Letter to Pennsylvania Senate on increasing sales tax and pension amortization.
To the Honorable Senator,
I am writing you in regards to the bill HB 1828 which passed the House and is up for consideration in the Senate. Philadelphia has a problem balancing its budget and when determining solutions it is very important to first look at why it has this problem.
First, the quick answer is going to be the national economic downturn. Ultimately it did create a smaller collection in tax revenues than prior years, but nothing that could not be reasonably dealt with. The biggest impact on the budget was its affect on the pension fund. The reason this was such a significant effect is that Philadelphia has continually refused to fund the pension at a responsible level in exchange for gratuitous political posturing. For example, in 2006 City Council passed legislation that removed the poison pill to allow cost of living increases to take place when the pension is funded below a certain level. They didn’t just pass it, but overrode a veto to do it. It is a small example of City Council not wanting to pay for the pension benefits it hands out.
A second reason for Philadelphia’s budget problem is its lax enforcement of tax and fee collections and not just in general, but from its own employees. An infuriating example of this was the recent news about how a staffer in Councilwoman Blackwell’s office hadn’t paid his property taxes for 25 years because she actually protected him from the City collecting. City Hall isn’t just poor in collecting taxes; it actually aides and abets the evasion.
A third problem with Philadelphia’s budget is the reluctance for City Hall to make hard decisions in turning Philadelphia around. It continues to give council staffers raises. They refuse to reform property tax collection and appraisals. It failed to pass legislation to stop paying for water for non-profits. The City Controller makes excuses for not auditing every department every year as mandated by law (and also oversees the pension board). Then, when their backs are firmly to the wall where it seems they have to make government more efficient, they proceed to pass the buck to the State and then blame those in Harrisburg for not helping.
Even though we know the causes, something still needs to be done and since Philadelphia is asking Harrisburg for help, Harrisburg can truly take the opportunity to help Philadelphia.
In exchange for the pension amortization, there should be a variety of requirements to require Philadelphia to fix a variety of its practices. These recommendations are not all encompassing, but ideas and guidelines.
1) Require Philadelphia to be on a schedule to attain a minimum funding level for the pension. Since Philadelphia already has to submit 5 year budgets to PICA, it should be relatively easy to incorporate a level of oversight. Require PICA to refuse any budget that does not meet the requirements.
2) Penalize any person in the city pension that falls behind on taxes or fees (such as water) for more than 5 years by revoking their pension benefits for the period of time they did not pay taxes. If City Council wants to protect their employees from paying taxes, there is no reason why the tax payers should subsidize it.
3) Vote “no” on the sales tax increase. Philadelphia is already listed as one of the most taxed cities in the country and does not need to add to that burden, especially in a tough economic time for everyone. This is an example of throwing good money after bad – more money is not going to fix Philadelphia. In conjunction, for every 1% of sales Philadelphia loses to other states or the Internet, it costs Harrisburg about $8 million in sales tax revenue, so it does hurt other Pennsylvanians as well.
I love Philadelphia and every day I try to make it a better place for my neighbors, my friends and myself. I honestly believe allowing Philadelphia to try to postpone the fixes it needs to make by allowing it more taxing authority and accounting gimmicks with the pension will make my city worse for the long term.
August 11, 2009