An $89.5 million bank balance, a debt diet and improved credit ratings aren't enough to get the city of Pittsburgh out of Act 47 fiscal oversight, the state Department of Community and Economic Development announced today.

Oversight will remain in place and focus on crafting a plan to tackle the city's debt, pension shortfall, retiree health insurance costs and workers' compensation bill.

Dennis Yablonsky, state secretary of Community and Economic Development, said in a statement that the city "has witnessed considerable progress in stabilizing its financial position, having achieved surpluses in the last three years," and praised Mayor Luke Ravenstahl for "spearheading the city's cost containment efforts."

But he cited projections that budget gaps could appear again as soon as 2011.

"Pittsburgh needs an amended recovery plan that would provide a blueprint for it to exit Act 47 and address pending legacy costs of debt, pensions, post retirement benefits, workers compensation along with a long-term capital plan, while maintaining positive operating budgets well into the future," he said.

The decision ends a process that began in November, when a council majority voted to ask the state to consider whether to lift oversight. Mr. Ravenstahl agreed that a review was appropriate, while stopping short of saying that oversight should promptly end.

The city's bank balance and credit improvements are counterbalanced by a still-yawning debt principal of around $765 million, a pension fund that's $462 million short of ideal levels, $220 million to $320 million in long-term obligations for some retired public safety workers' healthcare, and a workers' compensation tab expected to creep toward $25 million a year.

"It is absolutely imperative to foster sustainable fiscal integrity in order for the city of Pittsburgh to provide for the health, safety and welfare of its citizens," Mr. Yablonsky said. Getting out of Act 47 "would be premature and could subject the city to a return to distress status in the near future."

In 2003, Mayor Tom Murphy asked for a declaration of distress under Act 47 of 1987, and Mr. Yablonsky granted it.

The state appointed a recovery team consisting of law firm Eckert Seamans and number crunchers Public Financial Management. They wrote a plan approved by City Council in 2004, which limits costs and union contracts. The city is technically required to live up to the plan.

Also in 2004, the Legislature created a second panel, the Intergovernmental Cooperation Authority, or ICA, which approves and rejects city budgets and five-year plans and can withhold new tax revenue should elected leaders stray. It can't expire before 2011.

More details in tomorrow's Pittsburgh Post-Gazette.