Wednesday, December 19, 2007

The other, other shoe ...

I think it is possible to be of two minds on this UPMC Pittsburgh Promise/Pittsburgh Service Fund thing. On the one hand, we are talking about 10 million dollars this year for the Pittsburgh Promise. That will be a very good start for the program. The whole amount will probably not be used by 2008 graduates, so the remainder can generate interest for future years. By comparison, the million and a half the city is giving up is only a small part of the budget, which is in surplus anyway this next year and for a few years to come. The lack of the million and a half will accelerate the coming shortfall, but it would come anyway. And the city’s pension shortfall and other debt dwarf the million and a half; UPMC would have to start kicking in its entire “excess margin” to make much of a difference there.

The Pittsburgh Promise program could have a very beneficial effect on the city as well. If the students police themselves, control their behavior issues with an eye towards getting a college education and a way out of poverty, a lot of the problems in the city’s schools will go away. It may increase parental involvement in the schools as well. I realize I am implying that only poor kids have behavior problems, and I’m sure that’s not the case. But it may be that schools in poorer neighborhoods have more problems because the students don’t feel like they have much of a future, and rich kids who do have behavior problems have better access to treatment and tend to get passed along as merely “eccentric” anyway. If the Pittsburgh Promise succeeds it may not replace the million and a half lost to the city, but people may feel a bit better about the city.

On the other hand, it is possible to conceive a scenario where the Mayor and the School Superintendent had prematurely announced a program last December, were handed an incredible gift by UPMC (possibly at the Mario Invitational), sat on the details during the election and even through the announcement of the gift five weeks after the election. Now the messy details come out as council is set to adjourn for the year, and the Mayor tries to ram UPMC’s conditions through council. The Mayor had stated that he did not give UPMC or the Pens anything in exchange for the admission to play golf with Joe Theismann and Sidney Crosby. In fact, he suggested he was having business meetings while playing golf. Because this Mayor has lied to the press and reacted hostilely to their questions in the past, it is not hard to believe e could be concealing information in this case. He may have known the whole details of UPMC’s intention to donate up to a hundred million and the conditions attached since June, and this young Mayor may have been so dazzled by the size of the donation that he was distracted from what he was committing the city to give up.

Did this Mayor know, in August, when he talked to the Ethics Board, about UPMC’s gift to the PP, and its included conditions, that let UPMC off the hook if the State Legislature passes legislation taxing non-profits? Did the Mayor know about UPMC’s gift and its conditions when he asked Mark DeSantis, in the debates, how he would replace lost revenue if the Pittsburgh Service Fund was used to pay down debt and/or fund the pension fund to a higher level? Apparently, by agreeing initially to UPMC’s conditions with no open debate or public comment, the Mayor has placed City Council in the position of dashing the hopes of hundreds or thousands of High School Seniors or helping to expedite the financial ruin of the city.

Speaking of which, a commenter on the Burgh Report asked whether the Act 47 team should reopen the budget process. I believe it was the ICA team that signed off on the budget, or possibly both, but it is a good question. Maybe the ICA should come forward and make public the consequences of this situation. At least Luke can take his place among the people who got us into this mess.

The issue of why UPMC is pressing to be absolved from having to pay taxes in the future is a bit puzzling. Is there bipartisan support in the legislature for such a law? Is the support strong enough a bill is imminent? Maybe UPMC figures the only reason to pass such a law would be to help the states two largest (and struggling) cities, and if Pittsburgh say it doesn’t need tax revenue from its largest non-profit, the reason to pass such a bill would go away. I wonder if such a resolution would be legal, apparently UPMC thinks so (and I suspect their legal advice is really good).


Mark Rauterkus said...

UPMC's ability to peer into the future isn't any better than mine.

When Act 55 passed, it was by a MASSIVE majority. But, lots of those people got tossed out of office or have hit retirement. The voter unrest in PA is never like it was in the past.

UPMC has to watch out. And, it does.

UPMC wants an insurance policy. UPMC is in the 'insuance business' as well. And, the long-term health of the city, its schools and the municipality budget is in play.

If the 5.5% payroll tax was applied to UPMC, as was recently (past sessions) put into bills that didn't pass -- then UPMC's tax burden would swell by $200 M per year, so we are told.

Of course this is a political play more than it is one from generosity.

Great recap and overall posting, BTW.

EdHeath said...

Aw, p'shaw ... Thanks for the compliment, I'm not sure I deserve it (with all my fumbling around).

I really wonder if UPMC has lobbyist/spies that are telling them something. Some Pittsburghers may have caught onto the fact that the city is not likely to exit "distressed city" status under the current plan, or if it does we might go right back into being distressed because we failed to address long term financial problems. The state’s Legislative leadership may be thinking about additional special taxes just for Pittsburgh and/or Philadelphia.

Otherwise, I can’t see why UPMC bothered. All things being equal, there’s no reason to expect a tax on non-profits anytime soon, despite all our grumbling. Kind of odd.