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January 7, 2010

City, higher eds reach compromise, avert tax

A controversial proposal to tax students’ tuition was tabled late last month in an 11th-hour compromise between city and higher education officials, who jointly announced a “new Pittsburgh coalition” to address the city’s financial woes.

In his November budget proposal, Pittsburgh Mayor Luke Ravenstahl had pushed for a so-called “fair share tax” of 1 percent on city higher education students’ tuition as a way to fill a $15 million gap in the city’s 2010 budget due to underfunded city pension obligations.

After the state-appointed Intergovernmental Cooperation Authority, which oversees Pittsburgh’s finances under Pennsylvania’s Act 47 recovery plan, rejected Ravenstahl’s proposal to include the tax in his 2010 budget, the mayor continued to seek separate Pittsburgh City Council backing of the levy for inclusion in future budgets. The proposal was set for a Dec. 21 vote by council, which, based on public statements, appeared to support the measure by a slim majority.

But following behind-the-scenes negotiations, Ravenstahl tabled the tax proposal after Pitt, other nonprofit groups and some corporations pledged to form a coalition that would provide some direct financial assistance to the city, as well as help it to pursue other revenue streams.

At the Dec. 21 news conference announcing the new partnership, Chancellor Mark Nordenberg, flanked by the mayor and officials from Carnegie Mellon, Highmark and Duquesne Light, issued a statement praising the new collaboration as “unifying” following what increasingly was becoming an adversarial relationship over the proposed tuition tax.

“All of us, I know, are very pleased that the mayor has committed to the step of forming and leading a broad-based coalition to seek and secure a viable, long-term solution to the dramatic imbalance between the expense obligations that the city has inherited and the restrictions on revenue that so tightly constrain what it can do to meet those obligations,” Nordenberg said. “We are unified in our understanding that the city is being financially crushed by staggering legacy costs tied to significantly underfunded pension obligations.”

While congratulations for the new collaboration were exchanged, the compromise offered few specifics.

Nordenberg cited the University’s past commitment to the Pittsburgh Public Service Fund, a consortium of more than 100 local nonprofit institutions and agencies that voluntarily donated about $14 million to the city’s coffers under a three-year agreement that expired in 2007.

“The University of Pittsburgh made the very first pledge to the first Pittsburgh Public Service Fund and, consistent with that unbroken history, stands prepared to renew and increase that support once the impediment of the tuition tax proposal is removed,” Nordenberg said.

He did not specify what amount Pitt would pledge or over what timeframe under the new coalition commitment.

(The complete text of the chancellor’s statement is available at

Pitt and the nine other member institutions of the Pittsburgh Council on Higher Education previously had argued that pursuing voluntary contributions from the city’s nonprofits and developing “other funding streams” were the appropriate alternatives to the tuition tax. The institutions threatened legal challenges if the tuition tax proposal were passed by City Council.

Ravenstahl previously had proffered two alternatives to the tuition tax: extending the 0.55 percent payroll preparation tax to nonprofits, or increasing the $52 annual wage tax for those who work within the city limits to $144. State legislature approval would be required to adopt either option. So far, neither proposal has gotten much traction in Harrisburg, city officials acknowledged.

It is believed that, had it been approved, the tuition tax would have been the first of its kind in the nation. Ravenstahl’s proposal drew attention from city government bodies and academic institutions nationwide.

—Peter Hart

Filed under: Feature,Volume 42 Issue 9

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