Universities Need to Visit History Department

Pursuing a court case against the University of Pittsburgh Medical Center (UPMC) will tangentially affect the City’s institutions of higher education according to the Pittsburgh Council of Higher Education, which in turn will affect the task force working on non-profit issues (such as payments in lieu of taxes) that was created as a condition of the oversight board for approving the 2013 budget. Sounds like a house of cards or a big city version of the domino theory.

Because if the City challenges the medical system’s charitable status, as it has made clear it wants to, then the universities will feel threatened, and then any talk of cooperation on the task force will crumble under the specter of a lawsuit.

The universities indicate through a letter to the Mayor that they would prefer to move on to less controversial subjects like "…the city’s burgeoning pension obligations and the imposition of a tax on those who commute to the city". If the universities’ focus sounds eerily familiar it should: it was not long after the Mayor floated a variety of taxes and fees to see what would stick that what survived was the "post secondary education privilege tax" on college tuition. After that was eventually dropped in late 2009, the universities (along with one large Pittsburgh corporation) promised to go to Harrisburg and seek reform for pensions (this was post Act 44, but prior to the garage privatization plan) and possibly spreading the tax burden on to others. We noted at the time that "the universities should not, and in good conscience cannot, move from celebrating their hard work against the tuition tax to helping the City lobby Harrisburg for some other tax, most likely to be one imposed on people who cannot vote for the City’s elected officials."

There is a glimmer of hope four years later: the Council letter did note "The ultimate solution is not to look at another source of funding, but rather looking at the financial stresses of the city…Maybe there are some approaches that would reduce the need for funds". There’s been no shortage of recommendations on that line of thinking.

Poor City, Poor County

Now, both the City of Pittsburgh and Allegheny County are pushing ahead with plans to pry money out of the non-profit community, which, by and large, means the institutions in the City.

Both governments are facing difficulties balancing their out-year budgets so they are flailing around looking for any source of potential revenue they believe they might be able to intimidate or shame into coughing up money. The irony could not be more complete.

Hospitals and universities are endlessly hyped in marketing and self-promotion literature as the great drivers of the local economies. And they are. A large share of net new job growth is traceable to health care and education.

After imposing tax, regulatory and labor climates that are inimical to private sector expansion, the two governments (assisted by costly school districts) find themselves in position where raising taxes is likely to be counterproductive. Quite a conclusion for big government advocates. So what’s left to do? Go after non-profits that might have some extra money lying around. The question: where will they go when they milk all they can out of those institutions and it also turns out to be self-defeating and counterproductive and when they find still do not have enough cash coming in to fund government?

Cutting spending comes to mind. But why not do the cutting now before more revenue chasing does more harm to the area’s economy?