Arlen Specter's Responsibility for the Pennsylvania Budget Crisis

Yesterday, the PA Senate finally started the process of approving Philly’s pension change and sale tax hike that will keep the infamous ‘plan c’ from happening. Good. It is sort of hard to cheer such a basic thing, which should have been done a lot earlier, but, good.

Still in front of us, however, is the PA Budget. And, if Senate Republicans get their way, the State budget would arguably have an even greater impact on Philadelphia than the city’s own budget disaster. Cuts in everything from social services to parks to nursing homes for veterans to legal services for the poor are on the Senate chopping blocks. Basically, if the Senate gets its way, civil society in Pennsylvania fundamentally changes, for the worse.

And although we rightfully focus on Senate Republicans, especially Dominic Pillegi, for their current stance, the Joe Sestak campaign has reminded us of one guy who really has not gotten enough ‘credit’ for the huge gap in Pennsylvania’s budget: Arlen Specter. In fact, Arlen Specter is largely responsible for the entire gap between Ed Rendell’s original budget proposal and the infamous Senate Bill 850. How? With his ‘courage’ in the battle over President Obama's Recovery Act.

Back in May, the Pa. Senate Republicans released Senate Bill 850 (SB 850), which slashed every program imaginable to the bone or simply totally killed its funding. The difference between the Senate and Rendell’s budget was about 1.7 billion dollars. In effect, the Senate GOP was using the crisis as a chance to make an ideological stand to gut and gut and gut our civil society. But, guess what? That huge gap would barely have existed at all, except for the work of a couple ‘moderate’ Senators, led by our own Arlen Specter.

Nationally, most economists knew at the time of the stimulus that the original package proposed by the Democratic House was a good bill, but probably not big enough given how fast our economy was shrinking. And then, in a battle that echoes the global warming and health care fights, the Senate took the package and made it much worse. In the interest of ‘compromise,’ an Arlen Specter led group of Senators slashed 100 billion from the package, and shifted a lot of the funding towards tax cuts. Specter in fact lamented that we couldn’t have slashed all spending from the Recovery Act:

The agreement we reached was the best one we could under the circumstances. We were able to cut out $100 billion from the package and include 35% in tax relief in the overall bill. My preference would have been John McCain’s proposal, which I voted for, to have the stimulus package of $421 billion in tax cuts alone. I voted for the Reagan tax cuts back in 1981 and that would be the best course, but in a legislative body you don’t have exactly your own choice.

So, Specter didn’t get all of the cuts he wanted, but he was sure happy he was ‘able to cut 100 billion from the package.’ And what was one of the cuts he was successful in getting? 40 billion dollars for the state stabilization fund. In other words, 40 billion dollars in direct payment from the Federal Government to the states to help them with their huge budget problems.

According to Pa’s share of the national population, Arlen Specter’s Recovery Act cuts cost Pennsylvania about 1.6 billion dollars, or almost the entire gap between Rendell’s original budget proposal, and SB 850. Since then, the budget gap has grown. But even now, it would be halved if Arlen Specter didn’t slash the Recovery Act.

So the next time Specter brags about his vote on the Recovery Act, just remember what he was bragging about a couple months before he switched parties, and how that potentially could endanger Pennsylvania civil society as we know it.

Fascinating angle

Thanks, Dan.

Shifting off topic sort of - for the city budget approvals I'm dying to get some input on how the legislative process reconciles the State Senate version of the approvals which adds 50 pages of pension law amendments to the city budget approvals dictating among other things that DROP for electeds has to end (which is more than fine with me) and that next year the city has to reduce its pension costs by 25% (way to stick some unexpected extra drama in city union negotiations there guys, BTW).

