It's a seemingly trivial fact that few people know: In Pennsylvania, the earned income tax you pay generally goes to your home municipality.
But that fact contributes big-time to the troubles of third-class cities like Altoona.
"Sure does," said Jim Roberts, distressed municipality coordinator for Johnstown and New Castle, whose recovery plans Altoona City Council members have been studying in preparation for Monday's meeting on the pros and cons of "going distressed" here.
A hundred years ago, most people lived and worked in the same municipality, said A.C. Stickel, Altoona's controller.
Nowadays, "people no longer live where they work," said Roberts, a lawyer for Eckert Seamans in Pittsburgh.
Someone may work in Altoona but live in Hollidaysburg, paying earned income tax to Hollidaysburg Borough and Hollidaysburg Area School District - 0.5 percent to each.
That worker spends half his waking hours in the city, where he and his employer enjoy police and fire protection and the maintenance of the streets he travels.
But his earned income tax doesn't help to pay for those things.
Cities can levy earned income tax on non-residents, but it doesn't do any good if a worker's home municipality and school district levy their own EIT, Roberts said, as most do.
The limit for the standard EIT is 1 percent.
"There's nothing left over [for the city]," Roberts said.
There are exceptions, including the 0.2 percent pension surtax Altoona levies on both residents and non-residents.
But that doesn't help the general fund.
The distressed program provides another exception: Participating municipalities can levy additional EIT beyond 1 percent on both residents and non-residents to augment general fund revenues.
The non-resident portion is called a commuter tax.
Unfortunately, the exceptions can't continue once the municipality exits the distressed program, he said.
That's one of the reasons cities tend to stay distressed. Another is that the long-term solution for stabilizing the tax base - economic development - takes a long time.
Many cities have only half the population they had several generations ago. For example, population in nearby Johnstown is down to 21,000 after a high of 75,000 in the early 20th century.
"But it's still a complex city operation," Roberts said.
Altoona has shrunk from 80,000 in the 1920s to about 46,000.
Coordinators generally start with an expenditure analysis, according to Roberts. In Johnstown, Roberts also dealt with labor costs. Typically, personnel costs are 75 percent of a city's budget, he said.
In Altoona, it's 83 percent.
Eventually, Johnstown obtained full management control of the fire department, including elimination of minimum manning - a contract-based staffing requirement - the way it should be, Roberts said.
Altoona's fire department has minimum manning, requiring that 13 firefighters be on duty all the time. It is the result of binding arbitration in collective bargaining in the 1990s and results in a "whopping amount of overtime," according to City Manager Joe Weakland.
Firefighters have rejected the city's proposal to eliminate minimum manning, saying in 2011 they've made their share of concessions, including wage freezes, furloughs, periodic shutdowns of one station and health insurance reductions.
Distress coordinators try to spread the pain, Roberts said.
"Everybody has to participate," he said. "You've got to bring the community back from the edge of the cliff."
