February 7 2011

Guest commentary by Kevin K. Murphy
President, Berks County Community Foundation


A new governor and a new legislature bring hope that Pennsylvania will deal with the financial crisis facing its cities, townships, and boroughs.

And it is a crisis. The City of Harrisburg teeters on the edge of what looks like an inevitable bankruptcy. The City of Reading is not far behind, as even Act 47 protection has proven to be an inadequate tool to staunch its financial tailspin. Deep financial distress, growing poverty, failing infrastructure, and a declining employment base plague nearly all of Pennsylvania’s cities.

The crisis imposes real costs on citizens outside of the cities as well. At least one municipality recently found its costs to borrow money had increased simply because it was in the “same county as Harrisburg.”  It’s a difficult issue because while Pennsylvanians may understand the difference between, say, the City of Bethlehem and the Township of Bethlehem, outsiders—including businesses thinking about moving here—will just see a state that can’t pay its bills.  And that will cost us jobs.

Pennsylvania’s cities have entered a death spiral and there appears to be no mechanism available to pull them out of it.  It’s time for all of us – the legislature, the business community, the labor unions, and the residents – to stop ignoring the problem and deal with it head on.

For years, business groups have blocked almost every legislative attempt to find new sources of revenue, arguing that reforming pensions and contract arbitration rules have to come first—though these acts alone won’t come close to solving the problem.   Such intonations as “cut the fat” (which doesn’t exist in city budgets) and “run city government more like a business” are nonsensical in our current environment and don’t substitute for thoughtful policy.

Municipal union leaders defend the mathematically unsustainable—insisting on the preservation of state-mandated antiquated work rules and benefit packages that cities can no longer afford.  As painful as those realities may be to hard working city employees—they are still realities.

The cities themselves engage in a series of convoluted—and often bizarre—financial transactions to temporarily stave off the day of reckoning. Much of the borrowing we’ve seen these cities do can only be described as reckless.

While that’s going on, Pennsylvania’s legislature has simply averted its gaze, believing that hard choices aren’t popular and that somehow “this will all go away.”

Well it’s not going away.  And somebody must break the stalemate.

The fact is that most cities studied in a recent Pennsylvania Economy League report did not generate enough tax money (from all sources of taxation) to pay for their fire department and their police department, let alone any other services. 

Most people find that statistic staggering, but it’s true. Easton, Lancaster, Reading, and York don’t generate enough tax revenues to cover the cost of their public safety departments, let alone provide parks, libraries or snowplowing. 

That’s the kind of impossible position our cities are in.

So, what is a city to do? Cutting police and fire aren’t really options. I suspect that even the most fervent anti-government folks wouldn’t think that Reading has too many police officers on duty at any time (in fact, most experts think the 161-officer force is short by about ninety officers for a city this size).  And I don’t see a huge groundswell in York or Lancaster for letting fires burn out of control.

And does anyone think it makes sense to require state arbitrators to interpret labor agreements without any regard for a city’s ability to pay the costs associated with their rulings?

It is clear that the current rules don’t allow Pennsylvania’s cities to look forward to a future of anything except rapid decline. 

It’s time to change the rules.

The new state legislature must quickly enact a comprehensive package of reforms to stabilize our cities and return them to prosperity.  

The reforms must include removing burdensome state-imposed pension and arbitration requirements. They must include giving cities the ability to generate new revenue at the regional level to support city services.  But that alone won’t solve the problem.

A package of reforms must include serious incentives for regional cooperation so that cities don’t bear a disproportionate share of the cost of regional services.

It’s time for cities and their employees to adjust to the new normal.  The business community must recognize that this is a time for action, not ideology.  And the legislature and the governor must realize that we can’t put real municipal reform off any longer.