News/Views

Pennsylvania Economy League’s Award-Winning Site Updated with Focus on Local Government

(September 30, 2010 – Philadelphia)  Today the Pennsylvania Economy League, Inc. (PEL), the state’s leading regionally-based economic policy organization, re-launched IssuesPA.org, its Webby-nominated issues website originated for the Commonwealth’s 2002 elections.

In the new IssuesPA.org iteration, PEL chose to narrow its focus to the matrix of issues of local government and services reform that will affect all candidates elected to office this fall – irrespective of party affiliation. “The recession has worsened the fiscal condition of Pennsylvania’s municipalities, but the pressures from static or declining tax revenues, underfunded pensions, and rising costs have been building for decades,“ said Steve Wray, PEL’s managing director.  “The 2010 election year provides an excellent opportunity for PEL to highlight the challenges facing Pennsylvania’s local governments and the impact of our local governance systems on regional and state competitiveness.”

Demographic shifts and the economic crisis have put pressure on Pennsylvania’s entire system of local governments. Counties, cities, boroughs, and townships all have seen their fiscal assumptions overturned, resulting in reductions to service provision and calls for revenue increases -– all at a time when needs are growing due to the economic condition of the Commonwealth. Other factors threatening the future of our local governments include underfunded municipal and school district pension plans, retiree health costs, underinvestment in basic infrastructure, and an increasingly constrained state budget.

PEL’s history of nonpartisan issues study and analysis uniquely qualifies it to shine light on the flaws in Pennsylvania’s local government structures and also on potential changes or solutions that could be adopted. Moreover, remodeling and repairing the governance of Pennsylvania’s local communities has been central to the organization’s mission for almost 75 years.

In addition to original articles, issues scorecards, and dissemination of pertinent studies and reports, IssuesPA.org will identify the key issues and frame questions necessary for those elected in this cycle to address.

“The re-launch of IssuesPA provides PEL with a rare opportunity to bring to the fore issues of efficiency, effectiveness, and equity in Pennsylvania local government,” said Brian K. Jensen, PhD, executive director of the Economy League’s operations in southwestern Pennsylvania. “Working with our sister PEL offices, the Allegheny Conference on Community Development and its affiliate, the Greater Pittsburgh Chamber of Commerce, and with other organizations across the Commonwealth, PELSW is eager to help advance the cause of better local government in Pennsylvania.”

By engaging citizens, opinion-leaders, and like-minded good government organizations through IssuesPA.org, PEL believes that momentum can be developed to move the idea of changing Pennsylvania’s local government structure into reality.

Gerry Cross, executive director of PEL’s office in Wilkes Barre which covers the middle of the state said, “IssuesPA’s strength is that it provides a common area for those issues that might seem important only in a regional context, but on further examination, affect all the Commonwealth’s citizens.”

Visit www.IssuesPA.org for more information, and follow IssuesPA.org on Twitter: @IssuesPA.

PEL, Inc.  Board of Directors

Gregory J. Nowak, Esq. – Pepper Hamilton, Chair and President

Robert M. Geneczko – PPL Electric Utilities, Vice Chair and Vice President

Philip A. Peterson – Aon Consulting, Secretary – Treasurer

Thomas L. VanKirk, Esq. – Buchanan Ingersoll & Rooney, Assistant Secretary – Treasurer

Joseph C. Bright, Esq. – Cozen O’Connor

Fred Callahan – Colony Papers

Laura Ellsworth, Esq. – Jones Day

Robert Krizner – KPMG

Jeffrey P. Lindtner – Jeffrey P. Lindtner & Associates

H. David Prior, Esq. – Ballard Spahr

Richard A. Russell – Giant Eagle

Richard G. Russell – Hershey Foods

William H. Simpson – Susquehanna Real Estate

Lou Testoni – PriceWaterhouseCoopers

PEL , Inc. Affiliates

PEL Central (Wilkes-Barre)

Gerald Cross, Executive Director

www.pelcentral.org; 570 824 3559

PEL Southwest (Pittsburgh)

Brian K. Jensen, PhD, Executive Director

www.pelwest.org; 412 281 1890

Economy League of Greater Philadelphia (Philadelphia)

Steve Wray, Executive Director

www.economyleague.org; 215 875 1000

About the Pennsylvania Economy League

Established in 1936, PEL is an independent, nonpartisan, nonprofit, public policy research and development organization. Our mission is to provide critical information, perspective and support to the business, civic, and governmental leadership of our communities and our state in their efforts to make Pennsylvania a better place to live, work, and do business. For more information, visit issuespa.org/content/about-issuespa.

