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Analysis: City's weak pension fund fuels mayor's tuition tax stand
Sunday, December 20, 2009

The mayor introduces a student fee that is universally unpopular with colleges, students and business leaders. He gets shot down by the state legislature. The fee, which was supposed to bail out the city's struggling budget, does not get implemented.

Sound like a familiar story? There is a bit more to it. After Providence, R.I., Mayor David Cicillini introduced his student impact fee in the spring -- similar to the 1 percent tuition tax Mayor Luke Ravenstahl is proposing now -- his poll numbers shot up for the first time in years.

Critics have rained scorn on Mr. Ravenstahl's proposal, saying it squanders the great publicity Pittsburgh has earned lately for its economic resurgence -- much of it related to its successful nonprofit medical and educational institutions -- and turns off the very young people that the old city is trying to attract and retain.

"At a time when Pittsburgh is being held up globally as a thought leader in regional transformation, seeking to impose a tuition tax sends exactly the wrong message about the City and our entire region," said a statement last week from the Allegheny Conference on Community Development, which is usually in lockstep with the mayor.

In a testy City Council hearing Monday with college leaders and Mr. Ravenstahl, even the usually monastic Mark Nordenberg got hot under the collar, saying the proposal could damage city-school relations permanently.

"The way in which this discussion has to this point unfolded has been, in my mind, destructive," the University of Pittsburgh chancellor said. "I think that it does damage relationships in ways that are hard to repair."

The so-called Fair Share Tax proposal is set for another vote tomorrow, although it may be postponed while the universities agree to study other revenue proposals for the city.

Other nonprofit leaders are also grumbling about the plan, given that Mr. Ravenstahl is leaning hard on them to fund the Pittsburgh Promise scholarship program, one of the city's key renewal measures.

Given this ire -- and the fact that a first-of-its-kind student tax would spur a surefire lawsuit, and state legislators have vowed to block it -- why on earth is Mr. Ravenstahl gambling on what looks like a sure loser?

His supporters say there are no politics in the mayor's decision. Rather, the tax is the one way the city can significantly tap the nonprofit community for the $15 million the city needs to help address its notoriously weak municipal pension fund.

As for the bad headlines the tuition tax is spurring (it has received national attention in the Wall Street Journal and The New York Times), they say the bigger public relations disaster is the pension fund. It is the biggest factor holding Pittsburgh back from real financial health and mentioned every time bond rating agencies or other third parties take hard looks at the city's books.

As for lawsuits, they can be expected any time there is a controversial new tax -- see the Allegheny County drink tax, which survived court battles. And the city would welcome a struggle with the Legislature, the mayor's supporters say, claiming the state has not done enough to assist Pittsburgh the way it did Philadelphia, which got approval for a 1 percent sales tax increase in September.

In this reasoning, the mayor had no choice but to take the nonprofits head-on, and his decision to pursue the fight is a reminder of a previous mayor who butted heads city and statewide, and with the city's fiscal overseers, to fix the city budget.

"I'm not a big Tom Murphy supporter, but the changes Murphy did took courage," Councilman Jim Motznik, a Ravenstahl ally, said of the layoffs, pool closings and other cuts Mr. Murphy implemented in 2003-2004 before getting a partial bailout from the state.

Mr. Murphy "did that at the end of his term. The things Luke Ravenstahl [is] doing now show courage and he's doing them at the beginning of his career."

The Murphy analogy with Mr. Ravenstahl -- who has been in office since 2006 and announced the tax the week after winning a four-year term Nov. 3 -- is repeated by his critics.

"For a group of people I think are pretty good politically in these three years, I was kind of surprised they would pull a boner like this," said political analyst William Green.

"It was a political mistake. An ultimatum. You don't do politics like that in this city. It's very Tom Murphy-esque and us-against-them," Mr. Green said.

The mayor claims there are no politics behind his proposal and it was purely budget-minded. Believe that or not, he may not be hurt politically by the initiative.

In Providence, the poll numbers for Mayor Cicillini had bottomed out this February for the once-popular mayor, who won election in a landslide in 2002. After he introduced his $150-per-semester fee to tap money from Brown University and three other city colleges, his numbers jumped 7 percentage points.

"If anything, among the voting public it helped [Mr. Cicillini] in the community. It doesn't seem to have hurt him," said Marion Orr, a Brown political science professor and director of its Taubman Center for Public Policy and John Hazen White Public Opinion Laboratory.

According to Mr. Motznik, who leaves council next month to become a district judge in Brookline, the student tax has gone over well among his constituents.

"Who would be OK with it? Homeowners, property owners," he said.

Pumping money into the budget for the pension plan is good news to city employees -- who still factor in city elections -- which is why it has the support of the city's savvy firefighters union president, Joe King.

"The operating budget directly impacts the workers, the men and women on the street," Mr. King said last week.

On the campaign-finance side, nonprofits are barred from giving money to Mr. Ravenstahl anyway. And despite the protestations from the Allegheny Conference, its business leaders are among the mayor's biggest contributors and that is unlikely to change.

It is also just the beginning of his four-year term, when executives often push their most controversial efforts (see President Barack Obama and health care reform).

Mr. Ravenstahl may have been outflanked in one large political measure by the universities. Taxing faceless nonprofit institutions can be popular with voters "because they simply feel nonprofits are not giving their fair share," said Dr. Orr, of Brown. But he said governments lose the publicity battle when real faces -- of students -- get attached to the plans.

The University of Pittsburgh purchased newspaper ads featuring students complaining about the tax and deployed its news media office to connect students with reporters. Grass-roots antitax efforts by students citywide have also received loads of attention.

University officials are complaining behind the scenes about Mayor Ravenstahl's "bullying" on the tax, which includes his promise Dec. 10 that he would not pull the proposal without a commitment of at least $5 million annually from the schools.

Whether the universities put any money on the table in coming days -- or the mayor's council allies indeed move forward on the tax -- will go a long way toward deciding whether Mr. Ravenstahl saves face on this tax proposal, or gets egg on it.

Timothy McNulty can be reached at tmcnulty@post-gazette.com or 412-263-1581.
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First published on December 20, 2009 at 12:00 am