This murky process known as "reconciliation" seems to be a hot topic lately between the total overhaul of municipal pension law throughout the state of PA just tacked onto Philly's budget approvals and the possibility of it being invoked in health care reform. To be honest I don't really understand it. So if the the State House bill doesn't say a thing about forcing concessions from city workers on their retirement benefits and the State Senate says no matter what Nutter, or the unions, or City Council wants that the unions have to give in to 25% slash in cost of their retirement benefits, does "reconciliation" split the difference and they only have to give up 12.5% of their retirement benefits? At the Federal level if the House bill has a public option and the Senate does not do we only get half a public option?

I really don't understand this little used part of the legislative process and would appreciate any feedback or elucidation.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Dan, Thanks for this

Dan,

Thanks for this analysis. This certainly motivates me to get out my check book and contribute to Sestak.

Like Sean, I am totally confused by all this reconciliation stuff and would also appreciate some clarification

Nah. You are sort of

Nah. You are sort of confusing two things that are related but not the same.

First, on a Federal and State level, bills must match exactly. Each house passes a bill, and usually they are not the same. So, there is a conference committee between the two houses, where they must make the bills the same, and then re-vote on them. (If the bills already are the same, then there is no conference.) So, nationally, after the Senate is done, each House will vote out its final version of the bill, and it will go to conference. This is where the public option is probably in biggest danger- because it will all depend on who the leadership chooses to negotiate.

Then, there is reconciliation, which comes from the Congressional Budget Act in the 1970's. It says that if an act effects the budget, it only needs a simple majority in the each House.

Reconciliation is immune to a filibuster because debate is limited to 20 hours by the statute. That's why we are considering using reconciliation to pass health care reform, or at least the public option. With out the filibuster threat, the Democrats only need to muster 50 votes plus the vice president's tie breaker for passage.

The health care reform bill was included in both the House and Senate budget resolutions for fiscal year 2010. More on the process of this below. The important point is that reconciliation was included in the budget resolutions, so the reconciliation process may take place this year.

Under the rules of reconciliation, the budget committees direct the authorizing committees to submit their pieces of the reconciliation bill. It is up to the budget committees to combine these bills into one omnibus bill to be reported to the full chamber with fiscal reports from the Congressional Budget Office and the Joint Committee on Taxation. (Honestly, I cannot make heads or tales of the current reports on the reform bills. However, I do see a few key Blue Dogs, including Max Baucus and Kent Conrad on the committee.) The work of the Budget committees, however, is largely administrative since they are not allowed to make substantive changes to the bills that make up the omnibus. If the public option, for example, is in one bill, then it will be in the omnibus.

From there, the bill goes through the normal floor votes and conference report process with the exception of the 20 hour limit on debate in the Senate and the possibility of points of order outlined next.

I would check out Congress Matters for more.

OK that helps and also confuses

The first process with the conference committee is the one I am familiar with - which basically means what State Sen. Browne just tacked onto the city budget proposal either forces the State House to act in a ridiculously rushed fashion or still very much risks that we in the city are faced with the doomsday budget scenario of Plan C because he cut the timing so absurdly close. Considering the city passed its budget in the first couple of days of May, it seems plainly irresponsible to latch on a total overhaul of the state's municipal pension funds just now - instead of say 3.5 months ago when if they really wanted to there was still time to send City Council back to the drawing board.

"Reconciliation" at a Federal level seems to be a special exception only designed to iron out strictly monetary differences, though people have speaking about it in almost mystical terms lately, in reference to the health care debate.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Reconciliation is basically

Reconciliation is basically as strict as the Senate makes it. (Look up the Byrd rule, etc, and def check out what David Waldman has written on DailyKos and Congress Matters.)

link bad

hey dan, you have a bad link:
"we couldn’t have slashed all spending from the Recovery Act" is messed up, it's a file not found. I think there's some extra text by mistake.

Thanks. Links should be

Thanks. Links should be fixed.

