Grasping At Taxes to Pay for Pensions

Schools, municipalities get creative

Steve Malanga at Public Sector Inc. reports on Pennsylvania governments increasing taxes in order to pay increased pension requirements.

Malanga follows tax increases in Scranton, York City, and in a number of school districts. He also notes that districts are looking to challenge property assessments in search of more revenue.

The Warrior Run School District in Union and Northumberland counties has a different idea on how to raise revenues. Last week the school district sent registered letters to dozens of property owners advising them that it is challenging the assessments of their properties, asking for a higher value and tax bill. With health and pension costs creating a $1 million deficit, the district is looking to generate $600,000 from the unusual reassessment move.

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Some of this is happening in Michigan. New assessing rules have meant more inspections and after the housing bubble, cities are desperate to recognize increasing home values. Cities are also challenging previously exempt nonprofits to pay property taxes.

While Michigan has not seen the volume of tax hikes that Pennsylvania has, it may be around the corner. Allen Park, currently in emergency management, passed a public safety millage that will partially go to shore up underfunded police and fire pension systems. The increased contributions required by the pension system is one of the reasons that the city is under emergency management in the first place.

We are not likely to see such tactics in Michigan school districts, however. Most districts already charge the maximum amounts they can for operating purposes. So the increased retirement contributions must come out of their additional state contributions, through operating efficiencies, or through reductions.

The need for operating efficiencies is one reason why so many districts have contracted out support services.

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