The financial health of Pennsylvania towns is worsening, the result of rising tax burdens, overmatched tax bases, ballooning pensions, and fragmented governments, according to a report released Tuesday by the Pennsylvania Economy League.

"Pennsylvania's system of local governments is broken, and it's harming the people who live in our communities," said Kevin Murphy, president of the Berks County Community Foundation, one of 11 nonprofit groups that funded the study.

"The ability of municipalities to deliver the basic functions that result in a good quality of life is crucial to the economic sustainability and vitality of the commonwealth as a whole," the report said.

The Economy League said overall fiscal conditions have worsened over the last two decades and recommended that the state allow towns to tap more revenue sources, create incentives for local governments to collaborate, and expand their abilities to share tax bases and services. Counties have limited revenue options and cannot provide the same level of support as in other states, said Gerald Cross, executive director of the Economy League's central division.

Pennsylvania has over 2,500 municipalities, and median population for towns is under 2,000.

In an appeal to legislators to reform the state's local government taxation system, Cross asked them to "address the problem and invest in these communities."

"We don't have the ability to guarantee that we can fund services anymore," Cross is quoted as saying in the report.

Among the most-troubled towns cited in the report are Coatesville, Chester County; Chester, Delaware County; and Pottstown, Montgomery County.

Cross said that local tax increases are a result of "hard decisions" by municipal officials.

Police departments are among the largest expenses for municipalities. The Economy League said legislators should modernize the system for providing police coverage but did not advocate a specific plan.

Tax burdens have jumped in the state's cities, boroughs, and townships since 1990, outpacing gains in the tax base in boroughs and townships and leaving all types of municipalities vulnerable to financial distress, according to the study.

The  Economy League studied 2,388 of Pennsylvania's 2,561 municipalities for which data were available to compare the years 1970, 1990, and 2014. The study excluded the state's two largest cities — Philadelphia and Pittsburgh — because of their sizes and differences in tax laws.

Second-class townships, which have fewer than 300 residents per square mile and are the most plentiful form of government in the state, are generally better able to support population growth due to gains in wealth. In Philadelphia's collar counties, the 116 second-class townships are among the healthier in the state, Cross said.

But, Cross said, their larger populations will continue to demand costlier services, even as growth and wealth-generation slows.