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Help Wanted: Unemployment rates in the Harrisburg region are at their lowest in decades, but it’s not all good news.

Are you hiring in Harrisburg? Join the club.

Ten years after the Great Recession, the capital region has jobs than it does people to fill them.

Harrisburg’s metro area logged a 3.8 percent unemployment rate in August, signaling its ascent to full employment—that economic idyll where every willing, able job seeker can find work, at a living wage to boot.

But it’s not just the employment rate that’s booming. Other indicators suggest the regional economy is at its strongest point in a decade. Data show that the region’s workforce is slowly growing, as people who gave up on finding jobs once again begin to seek work. College graduates report high confidence in their employment prospects, and business owners feel increasingly optimistic about the economic climate.

Many of these same trends are true across the United States, where unemployment hit 3.7 percent in October—a 50-year low. But even as Harrisburg keeps pace with the national economy, it out-performs other parts of Pennsylvania. In a report published earlier this year, researchers at Penn State found that diverging economic fortunes are creating “two Pennsylvanias”—one with sluggish job growth that incentivizes out-migration; the other with a fast economy that draws in new residents with the promise of jobs. Harrisburg, aided by the fast-growing economies in Lancaster and Philadelphia, is part of the latter.

“Honestly, south-central Pennsylvania is a good place to be right now,” said Jesse McCree, executive director of South Central PA Works, a workforce development organization. “We’ve heard from more employers in last 12 to 24 months who cannot find people to fill jobs… and we’re seeing a lot of employers who want to improve job quality and invest in their workers as an asset.”

A “tight” labor market—one where jobs outnumber job seekers—tends to tip the scales of power towards workers, who can hop jobs or bargain with managers to secure better pay and benefits. Employers, on the other hand, say they can’t hire fast enough. Kathryn Sandoe, chief communications officer for the Lancaster County Solid Waste Management Authority (LCSWMA), said a months-long worker shortage has created a crisis in the waste industry.

“We’re operating at a high vacancy right now,” Sandoe said. “We have more waste to move than ever before, but quality truck drivers and equipment operators are at a premium.”

Other employers agree that the worker shortage is dampening productivity, especially in the building trades professions, where a growing construction market stresses a shrinking labor pipeline.

“We have work scheduled four, six months out almost all the time now,” said Seth Maurer, who owns a hardscaping and outdoor contracting company based in Susquehanna Township. “We have to turn a lot of jobs down.”

The competition bodes well for job seekers, who businesses want to woo with new incentives and job perks. Maurer’s company has increased its average starting wage to $16—$3 above the regional industry average, he said. They’ve also added healthcare benefits and one week of paid vacation. LCSWMA raised its entry-level wages this summer and is touting its comprehensive benefits package in ads and interviews.

Employers also find themselves investing more resources in branding and recruitment. Gone are the days when newspaper and job site ads yielded a robust field of applicants; recruiters say they’re now buying targeted online advertisements and billboard spots. But since job seekers can afford to be choosy, getting a candidate in for an interview is only half the battle.

“When previously did you have to worry about branding yourself as an employer?” Sandoe said. “Before, if you were hungry for a job, you would try to sell yourself hard as a candidate. Now, as an organization, we have to sell ourselves hard just as the candidate does.”

As demand for workers increases, those who previously left the workforce, or who were pushed to its margins, are dipping their toes back in. This particularly benefits job seekers who would be overlooked in a more crowded hiring field. This includes applicants with disabilities (federal data show the number of workers claiming disability insurance is plummeting) and those with criminal backgrounds.

“Employers are giving a second look to previously untapped labor markets,” McCree said. “When you look at specific populations, like people who were incarcerated, we are seeing workforce participation levels creeping up in a significant way.”

In all, economists agree that it’s better to be a worker now than at any point in the last decade. As employers scramble for staff, employees have their pick of jobs and can afford to leave lousy ones. Wage increases and newfound bargaining power are putting more money in some workers’ pockets. These combined forces should, theoretically, improve quality of life in and out of the workplace. As economist Stephen Herzenberg of the Keystone Research Center explained, “A tight labor market is a friend of high productivity, which is a friend of faster income growth and better living standards.”

