US: Tertiary institutions oppose new tax

A David vs Goliath battle is looming in Pittsburgh, Pennsylvania, over a
proposal by the city council to levy a 1% tuition tax on the city's postsecondary students.

"It's illegal," states Vice-chancellor Robert Hill of the Office of Public Affairs at the University of Pittsburgh about the so-called 'fair share tax'.

Hill adds that not only does the tax target those least able to pay "and already burdened with a range of local taxes", it also ignores the enormous economic, educational, social and intellectual contributions already made by the 65,000 students who study in Pittsburgh.

Pittsburgh Mayor Luke Ravenstahl reasons that since students use city services they should pay their "fair share" to the city. That would leave students facing a tax bill of between $27 and $409, with the revenue generated covering the $15 million necessary to keep the city's pension fund afloat.

Issues came to a head when, in spite of a refusal by the postsecondary institutions to support it, revenues from a Postsecondary Education Privilege tax were included in the city's proposed 2010 budget.

The state-appointed Intergovernmental Cooperation Authority that oversees budgets stymied the move last month. Explaining its decision, the authority's Chair Barbara McNees said that "existing tax legislation does not yet exist" to create such an impost. McNees said the city should first pursue cost cuts, more efficiencies and more shared services.

The key element in the dispute is the fact that non-profit universities, trade schools and colleges are exempt from paying some taxes by US law. But financially distressed cities such as Pittsburgh are eager to find new sources of income.

As city councillor Ray Burgess explains: "If they [the non-profit institutions] are willing to share their vast resources with the city, this [tax] will be avoided."

But the institutions feel they collectively and individually are already paying their fair share. Dr Mary Hines, President of Carlow University and Chair of the Pittsburgh Council on Higher Education, says the higher education institutions pay $23 million annually in taxes to the city for various municipal services as well as real estate not directly related to their educational missions. They also attract research revenue and generate business opportunities.

In a statement to the city, Hines rebuked Ravenstahl for seeking a "solution to years of [Pittsburgh's] financial woes ... on the backs of students bettering themselves". "They are the regional workforce that will help keep the city of Pittsburgh and the region competitive in an ever challenging national and international marketplace."

If Pittsburgh became the first American city to tax its students, a dangerous precedent in the non-profit sector of higher education in the US would have been established.

"It's a test case," Hines says. "It would open a door that hasn't been opened in any jurisdiction. It's important to us to make the case here in Pittsburgh and get it resolved."

Moody's Investors Service, which rates the financial health of universities, suggests the proposed tax represents the first step in a process that could see the non-profit sector of American higher education gradually being stripped of its autonomy.