For PA Municipalities, it’s About Seeking Change, Not Dollars

By Melissa Daniels | PA Independent

HARRISBURG — Across Pennsylvania, times are tough for local governments. About 41 percent of the state’s population live in a municipality facing some kind fiscal distress.

Yet Gov. Tom Corbett’s proposed budget holds municipal assistance relatively flat. That includes funding assistance for cities in Act 47, the official classification for the fiscally distressed.

But municipalities aren’t necessarily looking for state dollars. They’re looking for change, the kind that requires legislators to act.

This year, the administration proposes a $7 million transfer to the Municipalities Financial Recovery Revolving Aid fund for fiscally distressed governments. Last year the state transferred in a little more than $12 million. The year before, $1.4 million was transferred in, according to state budget documents.

Lyndsay Frank, a deputy press secretary with the Department of Community and Economic Development ,said last year’s increase was notable on two fronts.

“First, the increased funding for Act 47 made up for significant shortfalls in previous budgets that had the program on the path to insolvency,” she said in an email to PA Independent. “Second, the increased funding allowed the Governor’s Center for Local (Government) Services to utilize grants and loans from the program to support recovery plan implementation (Previous funding shortages did not allow for this).”

This year’s proposed funding, Frank said, will allow the state to support its 21 officially fiscally distressed communities.

Rick Schuettler, deputy executive director of the Pennsylvania Municipal League, said there is concern if more cities wind up in Act 47. That could threaten the money.

Barring that, Schuettler said municipalities understand that funding for more traditional state programs has waned during the past few years as the state dealt its own fiscal issues.

But, he said, “there are some things the state can do that would be on the expense side that could really help us.”

High on the list is municipal pension reform.

Collectively, Pennsylvania’s municipalities carry $6 billion in unfunded pension liabilities, $4 billion of which is from Philadelphia. Legislation from Rep. Seth Grove, R-York, would overhaul the system by creating new plans for police officers and firefighters.

Late last year, the Local Government Commission identified more than 6,500 “unfunded mandates,” or state laws that dictate local spending. Some of the more burdensome, according to the study, are Department of Corrections standards, stormwater planning requirements, competitive bid limits and legal notice publication requirements.

But one high-profile change Shelton said municipalities are looking for is updating Act 111, the state law governing binding arbitration between municipalities and public safety unions. The law prevents strikes; instead binding arbitration is used the event of a stalled contract negotiation.

Act 111 led to a $15-million settlement between the cash-strapped city of Scranton and the local firefighter union. The Pennsylvania Supreme Court ruled binding arbitration still applied though the city was declared fiscally distressed, though it didn’t have money to fulfill the original award of $30 million.

Sen. John Eichelberger, R-Blair, chairman of the Senate Local Government Committee, is sponsoring legislation to update Act 111, which hasn’t been changed since it was enacted in 1968.

Some changes initially discussed would split the cost of third-party arbitrators between the labor union and the local government, which is estimated between $3,000 and $5,000. It also would require arbitration meetings to be open to the public.

Les Neri, executive director of the Pennsylvania chapter of the Fraternal Order of Police, said changing Act 111 isn’t necessary.

Neri said the number of municipalities that wind up using binding arbitration is minimal compared to the state’s more than 3,000 municipalities. About 100 request an arbitration panel annually, though less than half end up using it, Neri said.

The majority of labor contracts are settled in negotiation – and that’s where savings can be found. Neri cited a recent example in Chester County where benefits reforms saved $200,000 to $300,000 in the local budget.

“We’ve even gone in and voluntarily taken pay freezes, we’ve gone in and restructured our benefits,” he said. “We’re willing to work with them in restructuring the way we do business in reviewing what pay raises are potentially available to our members.”

Neri said there’s no issue with making negotiations public, but such a law could be added to the state’s open meetings law rather than opening up Act 111. As for the arbitrator cost, some police unions have “only two or three members,” which would make cost-splitting unfair, he said.

“It would be more than the pay raise they could possibly receive to pay for neutral arbitrators,” he said.

Eichelberger also is chairman of the Local Government Commission, which is embarking on a long-term plan to reform Act 47. Legislation is expected by the end of 2013.

Eichelberger said the commission also is looking at what “unfunded mandates” could be eased. The goal, he said, is to reduce costs to local governments rather than hand over money.

“If we can unlock their handcuffs with some of the rules they have to live by,” he said, “we can lift some of the mandates that are funded off of them and we can give them a fair playing field with union negotiations, then they’ll be very happy with that.”

Contact Melissa Daniels at melissa@paindependent.com