But a tight market only reveals so much about an economy’s overall health. Even though the unemployment rate is one of the most frequently cited economic indicators, experts say it can mask more troubling, insidious trends. These trends—such as yawning income inequality and shrinking gains in social mobility—reveal themselves in conversations with job seekers, who describe a labor market much harsher than the one touted by politicians. They’re evident in local poverty rates, which have risen every year since the Great Recession. And they’re worrying the people who provide food, housing and other services to low-income residents, who say that full employment hasn’t translated into widespread self-sufficiency.

“I think we all kind of thought that once unemployment started to drop we would see a more significant reduction in need for services. But it didn’t quite happen—it spiked up,” said Joe Arthur, executive director of the Central Pennsylvania Food Bank. “Folks aren’t showing up on unemployment rolls, but we have a lot of families who are struggling towards the end of the month. That’s a big change over time. It wasn’t really like that when I started here 10 years ago.”

As Susan Wokulich of the United Way of the Capitol Region put it, people struggled during the recession because they couldn’t find jobs. Now, she says, “People are getting jobs but still need assistance. I would guess that problem existed [a decade ago,] but maybe not to as great a measure as it does now.”

On this surface, the coincidence of worker shortages and stubbornly low wages seems to defy basic supply and demand principles. But economists say it’s the result of years of policy failures that, even in a booming economy, could take years more to repair.


WHAT GIVES?

Even though the region is adding jobs, that growth isn’t uniform across all sectors of the economy. Data show that the industries that added the most jobs in the Harrisburg metro area in 2016 and 2017 were both low-wage ones. What’s more, wage growth remains sluggish. While some employers have increased pay in response to worker shortages, economists say one surge of raises won’t reverse long-term stagnation. The economy would need to stay at full employment for a long time to yield meaningful wages gains across all sectors.

“Tight labor markets can help a little bit, but by themselves are not likely to end four decades of wage stagnation and income stagnation for many families,” Herzenberg said. “We need policies that increase wages and give workers more bargaining power.”

Many researchers are quick to point to Pennsylvania’s minimum wage as one factor depressing pay across the state. There’s widespread support among Democrats in the state legislature to raise it to $12 an hour—the same rate that Gov. Tom Wolf instituted for all state workers in 2017. But lawmakers haven’t increased the $7.25 wage floor since 2009.

Service providers say that minimum wage jobs are becoming scarce, but many jobs in the region still don’t pay enough to live on, Wokulich said. And she doesn’t think that wages at the level Wolf proposed are any more viable.

“When you’re getting $11.50 or $12.50 an hour and you have a family, that’s not a living wage,” she said.

The Harrisburg region has low housing costs compared to large East Coast metropolises, or even to neighboring cities like Lancaster and Hershey. But a low wage still only goes so far. The costs of food, transportation healthcare and childcare burden many workers’ incomes, Wokulich said. And while welfare benefits can subsidize these expenses, experts say that current policies are wildly uncalibrated, trapping upwardly mobile workers in low-wage jobs.

Take the Child Care Network, which awards subsidies for daycare based on a sliding scale. The more you earn, the smaller your subsidy—and, at a certain income, the benefit disappears entirely. The graduated benefit plan was designed to lead families to self-sufficiency. But more often than not, the result is a net-loss of household resources.

“Everyone wants to see salary increases, but when subsidies start to drop off and you have less spending power for basic needs, one disaster—a flat tire or a sick child—can throw you off,” Wokulich said.

Policymakers call this phenomenon the “benefit cliff”: the point at which subsidies dissipate, leaving a worker who transcends the welfare system poorer than when she was on it. These cliffs also ensnare families receiving SNAP, a federal food assistance voucher, and those in public housing.

Arthur, the food bank director, thinks these cliffs could explain why some well-paying, mid-skilled jobs are going unfilled. Even with a salary raise, losing a benefit “can be the difference between staying afloat and not staying afloat,” he said. “It creates unintended obstacles for folks, because it basically does lower their household resources and possibly [disqualify] a job they otherwise would take.”

That’s certainly the case for Araija Robinson, a 21-year-old single mother who works part-time at the Harrisburg branch of CareerLink, an employment agency. Robinson’s current job pays her $8.75 an hour—barely enough to support her and her two children in a subsidized apartment in public housing.