Philly Clout has a page and a half "summary"

Of State Senator Browne's pension fund overhaul and its a pretty complicated piece of legislation. Every city in the state besides Philly is divided into 4 classes depending on the level of funding in their municipal pension funds - each level with a different set of remedies including in the worst category complete state takeover of the city's pension fund. For the city of Philadelphia it demands a 25% drop in retirement benefit costs by next year.

One of the weirdest things is that it demands the institution of some version of DROP for non-electeds in every city in the state, even as it eliminates it for electeds in "cities of the First Class" i.e. Philly. Thats bizarre because while virtually everyone who isn't an elected themselves thinks its inappropriate for electeds, there are a lot mixed reviews of DROP more generally. Generally the idea of giving workers an incentive to assist in planning for training their replacement is considered good. Its just there remains strong differences of opinions about how effectively it has been used in different city departments (like sometimes the worker enters the program signaling imminent retirement, it drains extra money out of the system but then nothing happens in terms finding and training a replacement). It remains something of an open question in other words whether DROP for non-electeds should maybe be fine-tuned in some way or refocused just on the jobs with the most specialized skill sets.

In short, it seems like the amendments are designed as much as possible to stall out in legislative debate (maybe the mayor of Williamsport doesn't want DROP, for example) and force the city of Philadelphia into Plan C as to actually fix anything in a lasting way.

For a point of comparison, there was lots squawking from Republicans in Congress about attaching reforms for VA hospitals to the last war funding bill but Browne's state amendment to the city's budget drastically changes the retirement rules for every single town and city in PA. It would be more like if they had attached the entire Health Care Reform bill to funding for the troops in Iraq and Afganistan.

-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Parts of this bill could be good

Some of it is going to make city workers rightfully furious because they aren't negotiating ballanced trade offs with the local mayor anymore but effectively doing it indirectly with the entire State Senate Republican Caucus and it has some complicated (maybe even arguably un-Constitutional) rules effecting their ability to lobby Harrisburg on how they would like their retirements to be managed. And by city workers I don't mean just in the city of Philadelphia, I mean anyone who works for any city or township in the state.

The problem is that Browne and Pileggi are using the desperateness of the city's fiscal timeline before Plan C kicks in to force changes on the rest of the state - changes the rest of the state would rightfully want to take their time to digest and possibly try to tweak.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Great point, Dan

Your biggest vote when you're in Congress is on the budget.

It defines who you are, what you stand for, and what you'll use your power (over the nation's pocketbook) to do.

That a Democrat in the '10 Senate race (currently polling behind the presumptive Republican) would define himself thusly is telling (sorry to copy your quote, but it bears repeating).

My preference would have been John McCain’s proposal, which I voted for, to have the stimulus package of $421 billion in tax cuts alone. I voted for the Reagan tax cuts back in 1981 and that would be the best course, but in a legislative body you don’t have exactly your own choice.

A Senator has enough choice in a budget to reveal his preferences regarding taxes and spending, regarding the practices of McCain, Reagan & Obama, for that matter.

Specter has shown his.

The question is:

Why would ANY Democrats from the center to the left consider voting for Specter when we have a viable alternative in Joe Sestak?

Dunno, Sam

A guy with a life-threatening cancer whose replacement might (or might not) be appointed by Gov. Tom Corbett who apparently still thinks John McCain (perhaps with the expert advice of "Joe the Plumber") had the right plan to steer us out of recession. And he's further down in the polls against Toomey than Sestak is. What could possibly go wrong?

Thanks for bringing this back around (as worrying as the digression in State Senate Republican antics is).
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

I just posted this everywhere I could think of

Facebook. StumbleUpon. Delicious. Digg. I put it everywhere that came to mind. Good work, Dan. this is a point that needs to get out there further and further.

---
This Too Will Pass, for the guts in your cerebrum.

This provision was specially crafted, Luigi

to cure Philadelphia (and Pittsburgh), or more accurately... to wipe out pension fund obligations that had been inserted into decades of union contracts as concessions over the years.

