• Warnock Associates, LLC

The Grey Tsunami

Updated: Nov 30, 2018

The sounds made their way through the thick mahogany doors of the state House chamber and seeped into the ornate State Capitol Rotunda, overheard by visiting students and tourists. Boos and hisses, hands slapping on desks, cries of “Never” and “Traitor.”

The target of this outburst was the diminutive woman standing at the rostrum: the governor of Pennsylvania.

It was January 2025.

She was there to deliver her annual budget address to the General Assembly. It had begun well enough; she was greeted with thunderous applause from her fellow Republicans and polite clapping by the Democrats. The mood changed abruptly after the governor began her speech.

“I come to you today as governor of a state in crises,” she said grimly. “We are facing a budget shortfall of billions of dollars — that's billions — unless we act quickly, decisively and in a bipartisan spirit.”

There were two main reasons for these burgeoning deficits, the governor explained. One was anemic sales and income tax revenues, which had flatlined for several years, making it hard for state government just to keep up with inflation.

The other was the skyrocketing costs of the state’s programs for the elderly, particularly Medicaid, as more and more Baby Boomers crossed the line of age 65.

The costs had been met in previous years by taking extraordinary — some would say desperate — measures. For a time, the state coasted on the increase in revenue from the legalization of marijuana, now sold only in state stores, renamed Wine & Weed Shops. But that was no longer enough.

“We have to face the music,” the governor said to a roomful of glum politicians, who didn’t want to face the music at all.

She proposed a uniform 10 percent cut in all state spending, except for programs for the aging.

Democrats groaned. Some hissed. That would mean a $1.3 billion reduction in basic education funding alone, cuts that would ripple down to every school district and classroom in the Commonwealth.

Next, it was the Republicans’ turn. The governor, a former state senator from western Pennsylvania, had run on a pledge of no new taxes, a bedrock belief of her party. But, she said, the dire circumstances had forced her to “regretfully re-evaluate my stance..."

She proposed an increase in the state income tax from 3.08 percent to 4.08 percent.

Republicans gasped. Many booed. Some, flushed with anger, rose from their seats and yelled “Traitor! Traitor!”

Later, the Republican leader of the Senate said his angry members were “blind-sided by this. We had no reason to believe this was coming.”

He was lying, of course.

He and other elected officials had seen it coming for years – an inexorable swelling tide of Pennsylvanian’s 65 and older, bringing with them a cluster of needs: Medicaid to pay for long stays in nursing homes, after they had spent all of their savings. Many retirees, with small or no nest eggs, had to live solely on their Social Security checks, with no money available for emergencies or to make needed repairs to their homes.

As the over-65 population aged, many faced the onset of Alzheimers and Dementia, debilitating and costly conditions that often left adults in need of constant care, either at home or in nursing homes.

Demographers had a name for this phenomenon of Boomers aging: The Grey Tsunami.

Sounds like the name of a new series on Netflix. It is not.

The scene above is fictional, although the scenario could very well come true, given the demographic and political state of the Commonwealth today.

To glimpse at the forces that will shape the future, look to the present.

Between the years 2010 and 2017, the percentage of Pennsylvanians over 65 (let’s call them potential patients) increased by an average of 16 percent, to 2,280,000 million. Meanwhile, the number of children under the age of 18 (let’s call them future taxpayers) declined by five percent overall.

The chart below shows the range of increases and decreases in each of the 67 counties.

These aren’t the only telling numbers.

According to the U.S. Census, Pennsylvania’s population rose by less than one percent in this decade, an anemic increase, compared to most of our neighbors in the Mid-Atlantic region. (The exception was West Virginia, which lost population.)

There are only two ways to grow population. One is through what is called “natural increase.” where there are more babies born than residents who die. The other is through immigration ­-- the arrival of people from other states and countries. Pennsylvania is not doing well in either category.

The state’s population rose 102,000 between 2010 and 2017, but, that growth was concentrated in just 20 counties. Population declined in 47 of the state’s 67 counties.

When it comes to migration. Pennsylvania had about 20,000 more people enter the state than leave it, but growth in the number of immigrants was centered in 21 counties. Forty-six counties had more residents emigrate — depart the state — than immigrants entering.

As to natural increase, 24 counties had more births than deaths; 43 had more deaths than births. In the map below, the counties with more births than deaths are brown, the ones with more deaths than births are teal.