Robinson was recently offered a job at UPS that would pay $20 an hour. She wants to take it, but she’s conflicted. Robinson fears she won’t be eligible to stay in her apartment if she makes that much money, but says she’s not ready to move out, especially once she starts paying for daycare.

“I think it will be worth it, but it’s just going to make things hard,” Robinson said. “The job is definitely ideal for me, but I know once I start it, I’ll have to move. And can I make $20 an hour and move into a nice apartment in the suburbs? No – not with two kids. I would have to find something dirt cheap that’s just like living in the projects.”

Experts say that good jobs, ones that offer living wages, benefits and a path to self-sufficiency, are out there—Pennsylvania just isn’t cultivating a workforce that can fill them. Data from South Central PA Works show a glut of workers in low-paying industries, such food preparation and retail sales. Meanwhile, mid-skilled occupations in the healthcare and IT fields see perennial worker shortages.

“There is still a mismatch in what Pennsylvania’s educational institutions produce and what our employers require,” said Sue Mukherjee, a former labor and industry analyst who now works for the state higher education system. Experts expect this “skills gap” will widen over the next decade, requiring governments, employers and schools to double down on workforce development and training.

“In this market, you would think anyone with any skills would look for a job,” Mukherjee said. “But there are many Pennsylvanians whose skills may have hemorrhaged a bit because of industry disruption, and there’s no infrastructure in place that is looking into educating and training the working poor and the working class.”

Some of that infrastructure is under development. In mid-October, Wolf announced a new building trades apprenticeship program in the Harrisburg area, which could add dozens more carpenters, electricians and plumbers to the local workforce in the coming years. As demand for workers increases across sectors, employers have started responding themselves, said John Shelton, a program manager at CareerLink’s office in Harrisburg. Shelton pointed to a local nursing home that’s tired of losing and replacing nurses. The company launched a mentorship and training program and now pays for some employees to get nursing certifications.

“I’ve never seen a nursing home facility do something like that, but they want keep people on board,” Shelton said. “There’s a feeling that companies are trying to make things better to keep people and help them advance.”

Shelton hopes that the current labor market will force companies to make work more meaningful and sustainable for their employees. If low unemployment rates persist, turning whispers of labor shortages into full on shouts, wage gains and job quality improvements could accelerate for workers across the board. But what remains to be seen is who will take the lead: the private sector, local and state government, schools or workers themselves.

Correction: A previous version of this article misidentified a United Way employee due to a transcription error. Her name is Susan Wokulich, not Susan Coolidge.

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Beyond the Bell: More than just kettles, Salvation Army helps rebuild lives.

Screenshot 2015-04-29 00.41.16Those who only “see red” when they think of The Salvation Army—as in the kettles of that color for collecting Christmas donations—must expand their vision.

TSA actually works year-round, offering a myriad of services to help those in need. Just in the Harrisburg Region, the Salvation Army offers 11 programs and services, including the only breakfast-feeding program in the area. Almost 70,000 times a year, TSA Harrisburg provides food for the hungry.

“Often people don’t know us until they need us,” said Major John Griner, area coordinator/corps officer for the Harrisburg Capital City Region.

This month, the good work of TSA Harrisburg will be highlighted and honored at the Annual Civic Event, which will double as the group’s 130th anniversary celebration. Moreover, it’s the 150th anniversary of the parent organization.

Positive Life Choices

In 1865, British preacher William Booth began to minister to those living on the margins of society. TSA since has greatly expanded its mission and today focuses on families, as well as individuals.

Locally, family services constitute a large part of the work of the Harrisburg Region. These include both short-term services to families in need of immediate food and shelter, as well as longer-term assistance.

Naomi, for instance, raising her young grandchildren, often uses the food pantry. “The money I save from the pantry helps me pay the light bill,” she said.

Another client, Yvonne, lost her two front teeth in an accident as a teen and has had other struggles over the years. She enrolled in TSA Harrisburg’s Hope and Vision Endeavor (HAVE) program, which uses a holistic approach to promote long-term self-sufficiency. With the assistance of a HAVE case manager, she replaced her teeth, obtained a driver’s license and secured employment.