The 25% wipeout in the cost structure dramatically boosts Philadelphia's funding responsibility and makes the City Pension Fund a grade-A retirement plan once more, which is what the Commonwealth wants and heads off insolvency. Brilliant move by the Caucus of The Distinguished Gentleman from Chester.

We both know the unions will not tolerate this, but given the fact that state employees have a hard enough time negotiating with their own Governor, the city's little unions will not have a voice anywhere in the Burg about this and will probably have to just eat this, and at the same time Philadelphia will have to deal with the 1-cent tax increase, which I think is a fair deal given the other debt obligations we have to pay off. And by that I'm talking about all the older City bonds that are still accruing plus the NTI bond deals that were added on top of it.

Pileggi gets a lot of money from unions

building trades unions to be specific. Perhaps we should try to be more precise with our terminology here.

I don't think it will sail through anywhere else in PA once municipal workers in those places get a whiff of what the bill expects them to give up without negotiation - never mind Philly. I am honestly a little suspicious at my most paranoid that "the plan" is for the bill to stall out, for Philly to be hung out to dry - in order to derail Nutter as mayor through a total fiscal meltdown, urged on by an unlikely and unholy alliance of building trades kingmakers and local Republicans who vainly hope this is their chance to "stage a comeback".

Look unlike Stan I think what Nutter was asking for in terms of concessions in Plan A on retirement benefits was quite reasonable. I supported it, actually. But both the way this State Senate bill is done and the severity of the drop off it demands is a blatant violation of the idea of collective bargaining at all. Lasting change happens gradually, deliberately. "Blow it all up" schemes that bank on complicated games of political ricochet are rarely suceesful or smart policy.

I think at bare minimum a whole lot of diferent people are actively risking Plan C callously to support various other agendas and I don't trust any of them to properly gauge when its "too late" to pull out of a game of political chicken because they have not really thought through the consequences.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Yeah, but

the building trades people MOSTLY live in South Jersey. They contribute and organize here in Pennsylvania a lot [can't keep them away from our polling stations]

Delco is also full of building trades people as well but these are Delco residents. They aren't affected much at all by a problem that's mostly contained within Philadelphia county. They may drive into the City to work, and they need contracts from the City and from city employers, but the relationship ends there.

City workers live in the city... that's not where most of the building trades folks are.

I think you've watched too much J.F.K.

"I don't think it will sail through anywhere else in PA once municipal workers in those places get a whiff of what the bill expects them to give up without negotiation - never mind Philly. I am honestly a little suspicious at my most paranoid that "the plan" is for the bill to stall out, for Philly to be hung out to dry - in order to derail Nutter as mayor through a total fiscal meltdown, urged on by an unlikely and unholy alliance of building trades kingmakers and local Republicans who vainly hope this is their chance to "stage a comeback"."

While this would NOT surprise me, and I know Delco is basically our sister Tammany Hall, except operated by Republicans; I am not sure that Mr. Chester has the wherewithal to create a Fumoesque fiefdom where a large chunk of Pennsylvania's resources get sucked into Eastern Delaware County while Philadelphia gets hung out to dry.

Both the City's backup budget plan and the one crafted by the Senate are both tough pills to swallow, but the Senate version is much more taxpayer friendly IMO than Plan C.

Do you think Dwight and Babbette would be so diametrically against pension reform as to reject ANY pension reform at the state level to be totally off the table and non-negotiable? The House knows if they tank this measure, Philadelphia has no choice but to start mass layoffs and create a much bigger taxpayer uproar.

1,500,000 pissed-off people is still a lot of pissed-off people.

This quote is quite insane

"1,500,000 pissed-off people is still a lot of pissed-off people."

Thats an absurd comment. The folks mad about city workers receiving a pension they negotiated is at most in the range of 15-20% of Philadelphia. And they don't tend to agree with eachother about what to do about it, some of them just don't vote.

