Slowly, the city of Pittsburgh's financial position is improving. The latest sign was Standard & Poor's upgrade last week of the city's credit rating to A from BBB.
That indicator continues its steady rise from the dark days of October 2003, when S&P declared Pittsburgh's creditworthiness had junk bond status, the worst of any major U.S. city. Although the progress has been long in coming, let's not get carried away.
City finance director Scott Kunka used the upgrade as an occasion to restate the administration's call for release from state fiscal oversight. After 2004, when the city was near bankruptcy, Pittsburgh was declared financially distressed under Act 47. A provision in the law installed a state-appointed recovery team to keep watch on the city's finances. The Legislature appointed its own set of overseers, the Intergovernmental Cooperation Authority, which must approve the city's budget.
The two groups of fiscal watchdogs remain in place today, monitoring the city's yearly spending and forcing it to do responsible, long-term budgeting. It's no surprise that the S&P report said that state oversight was one of the factors in the city's financial turnaround. Why cut that strong rudder loose when a look at the city's overall fiscal ship argues for caution?
The city contracts with both the police and firefighters unions expire at the end of 2014, and state oversight has given Pittsburgh the ability to keep labor costs in check. The S&P report cautioned that debt payments eat nearly a fifth of the city's 2013 budget and when combined with payments for pensions and retiree health care consume 30 percent of the budget. The city still has no plan for obtaining financial support from nonprofits. Plus, having a lame-duck mayor who is not very engaged in governing doesn't help either.
Fortunately, the Democratic mayoral nominee, Councilman Bill Peduto, believes that maintaining Act 47 oversight is necessary for Pittsburgh to keep its discipline and stay on a responsible fiscal course. The state should listen to him and other like-minded leaders before taking the S&P move as a sign that Pittsburgh is out of its financial thicket.