The Stimulus Trap—Allegheny County Style

The Stimulus Trap—Allegheny County Style

Seems like only yesterday we were warning the state, school districts and municipal government about the dangers of grabbing Federal stimulus dollars and spending them as if they were permanent replacement funds for local revenue shortfalls. Now the stimulus dollars are gone and local tax revenue has not risen enough to make up the difference. Case in point; Allegheny County is facing a significant budget problem for 2012 the Chief Executive spokesperson says stems directly from the cuts in Federal and state funds that were available in 2009, 2010 and 2011.

Rather than make the spending cuts in the Executive’s proposed 2012 budget plan the majority members of County Council are proceeding with legislation to boost the County tax rate to 5.69 mills, a 21 percent increase from the 4.69 rate currently in place. As we have noted earlier, the 21 percent hike in a reassessment year is likely to run into legal difficulties.

The problem for Council is twofold. The failure to adjust spending to a lower path when the stimulus funds were arriving in anticipation of the day when they would no longer be coming in is simply inexcusable. The nearly decade long adamant refusal to allow property assessments to change to reflect market movements has locked property tax revenues for the County at artificially low levels with the major inequities frozen in place as well. Now, the Council wants to solve all the problems created by past policy blunders in one dramatic act-raising taxes by 21 percent.

Thanks goodness state law will protect property owners although it is likely to get messy and drag out any eventual resolution. The question is how far and how vigorously the new Executive and the Council will push against the law as they have all too willing to do over the last few years, resulting in expensive lawsuits that have all been lost-up to and including a Supreme Court order to reassess.