In August 2010, PEL published a News and Views article (The Commonwealth Taps the Capital Markets As Its ATM) about the Commonwealth’s use of Tax Anticipation Notes (TANS) for the first time since the 1998 fiscal year.  In the 2009-10 fiscal year (year ending June 30, 2010), the Commonwealth borrowed $800,000,000 in TANS, short-term notes issued in advance of taxes and revenues to be received by the state.  These short-term notes are issued by states and municipalities as cash flow management tools used to smooth the differences between receipts of revenues by the Commonwealth and payment of ordinary and ongoing expenses.

In the article, PEL analyzed the cash position of the Commonwealth and suggested that the state’s cash flow situation indicated that the Commonwealth would need to return to the capital markets in the 2010-11 fiscal year for additional TANS.  “PEL expects that the Commonwealth will need to return to the capital markets in 2010-11, possibly as early as September or October… The Commonwealth may need to borrow as much as $1 billion or more … to generate the cash flow necessary for ongoing operational needs.”

Just as PEL anticipated, the Commonwealth’s Office of the Budget has announced a planned sale of $1,000,000,000 Tax Anticipation Notes, First Series of 2010-2011, that will be held on October 5, 2010.  The Office of the Budget also announced that $386,535,000 General Obligation Refunding Bonds will also be offered for sale on October 6, 2010.

As PEL remarked in the August News and Views article, the Commonwealth’s cash position, infrastructure needs, and lack of new revenue would require a similar journey to the capital markets in the 2011-12 fiscal year in order to raise the necessary funds.  PEL has and will continue to follow the fiscal position of the Commonwealth as the state increases its reliance on the capital markets to acquire the funds needed for both short-term operations and long-term projects.

PEL has discussed the impact of the changes that have taken place in the financial markets over the past two years, for example, the changes that have occurred in the credit markets with respect to municipal finance, and the impact of these changes on state and local governments.  The current issue of News and Views focuses on cash at the state level.

An important indicator of the fiscal condition of the Commonwealth for the 2009-2010 fiscal year that has received little attention was the state’s use of tax anticipation borrowing for the first time since the 1998 fiscal year.  In December 2009, Pennsylvania went to the capital markets to borrow $800 million in tax anticipation notes (TANS).  These TANS were issued under the authority of the Fiscal Code and were designed to smooth the differences between receipts of funds by the Commonwealth and payment of ordinary and ongoing expenses by the Commonwealth.

Table 1
General Fund tax Anticipation Notes
Fiscal Year 1994-1998 and 2010
(in millions)

SOURCE: Commonwealth Official Statement, December 22, 2009

The timing of receipts and payments under the Commonwealth’s current fiscal structure means that revenues tend to be received in an uneven pattern, with large receipts in the later months of the fiscal year (April through June), while payments are distributed more evenly throughout the fiscal year.  Payments are particularly heavy in August, October, December, February, April, and June when the Commonwealth makes the statutory subsidy payments to the state’s school districts.  For the 2009-10 fiscal year, the TANS were needed to provide the cash flow to make these and other payments due to the decline in revenue received by the Commonwealth in the General Fund.  The TANS were paid in May and June of 2010, the last two months of the fiscal year.

