analysis 2015). In times of significant 
shifts at both ends of the population, the labor market opportunities available 
to the demographic core (active workforce) are critical to both the state’s fiscal 
performance and successful generational transitions.

In sum, the state’s tax capacities may be more fragile than the education 
sector currently assumes. Dependency ratios both identify and mask genera-
tional needs and abilities to pay. Moving forward, more attention is required 
to assess the risks to education’s revenue generation sources.

Jobs by Age of Workers and Wage Sector (PA, 2015) 

Low-Wage Industries 566,488 1,755,110 615,710 

High-Wage Industries
20

5,
28

1 
1,845,293 704,992 

 -  500,000  1,000,000  1,500,000  2,000,000  2,500,000  3,000,000

< 25 25-54 55+

19% 60% 21%

26%
7% 67%

Figure 7. Age and Wage. (Data Source: U.S. Bureau of Labor Statistics, Quarterly Census of 
Employment and Wages; EMSI, 2015.) 



More Trouble Ahead for Public School Finance  65

Workforce Transition Problems

Aging in Pennsylvania presents a significant risk to the supply side of labor 
market dynamics. First, the sheer numbers of older workers significantly 
surpasses the numbers of younger workers. Second, the current pipeline of 
younger workers cannot easily substitute for the human and social capital 
skills of aging workers (Dychtwald, Erickson, and Morison 2004). In addition 
to poorly matched work experiences and skills, there are significant differ-
ences in preferences for sectors and occupations between the two age groups.

For example, in Pennsylvania the highest concentration of older workers 
(age 55+) is in teaching and training, management, and office and adminis-
trative occupations. The highest concentration of adult workers 25–54 is in 
computer, legal, and construction occupations. And the highest concentra-
tion of the youngest workers (< 25) is in food preparation and serving, sales, 
and personal care occupations. Younger workers may be working their way 
through school, or may not yet have landed a job for which they are quali-
fied. Nevertheless, these jobs are often less likely to build toward careers and 
upward mobility. When these low-wage jobs become low-wage occupations, 
they generate weak career trajectories. As a consequence, this can result in 
weak competition for jobs across cohorts because of differences in knowl-
edge, skills, and experiences. Consequently, there is a limited substitutability 
between them (Eichhorst et al. 2013; Samorodov 1999).

Education Policy for Pennsylvania’s Population 
Scale and Shift Problems

The problems created by the sheer scale of population shape-shifting lack 
precedent. Paying attention to dependency ratios and workforce quality is 
important in education policy because they influence revenue generation 
issues such as total tax burden and tax effort willingness. Too often in the 
past, school taxes have been treated as independent factors rather than as 
interdependent with other sectors of local and state taxation and develop-
ment. Taxpayers experience their sum of taxes more than their individual 
parts. Dependency ratios can affect a district’s or a state’s willingness to tax 
across the public sector, making education a development competitor with 
health, transportation, and other areas.

Challenges to Personal Incomes. Baby boomers aging out of the labor 
force are destabilizing the state’s already delicate balance between active and 
inactive workers. Increasing numbers of retirees are turning to Social Secu-



66 MAUREEn W. McCLURE AnD VERA KREKAnoVA

rity with limited savings to manage their own retirements and health care. 
In addition to retirees with limited savings, the state is called upon to sup-
port public education pension payouts. These are not insignificant. Where 
can Pennsylvania turn for additional resources? Not to retirees on limited 
incomes with limited savings. Not to the high-wage jobs left unfilled by retir-
ees. Not to the young in low-wage jobs. Not to unemployed, discouraged or 
part-time workers. Not to those voluntarily or involuntarily (disabled) not 
in the labor force. Will the state’s economic growth pull us out? Let us hope.

Challenges to Property Taxes. Personal incomes are not the only rev-
enue policy area that becomes complicated with increasing dependency ratios. 
Market values may be affected as well. What will be the demand for suburban 
homes when many baby-boomer retirees are ready to sell and fewer young 
people are available and/or able to buy? A younger generation of millennials 
is postponing marriage, childbearing, car and home buying for up to 10 years 
later than their parents’ generation (Taylor 2014). Many face large education 
debt loads and consequently have less available for mortgage payments. High 
debt loads are to be expected in a state like Pennsylvania with some of the 
highest public higher education in-state tuition costs in the United States.5 

Further complicating these generational transitions are the problems of the 
market’s financial interest rates, which, since the Great Recession, have been 
held deliberately low as an economic stimulus. This stimulus, however, came 
in the form of a massive interest rate subsidy. For the older generation it meant 
lower returns on their savings accounts, CDs, etc. For the younger generation 
it meant lower interest rates for big-ticket items such as homes and cars. Even 
with the lower interest rate subsidies, recovery was slow. Why? The young had 
fewer discretionary resources, making it difficult for them to take advantage 
of lower interest rates (e.g., school loan debt had higher interest rates than 
other items). Young people are also paying larger shares of their incomes for 
housing (Taylor 2014). All of these issues may eventually affect Pennsylvania’s 
market valuations of taxable properties in some school districts.

