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July 24, 2013 | By | Posted in WatchBlog

WATCHBLOG: Pennsylvania needs to reassess Act 47 program, expert says

By Eric Boehm | PA Independent

HARRISBURG – A new report on state interventions in municipal finances suggests Pennsylvania’s aggressive but reactive approach to dealing with distressed cities should be re-examined.

Pennsylvania’s program for distressed municipalities – known as “Act 47” – was created in 1987. Since then, 26 municipalities have entered the recovery program, but only six have successfully exited.

Some may never get out.

FEELING STRESSED: More than 40 percent of Pennsylvanians live in distressed municipalities.

FEELING STRESSED: More than 40 percent of Pennsylvanians live in distressed municipalities.

“Certainly, with that batting average, it deserves some additional reassessment of the program,” said Kil Huh, a researcher for the Pew Charitable Trusts who examines state and local government financing.

State lawmakers are in the midst of overhauling Act 47. A task force consisting of members from the General Assembly and local government lobbying groups is expected to deliver recommendations by the end of the year.

Under Act 47, municipalities become eligible for state aid and must craft a state-approved fiscal recovery plan. The state can appoint an adviser to guide financial decisions, as it has done in the state capitol of Harrisburg, if the city government is unable or unwilling to agree on a recovery plan.

Pennsylvania is one of the most aggressive states in the nation when it comes to responding to municipal problems, Huh said.

But the model is light on measures to keep towns and cities from falling into distress in the first place.

“For cities and states that can track and manage their own fiscal conditions, the types of interventions they can propose are more cost-effective and don’t require as much pain down the road,” Huh said.

Pennsylvania is one of 19 states where the state government can directly intervene in civic decision-making, according to the Pew study.

More than 5 percent of Pennsylvanians live in a city or town now under Act 47 protections. But some 5 million Pennsylvanians, nearly 40 percent of the state’s population, live in a municipality experiencing some form of financial distress, according to the Coalition for Sustainable Communities, a group of business and civic leaders calling for changes to Act 47.

Much of that distress is caused by pension and health-care benefits for retired city workers, police officers and firefighters.

In Allentown, retiree costs are expected to consume 30 percent of the city’s budget by 2015. In Scranton, municipal services have already been pared back so the city can meet its obligations to retired workers.

Boehm can be reached at Eric@PAIndependent.com and follow @PAIndependent on Twitter for more.

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Eric Boehm is a reporter for PA Independent. He can be reached at Eric@PAIndependent.com or at (717) 350-0963.

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