Findings in New Study have Dire Implications for the Commonwealth

Fiscal decay has accelerated in all types and sizes of Commonwealth municipalities over the last 24 years, jeopardizing Pennsylvania’s health and economic competitiveness, according to a compelling new Pennsylvania Economy League (PEL) report, “Communities in Crisis: The Truth and Consequences of Municipal Fiscal Distress in Pennsylvania, 1970 – 2014.”

The disturbing drift threatens the ability of many urban, suburban and rural municipalities to provide even basic services that keep the communities where we live, work, shop and go to school safe, well-maintained, and free from crime and blight. It means core municipalities, whose fiscal health has a direct influence on the financial well-being of the surrounding region as centers of commerce, health care, courts, education and more, are increasingly distressed.

PEL used a mathematical formula to determine the available “tax base” per household and “tax burden,” which is the percentage of the tax base taken in the form of taxes to provide local government services. The formula considers a municipality’s market value, tax revenue, aggregated household income, and the number of households. The measurement is for the municipality only and does not consider county, school district or other real estate taxes or fees.

Among the key findings:
Tax Burden: The percentage taken from a municipality’s tax base in the form of taxes to pay for services has grown on average for all types of municipalities since 1990.
Tax Base: Tax base has fallen on average in cities since 1970.
Act 47: Municipalities in the state’s Act 47 distressed municipalities program generally performed worse than average despite state assistance that in some cases has stretched for decades.
Police Costs: Communities that pay for their own local police force on average had twice the municipal tax burden and ranked much lower than those that rely solely on default free Pennsylvania State Police coverage.

The study, which was funded by a statewide coalition of ten community foundations, looked at 2,388 of the state’s 2,561 municipalities for which there was consistent data from 1970, 1990 and 2014. Once tax base and tax burden were calculated, municipalities were ranked from 1 to 2,388 and divided into quintiles, with those in the first quintile generally the healthiest and those in the fifth quintile considered the most distressed. Philadelphia and Pittsburgh were excluded due to their size and tax structure so as not to skew the results.