1. 1 The Challenge of Sustaining Your Local Government August 2011 York Rotary Luncheon Pennsylvania Economy League Central PA Division

2. 2 Pennsylvania Economy League A non-partisan, non-profit organization Regionally based and Statewide Working to improve state and local government through independent policy analysis for business, civic, and governmental leadership Make PA a better place to live, work, and do business

3. 3 Pennsylvania Economy League York County activities include –York County leadership committee –Issues Forums highlighting important issues Our members are often ahead of the pack –We highlighted the pension dilemma in 2007 –Reports on teacher compensation, prevailing wage, public school performance –Local government fiscal crisis

4. 4 The Local Government Crisis Fiscal Basics: Historically municipal governments rely on Real Estate taxes Municipalities could supplement with: –Earned Income Tax (EIT) –Mercantile and Business Privilege –Real Estate Transfer –Local Services Tax –Other “Nuisance” taxes

5. 5 The Local Government Crisis Total Tax Revenue Real EstateNon Real Estate % Bethlehem63.436.6 Easton79.820.2 Lancaster72.227.8 Reading50.549.5 York67.932.1

6. 6 The Local Government Crisis Real Estate Taxes do not cover the cost of services required in the cities –Fire and Police services cost more than the revenue raised by real estate taxes Total Taxes do not cover the cost of services required in the cities –In many cities, fire and police services cost more than the revenue raised by total taxes

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9. 9 The Local Government Crisis If total taxes do not pay for services, what does? Operational Supplements –Fees for services (garbage collection etc.) –Water and sewer operations (!) –One time asset sales –Incur future liability (DEBT) to pay today’s expenses Incur new or restructure existing debt –Swaps and derivatives were (are) popular

10. 10 The Local Government Crisis Using operational supplements to balance budgets results in budgets that generally balance However, when the operational supplements are removed deficits would have occurred for each year

11. 11 The Local Government Crisis Statewide, the historical fiscal trend for all municipalities is not positive: –In 1970 t otal taxes were 58.1 percent of all revenue –In 2006 t otal taxes were 38.9 percent of all revenue –Thirty six year trend was similar for cities, boroughs, and for townships

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13. 13 Why Does It Matter? What happens to local government has an effect on businesses, from property tax expenses to employee safety; Every business in PA is within a local government.

14. 14 Why Does It Matter? Created by the Pennsylvania Economy League of Southwestern Pennsylvania, April 2010

15. 15 Solutions? Create a local government reform initiative among civic leaders and the business community, Cooperation of municipal leaders and labor unions is important to the initiative, Municipal officials must be encouraged to likely to look beyond their own borders

16. 16 Solutions? The education of the State Legislature is primary –There seems to be a genuine lack of understanding of how local government is financed The business community must look beyond the traditional answer of mandatory municipal mergers as the cure all

17. 17 Solutions? Expenditure control will require change to state law for collective bargaining for public safety Pension reform for new hires and for local flexibility in plan design Make it easier for sharing of municipal services

18. 18 Solutions? Don’t assume consolidation of municipalities is the only answer; look at the problem as too many providers of government services rather than too many governments New municipal funding sources could include use of a regional tax or regional fee to support regional services

19. 19 Solutions? Expenditure control will require change to state law for collective bargaining for public safety Pension reform for new hires and local flexibility in plan design Make it easier to share municipal services

20. 20 The Local Government Crisis Questions? Comments?

21. 21 The Challenge of Sustaining Your Local Government August 2011 York Rotary Luncheon Pennsylvania Economy League Central PA Division