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No progress seen on big deficit

Wednesday, April 02, 2003

By Timothy McNulty, Post-Gazette Staff Writer

With the clock halfway expired on efforts to salvage the city's 2003 budget, Pittsburgh City Council members said yesterday that it is time to start planning for bankruptcy-type action or other solutions.

The city took a leap of faith in December when it approved its $386 million budget, counting on state legislative approval for two new taxes, state pension aid and a fire-paramedic merger by July 1. Without those and other initiatives, the city faces a $60 million budget hole, which could trigger layoffs, tax increases or other actions.

As of yesterday, the city was halfway to the July deadline with little apparent success in filling the gap, council members noted. They called on the Murphy administration for a status report on the budget proposals and to begin contemplating worst-case scenarios, such as state oversight of city finances.

"We have to be prepared for filing for Act 47 as a distressed city," said Sala Udin, council's budget chairman.

The city wants approval to levy a 0.5 percent tax on payrolls and a 10 percent tax on over-the-counter alcoholic drinks, which would generate roughly $29 million this year. It also wants the state to increase its pension aid from $16 million to $28 million, an amount the state last issued Pittsburgh in 1989.

There has been no public support for the initiatives from Republican House and Senate leaders. Even most local Democratic legislators are against them, with the exception of state Rep. Dan Frankel, D-Squirrel Hill, an ally of Mayor Tom Murphy.

Gov. Ed Rendell named a task force, chaired by Joseph Vignola, to study the city budget. Vignola runs the state agency overseeing Philadelphia's finances.

Delays in issuing the panel's recommendations have lately been exacerbated by confusion surrounding the state budget, but yesterday Vignola said something could be issued in a week to 10 days.

Even after that, the city should expect to be lobbying in Harrisburg right up to its July 1 deadline, he said.

"I'm just as concerned as council about being three months into the budget process. But given the fact that it needs legislative approval, there will be a lot more weeping and gnashing of teeth. The General Assembly is not going to resolve any finances at the state and local levels until June," Vignola said in a phone interview.

The Legislature has its hands full with the state's 2003-04 budget and the Democratic governor's calls to hike state income taxes and other levies to fuel economic recovery and reforms to property taxes and education programs.

Locally, talks are ongoing with the fire and paramedic unions toward a merger that the administration says could save $7.5 million this year and $15 million annually. That merger could trigger closings of nine of the city's 35 fire stations, according to preliminary plans released last week.

Murphy is trying to save $2.5 million this year by cutting 50 police jobs, with roughly 25 jobs already cut as of last month.

The city also plans to save $13 million this year by refinancing debt, which will increase debt payments by $14 million a decade from now. The refinancing could occur in two weeks, said Councilman William Peduto, who criticized the action as "issuing debt to pay operating costs."

In an interview in February, Murphy said if the state doesn't approve the proposed taxes or provide some other form of relief by the beginning of July, immediate cuts in city staffing would probably occur.

He said the city would be able to meet most payroll costs but would have difficulty in the last quarter of the year covering multimillion-dollar bond payments and pension obligations.

Udin said yesterday that budget briefings with the Murphy administration should be held behind closed doors, if authorized by the city Law Department. Under state law, governing bodies can only meet together privately when discussing sensitive legal, real estate and personnel matters.