In Harrisburg, more than 300 kids participate in TSA’s Summer Youth Enrichment Program, held at various outreach locations. In this all-day program, which lasts for nine weeks, youngsters rotate through eight activity programs, including arts education, nutrition education and physical education.

Another program, Bridging the Gap, offers 41 curriculum units to guide children—many of whom live in difficult, negative environments—to make positive life choices.

“The physical location of youth programs can be anywhere and everywhere we go to connect with kids, such as schools, churches and alternative education program sites,” said Kathy Anderson-Martin, director of philanthropy. “We focus on current and emerging needs of youth and adapt curriculum accordingly.”

Speaking of location, the administrative offices of the Harrisburg Region long have been at 1122 Green St., but officials now are looking to relocate.

“Our facilities are inadequate to serve the more than 20,000 people who visit our office each year, and we need to be closer to the clients who need us,” said Anderson-Martin. “Our current location is on the market.”

Outside the Box

Every region of this huge international organization operates locally and has to raise funds for its own budget. If the goals aren’t met, programs might have to be cut.

For the past five or so years, noted Griner, the Harrisburg Region has worked especially hard to identify and serve communal needs.

“In 10 out of 10 cases, these revolve around kids and education,” he said. “So, we have focused on partnering with or assisting local schools and teachers to work on educational deficits.”

Partners in the effort include area schools, such as Downey Elementary, which is the site of the after-school program, Messiah College, the local United Way and the Joshua Group.

“We try not to reinvent the wheel,” said Griner.

The Region welcomes volunteers at all times, but especially before the holidays. They can provide new toys and clothing items for children and seniors through the Angel Tree and Adopt a Family or Adopt a Senior program, pack Christmas gift boxes or ring the bells at red kettles.

One Region event, Shoe Strut, has provided shoes to nearly 1,000 kids over the past three years. Shoe Strut resulted from a brainstorming session of a group of volunteers of the women’s auxiliary to meet a need creatively and effectively.

“We try to think outside the box,” said Anderson-Martin.

According to Anderson-Martin, it is particularly gratifying to hear an adult say, “I was one of your kids, and remember what you provided.” Or: “A meal changed my life perspective.”

“If you can get to the kids, you can hopefully break the cycle,” she said.

You can help Salvation Army Harrisburg Region celebrate its 130th birthday at its Annual Civic Event on May 13 at Radisson Hotel Harrisburg in Camp Hill. This year, the organization honors Penn State football head coach James Franklin. Sponsorship opportunities, including those with a VIP Meet & Greet with Coach Franklin, are available on a limited basis.
 
If you wish to volunteer or want more information about the Civic Event or the organization, call 717-233-6755 or visit www.salvationarmyharrisburg.org.

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Non-Profit Problem: About half the property in Harrisburg is nontaxable. Can anything be done about it?

Non-profits in downtown Harrisburg.

Non-profits in downtown Harrisburg.

Forum Place. Harrisburg Hospital. The Farm Show complex. The state Capitol.

Four places, four very different businesses, one thing in common—all are regarded as nonprofit entities, so pay no property taxes to their host city, Harrisburg.

According to the city treasurer’s office, Harrisburg is home to 716 parcels that are tax-exempt due to their non-profit status. Making the situation even more difficult: more than 75 percent of those parcels belong to either the government or government-related entities, which by law cannot be taxed, according to the Harrisburg receiver’s office.

So, what’s a city to do?

For years, the answer was “not much,” as the state did with Harrisburg pretty much what it wanted. Condemn and raze entire neighborhoods? Sure. Turn local streets into forbidding, perilous highways to accommodate suburban workers? Why not? Expand and take more properties off the tax roles? OK.

During the past century, the city has toggled between actively participating in its own destruction by facilitating the state’s unquenchable thirst for more land and, more recently, lamely complaining in City Council meetings and mayoral press conferences that the state does not pay its fair share for the services it consumes.

Last month, the situation changed somewhat. The state passed a 2013-14 budget that gave Harrisburg $5 million in “fire protection” funds, representing the largest-ever direct infusion of cash from the state as part of a regular budget process.