Is Relief on the Way?

Not likely. Two issues that state, regional, and local education policymakers 
can’t ignore are increased dependency ratios and a smaller workforce with 
fewer economic opportunities for at least the next decade or so. Together they 
help make the state less competitive in national and global markets. First, the 
state can’t deport aging seniors who increase dependency ratios, putting greater 
public responsibilities on the labor force. Raising taxes to meet public demand 
for services risks making the state less competitive in the marketplace. While 



More Trouble Ahead for Public School Finance  67

seniors enjoy lighter tax burdens and are likely to be less mobile, younger work-
ers have heavier tax burdens and are more mobile. Younger, more educated 
people are more likely to leave for younger states with less heavy tax burdens.

Pennsylvania is an aging state with many small school districts that 
already have relatively few taxpayers. Now many of them are aging out of 
personal income taxes, buying less, and voting to keep taxes down so they 
can stay in their homes. Will this contribute to an increasingly lower qual-
ity workforce and make the state even less competitive? In the face of these 
challenges, Pennsylvania needs to better invest in children from low-income 
families today so they have opportunities to successfully access a civil society 
and prosperous economy tomorrow (Carnevale, Hanson, and Gulish 2013).

Today, education policy makers and planners need to broaden their views 
beyond instructional accountability in the classroom and better manage the 
empirical realities and trajectories that add risk to revenues. The state’s demo-
graphics and workforce quality data are well known, but these data have not 
yet been visibly incorporated in the PDE’s funding policies or in its direc-
tives for regional and local strategic planning. This continues despite growing 
uncertainty and risk. The longer education policy makers avoid addressing 
the uncertainty inevitably being created by these shifts, the more difficult 
responses may be in the future.

Why now? The die is already cast. The players for 2040 are already on the 
stage. Children born today will only be 25 in 2040. They may still be in the 
workforce in 2080. The Commonwealth needs to carefully review its social 
contract for generational succession. Schools may be like businesses in some 
ways, but markets may not be the only, nor the best framework for managing 
long-term generational security issues.

So What Is the Road Forward?

Education policy and planning data, especially at regional and local levels, tend 
to be isolated from other sector wide and cross-sectoral data. Two examples 
are tax capacity and workforce quality data, even though they are well known 
and available. The road forward is to support PDE’s efforts to include data that 
focus on education’s contribution to development in state funding policies, and 
support for regional and local workforce planning and policy. Deeper integra-
tion of the state’s data silos and more visible promotion of accessible finance 
research reports could help the education sector think beyond classroom tests 
to its contributions to Pennsylvania’s economic and civic development.

The sector’s current focus on “the greater need” marginalizes its greater 
contribution. This includes the mapping of the networks of interdependence 



68 MAUREEn W. McCLURE AnD VERA KREKAnoVA

that are created by districts’ changing demographics, revenue generation 
sources, and workforce quantity and quality. How do these contexts fit in 
institutional budgeting, strategic planning, and collective bargaining con-
tracts?

Of course sector-wide and cross-sectoral issues are messy and are wick-
edly difficult to model. Ignoring the mess for the tidiness of test scores, how-
ever, may land Pennsylvania’s education policy makers and planners in the 
classic dilemma found in the keys and the streetlight story. Someone finds 
a person looking for keys under a streetlight. Pitching in, neither has any 
luck. “Where did you lose your keys?” the one inquired. “In the park,” the 
other responded. “Then why look here?” “Because the light is better here.” 
Understanding education’s development relationships with tax capacities and 
workforce quality means working in much dimmer light than more tradi-
tional measures of classroom accountability using test scores. It’s worth it. The 
good news is, more than many other states, Pennsylvania has many resources 
on which to draw.

NOTES

1. National Center for Children in Poverty, http://www.nccp.org/profiles/PA_pro 
file_8.html. 

2. Pennsylvania State Data Center/Center for Rural Pennsylvania, http://www.rural 
.palegislature.us/demographics_population_projections.html.

3. U.S. Bureau of Labor Statistics, 2015.
4. Ibid.
5. U.S. News, http://www.usnews.com/education/best-colleges/the-short-list-college 

/articles/2014/10/28/10-colleges-where-in-state-students-pay-the-most-tuition.

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	Structure Bookmarks
	Prologue
	Education: Losing Its Fan Base? 
	Generational Threat to Revenue Stability
	Is Relief on the Way?
	So What Is the Road Forward?




