Harrisburg’s financial crisis is back, and that could lead the city to impose dramatic budget cuts, according to the mayor.
Mayor Eric Papenfuse plans to hold a press conference tomorrow afternoon declaring the city to be back in a state of fiscal emergency following the state legislature’s refusal last week to allow the city to retain its extra taxing authority and leave Act 47, the state’s program for fiscally distressed municipalities.
“With the state legislature’s failure to act Friday to extend Harrisburg’s taxing authority beyond Act 47, the city now faces a looming financial catastrophe that will require immediate implementation of austerity measures to begin to close a projected $12 million budget deficit over the next three years,” Papenfuse said in a statement.
He did not immediately reveal what those austerity measures might include, nor did he immediately return a phone call asking for additional comment.
On Friday, the House and Senate declined to consider a measure that would have allowed the city to keep its special taxing authority, enabling it to exit Act 47 without sacrificing tax revenue.
That amendment never made it into the appropriations bill that the Senate subsequently passed.
As part of Harrisburg’s current financial recovery plan, the Commonwealth Court permitted the city to raise those taxes beyond what is allowed in the state tax code. The city doubled its earned income tax (EIT) in 2012 and tripled its local services tax (LST) in 2016. Those taxes bring in about $12 million in annual revenue for the city.
The city’s current, five-year financial recovery plan under Act 47 expires in September. The state likely will grant the city a three-year extension. However, a new plan would have to be drafted and approved and, with it, the city may lose those extra taxes and that extra revenue, Papenfuse has said.
Last week, Papenfuse said that he believed the city had the votes in the legislature to retain the current, elevated EIT and LST, as well as the support of Gov. Tom Wolf. However, House Speaker Mike Turzai has been publicly opposed to allowing the city to retain the current EIT and LST, advocating a three-year extension and saying that “the city had not completely addressed its financial issues.”
“Just as we did with Pittsburgh, we need to get Harrisburg on track to exit Act 47 on strong financial footing, instead of allowing it to simply continue to tax those who live and work in the city at a higher rate,” Turzai said in a June 13 statement.
With Turzai opposed, the measure to allow the city to retain its EIT and LST, and exit Act 47, never came up for a vote.