General Fund receipts declined by 4.1 percent in the 2009-10 fiscal year from the original budget estimate.  General Fund revenues are projected at $27.5 billion for the 2010-11 fiscal year, a decrease of $0.8 billion from the 2009-10 total of $28.3 billion.  The most direct impact of these declines on the Commonwealth’s fiscal position is a substantial decrease in the state’s cash flow and cash position.  As with private sector businesses, the Commonwealth needs cash to operate, to pay payroll, to make the various subsidy and transfer payments to local governments and school districts, to pay vendors and contractors, and to buy the myriad goods and services that are essential to the functions of the state.  Revenue declines mean more than debates about budget reductions; these decreases mean that there is less cash immediately available for operations at the state and at the local level as well.

The 2010-11 budget as adopted does not significantly provide for new revenue to increase the Commonwealth’s cash position.  PEL expects that the Commonwealth will need to return to the capital markets in 2010-11 for TANS, possibly as early as September or October.  The size of the 2010-11 TANS may also exceed the $800 million borrowed in 2009-10.  The Commonwealth may need to borrow as much as $1 billion or more and may use more than one series of TANS to access the capital markets to generate the cash flow necessary for ongoing operational needs.

The Commonwealth borrowed $800 million in TANS and $1.9 billion in long-term bonds during the 2009-10 fiscal year, a total of $2.7 billion in funds acquired from the capital markets.  The State’s cash position, budget projections, infrastructure needs, and other commitments portend a similar journey in the 2010-11 fiscal year.

The costs of acquiring both short-term and long-term funds are low by historical standards and the Commonwealth maintains excellent ratings from the major credit rating agencies.  Using the capital markets to manage the State’s cash position is a sound fiscal practice, but a practice that requires vigilance and a continuing knowledge and appreciation of the impact of these markets on the Commonwealth’s fiscal reputation.

Table 2
General Fund Cash Balances * (unaudited)
Fiscal Year 2002 – Fiscal Year 2010
(in millions)

SOURCE: Commonwealth Official Statement, December 22, 2009

Recently, the staff of the Pennsylvania Economy League gave presentations on the subject of local government fiscal health.  The presentations focused on recent PEL research on trends from 1970 to 2006 in local government revenue and expenditures.  The structure of local government finance in Pennsylvania is under stress and in danger of not providing sufficient resources to provide broad-based municipal services to their citizens. 

You can view the presentations by following these links:

Pennsylvania State Mayor’s Association

Lehigh Valley Luncheon Presentation

To view the complete presentation from the Lancaster PEL/Chamber event on PA Public Pensions & Politics: The Absence of Sound Public Policy Principles,
open the following link:

PA Pension Reform Lancaster 08-26-2010

Rick Dreyfuss Business Consultant and Actuary Senior Fellow – The Commonwealth Foundation
Presentation to the Pennsylvania Economy League, Inc. and the Lancaster Chamber of Business and Industry Breakfast meeting August 26 2010

According to a recent report by the state Public Employee Retirement Commission, pension plans in many municipalities in Pennsylvania are financially distressed. 

A pension plan’s funding ratio indicates how severely distressed a plan is and shows the plan’s ability to meet the future costs of local pensions.  Recent legislation has mandated that municipalities with even moderately distressed plans must create an action plan to improve the status of the pension plan.

You may check the status of your local municipal pension with this report.  It is important to remember that while a pension plan may be listed as severely distressed, there is no enforcement provision to require that the local plans be funded to a level necessary to pay its obligations.  Therefore, public knowledge and involvement of each municipality is needed to ensure that local governments are adequately funding their employee pensions to avoid sudden demand for increased local taxes in the future.

To review the status of your municipality’s pension fund, follow the links below.

Distress Score Report (Excel)

Distress Score Report (PDF)

The economic benefits and fiscal impact of Pennsylvania’s hospitals and healthsystems have remained a valuable source of local economic development and employment, even in a time of considerable economic stress. 

Recently, a report on the continuing positive regional economic impact on hospitals was released by the Hospital & Healthsystem Association of Pennsylvania (HAP).  In 55 of the 67 Pennsylvania counties, hospitals remain among the top five employers and more than 596,000 Pennsylvanians depend on hospitals for their jobs through direct employment and the ripple effect of hospital employment.  The economic impact helps not only the local region but the state as a whole.