However, as it stands right now, that level of funding is a one-shot, one-year deal. Meanwhile, there are numerous other issues emerging that could affect the capital city’s relationship with the many nonprofit entities that call Harrisburg home.

State of the State Funding

To say that John Campbell was surprised would be an understatement.

“I’ll be honest with you—I was shocked,” said Campbell, Harrisburg’s treasurer.

Campbell was speaking of the $5 million the state coughed up to the city, double the amount allocated in the 2012-13 budget. His surprise was heightened by the fact that House Republicans, in their budget plan, had already slashed the allocation to $496,000.

Most city officials, including Mayor Linda Thompson, expected the amount to increase once the budget bill was finalized. In the end, however, it surpassed nearly everyone’s expectations.

“It’s a figure we’ve never received before,” Campbell said.

State Sen. Rob Teplitz said he and Rep. Patty Kim had worked hard to get funding restored, hoping to reach $4 million, a figure most city officials had set their eyes on. Receiver William Lynch lobbied Gov. Tom Corbett and Republican legislative leaders for another $1 million, which is how Harrisburg ended up with $5 million for this fiscal year, said Teplitz.

“It really is a windfall,” he said. “But we’re not asking for extra payment. We’re only asking for fair compensation.”

That fair compensation is, technically speaking, for protecting state buildings from fire, thus the money is accounted for in the state budget’s line item for fire protection. In fact, according to Teplitz, the city had to pledge the money would go only for that purpose.

However, it’s a stretch to believe that 60 percent of the city Fire Bureau’s $8.4 million budget goes to safeguarding the 40 buildings that constitute the Capitol complex. The money, in fact, flows to the city’s general fund, which does include the Fire Bureau, but also includes most other parts of the city government. So, money that goes into the Fire Bureau budget simply frees up funds elsewhere for the financially strapped, indebted city.

In the end, the state uses fire protection as a politically expedient way to compensate Harrisburg. It’s simply easier to fund a single, existing line item for a specific use than to transfer money into the general fund of the much-criticized and ostracized city. Besides, firefighters have hero clout lacking in, let’s say, the city’s IT department.

Harrisburg is happy to go along with this process because the state has habitually underfunded the city for services rendered: use of its roads, its emergency services, its public works and sanitation staff. Each weekday, the population of Harrisburg doubles, largely due to the presence of the state government, with the small population of the largely poor city left to pick up the tab of this white-collar invasion.

Until this year, the state has never owned up to its obligation as, by far, the largest employer and landowner in Harrisburg. Exempt from having to pay property taxes, the legislature allocated whatever it wanted, with the amount bouncing around from year to year. So, under the Reed administration, the state often provided just over $1 million. In 2010, that amount was cut to $987,000 and then to $496,000 in 2011. After the city’s financial crisis hit full-on, the state used the line item to assist the city to the tune of $2.5 million for 2012 and now $5 million.

City officials seem satisfied with that level—that $5 million finally compensates the city fairly. The problem, however, is that the funding level is not guaranteed going forward. It’s subject to the legislature’s annual horse-trading extravaganza known as the budget process. So, will the state reduce funding again once the city’s finances stabilize or when Corbett is no longer governor or Lynch is no longer receiver? No one knows.

Teplitz said he’s introducing legislation in the fall that would stabilize Harrisburg’s state funding, ensuring the city fair compensation in the fire protection line item that also would allow it to plan financially from year to year.

“The legislation would require the actual cost to get reimbursed,” he said.

Teplitz acknowledged passing such legislation would be an uphill climb, but vowed to put in a strong effort.

“Then we wouldn’t have to go begging every year,” he said.

PILOT Programs

In Harrisburg, after the state government, the next largest block of tax-exempt properties in the city belongs to PinnacleHealth System, one of the area’s largest healthcare providers, which is listed as a non-profit 501(3), the IRS’s designation for a tax-exempt organization. In the city, healthcare providers alone account for 11 percent of the non-taxable properties. If taxed, the PinnacleHealth parcels alone would bring in more than $1.13 million in property tax revenue, according to the receiver’s report.

But Pinnacle, like many other non-profits, instead makes Payments In Lieu of Taxes (PILOTs) to the city, amounting to more than $120,000 a year. Pinnacle spokeswoman Kelly McCall said in an e-mail that a 1998 court settlement prevented her from discussing specifics.

