Pensions drive local taxes up, up and away in PA….

Pennsylvania Gov. Tom Corbett’s call for pension reform hasn’t resonated with the state’s residents, which is one big reason why Corbett hasn’t been able to persuade even his own Republican colleagues in the state legislature to enact changes to the state’s underfunded pensions. But now that municipal and school taxes are going up around the state in direct response to higher pension costs, taxpayers might start paying more attention.

Scranton’s pension plan is headed toward insolvency (see Gary Lewis item below), so earlier this year the city enacted a new commuter tax to raise $5 million a year.

Looking to follow suit, York City has now proposed a distressed pension income tax on commuters. The city, like Scranton, could levy that tax thanks to a Pennsylvania law that allows municipalities with pensions that don’t meet funding standards to impose local income taxes. But commuters cannot be taxed at a higher rate than local residents, meaning that to impose the tax, York would also have to raise taxes on its own residents. Next year, the city faces a steep jump in its required pension contributions, to $8.2 million, from about $5.7 million.

Municipal taxes come on top of a barrage of school property tax increases. A report earlier this year by a state association of school district officials calculated that average pension costs will rise 25 percent this school year, after a similar increase last year. By 2020, the report said, pensions costs will be the equivalent of 30 percent of payroll, up from just 4 percent of payroll in 2009.

In July, the governor’s office disclosed that 163 school districts around the state filed for an exception to the state’s property tax cap, which limits yearly increases in local taxes, and every one of them cited rising pension costs as one reason for the request for an exception to the law.

Residents of the Conewago School District, which serves nearly 4,000 students in Adams County, will see their property taxes go up 5 percent thanks largely to rising pension costs.

The Carlisle Area School District, educating some 4,700 students in Cumberland County, imposed its fourth consecutive property tax increase this year thanks to rising pension and health care costs.

The Warrior Run School District in Union and Northumberland counties has a different idea on how to raise revenues. Last week the school district sent registered letters to dozens of property owners advising them that it is challenging the assessments of their properties, asking for a higher value and tax bill. With health and pension costs creating a $1 million deficit, the district is looking to generate $600,000 from the unusual reassessment move. Said the Northumberland County Chief Assessor:

“This is unique and unprecedented in this county. I never before had to tell a property owner that the government is appealing their property. I’ve done the opposite, but never this.” 

Pennsylvania communities are sure to see even more ‘unique’ tax increases in coming years as the state’s municipalities face down big pension debts.

 

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