The City of Pittsburgh’s Unfair-share Tax

This is the print version of those portions of Chancellor Mark A. Nordenberg’s Nov. 11, 2009, report to the Senate Council that relate to the city’s proposed “tuition tax.”

Four months and eleven days into the new fiscal year, we still are waiting for the Commonwealth’s budget, including our appropriation, to be finalized. To some extent, we are being held hostage to disagreements over particular provisions in gaming legislation now under consideration. We also are the victims of an unusually contentious climate in the Capitol. Almost every day, I get messages that some small steps in a positive direction have been taken in Harrisburg. Those messages are a cause for some hope, but we still do not have an appropriation, and even as the state is failing to give, the city is attempting to take away.

All of you, I am sure, have read of the mayor’s plan, announced on Monday [Nov. 9, 2009], to impose a tuition tax on all students attending institutions of higher learning in the City of Pittsburgh. As you also know, the education and health services sector has become an increasingly important part of the regional economy measured in virtually every way, but especially in terms of job growth. We now are the region’s largest employment sector and are the only sector that has added jobs each and every year since 1995.

If the mayor’s plan was to become law, we also would be the nation’s only higher education sector subject to such taxation. Particularly given the very positive national and international attention that Pittsburgh has received for the remarkable development of its “new knowledge economy,” the self-defeating nature of this approach, which would place one of the region’s key economic engines at a clear competitive disadvantage, is even more striking.

As calculated today, the amount of this tuition tax would range from $27 for a CCAC student to more than $400 for a CMU student, with the typical Pitt charge falling somewhere in between. That itself is a burden, and it is critical to remember that this is just today’s calculation. One week ago, the city administration was advocating for a tax tied to a percentage calculation that included not only tuition but also room and board charges and other fees, which would have produced an even higher number. And, if the city is allowed to collect 1 percent today, there is nothing that stands in the way of it collecting a higher percentage in the future.

Also, because the imposition of this tax is tied to the vague concept of the “privilege” of engaging in some activity within the borders of the City of Pittsburgh, there is almost no limit to what might become the target of future tax efforts. Even in the last few days, the mayor was considering, to give one other concrete example, the imposition of a tax on the privilege of receiving medical treatment in the city.

Two tellingly differing perspectives on the city’s authority to collect a tuition tax without legislative authorization were offered in an article in Wednesday [Nov. 11] morning’s edition of the Pittsburgh Post-Gazette. The chair of the Senate Education Committee stated clearly that such a tax could not be imposed without legislative approval. He then went on to say, “When times already are tough for students and families, why would we add to this expense and why would Pittsburgh put itself at such a disadvantage, particularly to tax an enterprise (higher education) that is actually working in their city?”

The executive director of the House Finance Committee offered a different opinion. He stated that the city probably did not need state approval and noted that the Local Tax Enabling Act’s nickname was “the tax anything act.” If he is correct in his interpretation, that is the type of over-reaching legislation that every citizen should fear.

The member institutions of the Pittsburgh Council on Higher Education have consulted with both tax counsel and litigation counsel and are confident that the proposed tax cannot withstand legal challenge. Among other things, this means that the foundation upon which the city’s budget is being built is not sound. That is unfortunate for everyone who cares about the city.

Contextually, let me offer just a few additional thoughts. The  mayor has labeled this a “Fair Share” tax. Viewed from a range of perspectives, though, this proposal is fundamentally unfair.

(1) The only real hole that needs to be filled in this budget is the one tied to the city’s large unfunded pension obligation. That problem is the product of generations of financial inattentiveness from city leaders. It hardly seems fair to now place the burden of dealing with that long-developing problem on the shoulders of the current generation of students.

(2) In presenting this tax, the mayor used a number of examples tied to the income and property taxes he pays and that certain council members pay and that ordinary citizens pay and suggests that students pay no such taxes in support of whatever services they may consume. However, fairness requires the acknowledgment that any student who lives and works in the city pays income taxes to the city and that any student who lives off-campus also pays property taxes – most of the time indirectly, through rent payments that support the taxes that landlords pay directly. In Pitt’s case, only one-quarter of our Oakland students—roughly 7,000 out of 28,000—live on campus, and the city has long urged us to grow that number.

(3) The arguments advanced in support of this proposed tax also fail to fairly acknowledge the important service contributions made by our colleges and universities. At Pitt, for example, we maintain the third-largest police department in Allegheny County, and more than 80 percent of the citations issued and arrests made by that department are not University-related but, instead, are a product of the role we play in keeping the Oakland neighborhood safe for everyone. And since the proposal also provides for student-funded support of the public libraries, it seems only fair to acknowledge that Pitt maintains a collection larger than that of the Carnegie Libraries and that our collections are largely open to the public. Both community policing and University libraries, then, might be viewed as services paid for by Pitt students and provided to the city without any reimbursement being made.

(4) Returning to broader issues, this proposal can be viewed as unfair to anyone who is seeking cost-effectiveness in city government because it spares the need for a closer look at the expense side of budget creation. The proposal also can be viewed as unfair to anyone who cares about Pittsburgh’s future because it places one of the region’s most important economic engines and employment sectors at a clear competitive disadvantage.

A thoughtful editorial in last Tuesday’s [Nov. 10] Pitt News closed with the following thought—“If you didn’t vote, don’t complain about the tax—because you could have prevented it.” As one who never misses the chance to vote, I am sympathetic to that sentiment. On the other hand, the “tuition tax” is not law yet. Instead, it is only a proposal—which means that there are continuing opportunities for interested persons, in addition to the institutions of the Pittsburgh Council on Higher Education, to have an impact on an important law-making process that is still unfolding.

Pitt continues to be deeply committed to the city and makes many important contributions both to Pittsburgh’s economic strength and to its social vibrancy. Just this fall, in fact, the University was the country’s top-ranked public university in the Saviors of our Cities survey, assessing the impact of America’s “best neighbor universities” on their urban communities. We fully intend to continue contributing through our “demonstrated and documented long-standing cooperative efforts” to advance a broad range of important community initiatives. We also must continue to resist the imposition of the “tuition tax,” which is not authorized by existing law, is incompatible with 250 years of American legal tradition, and would undermine much of the very work that holds such promise for Pittsburgh as it moves further into the 21st century.

A UNIFIED, RESOUNDING “NO”

Eight local college and university presidents held a Nov. 10 news conference Downtown to voice their opposition to the mayor of Pittsburgh’s proposed 1 percent privilege tax on tuition for undergraduate college students in Pittsburgh. The Pittsburgh Council on Higher Education (PCHE) organized the conference and participants vowed to fight the proposed tax. “We cannot afford to have extra burdens placed upon our students,” said Pitt Chancellor Mark A. Nordenberg (above). Behind Nordenberg, from left, are Candace Introcaso, La Roche College president; Mary Hines, Carlow University president and PCHE chair; and Paul Hennigan, Point Park University president.