You have been spending too much time in the Philadelphia Speaks echo chamber. Most people don't resent city workers like that. They recognize their neighbors, regular folks just doing work, trying to help them with average business in the face of city workers. They resent Latrice Bryant, they think politicians get all the breaks, don't care enough about the plight of regular people. They don't love paying taxes but honestly they don't blame average city workers for Philadelphia corruption. You have fundamentally misread Philadelphia's citizenry.

What is entirely possible on the other hand is that people don't have a very complicated understanding of government. There is one boss, the mayor, who should be able to fix everything. If and when there is a hang-up and we do end up with Plan C, people will blame Nutter swear to vote for someone else and that someone else is more likely to someone who resents having to be apologetic about the bad old ways of Philly politics than it is someone who at least articulates any version of fiscal responsibility or transparency in government.

You think you are cheering for "taxpayers" but most of the folks who pay the actual taxes in this city (including wage taxes) think nothing like you on the matter at hand - the Pew polls were pretty clear on that. Sometimes they make smart choices, sometimes I feel people are easily swayed by what I might call "bad populism" on both the left and the right. A lot of folks on all sides don't innately trust politicians who don't have the same skin color as them. But of the people who choose to leave Philadelphia do so mostly because they don't think its government delivers the goods, not that they are so angry at how much it costs. Thats the simple reality of the situation.

Yes I believe its entirely possible that because its called "pension reform" and folks (including House members) don't pay enough attention that the State Senate bill goes through, but basically it boils down to how effective to city workers both here and in the rest of the state are at getting their side of the story out. I think they are sometimes surprisingly effective on election day, if not a media relations. For better or worse I see enough poltical clout being thrown that I see this stalling in the House, with the better case scenario being the Senate provisions being toned down dramatically in conference committee and barely passing in time to avoid Plan C. The worst case scenario is the State Senate refuses to back down in any way, it stalls completely and we end up with Plan C - which I am still not convinced the State Senate Republicans care or adept enough at avoiding even if they do care. Nutter's efectiveness at pushing any real, actual lasting reform in city government then is over and chances for lasting sane, humane but fiscally responsible reform is shot in Philly for about decade or so. I may not raise my kid here.

I've seen municipal unions be sometimes be tremendously effective at stopping even quite reasonable reforms because somebody merely talks about making a real effort city government a better buy for the buck. I can't believe they will sit down and be bushwacked by a heavyhanded and innately unfair and unconstitutional power grab. If they are bushwacked now by this bill, the poltical reaction will be worse ultimately for Philadelphia's future politics. Think Mayor Jannie Blackwell.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Let's make it much more

Let's make it much more simple: The biggest employers in Philadelphia are the Federal Government, the City, the State and Penn.

People are much more pro government worker than anyone really hears about in the media. These are not mysterious people stealing money with a nefarious pension- they our neighbors, our families and our friends, who have collectively bargained for a decent retirement.

And our unions are often supportive of reform

I happened to be in the room a few years ago when Tom Cronin practically begged Mayor Street to get the reinventing government initiative going again. Tom believed, rightly in my view, that city workers in DC 47 had lots of good ideas that would save the city money and improve their work lives.

Mayor Street said yes. And then nothing happened.

In preparation for my Council campaign, I talked to lots of union members to see what ideas they had for making the government work better. I learned a great deal about how tough it is for them to get their views heard.

So any implication that unions in this city resist efforts to make the city more efficient is simply untrue.

Fair enough, Marc

in general I think you are right. Civil service workers genarlly want to serve the public as well as possible, though as in any large institution innefective practices take hold and become engrained over time because "thats the way things have always been done." The worst practices are often the result not of bad work ethic or bad civil service management but because city government is not following a coherent plan but rather subject to the competing whims of various political players. And then there are the non-civil service parts - like the BRT, the PPA, the row offices.

