Act 47 worked; let it go: The city of Pittsburgh is no longer 'financially distressed'
October 26, 2012 4:00 AM
By Dean Kaplan and Jim Roberts
Nine years ago the city of Pittsburgh was on the brink of financial disaster. Police and paramedics were laid off, pools and recreation centers were shuttered, and bonds were downgraded to "junk" status. The city's auditor suggested that the city government might soon cease to be a going concern.
What's different now? Almost everything.
The mayor and City Council have embraced changes required by the 2004 and 2009 Act 47 recovery plans, reaching ground-breaking labor agreements with all city unions, expanding cooperation with Allegheny County and municipal neighbors, and right-sizing and putting out for competition many city services.
The city has had a string of largely balanced operating budgets, something few other cities have managed through the recession. While it faces the same long-term challenges as those municipalities, it now has the right tools to take corrective action well before trouble starts. Those tools include publicly released and reliable quarterly financial reporting, solid current-year and long-term projections, and a fund balance reserve that has consistently exceeded $50 million.
The number of city employees is down from more than 4,200 in January 2000 to just over 3,200 in the first pay period of this year, a drop of almost 25 percent. The city has also established a collaborative process among the administration, the council and the public for annually developing a multiyear capital program and budget.
Long-term challenges remain, but the city has taken steps to confront them. Outstanding debt has dropped by more than $300 million and will be paid off by 2026, meeting best-practice standards. A new debt policy governs future borrowing, and the new capital budget process is more transparent and prioritizes the most critical needs.
Unaffordable post-retirement health care has been eliminated for employees hired since 2005 and an irrevocable trust fund (one of few in Pennsylvania) has been established to pay for older employees still entitled to the benefit. The commonwealth has stopped requiring huge advance cash contributions to ensure that funds will be available for workers' compensation recipients, and the city has methodically pursued an innovative approach to negotiating buy-outs, eliminating payments to one-third of long-term recipients.
It is likely impossible for the city to comprehensively address its pension-funding problem without corrective legislation from Harrisburg. However, the city has done much within its legal control, including a council-sponsored long-term commitment of parking-tax revenue to the pension fund and an agreement with our sister oversight body, the Intergovernmental Cooperation Authority, to pledge annual pension payments from the city's portion of gaming revenue. The city has begun to make annual pension contributions that are greater than the legally required amount and has a plan in place to stabilize pension-fund cash flow.
In proposing to end Act 47 oversight, we see a fundamentally different picture than we did in 2009, when we opposed the request of the mayor and the council president to exit the program. Now, the city has made substantial progress in addressing the remaining legacy-cost issues that were cited in rejecting its 2009 petition. The city has made steady progress on the operating budget and repeatedly shown its ability to control expenditures. And the continued presence of the ICA means that annual budgets and five-year financial plans will continue to receive scrutiny from independent overseers.
Act 47 oversight has been a success for Pittsburgh. It's time to move on to the next chapter in a great city's history.
Dean Kaplan and Jim Roberts are the Act 47 coordinators for Pittsburgh. The state Department of Community and Economic Development will hold a hearing at 4 p.m. Monday in City Council chambers on a proposal to end Act 47 oversight and Pittsburgh's status as financially distressed.