Articles

(April 2004) Pittsburgh is facing a serious fiscal crisis. County and city governments, two state-appointed bodies, and the private sector all are trying to find a solution. Why should Pennsylvanians in other parts of the state care? Because Pittsburgh's fiscal crisis isn't all that different from those in other Pennsylvania cities and towns.

What's happening now in Pittsburgh? IssuesPA investigated.

Last November, Mayor Tom Murphy filed a petition with the Pennsylvania Department of Community and Economic Development (DCED) seeking "distressed" status for the City of Pittsburgh under the state's Municipalities Financial Recovery Act - Act 47 of 1987.

In an evaluation of Pittsburgh's fiscal situation, Public Finance Management (PFM) concluded the city met three of the state's 11 criteria for obtaining distressed status. Meeting only one criterion is necessary to qualify. The state approved the petition in December, and Pittsburgh became the 20th - and largest - municipality to obtain distressed status.

In January, Pittsburgh City Council approved a 2004 budget of $388.8 million - a $1.1 million decrease from 2003 budgeted expenditures and a $21.7 million increase over 2003 actual expenditures. It became law without the Mayor's signature. Following a public outcry over a major increase in Pittsburgh's already high parking tax, Council voted to roll back the rate. The Mayor vetoed the measure and the budget, as passed in January, still stands.

The 2004 budget anticipates increased yields from most city taxes without rate increases (except for the parking tax) plus more money from other payments, fees and reimbursements - and over $4.2 million in savings from anticipated intergovernmental cooperation. Early analysis suggests the city will face about a $40 million deficit in the current fiscal year as debt payments and other expenses increase.

What's Pittsburgh's Act 47 status?

In late January, DCED named PFM and Eckert Seamans Cherin & Mellott, a Pittsburgh law firm, as Act 47 coordinators. After signing a contract earlier this month, the Act 47 team has 90 days to develop a plan to address Pittsburgh's financial problems and eliminate the $40 million projected deficit. If the Mayor and City Council fail to approve the coordinators' proposed fiscal plan or propose an alternate plan that's not acceptable to the coordinators, they can ask the state to impose sanctions - including withholding Pittsburgh's state funding.

The coordinators already have made interim recommendations, including freezing all discretionary spending, all hiring, and spending on non-emergency capital projects; privatizing the city's fleet management; and merging the city's 9-1-1 operations with Allegheny County. City Council approved the merger of 9-1-1 operations early in March, a move that would allow the city to cut 70 dispatch positions and avoid over $4 million in scheduled capital improvements.

How else is state government involved?

In February, Governor Rendell signed Act 11, establishing an Intergovernmental Cooperation Authority for Pittsburgh. Commonly called the "oversight board," the authority has 5 voting members, one each appointed by the Governor and the majority and minority legislative leaders, and 2 non-voting members - Pittsburgh's finance director and Pennsylvania's Secretary of the Budget. The authority has responsibility for approving the city's budget and 5-year fiscal plan, and for making recommendations.

If the authority doesn't approve the city's budget, or if the city doesn't conform to a budget approved by the authority, the authority can act to withhold state funding (with some exceptions) and prevent Pittsburgh from collecting other revenues. Act 11 specifically prohibits the city from enacting budgets that require new taxes. The authority recently submitted its first required report to the Governor and legislature, promising further recommendations later. (See "What's the answer?" for more details.)

Nineteen other municipalities have gone through the Act 47 process and Philadelphia has had a state-appointed oversight board since its fiscal crisis in the early 1990s. But Pittsburgh is making history by having both a team of Act 47 coordinators and an oversight board.

So where are these processes headed?

Act 11 specifically calls for the authority to "operate concurrently and equally" with the Act 47 process - but provides no further detail. The two fiscal recovery processes have distinct differences. Under Act 47, the team of coordinators creates the fiscal recovery plan and the Mayor and City Council approve it. Under Act 11, the Mayor presents a budget and a five-year financial plan to the authority for its approval. The timeframe for creating and approving these plans also differs. Right now, there's no established process to ensure the plans developed under Act 47 and Act 11 are the same. (Click here for a detailed comparison of Act 47 and Act 11.)

Also under consideration? A merger between Pittsburgh and Allegheny County. In mid-February 2004, the Pittsburgh City Council and the Allegheny County Council held a summit meeting to explore ways the two governments could work together. Following that meeting, joint working groups began exploring consolidation of services.

Later in February, Pittsburgh Mayor Tom Murphy and Allegheny County Chief Executive Dan Onorato discussed the possibility of merging the City of Pittsburgh into Allegheny County, a discussion that generated significant media coverage and editorials.

And in its preliminary report, Pittsburgh's Intergovernmental Cooperation Authority also promised future recommendations on changing the structure of city government.