Age against the machine

One of Pennsylvania’s biggest problems is that it has too many people over the age of 65 – and the situation is only going to get worse.

We rank fourth in the nation in terms of the percentage of our citizens who are over 65 (behind Florida, Maine and West Virginia). This group accounts for 16 percent of the state’s population, or about 2 million people, with a median age of 74.5 – also among the highest in America.

Everyone knows that the number of older residents in the state will increase with the influx – make that flood – of baby boomers into the ranks of the elderly.

By one Census Bureau estimate, Pennsylvania will have close to 3 million residents over the age of 65 in 2030 – nearly 23 percent of the state’s total population.

This will have enormous social and economic consequences.

The social consequences will be visible on the local level. Not only will the state have a million more elderly citizens, it will also have a huge increase in the number of “super-elderly” – people who are at least 80 years old. They tend to be frailer, some with serious medical challenges, and are more prone to dementia and Alzheimer’s disease than younger seniors.

Anyone who has cared for an elderly parent can tell you the emotional, physical and sometimes financial burdens that entails for both parents and children.

On the plus side, the state has developed a myriad of programs to support seniors using money from the state lottery, the tobacco settlement money and the state’s general fund. In some cases, the federal government picks up a share of the expense, especially when it comes to medical and nursing care.

In other cases, the state goes it alone with a list of programs and services that includes property tax rebates, free public transit, adult day care, subsidies for home caregivers and prescription drugs. Many of these programs use means testing and are targeted to the elderly poor; others are not.

According to an estimate made by economist Robert P. Strauss, in 2013, the state spent between $4.2 billion and $4.7 billion in general fund and off-budget programs for those over 65.

By 2025, Strauss estimates those same services will cost $5.8 billion to $7.8 billion.

Where are we going to get that additional $2 billion to $3 billion? No one knows – certainly, no one at the political level is talking about it much. (To be sure, those who run programs for the elderly are acutely aware of the trends, with some calling the coming maelstrom the “silver tsunami.”)

In this state, we prefer to practice “Mañana Economics” – “We’ll worry about it tomorrow.”

Strauss, a professor at Carnegie Mellon University, is emphatically not a member of this school.

“The thing about the elderly problem is that we are all in this together as a civilized society, but no one wants to talk about it in a meaningful way,” Strauss told me.

By “meaningful,” he means “fact-based.”

The reality, as Strauss and other fiscal experts know, is that the incremental rise in state tax collections will not be enough to meet this bulge in expenses. The result could be a hole several billion dollars deep.

Strauss is also alarmed because he projects that the number of people in the working-age group will decline by 1 million over the next 15 years. Others say the decline will be less sharp, but the U.S. Census Bureau does project fewer adults aged 30 to 64 in this state in the coming years.

It makes sense: Pennsylvania is not a state that draws a lot of migrants – foreign or American. Our population growth rate is usually in the single digits.

The upshot is that sometime in the next decade, there will be fewer people in the workforce to pay the taxes needed to subsidize the growing number of elderly.

“We don’t know what we are going to do,” Strauss lamented at one point. Later, he predicted: “The strain from this is going to rip what is left of our political fabric.”

What makes Strauss unpopular in some political circles is not his analysis, but his proposed cure, which steps boldly into taboo territory: He wants to tax the elderly.

Pennsylvania is one of only four states that exempts people over 65 from paying state and local income taxes. Most other states tax all or some of retirees’ income from public and private pensions. “We are giving the elderly a free ride,” Strauss said.

And it isn’t a cheap one. Strauss estimates it cost the state $2.5 billion in lost income taxes in 2013 to keep these exemptions in place. That figure, too, will rise with time. A recent paper put the cost of the exemptions at $5.4 billion – and possibly more – by 2025.

Strauss has a point that goes beyond his critique of the economic side of this issue. If it’s been said once, it’s been said a thousand times by our politicians: We must invest in our future.

In Pennsylvania, though, we have put down a lot of money on the past.

For example: Pennsylvania’s lottery yields about $1 billion in profits a year – and all of that money is dedicated to programs for seniors. But, in 16 other states with lotteries, the proceeds go to education: sometimes in the form of subsidies to higher education institutions (California); sometimes to bolster aid to basic education. Three states – Florida, Georgia and Kentucky – use chunks of their lottery proceeds to fund scholarships for children to attend state public and private colleges.

That lottery distribution could be changed in Pennsylvania, but the degree of political difficulty would be excruciating. Getting seniors to agree to give up part of their exemption from income taxes also would be a hard sell, enough to scare away politicians afraid of being accused of ageism. “How can you be against our seniors?” is a question that would haunt their dreams.

Strauss has a rejoinder to that: “I’m 72, for Chrissakes,” he exclaims. “Look, we’re all old. The question, is, are you going to pass the buck to a young working couple making $45,000 a year?”

Within a decade, that question could dominate the state’s public policy and politics. ■