Fiscal distress program a function of PA’s state-city dynamic
Harrisburg is among the Pennsylvania cities in the Act 47 program.
A recent Pew Charitable Trusts study all but condemns Pennsylvania’s approach to assisting cities in fiscal distress. But the number and variety of municipalities in Pennsylvania plays a factor in the commonwealth’s poor response to municipal fiscal distress.
A recent report suggests the state’s Act 47 program is too reactive to successfully guide cash-strapped municipalities back to financial recovery – of the 27 municipalities that have entered, only six have exited. But it doesn’t help that the commonwealth has an unusually large number of local governments – and it treats them with a deference not found in places like Virginia, North Carolina, and Maryland.
“They’ve just selected a different way of dealing with their municipal governments,” said Brian Jensen, director of the Pennsylvania Economy League of Pittsburgh.
In North Carolina, for example, cities have to go to the state for approval when issuing bonds. There’s a single consolidated public sector pension system. In Pennsylvania, Jensen said, “we’re pretty atomized.”
“The pension laws alone are very different in all the forms of government,” he added.
Fred Reddig, something like a czar for the state’s fiscal distress program, said the commonwealth is limited in its ability to guide local governments out of dire financial straits.
“We provide – try to provide – the resources but we don’t have the ability to specifically dictate, and that goes really to the constitution and really the limitations that exist there,” Reddig said. He said many local governments have laypeople reporting municipal finances to the state, and they don’t have to use a standardized method.
“One of the issues that our office struggles with is the quality of the information,” Reddig said. “Now, when we have the CPA report we have greater confidence in the data that is in that report than we do necessarily in some of the reports that come in from elected auditors.”
Jensen stresses there are advantages to the strength, variety, and sheer number of local governments in Pennsylvania.
“It’s only a bad thing if you’re in bad shape,” he said.
Some say tightened laws on financial reporting could help. A state legislative task force is studying potential remedies to the Act 47 program and will issue recommendations this year.
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