Readings Financial Crisis: Why It Matters to All of Us

By Kevin K. Murphy, President, Berks County Community Foundation, Reading, Pennsylvania

November 12, 2009 (READING) -- The City of Reading was declared financially distressed by the
Commonwealth of Pennsylvania this morning. After nearly a decade of financial engineering and onetime fixes, its clear that our city is running out of options.
Reading is not alone: Cities of similar size across Pennsylvania are facing the same crisis. Reading is
simply the latest canary in the mine to file for protection under the states Act 47 program. In fact,
research by the Pennsylvania Economy League suggests that a large number of Pennsylvanias
municipalitiesand not just its older industrial citiesare facing deep financial distress.
Theres no question that some of this problem was created by poor choices made at City Hall. One
administration and council after the next ignored warning signals so loud that they were deafening.
Theres no point in attempting to defend our local failure to act sooner.
And yet poor behavior by city government alone doesnt account for how Reading got in this boat. The
underlying cause of Readings financial distress ties back to its legal inability to help itself. Simply put,
the tax revenues property and otherwise that Reading is legally permitted to collect do not add up to
enough money to fund the police and fire service it needs, let alone anything else.
In Pennsylvania, each municipality may tax itself but may not look to surrounding municipalities for
revenue. This may not sound like a bad thing. But over time, many of the states 2,567 municipalities
have physically bumped up against each other, creating what look like cities but are really different
townships and boroughs knitted together into a metropolitan region. The cities in the center of those
metropolitan regions provide services that are used by all of those surrounding municipalities, yet the
cities can collect taxes only from their own populations. Couple that limitation with the fact that 62% of
Berks Countys poor people live in Reading and you have a recipe for disaster.
In Reading, that disaster is becoming more clearly defined. As a result of its financial crisis, Reading will
cut its fire and police forces below the levels required for adequate public safety on January 1. In fact,
Reading has already announced that it wont be able to investigate certain categories of crime.
As Berks County residents, we need to stop imagining that this is Readings problem. The cost of
Readings distress will be borne by all of us. The environmental costs will shift to all Berks Countians if
Reading cant build a required new sewage plant. When Reading cant provide adequate police
protection, crime will spread throughout the county. The costs of courts and corrections are borne by

all of us. Ultimately, failing municipalities will undermine the credit rating of The Commonwealth, which
means higher costs for state government and higher taxes for all Pennsylvanians.
But the worst effect of all is that Pennsylvania will continue its slide toward being a place where our kids
dont want to live.
Its time for Pennsylvanians to demand action from Harrisburg to save our communities. If nothing else,
our community needs the ability to make our own choices. Earlier this year, House Bill 1682 was
introduced. The bill would allow Pennsylvanias communities to voluntarily shift their tax burden to the
county levelspreading the costs of municipal services more fairly. That bill almost immediately died
as special interest groups and disinterested legislators killed it with amendments.
Another attempt, this one to provide meaningful reform to the outdated pension laws that drive up
costs for struggling municipalities, was also shot down. House Bill 1828 would have begun to make
meaningful reforms in Pennsylvanias burdensome, antiquated and inefficient system of local pension
programs (did you know that over a quarter of all government pension plans in the United States are in
Pennsylvania?). Instead, the legislature passed a law changing the way we do accounting for pensions.
So they punted and shifted the costs and the decisions to another dayagain.
If pension reform and community-based revenue sharing are too controversial, perhaps our legislators
have other ideas. But its time for those of us who live in suburban and rural Pennsylvania to recognize
that this 18th century municipal structure and taxation system doesnt work. It isnt fair to anyone and it
is especially unfair to our children who will get stuck with the bill for rebuilding Pennsylvaniain the
unlikely event that they even bother to stick around.
Pennsylvanias communities are at an inflection point. Readings financial disaster is only the first in
what is likely to be a long string of similar crises that will hit our state fast. We must join together and
demand that our legislators turn their attention to this crisis and act on legislation that enables us to
save our cities, our boroughs, and our townships today not leave yet another mess for our children to
clean up tomorrow.