Progress moves fastest when its a local cooperative goal, not the result of partisan armtwisting from the State Senate.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Then why...

does Bob Brady have to swoop down every time we have a contract negotiation over at the Crowne Plaza? For a Congressman who's effectiveness has always been in doubt, I often wonder why he's always been necessary at the bargaining table. My only guess is that it's an effort at constituent service.

Reality is often absurd, Sean

>>"1,500,000 pissed-off people is still a lot of pissed-off people."

>>Thats an absurd comment. The folks mad about city workers receiving a pension they negotiated is at most in the range of 15-20% of Philadelphia. And they don't tend to agree with eachother about what to do about it, some of them just don't vote.

The pissed-offness that I mention, which you know why I made that comment... has to do with how immediately visible Plan C will be to the local population, and it begins with the Trash pickup and the absence of street cleaning. That will discourage and demoralize everyone in the City on both ends of the political spectrum, and it will lead to anger as you further delve into in your comment.

>>I've seen municipal unions be sometimes be tremendously effective at stopping even quite reasonable reforms because somebody merely talks about making a real >>effort city government a better buy for the buck. I can't believe they will sit down and be bushwacked by a heavyhanded and innately unfair and >>unconstitutional >>power grab. If they are bushwacked now by this bill, the poltical reaction will be worse ultimately for Philadelphia's future politics. >>Think Mayor Jannie Blackwell.

This is why I keep harping on the "Nuclear Option". The largest city in Pennsylvania making a run for BK, even if it does get dismissed, will cause extreme damage to every municipality in the Commonwealth because it puts every public bond in the state in serious doubt with the investing public. It will also paralyze the legislature.

Suppose Plan C kicks in and we see a mass exodus in the next 5 years of 20,000 wage tax residents which also triggers a massive wave in property value decreases because they leave. That kicks both the City and the SRC in the pants, hard, and insolvency and missed debt payments occur as a result. This could mean the City's checkbook gets taken away from City Council anyway, or worse, City administration is totally paralyzed by the state ala Camden.

So even if Jannie did somehow come on top in this dystopia you imagine, she'd be ineffectual at best and nothing more than a 6'o clock TV personality while the rest of the City burns.

City Bankruptcy is illegal, period

The PICA legislation bars the City filing for bankruptcy without the Governor's approval, no ifs ands or buts. It was one of the options the City was contemplating, although barely, when it almost went belly up under Goode. It's off the table now.

Stan is correct

Not to mention that bankruptcy in this scenario is just a means to the end of eviscerating the retirements of folks who have already invested into the system for a decade or so - which is both immoral and bad policy.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

You Fail to Recognize

That is a States Rights issue.

This is analogous to Harrisburg declaring Bankruptcy illegal for all Pennsylvanians, which we all know to be preposterous. When you declare bankruptcy you do not do it in a Commonwealth court. So, why exactly could Philadelphia NOT go to a Federal court (over state objection) and file for Chapter 9 protection under Federal jurisdiction?

My argument with this here, is that the PICA law is meaningless when it comes to barring any entity, be it a person, a corporation, or a government, from seeking bankruptcy protection.

Pennsylvania has no right to enjoin.

But the city of Philadelphia has no right to exist

except by the provision of the legal authority of the state of Pennsylvania. Thats what the Home Rule Charter is. There is no "Philadelphia" that exists legally beyond the scope of state law.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

If that assertion proves true

Then the City can also choose to become derelict if we wind up in Plan C and that turns out to be a failure, anyway.

Creditors have to sue SOMEONE to get repayment, or obligations have to be voided by someone.

If we don't pay our bills

PICA stops city government from getting reimbursements from the state. We could raise the sales tax 20% but the city would not receive a cent of it because PICA would stop reimbursing us. Thats why this bill is overstepping. PICA is already the nuclear option for fiscal mismanagement by the city, no need for any further micromanagement by the state.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Well, Doomsday has to arrive sometime or another...

if you don't ensure long term revenue >= expenses.