Review the report here:

HAP – Pennsylvania Hospitals Strengthen Pennsylvania’s Economy 

Quoting from the release:

“The Hospital & Healthsystem Association of Pennsylvania (HAP) has issued its sixth hospital economic impact report, Pennsylvania Hospitals Strengthen Pennsylvania’s Economy, which indicates that Pennsylvania’s hospitals and health systems contributed $89.8 billion to the state’s economy in 2008, an increase of nearly $6 billion since 2007. The report also gives special attention to the role hospitals play developing and training the health care workforce, which is significant at a time of increased unemployment and continued economic uncertainty.”

On a related note, in 2009, the Commonwealth’s Legislative and Budget Finance Committee released a study: “Tax Exempt Property and Municipal Fiscal Status”.  PEL provided research assistance to this report.

Download the LB&FC report here:

Tax Exempt Property and Municipal Fiscal Status

To view the complete presentation on PA Public Pensions & Politics: The Absence of Sound Public Policy Principles,
open the following link:

PA Pension Reform Bethlehem: 06-17-2010

Richard C. Dreyfuss

To view the full report, open the following link:

Police Regionalization in Luzerne County

(Wilkes-Barre) The Pennsylvania Economy League (PEL) and The Institute for Public Policy & Economic Development (The Institute) joined forces to analyze regional policing versus individual community policing from both a cost perspective and a presence of full time dedicated police officers. This jointly issued report uses an unusual data source – a comprehensive inventory of all municipal police services, employees, and equipment completed after the 1972 Agnes disaster—with a 2006 inventory of police forces in the 76 municipalities of Luzerne County.  Using this information, PEL and The Institute are able to compare the quality of local police coverage (as defined by the number of full time police officers employed) in 1974 and in 2006.  The report shows that while full time policing has remained nearly the same in the cities and has increased in townships of the second class, employment of full time officers as a percentage of officers has decreased significantly in boroughs and first class townships. Given the decline in full time officers, communities and residents are at a higher risk and with limited resources, training, and investigative crime ― crime resolution is not at a high level. This study promotes regionalization of police forces to enhance coverage across all communities in Luzerne County.

PEL Director Gerry Cross indicated, “Since 1972 there has been a reduction of full time police protection in our oldest and most populated areas in the County and this  should be of particular concern for the law abiding citizen.  The reduction of full-time officers in boroughs and first class townships is especially disturbing as more people live in Luzerne County’s boroughs than in the four cities combined. Recent migration trends along with the ready availability of workforce housing in these older areas argues for an increase in the use of full time officers rather than the budget expedient method of part time police to save tax dollars.  As the report indicates from 1972 to 2006, there was a significant decline in the percentage of full-time police forces serving boroughs and first class townships. These areas – especially the boroughs—can least afford a reduction in public protection through an inadequate police force.”

 “Based upon the combined problems of increasing drug related crimes and the level of poverty in Luzerne County, there will be a need for improved efficiencies in crime deterrence, investigations, and arrests.  Regionalization of police services in Luzerne County can result in improvements in each of these areas,” said Teri Ooms, from The Institute. 

Perhaps the most important reason for a transition to regionalized police forces in Luzerne County is the loss of full-time officers in boroughs.  A reduction of full-time officers serving borough forces from 57.5 percent in 1972 to 31.6 percent in 2006 poses some obvious problems, one of which is the limitation of borough departments to respond to a series of needs at a given time.  Consolidating the police forces can offer improvement in responsiveness and the efficiency with which crimes are handled or prevented.

Open the links that follow to read more regarding impending issues forums.

Williamsport, PA:  May 26:  The PA Public Pension Crisis: Politics and Public Policy

Lehigh Valley:  June 17:  PA Public Pensions: Politics and Public Policy

Berks County:  July 15:  PA Public Pensions:  Politics and Public Policy

All PEL events are open to members of the public; we ask that you pre-register by following the links above.