Facing immense fiscal and political pressures, many local governments are looking for ways to fund services without raising taxes. But officials need not curb their enthusiasm for fiscal responsibility if they simply put the brakes on being in the parking business. Pennsylvania has 41 special government parking authorities; the rest of the nation, combined, has five. Despite their abundance, few can explain exactly why Pennsylvania relies on government-run parking monopolies.
Earlier this month, Gov. Tom Corbett suggested the commonwealth consider leasing state park operations and services. Almost immediately and without thoughtful consideration, pundits launched political fire, claiming "privateers" would exploit or commercialize our natural resources beyond recognition.
This report surveys the scope of Yellow Pages Government in Pennsylvania, looks at examples of state and local privatization throughout the country, and outlines best practices to equip lawmakers to successfully transition government out of unnecessary services by implementing a variety of models.
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Dwight K. Schrute is an employee at Dunder Mifflin—a fictional Scranton paper company featured in NBC’s The Office. And he just may be the key to overcoming the city’s very real economic decline.
But before offering a way forward for Scranton, it’s important to understand why the city is struggling. A new paper from the Mercatus Center does an excellent job detailing the source of Scranton’s troubles.
The authors—Adam Millsap and Eileen Norcross—identify Scranton’s inability to adapt to changing economic conditions as one of the main reasons for the city’s economic and fiscal problems.
They specifically cite economist Ed Glaeser who wrote, “In the coal towns of central Pennsylvania, exodus, not innovation, was a more common response.” Glaeser's rhetoric matches reality. In 1930, the city’s population was 143,433. In 2014, it was just 75,281.
Regrettably, government policies only made things worse. Spending and taxes rose—forcing fewer taxpayers to pay for bloated budgets driven by public sector benefits. Millsap and Norcross cite the inflexibility of Pennsylvania’s collective bargaining process as the main culprit:
Act 111 is intended to give police and firefighters’ unions binding arbitration in exchange for a prohibition against striking.  However, the law evolved to “give uniformed employees the upper hand when it comes to collective bargaining.”  When negotiations between the city and unions break down, an arbitration panel of three people is selected. Municipalities are required to pay the full cost of arbitration, regardless of ability to pay. Arbitration sessions are not open to the public. The municipality has limited ability to appeal the panel’s decisions.
The chart below illustrates spending growth for police and fire services—a product of the state’s broken collective bargaining process.
Officials have tried to improve Scranton’s finances with a combination of tax increases, cost cutting, and asset sales but costs, thanks to pensions, continue to soar. They’ve also utilized government-subsidized development projects to boost economic growth but to no avail. Government-centric solutions simply aren't working.
To truly turn Scranton around, dramatic changes to state and local policies are necessary. At the local level, Millsap and Norcross recommend improving the city’s business climate by reducing the overall tax burden. Controlling spending is critical too. Officials can do this by privatizing government functions—the city's parking authority is one possible option, according to the report.
At the state level, officials must reform the collective bargaining process to help distressed cities get control of their budgets. As it stands now, collective bargaining law imposes costs on cities without taking into account their ability to pay. By giving local officials more autonomy to negotiate with unions, they can better protect local taxpayers.
Back to Dwight Schrute. If you know the character, he has a reputation for being entrepreneurial and hardworking (also, a little quirky). If distressed places like Scranton and Uniontown are going to experience a revitalization, that's exactly the kind of people they'll need to attract.
Ultimately, government can only lay the foundation for an economic turnaround. But if that foundation is strong, innovative, educated, and hardworking people can and will build upon it.
On Tuesday, a task force spearheaded by Auditor General Eugene DePasquale released its recommendation for municipal pension reform. The report recommends, among other things, more transparency and accountability in municipal pensions and taking pensions out of the collective bargaining process.
This report is the latest in a string of bipartisan efforts to tackle the municipal pension problem.
Last week, the Senate Finance Committee advanced SB 755, legislation that would indeed take pensions out of collective bargaining and put all new public safety employees into a defined contribution plan.
SB 755 has the support of the Commonwealth Foundation along with the Coalition for Sustainable Communities—a coalition of local officials and business leaders. But for the first time, the legislation received Democratic legislative support. Sen. Art Haywood, from Montgomery County and a former township commissioner, joined with Republicans to advance the bill.
Other Democratic Senators also indicated they might be open to supporting the final legislation.
The panel's ranking Democrat, Sen. John Blake, D-22, Archbald, voted against the bill as did other caucus members with one exception. But Mr. Blake said he’s keeping the option of eventually supporting the bill open, depending on what a pending report from Gov. Tom Wolf’s task force on municipal pensions recommends.
Mr. Blake said he’s concerned that switching to a defined-contribution plan could ultimately lead to more pension debt. He noted that Carbondale Mayor Justin Taylor supports the bill.
Sen. John Yudichak, D-14, Plymouth Twp., said he plans to keep an open mind about municipal pension changes if the bill reaches the Senate floor. He said pension changes are one reason why Nanticoke is ready to leave Act 47 distressed municipality status.
Of course, municipal pension reform has been a top priority for Democratic mayors from across the commonwealth for some time. As the Pittsburgh Post-Gazette reports:
[Pittsburgh] Mayor Bill Peduto has pushed hard this year for overhauling municipal pensions, joining nine other Democratic mayors in chastising Democratic legislators for what they called a failure to act, and has met with the governor and legislators on the issue.
"His message has been that pension reform is the number one priority for this city and every other one in the state," said Tim McNulty, Mr. Peduto’s spokesman.
Mr. Peduto and other proponents have said looming election cycles and the heavy political influence of public safety unions may make future efforts to overhaul the system difficult.
"It's going to be a hard reach to do state pension reform this year and municipal pension reform next year," said Lancaster Mayor J. Richard Gray.
While budget discussions continue under the Capitol dome, addressing municipal pensions is no less urgent. And given the bipartisan support behind this effort, the time is ripe.
"They are going to take away your pension!" is a common scare tactic used by Pennsylvania government union leaders to oppose pension reform (even though private school unions have agreed to pension reform).
Such a scenario is no longer fiction for workers in Detroit. Yesterday a federal bankruptcy court ruled the City of Detroit has the ability to renegotiate pension benefits, like any other contract with the city’s 100,000 plus creditors. The dramatic development has widespread implications across the country—including Pennsylvania, where unfunded local and state pension liabilities surpass $50 billion.
Ironically, union officials' refusal to consider reform has endangered the very pensions they claimed they were protecting.
We've noted before the desperate municipal situations in Scranton, Pittsburgh, Allentown and Harrisburg. Government union leaders' unwillingness to compromise and ignore fiscal reality have put these cities on Detroit’s destructive path—harming taxpayers, residents and government employees.
Only by depoliticizing government pensions with 401(k)-type plans will state and local workers be able to keep their pension and create a system that’s fair to new workers and taxpayers.
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The Commonwealth Foundation is Pennsylvania's free-market think tank. The Commonwealth Foundation transforms free-market ideas into public policies so all Pennsylvanians can flourish.
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