Pittsburgh staying under state financial oversight

| Thursday, March 13, 2014, 12:48 p.m.

Mayor Bill Peduto and Gov. Tom Corbett on Thursday called for five more years of state oversight of Pittsburgh's financial recovery, a decision that could test the city's ability to raise money and drew barbs from a major city union.

“I can appreciate the union leaders fighting for as much as they can get for their members. But I've got not 600 members, not 900 members. I have 310,000 members, and I gotta fight for them as hard,” Peduto said, referring to city residents.

For the past decade, Pittsburgh has operated as a financially distressed municipality under a financial oversight program governed by state Act 47. Two five-year recovery plans have allowed the city to reduce the size of its workforce, earn a higher bond rating and increase its pension fund reserves beyond 60 percent. But pension costs, long-term debt and neglected infrastructure needs continue to drag on city finances.

It's time, Peduto said, for a final five-year plan that provides long-term stability.

“We can hit these goals, and we can get the structure in there; it will sustain the city's budget no matter who the mayor is for years to come,” he said. “Once you hit the goals, you exit.”

The city's unions have urged the city to exit state oversight sooner.

Joe King, president of International Association of Firefighters Local No. 1, said Pittsburgh has used Act 47 “as a sword” to limit union gains. Act 47 means collective bargaining agreements in front of an arbitrator must consider the city's ability to pay in any decision, setting potential ceilings for benefits.

King said firefighters have given up $104 million through cuts in the department's operating budget since 2004 and in salary and benefit give-backs. The union recently urged Corbett in a letter to release the city from fiscal oversight.

“This is nothing but a politically motivated agreement between Peduto and Corbett,” said King, 64, of Brighton Heights. “Peduto is going to use this as a political sword to go to Harrisburg and try to realign firefighters' pensions and restrict collective bargaining, saying to the General Assembly, ‘This is what Act 47 told me to do.'”

Peduto disagreed that Act 47 hamstrings collective bargaining.

“It just says this is the amount of money the taxpayers of the city of Pittsburgh can afford to spend,” Peduto said.

Corbett of Shaler said the state wants Pittsburgh to come up with a five-year plan that works. Crafting the plan will involve input from state and local officials, the state Legislature-appointed Intergovernmental Cooperation Authority and Act 47 coordinators law firm Eckert Seamans and consultant Public Financial Management.

“While Pittsburgh continues to take considerable steps and efforts in stabilizing the city's financial position, many conditions that originally led to distressed determination have not been alleviated,” Corbett said.

Goals for the exit strategy include finding new revenue streams — perhaps in the form of payments from nonprofit organizations — spending more on capital improvements and increasing payments to pension funds. At the same time, Peduto said the city needs to decrease its debt and cut operational spending. Cost-cutting starts on Friday, he said, referring to more than 60 city employees who are retiring. Some of their positions will remain vacant, the mayor said.

“We've come a long way since 2003 with respect to our finances,” Controller Michael Lamb said. “And the issue now is these legacy costs and the opportunities for a new revenue stream for the city.”

Brian Jensen, executive director of the Pennsylvania Economic League of Greater Pittsburgh, said that while the city has plans to cover increased pension costs through parking taxes, more assistance must come by way of state laws.

That could involve reducing the cost of benefits for future employees, Jensen said, and forbidding pension spiking, or workers' inflating earnings before retirement to boost pension payments.

“They don't have the tools really to reduce the costs,” he said. “Basically, they're stuck until there are changes in state law.”

Peduto said he'll lobby the Legislature to pass “common-sense reforms” for Act 111 and Act 205, laws that govern collective bargaining and municipal pensions. But the legislative appetite for those reforms seems slight, with lawmakers focusing on enacting pension reform at the state employee level.

Melissa Daniels is a staff writer for Trib Total Media. Staff writer Bob Bauder contributed to this report.

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