Plan R (in whatever form) is a better attempt at solving the lion's share of City outlay... which is what the City's biggest problem is when it comes to paying its bills.

Plan C is an amputation effort aimed at basic public services that does nothing with the pension system.

Total insolvency is the same thing as if Plan C or Plan R fail because of an exodus of taxpayers that may come as a result (see: Detroit).

In either case, any failure to pay the bills means a sharp cut in services and Rip Van Winkle (the general populous) could waken at any time and do serious damage to the City's political landscape as a result.

Or, the more likely case, people who still have money pack up and leave the city and leave behind the people who can't afford to leave (again, see: Detroit).

I think it would be better for everyone who lives here, not just the ones who are paying taxes, but everyone, that we do something about the City's expenses. If that means the state comes in with a chainsaw to the pension plan to rescue the City from mass layoffs, well.... "them's the breaks."

Plan A ballanced the budget - by law

and eased into what I considered resonable concessions for new hires and would have got them the right way - through negotiation. This uses a technical approval neede for self-governance to force drastic manipulated concessions by legislative fiat - on the whole state.

-Sean
MrLuigi, my cat, actually only types half as badly as I do.

We could implement Pay-Go

... with a Court of Financial Responsibility and have it sit in the Judicial branch entrusted with the power to void appropriations that throw the budget out of balance.

Or some other lock-step method that strangulates PA legislature so new spending measures that are inserted into bills have to have an offset of some kind at the other end (an increased tax or a deleted/reduced spending item).

We have computers and fancy software. We could theoretically eliminate annual budgets and replace it with a continuous ("live") budget that has a forward looking window and gets updated at the end of every accounting period.

Wasn't this a feature the Clinton Administration was trying to implement along with Congress before GW Bush came in and wrecked everything?

PICA already is Pay-Go

If the city's projections go out of whack, they demand they be adjusted or they cut off disbursements from the state. That was the first library fight - the recession was causing the projections to no longer reflect reality, PICA said Nutter had to fix it, he made cuts without consulting anybody and a lot of people said - "show us you can't find it someplace else to cut or raise revenue somewhere else before you close libraries".

Again the city wasn't asking for anything other than the right to settle an economic crisis with a real actual balanced budget on its own terms. Pension fund health is an issue Harrisburg ignored for decades - except for PICA - which brought it up again and again with every budget. And PICA did carefully review the adjusting of terms this year in depth and concluded it did in fact pass the smell test. A fairer solution might be to set general stricter limits for pension fund health that the city has to get to over time and let the city work it out with PICA.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

There is no states' rights issue here

because all states (and that would include Pennsylvania) have been given power under federal bankruptcy law to decide if their municipalities can declare bankruptcy. Congress is completely within its right to give this power to the States as there is no constitutional right to bankruptcy protection. Pennsylvania has exercised its power to rule that Philadelphia can't go that route without the Governor's OK. There are no legal issues here, no ambiguities, no ifs ands or buts. This is a nonissue, and you're really wasting everyone's time by bringing it up.

Here's the relevant language from the PICA statute, at 53 P.S. Section s 12720.211 (b):

[N]otwithstanding any other provision of law, no city of the first class [i.e. Philadelphia] shall be authorized to file a petition for relief under 11 U.S.C. Ch. 9 or any successor Federal bankruptcy law, unless such petition has first been submitted to, and the filing thereof has been first approved in writing by the Governor.

Laws didn't Stop Nutter from trying to pass...

illegal gun restriction laws in the face of municipal restrictions on legislation, now does it?

We should file just for fun in hopes the credit rating agencies that score PA state bond debt take notice.

Just the big scary headlines "PHILADELPHIA FILES FOR BANKRUPTCY" would be enough to send a message, even if it gets dismissed and no creditors committee is formed.

The real McCoy

This hardly sounds like Doomsday to me:

Provides special provisions for cities of the first class. Provides a 30 year “fresh start” for amortization of unfunded actuarial accrued liability.

