Wages have largely stagnated over the past three decades. There has also been a sharp slowdown in gains in educational attainment and reduced rates of public investments, and fading returns to those investments. The crisis in state budgets and the requirement that they balance budgets each year threatens to compound this — forcing cuts in critical public investment projects that determine our future prosperity, and that of our children.

Today, two out of every five Pennsylvanians live in a municipality in fiscal distress. As this number continues to grow, it is slowly and steadily undermining the commonwealth’s reputation as a stable place to raise a family or build a business. A common response to this trend has been to say, “its the bigger governments – places like Pittsburgh, Philadelphia, Harrisburg, and Reading – that are in real financial trouble.” This point has also been used to fight against local government consolidation (even sharing of services or resources) noting that if bigger government is better why then are city governments in financial distress? Older cities are pitted against newer suburbs, with the leadership of urban communities painted as poster children for poor fiscal discipline. This politically favorable, if self-forgiving, narrative has replaced reality in our public discourse on this issue.

The fact is that most cities studied in a recent Pennsylvania Economy League report did not generate enough tax money (from all sources of taxation) to pay for their fire department and their police department, let alone any other services. Most people find that statistic staggering, but it’s true. Easton, Lancaster, Reading, and York don’t generate enough tax revenues to cover the cost of their public safety departments, let alone provide parks, libraries or snowplowing.

Maybe it’s time to give up on Camden remaining a municipality. A failed state takeover barely moved the city closer to being a self-sustaining entity. And new solutions proposed for Camden seem to have little chance of being implemented soon enough to keep it from strangling in debt.

Will 2011 mark massive Athens- and Paris-like street demonstrations as American state and local government workers protest recession-triggered cuts in their pay and retirement benefits? Some are making that prediction. I don’t, because I don’t believe the public will be with the workers. For good or ill, we chronically regard government — and its employees — as “somebody else,” not “us.” We exhibit little of the class or cultural solidarity that undergirded the protests in Europe. But there’s no doubt that a major showdown on public sector wages and benefits is at hand. On the very day of his inauguration, Democratic Gov. Andrew Cuomo of New York agreed to an order by his predecessor to lay off 900 state workers because union leaders had refused to agree to $250 million in concessions.

Pennsylvania's budget problems present a special challenge for Corbett, who campaigned on a pledge that he would not raise taxes. Here are some choices that could be made to help solve the state's budget problems.

City Council overrode the mayor’s veto of their amended 2011 budget on Tuesday, effectively signing it into law. They also overrode the mayor’s veto of two staffing ordinances for the police and fire departments. The legality of the manning clauses has been contested by Mayor Chris Doherty.

NJ has 566 municipalities which puts it in similar straits as PA regarding government fragmentation.

Co-sponsored by PEL Central.

ELGP report detailing the state revenues generated by the region as well as estimating Southeastern Pennsylvania’s share of Pennsylvania’s total economic activity.