Study lines up Act 47 against other models

State policymakers could pick up some tips from a new report looking into the ways states deal with cities on the brink of financial collapse.

Pennsylvania is one of 19 states with laws allowing them to intervene in local governments’ financial crises. The commonwealth’s Act 47 program has been likened to a type of Roach Motel – 27 cities and municipalities have checked in, only six have checked out.

The Pew Charitable Trusts study suggests proactive programs would have success where Pennsylvania’s reactive program hasn’t. Kil Huh, one of the report’s authors, said Pennsylvania could follow the example of other states with commissions to keep an eye on their cities before they’re in crisis.

“Monitoring has its benefits – making sure that you’re attuned to the fiscal conditions of your local governments,” he said. “Make sure that the revenues coming in is lined up with the spending going out, and the borrowing that you’re engaged in as well as the benefits that you’re promising your workers and retirees is in line with what you can afford over the long term.”

The study makes other recommendations for policy makers – make intervention programs transparent and create a clear exit-plan for cities that enter the equivalent of municipal rehab – but it’s unclear how much Pennsylvania could model the approaches of other states. A state like North Carolina has historically had a great amount of control over individual municipalities, and a consolidated public sector pension system. By contrast, the report notes, Pennsylvania “has the second-highest number of local
governments in the country after Illinois.”

Lawmakers have been considering an overhaul to the Act 47 program, with proposals to let cities to collect taxes from nonprofits within their borders and allow distressed cities to renegotiate benefit awards for public sector workers.