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May 22, 2012                                                                                 Ashley Henry, (412) 697-0339

Earll, Ross & Coalition for Sustainable Communities Push for Act 47 Legislative Fix CSC Believes Fix is the First Step Toward Addressing Municipal Budgetary Challenges

HARRISBURG, PA – Senator Jane Earll (R-49, Erie) and Representative Chris Ross (R-158, Chester) joined members of the Coalition for Sustainable Communities (CSC) at a press conference today to discuss support for Senate Bill 1321 (Earll) and House Bill 1988 (Ross). Both bills seek to clarify Act 47 – the Municipalities Financial Recovery Act.  The legislation is in response to an October 2011 Pennsylvania Supreme Court decision that severely reduced the ability of distressed municipalities to regain fiscal health by taking arbitration awards out of the confines of Act 47. 

Earll and Ross were joined by Tom Baldrige, President of the Lancaster Chamber of Commerce & Industry and Richard P. Vilello, Jr., Mayor of Lock Haven (Clinton) and President of the Pennsylvania League of Cities and Municipalities, both founding members of the CSC. More than 20 members of the CSC attended the event, including representatives from chambers of commerce, local government associations and other business, community and municipal leaders.

“Regardless of your politics, it is extremely important that the Commonwealth ensure that its local communities have the tools and resources necessary to maintain financial stability in both the short and long-term,” said Earll. “Furthermore, I strongly believe we must ensure that there is a path back to fiscally sound ground for those municipalities that are financially distressed or approaching such a status.  The citizens of Pennsylvania deserve nothing less.”

Act 47 is the state law that governs how financially distressed municipalities put their fiscal houses in order. For years, municipalities operating under Act 47 were able to consider their ability to pay when contracting with employees.  Everyone involved, from the recovery plan coordinators to the businesses and residents in a community, could rely on the fact that the recovering municipality could consider its ability to pay when negotiating with and going to arbitration with public safety employees. By virtue of the Pennsylvania Supreme Court’s decision, financially struggling municipalities, in addition to the residents and businesses within them, have less certainty about how they will return to a state of fiscal health.

“Last year’s Pennsylvania Supreme Court decision now allows a municipality’s financial condition to be ignored. The proposed legislation reinstates a very important tool that distressed communities need if they are to regain fiscal health – the requirement to bargain within the confines of the recovery plan of the community,” said John A. Garner, Jr., Executive Director of the Pennsylvania League of Cities and Municipalities. “Municipal leaders and their communities are prepared to roll up their sleeves and continue to do the hard work of becoming financially healthy; however, they should have every tool they've ever had to help them do that,” added Garner.

Over the past several months, CSC members have traveled to Harrisburg to educate legislators and the Corbett Administration about the need for clarifying Act 47, while working to develop sensible public policy solutions that level the playing field for municipalities struggling to maintain their financial health.

“The last several years have not only been difficult for Pennsylvania’s families; the Commonwealth’s 2,562 municipal governments have also encountered financial hardships. Many municipalities have less revenue available and cutbacks in state funding have further exacerbated the problem,” said Vilello. “Municipalities need every tool in the toolbox to control expenses and pay the bills. It’s why the Act 47 fix is so critical and it’s why the CSC membership continues to grow and is seeking reforms that help municipalities achieve fiscal recovery.”

In addition to changes to Act 47, the CSC is also seeking Act 111 reform. These reforms include but are not limited to the following:

· Ensuring that standards for awards include a justification of the award based on a municipality’s ability to pay;

· Prohibiting post-retirement health care and pension benefits not required by statute from being the subject of collective bargaining;

· Requiring the cost of arbitration to be shared equally between both parties; and

· Requiring arbitration hearings to be open to the public.

One of the largest challenges facing communities is the number of grossly underfunded municipal pension plans – 66 of Pennsylvania’s 67 counties have at least one municipality with a pension plan that is under a high level of financial stress. Consequently, the CSC has developed a list of reforms to address the unfunded liabilities of municipal pension plans. Some of those reforms include:

· Establishing pension plan portability options for new hires;

· Decreasing vesting period and increasing retirement age and length of service;

· Requiring pensions to be calculated on base pay only, thereby eliminating “spiking;” and

· Shifting from a defined pension benefit to a hybrid plan – a more modest defined benefit supplemented by a defined contribution plan.

“In our opinion, the definitional changes to Act 47 will serve as the foundation upon which these additional reforms can be established. We applaud Senator Earll and Representative Ross for their thoughtful consideration and support for this clarification to the law and hope that it serves as the jumping off point for ongoing reformation discussions,” added Baldrige.

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