Reforming Pennsylvania’s distressed municipalities

December 6, 2013

I met a muniland superstar, Pennsylvania State Senator John Eichelberger, in Philadelphia while taping a final segment on distressed municipalities for Pennsylvania Cable News (PCN). The series, hosted by PCN’s Corinna Vecsey Wilson, brought together municipal officials, state legislators and policy experts to examine the condition of the state’s distressed communities and look at what solutions might be available.

State Senator Eichelberger, a Republican, chairs the Local Government Committee. He has dived into some of the most vital areas of state oversight. A state law, Act 47, takes distressed municipalities under partial state control. The law is over 20 years old, however, and has lost its effectiveness. Of 27 municipal units that have entered the program, only seven have exited. Pittsburgh, for example, has remained under Act 47 supervision for over 20 years. Eichelberger has legislation to reform and strengthen Act 47. From the Altoona Mirror:

‘A major change that we hope will happen would be a five-year limit on a community staying in Act 47. This was never intended for communities to stay in it for decades. We are stressing an early intervention program to help them to get in and out,’ Sen. John H. Eichelberger Jr., R-Blair, told members of the Blair County Chamber of Commerce Breakfast Club Thursday at The Casino at Lakemont Park.

Eichelberger, who co-chairs a task force studying reforms to Act 47, which Altoona joined last year, said some municipalities might be dissolved.

‘We will have a couple of municipalities – not Altoona – that are not viable any more. They will be disincorporated, and DCED will work with them and try to merge them with another community,’ Eichelberger said.

Moving cities through a reform process in five to eight years would be better than allowing them to limp along for decades without addressing structural issues. I encouraged Senator Eichelberger to contact New York Comptroller Tom DiNapoli to learn more about the early warning fiscal monitoring system he has developed for New York municipalities. Something similar might be useful to identify early stress in Pennsylvania municipalities..

One of the toughest issues for Pennsylvania communities is that they must engage in binding arbitration with public unions. Eichelberger wrote legislation that would enact some important reforms to Pennsylvania’s Act 111, which governs arbitration and is heavily tilted in favor of unions. His legislation would:

  • Ensure that arbitration awards include justification based on the evidence presented and specific findings of fact
  • Provide either the community or public union the ability to file an unfair labor practice charge
  • Start the collective bargaining process earlier in the year and require arbitration be requested earlier
  • Require the cost of arbitration be shared equally between both parties
  • Require arbitration sessions be open to the public
  • Codify the avenues for appeal of an award by either side.

Eichelberger is wrestling with the issue of reducing the use of interest-rate swaps by Pennsylvania local governments. The state was especially hard hit by swaps abuses. The incinerator debacle in Harrisburg is exhibit number one. Eichelberger is trying to understand all sides of the debate. I encouraged him to be in touch with the director of the SEC Office of Municipal Securities John Cross and the MSRB’s General Counsel Gary Goldsholle to understand how to mesh his state legislation with the provisions of the newly finalized SEC rule for municipal advisors. Strong protections for the municipal entity have been incorporated in the SEC rule for municipal advisors.

Reforming muniland is a big, unglamorous process. It’s rare to meet an elected official ready to jump into the fray. Kudos to Senator Eichelberger and his reform efforts.

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