New Report Proves Pennsylvania’s Pensions Are Doomed

Many are aware that Pennsylvania is facing a substantial budget crunch due to excessive debts. But just how bad is Pennsylvania’s debt? Well, the financial hole Pennsylvania is in is so deep that it will cost tax payers $16,800 each to bail out the state and it will rob countless government employees of their pensions.

One Of the Worst

Pennsylvania tax burden for everyone has doubled since 2009. Nevertheless, there is no clearing in sight. This crisis has been ongoing for some time but has been largely ignored due to political expedience and bad accounting. For a long time, state governments and local municipalities were allowed to hide their long term debts. Non-profit Chicago analytics group Truth in Accounting, founded in 2002, made it their stated goal to provide transparent reporting of state and municipal debts, expenses and liabilities. Due to their efforts, a recent ruling was made to force State and Local municipalities to begin showing their total debt figures. Truth In Accounting has pioneered realistic methods for accessing state and municipal government indebtedness. Utilizing their auditing conditions to create a Comprehensive Annual Financial Report for each State, Truth In Accounting, or TIA, has exposed just how bad the future tax burden for tax payers will be. For instance, Pennsylvania supposedly only had a deficit t of 2 or 3 billion dollars. But this figure ignores future obligations like bonds, underfunded pension liabilities, and unfunded retiree healthcare cost. When these debts are included Pennsylvania’s unpaid bills total $74.2 billion dollars!!! In other words, there is no money to fund the retirement of government employees. The federal government has the ability to print money in an attempt to delay inevitable shortfalls. States have no such freedom. The stark reality is that many government employees will have to face the fact that there pensions will be cut.  Furthermore, unlike private companies, there isn’t an insurance company ready to step in to salvage state or local government pensions.

Breakdown

To arrive at the $74.2 billion dollar figure you take Pennsylvania’s total assets minus capital assets (these are things like building and infrastructure) and restricted assets. This will provide the total amount of assets available to pay bills which for Pennsylvania is $39,017,213,000.  How do we arrive at Pennsylvania’s bills? We take bonds, other liabilities, unfunded pension liabilities and unfunded future health care liabilities in order to come up with a total bill- This is basically all the debts Pennsylvania or in other words the Pennsylvania tax payer will have to pay back. We also minus out any debt tied to capital assets. This will give us a total bill of $111,371,213,000. When we combine to two figures we are left with a bill of $74.2 billion!

Source: Obtained From State Report Released By Truth In Accounting’s State Data Lab

Applying This Analysis To Scranton

Scranton has one of the worst fiscal problems in State of Pennsylvania. What would happen if we applied this same analysis to Scranton? What would Scranton’s financial health look like?  Stay Tuned!

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Scranton Mayoral Candidate Gary St. Fleur and Group of Eight Will See Scranton Government in Court Over Local Taxes

For Immediate Release
April 19, 2017
Scranton, PA-  The City of Scranton will go to trial on May 30th 2017 over taxation lawsuit brought against it by Scranton Mayoral Candidate Gary St. Fleur and the Group of Eight. The lawsuit contends that the government of Scranton has been collecting Taxes in excess of the legal limit and that a mandamus should be issued against the city. The City of Scranton claims it has a home rule charter and is thus not subject to the cap stipulated in Act 511. The City claims that it has sole authority to increase levels of taxation to any amount. It also claimed other objections that are of a procedural nature. Mr. St. Fleur and the Group of Eight represented by Attorney John Mcgovern are convinced that all known ordinances and precedents allows the city of  Scranton to control its rates of taxation but says nothing about the aggregate amount they can collect in taxes. According to Mr. St. Fleur, “it is the difference between speed limit and distance. You can choose your rate speed but the limitation on distance must still be observed.”

The statutory law in question specifically states:

“The aggregate amount of all taxes imposed by any political subdivision under this section and in effect during any fiscal year shall not exceed an amount equal to the product obtained by multiplying the latest total market valuation of real estate in such political subdivision, as determined by the board for the assessment and revision of taxes or any similar board established by the assessment laws which determines market values of real estate within the political subdivision, by twelve mills.”(Act 511)

The lawsuit, or mandamus action, would force the Mayor of the City to obey the law which under Act 511 reads:

Any one of more persons liable for the payment of taxes levied and collected under the authority of this chapter shall have the right to complain to the court of common pleas of the county in an action mandamus to compel compliance with the preceding provision of this subsection. Tax moneys levied and collected in any fiscal year in excess of the limitations imposed by this chapter shall not be expended during such a year, but shall be deposited in a separate account in the treasury of the political subdivision for expenditure in the following fiscal year.

Act 511 bases the cap on a formula that includes the value of the properties in the municipality multiplied by 12 mills- a mill being one of one thousand. Scranton Mayoral Candidate Gary St. Fleur explains, “The legislation is written to protect citizens form excessive taxation. If home values are plummeting then that is a sure indication that the people are becoming poorer. It would be unconscionable to continue increasing the levying of taxes on an already impoverished people.”
St. Fleur contends that the City of Scranton is in severe financial distress and there is practically no recourse left except for the government to file for Chapter 9 Bankruptcy. He has also initiated a ballot measure to force the City into Bankruptcy. A Wells Fargo report from October 2016 explains that a 2014 audit of Scranton revealed $375 million in liabilities and $184 million in unfunded non-pension post-retirement benefits to government employees. The City has had to sell various public assets, such as the sewer authority ($195 million), and issue bonds (that are rated as ‘junk’ status by rating agencies) in order to sustain adequate revenue stream. Mr. St Fleur is adamant that lowering taxes across the board is the only way to Save Scranton from its economic depression. Bankruptcy would lessen the cities financial burdens to make lessening taxes possible.

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