Philadelphia

Allows a first class city to defer pension payments in lieu of being subject to the Level III distress provisions. In order to be eligible for deferral, the city must adopt a revised collective bargaining plan for new hires by September 9, 2009. The plan may cost no more than 80% of the existing plan.
Establishes contribution rates for new hires.

Allows the city to defer a portion of its minimum funding obligation as follows:
1. For 2010, deferral of up to $155,000,000.
2. For 2011, deferral of up to $ 80,000,000.
Repayment shall include 8.25% interest. The city shall repay $90,000,000 plus interest by June 30, 2013. The balance of amounts deferred shall be repaid by June 30, 2014.

In order to retain the authority to utilize the deferrals, the city must freeze pension benefits for existing employees, adopt the required plan for new hires, appeal arbitration decisions inconsistent with the plan and make scheduled repayments. If the city fails to comply, it will be subject to the levels of distress applicable to other municipalities.

Authorizes the city of the first class to impose a 1% sales tax. In order to retain the authority to impose the tax, the city must freeze pension benefits for existing employees, submit the required plan for new hires and appeal arbitration decisions inconsistent with the plan. If the city fails to comply, it shall lose the authority to tax. If it fails to repay all deferred amounts as required, the State Treasurer shall withhold other funds that go to the city in the amount owed and deposit those funds in the city’s pension account. Excludes welfare, human service, and debt service payments.
Beginning January 1, 2006, the city shall be subject to the three distress levels provided for other municipalities.

The tax expires in 2014.

Right so if you have worked for the city for 15 years

and you are say 5 years from retirement, you can not earn a cent more of retirement benefit whether you put in those 5 years or 10 more or stop working tommorow. Benefit is no longer a reflection of how much time you put in - even though the money put into the system is supposed to in fact be compensation for the work you are doing right now. In other words the State Senate Republican Caucus just summarily erased a contractual obligation you had earned through collective bargaining - without you, your union, or any locally elected official having any say whatsoever in the matter.

Why would anyone putting in the years working for the city object to that?
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Self-control?

The unions could have offered an option to allow employees to forego the pension in totality and redirect contributions into their own IRA if they chose. I understand the difference between the tradeoffs of pension employment vs. private employment, and public workers go into it not for altruistic sake, but for the dream of a fixed income coming out the other end funded by workers further back in the system.

But where was everyone when pension obligations increased in magnitude over the last 10 contract cycles?

Asleep?

If you work it out in negotiation

you take responsibility for the results. contract negotiations should be about both sides taking responsibility. I personally would not mind at all if Philly workers contributed as much from their paycheck towards the pension fund as city workers do in San Francisco. I just don't think its good policy for the State Senate to short circuit the process.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

Maybe I'm wrong

But HBG could have just amended the scripture that brought us PICA to suspend the September deadline and push it out pending a complete enacted budget from Harrisburg and while that's being sorted, continue distribution payments as normal.

I guess that was too much to ask.

They could have done that

but amending PICA would involve working with the Governor who ultimately holds the purse strings for PICA. And Pileggi's whole plan was about sticking a thumb in the Governor's eye on the state budget and this whole business now with an overreaching power grab into the world of local government's ability to negotiate its own contracts seems to have been a mere afterthought. If they really wanted to tweak PICA or take time to deal with pension funds in a responsible way they could have started months ago. They didn't because its more about "No I'm the $#@$ boss" than finding a lasting solutions through a fair and transparent process.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.

A cue from Allyson Schwartz...

Washington, D.C. – Today, July 31, 2009, the House of Representatives unanimously passed a resolution marking National Save for Retirement Week, sponsored by U.S. Representatives Allyson Schwartz (PA-13) and Sam Johnson (TX-03).

I think Allyson's on to something.

Maybe next month she'll get "National Live Within Your Means Awareness Week" passed, in time for the Holiday shopping season.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Syndicate content