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Tuesday, December 22, 2009

Final exam on the tuition tax

Posted By on Tue, Dec 22, 2009 at 6:13 PM

Back during the Cold War, Richard Nixon pioneered the use of what he called the "madman strategy." The idea was to convince the Commies that the guy in the White House might be just bonkers enough to push the button ... and that they better negotiate accordingly. The Russkies and their allies, in other words, were supposed to be the sane ones. 

The consensus among historians is that the strategy didn't really work. But the idea lives on, and Luke Ravenstahl's now-shelved tuition tax is a variant: Call it the "sullen post-adolescent strategy." Will it turn out any better? 

That's the main question after Ravenstahl, appearing with educators at a press conference yesterday, announced plans to drop his proposed tuition tax.

The legal merits of the tax seemed dubious: All that was certain was a protracted court battle. But as Pitt chancellor Mark Nordenberg noted at a city council hearing last week, it was a battle that both sides would lose, with each running up legal bills and bad PR. The tuition tax was the legislative equivalent of Mutually Assured Destruction. And if it wasn't aimed straight at Moscow -- at UPMC or Highmark, say -- it was aimed at a key ally, the equivalent of Cuba or Vietnam. 

The Pittsburgh Comet and its tribe are skeptical that the tax threat did any good, for the understandable reason that so much about the ensuing detente remains uncertain.

Three of the city's largest non-profits -- Pitt, CMU and Highmark -- did agree to transfer more money to the city than they ever have before. But how much is that, exactly? No one knows yet. All we can say is that it is more than they offered before the tax was proposed, but obviously far less than the $16 million Ravenstahl hoped the tax would produce.

Simliarly, the universities are joining with the city and other players to begin lobbying for a more thoroughgoing approach to city finances. But no one knows what the outcome of that collaboration will be either. 

Adding to the confusion is that people on both sides are going to spin this. Brick-throwers like me will suspect that -- surprise, surprise -- universities were willing to negotiate with an ax over their heads after all. The univeristy folks will insist they didn't cave, and that they were sympathetic to the city's needs all along. The mayor's backers will say he took a strong stance, but demonstrated flexibility and leadership by backing off. Mayoral critics will insist he could have gotten all this, and more, a long time back without all the hassle.

But the argument is pointless now. What's more, the fact that we can have it is perhaps the surest sign of a compromise: Everyone can spin the agreement to make themselves look good. In any case, before we judge recent events, we should look at the broader historical trend, the one suggested by this post from the P-G's Tim McNulty.

As McNulty's post points out, none of this conversation is new. Pittsburgh's recent -- and by "recent" I mean, the past couple decades -- fiscal history has been dominated by two parallel trends:

1) City officials will do everything they can to resist cutting costs;

2) Big non-profits will do everything they can to avoid paying costs

That's the nut of the issue right there. It's the demands of the Old Pittsburgh vying with the demands of the New. Or more precisely, it's the special-interest groups who called the shots yesterday -- public-sector unions and their backers -- squaring off against the special-interest groups who will call the shots tomorrow.

Those are the superpowers. And their failure to see eye to eye is the status quo that, if we're lucky, the tuition tax debate can shake up. 

I'd argue that both sides of that equation need to be worked on -- the cost side and revenue side alike. But I would also argue that in the past several years, more has been done to address the faults of Old Pittsburgh than New.

The city, as we all know, is in the thrall of not one but two forms of state financial oversight. But as far as big tax-exempts are concerned, absolutely nothing has been done to address the revenue side of the equation: Some of the city's biggest employers, its institutional non-profits, are still paying the least to support city operations. 

During the tax debate itself, apologists for the non-profits tried desperately to confuse the issue. All the change had to come from one side of the equation, not the other. Exhibit A is a deeply silly Post-Gazette op ed by John Murray, the former Duquesne University head who opined that consolidating city and county government was a "real solution" to the city's financial problems.

Others have already pointed out some of the fallacies and omissions in this piece. Basically, it purports that "the essential solution [to the city's problems] is not to tax more; it is to spend less."  But it's woefully short on specifics. Murray merely contends that "it is time to surrender vested interests," but makes clear that only one set of interests is supposed to do so. Murray seems to believe, for example, that city dwellers should feel content to surrender their council and make do with the part-timers over on Allegheny County Council. (From this, I assume that Murray doesn't spend much time at County Council meetings. City Council has always had its share of clowns, but county council makes the city government look like Athens in the Golden Age.)

If Ravensthal's deal puts an end to that sort of bogus argument, it'll have paid for itself already.

What I'd also like to see end is the argument that city residents are the only people who should be held accountable for the city's pension debt. (The pensions, of course, are the real financial problem at this point.) The reasoning here, expressed by students and others, is, "You dumbshits elected these folks -- it's your fault." But that is way too simplistic. These pensions benefits were promised years ago, but some Pittsburgh residents have been in town for less time than the sixth-year seniors at Pitt. If you're going to argue that Pitt students should get a pass just because they're latecomers, then recent arrivals can't be held accountable either.

Meanwhile, folks in the suburbs shouldn't be left off the hook either. Some of the folks living in the suburbs probably did live in the city when those pension promises were made ... all that sprawl came from somewhere. Hell, as we've pointed out before, some of the people living in the suburbs are receiving those pension checks. In any case, if you think a tuition tax was bad PR for our region, imagine what a municipal bankruptcy would do. (And yeah, that's how serious the pension problem is, as Chris Briem is happy to point out.)

The point being that a lot of folks are clothing their own self-interest in the mantle of virtue: union leaders for sure, but also big non-profits, suburbanites, and everyone else. The city could do a lot more to cut costs -- just look at the many recommendations by overseers the city has stalled on. But it has taken some early steps, and the tuition tax, I hope, has convinced some of the city's biggest employers that it is high time they began down the road as well.

As I pointed out in the column posted above, until the tuition tax came along, nonprofits this year were content to shell out a voluntary donation that was less than two thirds of what they contributed back in the 1990s. Name another constituency in this city -- residents, for-profit business, commuters -- whose non-voluntary obligations have dropped that much.

This isn't just about what the non-profits owe the city. It's about what they owe to the rest of us, who have been shouldering this burden alone. If UPMC wants to pat itself on the back with ads showing rowing teams plying the waters of the Allegheny, then it needs to get in the boat and grab a goddamn oar

This is what a community is: Old and New Pittsburgh reconciling themselves to each other. Old Pittsburgh is more than just some public-works employee sleeping the afternoon away. As I've noted before, Old Pittsburghers have been paying the state taxes that have helped support the University of Pittsburgh for decades. Old Pittsburghers also provide no small amount of business to our wonderful hospitals: Yeah, Pittsburgh would be a lot smaller without UPMC ... but UPMC would be a lot smaller without all those Pittsburghers on Medicare. So you're going to hike their property taxes if UPMC doesn't want to chip in? 

Old Pittsburgh does need to change and lower costs, but New Pittsburgh has an obligation to help shoulder the burden of the costs still remaining. 

The "sullen post-adolescent" strategy may show that Luke Ravenstahl has a some growing up to do. But it also showed that he's not the only one.  Let's hope we see a more mature debate in the months ahead.

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