Pittsburgh Ponders "Fair Share" Tuition Tax To Fund Pensions

Instead of addressing pension problems escalating out of control, Pittsburgh Sets Vote on Adding Tax on Tuition.

The mayor of Pittsburgh calls it the “Fair Share Tax.” But to officials at the city’s 10 colleges and universities and many of their 100,000 students, it is anything but.

On Wednesday, the City Council is expected to give preliminary approval to Mayor Luke Ravenstahl’s proposal for a 1 percent tuition tax on students attending college in Pittsburgh, which he says will raise $16.2 million in annual revenue that is needed to pay pensions for retired city employees.

The tax would be the first of its kind in the nation, and other cities are watching closely as they try to find ways to close their own budget gaps.

“City officials see this as an untapped revenue source, and if Pittsburgh succeeds, I think you will see a lot of other cities immediately move to do the same,” said Terry Hartle of the American Council on Education, a lobbying group for universities. He added that if the Pittsburgh City Council approves the mayor’s proposal, the matter will surely go to the courts.

“This is a turning point for us,” said Joe King, president of the Pittsburgh firefighters’ union. He said that after Miami-Dade County in Florida, Allegheny County has the second largest number of seniors of any county in the United States and that in his union alone he has 900 retirees and 450 surviving spouses whose pensions need to be financed.

When and where does the insanity stop?

Note that this ridiculous proposal does nothing to solve Pittsburgh's structural problem. Pittsburgh has 900 retirees and 450 surviving spouses pensions to pay for, a number that will increase every year.

Meanwhile, the stock market is not going to return enough to meet plan assumptions and sales tax revenue will not return to pre-crash levels.

The correct solution for Pittsburgh is to warn the unions there is not enough money, ask for huge concessions, and if the city does not get them, then Pittsburgh should declare bankruptcy.

Instead mayor Luke Ravenstahl, like all mayoral wimps, has caved into the unions to the detriment of everyone else in the city.

Taxman

Let me tell you how it will be,
There’s one for you, nineteen for me,
‘Cause I’m the Taxman
If you drive a car, I’ll tax the street,
If you try to sit, I’ll tax your seat,
If you get too cold, I’ll tax the heat,
If you take a walk, I’ll tax your feet.

Thanks to the Beatles.

One hell of a revolt is coming. I don't know when, but robbing the have nots to pay the haves cannot last forever.

Article Comments

Some of some comments on the New York Times are quite interesting.
Here is a sample

Denver Randy: It is so obvious that the next 30 years will pit younger, pension-less workers against a rapidly aging population, eager for their promised pensions. To assuage labor and other disputes promises were made that can never be kept. Until the younger generation votes with the regularity and consistency of their elders, the folks with the pensions will get paid and the youngsters will pay the price.

John: Maybe they should tax the firefighters 1% and have other public servants fund their own pensions. Out in the real world there are lots of folks with no pensions at all. Why should they pay bloated public sector pensions?

CB: It's time to elect politicians willing to stand up to these public employee unions. Public employee unions have pretty much become leaches on productive society. That includes the teachers unions.

Michael: Public service employee pensions are all set to financially bury municipalities all over this country.State officials grant generous pensions to unions in return for political support.They are subject to little real oversight and have no economic rationale .Few private companies could offer similar pensions since they would be out of business in short order.Elected officials figure they can always pass the costs onto the public in the form of higher fees and taxes.The implications of this gross administrative mismanagement is now before us.

John: Congratulations, Pittsburgh! You couldn't come up with a better strategy to promote "brain drain" if you tried.

Sandy: Call me stupid here, but why should the students of Pittsburgh pay taxes to fund pensions of retired city workers? It's not the responsibility of some out of state student, who is already paying $40,000 a year at Carnegie-Mellon! Nor is it the responsibility of some in state student at a city college who can barely afford the per credit hour cost in between jobs! To ask these kids to bear ANY responsibility for the city's inability to properly fund or pay their pension obligations is crazy. These students have trouble enough making ends meet while trying to complete school and should not be the target of some burdensome tax.

Addendum:

Reader Kim emailed me with a comment that "900 retirees and 450 surviving spouses" was firefighters alone. Kim is correct. Those numbers do not include police and other city workers.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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