Philadelphia joined a host of other cities and towns – as well as states – across the nation hanging up “closed” signs on government funded institutions. Just months after Chicago ordered non-unionized employees to take unpaid furloughs and Hawaii warned of state employee furloughs, signs on Philadelphia public libraries and recreation centers warned of impending shut downs. The Free Library of Philadelphia, which once held the world’s largest circulation of books, warned:
As a result of the state budget crisis and legislation impasse, the entire Free Library of Philadelphia system is set to close October 2nd.
So, how did it come to this? Shutting down libraries, recreation centers, and other services? These shut downs are on top of other recent shutdowns (including my local firehouse).
Of course, there’s a budget crisis. Not enough revenue coming in. We get it, we’ve heard similar horror stories in other places. The recession has hit state and local coffers hard – not a day goes by practically that you don’t hear the Governors of New Jersey or California warning about budget shortfalls.
But in Philly, we have something worse than revenue shortfalls: the dreaded “legislation impasse.” And here’s how it works…
Philly needed extra revenue. After considering a host of options, Council and the Mayor agreed to a “temporary” (*cough*) increase in the sales tax of 1%. In Pennsylvania, the sales tax rate is currently 6% with a 1% increase in Philadelphia. So if you spend your dollars in Philly (and we certainly hope that you do), you pay 7% sales tax. With the additional increase, Pennsylvania sales tax would remain at 6% but Philadelphia sales tax would increase to 8%. Even with the additional increase, the sales tax would remain below that of other major cities, including Chicago, New York City and Los Angeles.
So, with that in mind, everyone nodded agreeably and the proposal was made to the Commonwealth that the sales tax be increased. Under the Pennsylvania Charter, increases in sales tax must be approved by the state legislature. Philadelphia submitted its proposal and held its breath.
The legislation was approved in the House. The increase would allow Philadelphia to raise its sales tax and temporarily defer pension payments. When it made it to the Senate, the legislation was amended to allow the state to step in and manage “Level 3 distressed municipal pensions.” Level 3 pensions are those funded at less than 50% – in Pennsylvania, currently Pittsburgh fits that bill, coming in at just 31% funded. The Senate also insisted on a pension freeze and reductions in benefits for incoming municipal workers.
And that’s where the sales tax increase got de-railed. The GOP won’t vote yes on the sales tax increase unless the other concessions are included. The Democrats, facing considerable pressure from organized labor, won’t agree to include the cost-cutting provisions. The result? A legislative impasse.
What’s a legislator to do? Here’s a thought: make them separate issues.
The GOP and the Dems both agree on a sales tax increase for Philly. City Council and the Mayor agree on a sales tax increase for Philly. Should be end of story.
But politicians like the idea of leverage. They like the notion that they can hold bills hostage while tacking on new, controversial and generally unrelated measures (that’s why, for example, the credit card reform bill that passed Congress this fall included language to allow concealed weapons in national parks). And so Senate Majority Leader Dominic Pileggi (R – Del) has said that there will be no compromise to split the bill.
Hey, I like Pittsburgh – but what does their distressed pension system have to do with my Philadelphia sales tax? Exactly. Nothing.
So, while legislators in Harrisburg argue about pension plans and benefits for union workers, signs are being tacked up on libraries announcing closures. Trash pick up may be reduced in the City. Letters informing workers that they’ve been let go are going out next week (a good friend has advised that her entire department will be receiving them). The Fire Commissioner will announce six engine and three ladder companies, plus five medic units, which will close. Two health centers are closing. Thanks, Harrisburg.
If you live in Philly, you should be angry. Angry that this has been allowed to happen. And if you live further afield – whether in West Chester or Pittsburgh – or even in Boise, Idaho, you should be concerned that so much of our tax policy has nothing to do with taxes at all: it’s about politics.Want more taxgirl goodness? Pick your poison: You can receive posts by email, follow me on twitter (@taxgirl) hang out with me on Facebook and check out my YouTube channel.