State discusses Act 47 reforms

HARRISBURG – On Thursday, near the end of a state Senate Local Government Committee hearing on proposed revisions to the Act 47 distressed municipalities recovery law, solicitor Neil Grover of Harrisburg recalled a similar 2011 hearing at which then-Sen. Jane Earll told fellow lawmakers “what they badly needed was a very large shot of testosterone.”

“That hasn’t changed,” Grover told the committee, chaired by John H. Eichelberger Jr., R-Blair.

There’s still the need for political courage to attack the problems that underlie the financial distress of municipalities like Harrisburg and Altoona, according to Grover and other officials, including Eichelberger – although there’s disagreement on whether Act 47 is the right venue for the heaviest changes they want.

The reforms included in Eichelberger’s Senate bill and a companion House bill that is ready for a floor vote include taxing options, a stronger “early intervention” program, a participation limit of five years plus a three-year extension, receivership for municipalities that can’t make it and, in extreme cases, “disincorporation.”

Much of that will help, according to Pennsylvania Municipal League’s Amy Sturges, who testified Thursday.

But like the current Act 47 provisions, they don’t get to the underlying problems that drive municipalities to seek help in the first place, according to Sturges and Grover.

Those problems include taxing limitations, a high percentage of tax-exempt properties in core municipalities and laws governing both binding arbitration for public safety workers and pensions, according to Sturges.

The tax options in the Act 47 proposals won’t help much because they’re largely a tradeoff, according to the critics.

The proposed new laws would allow an increase in the Local Services tax beyond the normal state cap, but use of that option would reinstate the regular cap on earned income tax, for example.

Municipalities need ways to put in place permanently the kind of taxing liberties they enjoy with Act 47, with the flexibility to custom design those taxes to fit their situations and to redesign when things change, according to Grover.

The Act 47 reforms don’t do anything about properties exempt from a real estate tax, binding arbitration that results in contracts that municipalities can’t afford and defined-benefit pension plans whose liabilities threaten municipal solvency, according to the critics.

You’re expecting too much from those Act 47 reforms, Eichelberger told Sturges.

He agrees they’re needed, but lawmakers who also agree are taking those issues up in separate legislation, he said.

Sturges acknowledged that after the hearing and explained that the

Coalition for Sustainable Communities, which includes her organization, is working on the expense issues first.

Eichelberger himself has sponsored a bill to reform binding arbitration.

That bill would make evidentiary hearings open to the public, would require arbitrators to make awards that are in keeping with financial analyses of municipalities, would enlarge the pool of arbitrators to help eliminate what critics say is the tendency of arbitrators to favor unions to ensure repeat assignments and require unions to share the cost of neutral arbitrators, Sturges said.

The unions oppose that bill, and it faces formidable odds, according to Eichelberger.

Another bill sponsored by Rep. Seth Grove would help municipalities begin to shrink their pension liabilities by placing new public safety hirees into what are essentially defined contribution plans.

The unions also oppose that bill, although the odds aren’t as long as they are for the arbitration bill, according to Eichelberger.

The coalition is waiting to push for revenue-generating reforms – including tax and tax-exemption law reform, Sturges said.

Many groups, including ordinary taxpayers, are likely to contest tax reform, she predicted.

And institutions, including hospitals, will contest proposals they believe threaten their property tax exemptions, according to Sturges.

After the hearing, Eichelberger agreed with Grover’s channeling of Earll.

“People here have to do the right thing,” he said.

The unions that represent municipal workers – the Fraternal Order of Police, the Pennsylvania Professional Fire Fighters Association and the American Federation of State, County and Municipal Employees – didn’t testify at Thursday’s hearing, but issued a joint statement.

“We agree that Act 47 is in need of reform,” the unions state.

The current version allows municipalities to linger indefinitely in distress, to the detriment of workers, according to the unions.

“One need only look at the dismal ‘graduation’ rate to see that the longstanding exit process is broken,” the union states. “But [the Senate version] as currently drafted does nothing to improve the exit process.”

Instead, it provides “a fast track to bankruptcy or mandating the outright dissolution of municipalities,” the union states.

Neither “nuclear” option is advisable, the unions say.

The House version, however, allows unions to petition the state for municipalities to leave, according to officials at the hearing.

“It is our hope that we and our fellow stakeholders can work together in the Senate to secure additional improvements to Act 47 that do not punish the thousands of FOP, PPFA and AFSCME members who live, work and pay taxes in Act 47 communities, but instead provide our members and the citizens they serve with tools to enable [those] communities to survive and thrive without state oversight,” the unions stated.

New Local Government Committee member Scott Wagner of York County spoke with scorn of the unions, saying that from what he has seen, they “run the state” with “the mentality that there’s unlimited water in the well.”

Lawmakers are afraid of them, he said.

Or beholden to them, Eichelberger suggested.

Grover said he has represented unions for 25 years, and his father was a Teamster.

Right now, the process is “poisoned,” and “the worst elements on both sides” are in the forefront, creating deep distrust, he said.

The ideal is to work cooperatively and “apply the facts,” he said.

Mirror Staff Writer William Kibler is at 949-7038.