Another factor likely to influence the future is that the fertility rate among women of child-bearing age has been declining and is expected to continue to decrease.

Sources: Enterprise Data Dissemination Infomatics Exchange (EDDIE); PA Department of Health

Despite these disheartening numbers, the influential Pennsylvania State Data Center remains optimistic about the future, projecting the state’s population will increase by 542,000 by 2025.

Jenny Van Hook, a demographer and sociologist at Penn State, doesn’t share that optimism. She said it was well within the realm of possibility that Pennsylvania’s overall population will decrease in the coming years.

“A lot of the decline in population has to do with the out-migration of youth,” said Van Hook. “I don’t know what it will take to get them back. I suspect they are moving out because they are looking for jobs. We have to get more younger workers relative to older ones. There has to be more leadership when it comes to encouraging younger workers to come back.”

Robert Strauss, an economist and demographer at Carnegie Mellon University, thinks it is probable the state’s population will decrease in the coming years.

“The problems are not going away and the demographics are making it worse,” he said. “This is a big ship and you cannot change the demography of a state in three or four years.”

We know the state’s population of people under 65 is shrinking and will continue to do so. The Data Center projects there will be 103,000 fewer residents between ages 20 and 64 by 2025.

This means there will be fewer Pennsylvanians of working age. Fewer people to pay taxes.

We also know there will a major increase in Pennsylvanians over age 65. Again, the Data Center projects the elderly population will increase by 535,000 by 2025, with about half in the 65-to-74 age group, and half aged 75 and older.

As Boomers leave the work force they become exempt from paying the state income tax on public and private pensions. Strauss said this exemption costs the state about $2.5 billion a year in lost tax revenue.

On the other side of the ledger are the increasing costs. Again, Strauss puts the current cost to the state of providing services to the elderly at between $4.2 billion and $4.7 billion. He projects it could rise to between $5.8 billion and $7.8 billion by 2025.

It adds up to $2 billion to $3 billion in additional costs — each year.

Strauss’s suggested remedy is to end the income tax exemption for seniors, in whole or part. He points out that most states tax private and public pension income in some fashion.

Politically, that idea would be DOA in the legislature.

Even today, the legislature is reticent to fund programs for seniors. One of the largest is called PennCARE, which funnels $310 million to social services contractors and to Area Agencies on Aging (AAA), arms of county governments, which manage programs for the elderly.

In 2012, Gov. Tom Corbett changed PennCARE to a block grant program, a move which officials at the county level appreciated because it gave them more flexibility in how to spend the money. At the same time, however, Corbett and the legislature cut PennCARE funding by 12 percent. It has not been restored.

“Budgeting is a major obstacle,” said Rebecca May Cole, executive director of the state association of AAA’s. “It’s because of the fact that for the most part funding hasn’t changed for many years.”

At about the same time, the legislature passed a law adding seniors to the anti-abuse laws. In the last three years, investigations into elder abuse have risen 33 percent. So has the the number of substantiated cases, often leading to costly interventions. An elderly women living alone and unable to care for herself may require a regular home visitor, a full-time assistant or a stay in a hospital or nursing home.

Source: PA Department of Aging

“In the PennCARE line, there is only one pot of money and it hasn’t changed despite the rise in Protective Services calls,” Cole said. “We were fortunate in that we received $2 million more from the legislature and governor for protective services, but we did a survey of our membership and they said they needed $8 million.”

George Halcovage Jr., chair of the Schuylkill County Commissioners, praised his county’s human services workers for trying to do more with less.

“We don’t make widgets,” Halcovage said. “We don’t have a product to make. We are there to provide services and have to count on property owners for our income. Don’t push down the responsibilities without the funding.”

This is simply not a story of dollars and cents. Care for the elderly in need can put a strain on families, neighborhoods and communities. It’s a task exacerbated in counties where population is declining and the young are leaving. You can’t call your daughter to take you shopping if she lives in Colorado. You can’t ask your son who lives in Texas to drive you to a doctor's appointment.

As the current trends continue, many communities are destined to become what demographers called NORC’s – Naturally Occurring Retirement Communities, with heavy concentration of elderly. The needs will increase – on family and government budgets, on families and friends – as the senior population surges.

To avoid the grim scenario sketched out for 2025 – just seven years away – the politicians can’t stand on the beach today, calmly staring out at the ocean, hoping the tsunami will never come.

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