“Our PILOT was established through the Settlement Agreement, and the Agreement contains a confidentiality provision. We do make PILOT payments to the City of Harrisburg, Harrisburg School District and Dauphin County,” McCall’s e-mail said.

“PinnacleHealth provided more than $14.8 million in community benefits and reached more than 2.1 million people through programs and services, such as free screenings, community health education and chronic disease management in fiscal year 2012.

In addition, PinnacleHealth has supported numerous initiatives within Harrisburg, including increasing access to healthcare for the underserved through the Keystone Continuum, donating to maintain extracurricular activities and athletic programs in the Harrisburg School District and providing nutrition and physical activity education and meals to Harrisburg School District students,” she continued.

Overall, Harrisburg received a total of more than $420,000 in PILOTs in 2009, $410,244 in 2010 and $420,286 in 2011. According to city records, Harrisburg anticipates, in its 2013 budget, receiving about $425,000 in PILOTs. Next to Pinnacle, PHEAA, the Pennsylvania Higher Education Assistance Agency, state is the second biggest PILOT contributor, sending in $107,444.79 each year for properties in the city.

“Under the Purely Public Charities Act, (Act 55), any PILOT payments are totally voluntary on the part of the non-profit,” said Cory Angell, a spokesperson for city receiver Lynch.

While a noteworthy addition to any municipal budget, PILOTs rarely constitute more than 1 percent of any total budget, according to an exhaustive 2010 nationwide study of the issue conducted by the Lincoln Institute for Land Policy. In Harrisburg, PILOTs account for about three-quarters of 1 percent of the budget, a figure largely unchanged for the past decade.

Tony Ross, president of the United Way of Pennsylvania, which has members who partner with more than 5,000 not-for-profit social service agencies statewide, said that standardizing a definition of what is and what is not a non-profit in Pennsylvania would help eliminate the fear that smaller non-profits—which have fewer assets and resources than the healthcare behemoths—end up bearing an undue share of the tax burden if stripped of their tax-exempt statuses. It would also help clear up the issue of just what qualifies as a non-profit from county to county.

“We’re concerned that non-profits are getting lumped into one group,” Ross said.

Ross explained that many of his affiliates, which tend to be smaller, community-based organizations, lack the assets and resources of the healthcare giants. What is a PILOT to PinnacleHealth could be a life or death situation to a smaller organization, he said.

“From what I can tell, those sorts of distinctions aren’t being made,” Ross said.  “Whatever is done, it needs to be uniform across the state.”

“This tension has been going on for a long time,” said Joe Geiger, who until recently was the long-time director of the Pennsylvania Association of Non-Profit Organizations. “It wouldn’t even be close to enough money to offset the deficit. And there are some unintended consequences that could occur where some non-profits who are currently operating in Harrisburg may decide they need to find a more favorable environment in which to operate.” 

“Poor decisions like that are what happened with the incinerator. That’s where the problem is. It’s not the fact that non-profits aren’t paying taxes,” Geiger said. 

“Very few non-profits are property tax-exempt,” Geiger explained.  “Most of them rent their properties and pay their taxes through the rent that they pay. So, when you look at the amount of debt that Harrisburg is in and you look at the amount of money that they could leverage out of charities, it’s not going to come anywhere close to the solution.” 

“Non-profits and the local government ought to be working together to look at solutions, not taking each other to court,” he said.

Baseball & Bathrooms

After the state and PinnacleHealth, a host of smaller nonprofits dot the Harrisburg landscape (see map). In fact, you can walk through much of downtown and Midtown and hit one after another.

Did you know that Metro Bank Park is still owned by the city, so is tax-exempt even though Harrisburg sold the Senators baseball team in 2007? The team now leases the ballpark from the city.

The restrooms at Sunshine Park on Herr Street are also tax exempt, as is the controversial Forum Place building on Walnut Street, even though it’s valued at more than $63 million.

Rep. Patty Kim, a first-year Democrat representing Harrisburg’s 103rd district, said she thinks it’s time for a public hearing as legislators have been getting lots of mail from the public. She also said she thinks that the non-profit designation should be made closer to home.

