Harrisburg officials plan to march on Friday morning to the state Capitol, as the city faces two stark choices—fiscal freedom or renewed crisis.
In an interview late last night, Mayor Eric Papenfuse said officials from his administration, police officers and firefighters will walk from city hall to the Capitol in a last-ditch effort to convince House Speaker Mike Turzai to back a measure that would free the city from Act 47, the state’s program for fiscally distressed cities.
The state legislature is on the brink of passing a 2018-19 budget, which may include an amendment that would allow Harrisburg to exit Act 47 by granting the city the ability to retain increases to both its local services tax (LST) and earned income tax (EST).
“We have made incredible inroads,” Papenfuse said. “We have an amendment to the fiscal code that will allow the city to keep its taxing authority and exit Act 47.”
Papenfuse said he believes that majorities in both the House and Senate, as well as Gov. Tom Wolf, back the amendment. However, one critical House member is opposed—Turzai.
If the amendment fails, the city likely will be plunged back into state receivership, Papenfuse said.
That’s because the city’s Act 47 status ends in September and, with it, the city’s extra taxing authority, which accounts for about $14 million of its $72 million budget.
The city could stay in Act 47 for three more years, but that would require another financial plan, likely without the extra taxing authority, Papenfuse said. Because the city would never raise property taxes enough to cover the budget shortfall, it almost certainly would wind up back in state receivership, he said.
“Ultimately, it brings us right back to square one,” he said. “All the gains we made would be wiped out.”
Last week, Turzai released a statement announcing his opposition to the amendment, stating that Harrisburg should remain in Act 47.
“If Harrisburg officials want to get out of Act 47, they should give up the increased earned income tax on residents and the doubling of the local services tax (LST),” Turzai said. “Further, while in Act 47, the city needs to make changes working with the private sector, not against it.”
As part of its financial recovery plan, the state allowed the city to double its EIT to 2 percent and triple its LST to $156 a year.
In his statement, Turzai said that he believes that city has not done all it can to put its fiscal house in order.
“While Harrisburg officials claim to have taken steps to address the city’s legacy costs, they have not truly begun to undertake the needed reforms to get the city back onto steady financial footing,” he said. “Allowing the city to maintain the increased taxes allowed under Act 47 without the oversight to rein in its spending would only seek to encourage the city to continue the spending habits that got them into Act 47 protection in the first place.”
Papenfuse said that, on Thursday afternoon, he met briefly with Turzai, but made little progress in convincing him that the city has cut expenses “to the bone” and, having sold off its incinerator and leased out its parking system, had no other major assets that it could monetize. The meeting, he said, ended acrimoniously, leading to the plan to march to the Capitol building on Friday morning.
“The danger is that, if [Turzai] is successful, he’s made things even worse for us,” Papenfuse said. “If he’s successful, we’re back in receivership.”
By marching, Papenfuse hopes to show legislators the city employees, especially the emergency workers, who help ensure the security of the state government every day. These workers must believe they have stable jobs if they’re going to remain with the city, he said.
“Fire and police have agreed to walk with me to the speaker’s office because we simply can’t cut public safety,” he said.