“I think it should be a municipal decision if it comes to that because, if the state does it, it’s going to be like a cookie-cutter formula that doesn’t fit with everybody’s unique situations in the city,” she said.

Kim said she was working with Rep. Robert L. Freeman, a Democrat from the 136th district representing Easton and Northampton County, as a future co-sponsor of a proposed bill that would ensure additional resources to cities like Harrisburg that have a disproportionate number of tax-exempt properties.

Speaking of legislation, a legislative solution is brewing that could expand the definition of a non-profit in Pennsylvania, which might further impact Harrisburg.

In June, the House Finance Committee stopped short of a vote on a proposed law that would amend the state constitution to give the General Assembly the power to define a tax-exempt non-profit statewide. The House was taking its look at the proposed new standards, known as Senate Bill No. 4, after the Senate approved it in March.

Pinnacle’s McCall said that Pinnacle is also closely watching the progress of the proposed constitutional amendment, which likely would lead to a more liberal definition of what qualifies to be a non-profit.

“PinnacleHealth supports the legislation, as it will provide clarity and uniform treatment of charities throughout Pennsylvania,” she said.

In Pinnacle’s case, its payments are made as a result of a 1998 settlement reached with the Dauphin County Board of Assessment Appeals after the hospital appealed the county’s decision stripping the hospital’s tax exempt status in 1993. The reason the tax board took the hospital off the tax-exempt rolls? The county was not satisfied that the hospital had continued to meet the five-prong “HUP test”—established by a 1985 court decision to help determine what is a non-profit—because it engaged in competitive practices with other local healthcare providers.

Dauphin County Judge Richard A. Lewis later agreed, ruling that Pinnacle’s acquisition of local private physician practices as part of its expansion of an integrated healthcare system evidenced a private profit motive on the part of the hospital.

“The taxing authorities argue that the physician practices compete with private physicians and that such competition is evidence of a private profit motive. This court finds that [Pinnacle] cannot compete while still maintaining its charitable mission and charitable nature,” Lewis wrote.

Eric Montarti, senior policy analyst with the Allegheny Institute for Public Policy, a Pittsburgh-based non-profit taxpayer interest research group, said that hospitals, in a sense, are placed in a vulnerable position since no one wants to be seen as wishing to start taxing churches and schools.

“Take away these things that you’re never going to tax. Take away these things that the politicians are never going to go after, and what are you left with?”

Pittsburgh, like Harrisburg, has an Act 47 problem, the legislative term used to describe when the state appoints an outsider to oversee a city’s finances because the municipality is so far in debt that it has been declared a financially “distressed” city. In 2004, Pittsburgh began grappling with a $34.3 million deficit.

“It obviously didn’t solve the city of Pittsburgh’s issue,” he said.

Harrisburg, a city with a $56.3 million budget, currently faces an operating deficit of about $12 million and a $350 million debt tied to its botched incinerator retrofit, which has pushed the city to the brink of bankruptcy.

Montarti said that trying to, in effect, indirectly tax tax-exempts is the wrong direction to take as nonprofits attract people who, for example, buy properties in the municipalities and therefore later end up paying property taxes. Montarti said that those same people also end up paying taxes on local services while otherwise helping to support the local economy. The city, instead of trying to tax non-profits, should first get its own fiscal house in order, he said.

“Our argument would have been, ‘Well, okay, the city of Pittsburgh really needs to look at what it’s spending and what it’s doing in terms of how many services it provides, how many people it employs, how much cooperation there is between it and the county on similar services,’” he said.

People have made the same point about Harrisburg. Over the past few years, however, Harrisburg has slashed and slashed and slashed. The once-bloated city government now is down to its bare bones, challenged to deliver even basic services.

After years of underfunding its obligations, the state government has finally stepped up—at least for one year. PinnacleHealth also has shown that it’s willing to be civic-minded. Will other nonprofits follow suit? Given the city’s vast financial needs, PILOT payments may never amount to too much. However, Harrisburg does provide these nonprofit organizations with vital services. Given its desperate shape, the city is searching for every penny it can find.

Reggie Sheffield is a freelance reporter in Harrisburg.  He may be reached at troylus@comcast.net.

 

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