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Harrisburg Mayor declares state of fiscal crisis for city

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Harrisburg mayor Eric Papenfuse, speaks at a press conference Monday afternoon outlining his next steps to deal with the city's budget.
Harrisburg mayor Eric Papenfuse, speaks at a press conference Monday afternoon outlining his next steps to deal with the city's budget. - (Photo / )

Harrisburg Mayor Eric Papenfuse declared a state of fiscal crisis in Harrisburg Monday afternoon after the state legislature rejected his request for the city to exit Act 47.

The mayor wanted the legislature to allow Harrisburg to exit the state program for financially distressed municipalities while extending its taxing powers through a special status in the state’s fiscal code.

The Act 47 program has allowed Harrisburg to raise an additional $12 million per year since 2013 through local services tax and earned income tax increases. 

Harrisburg would have three years of the additional revenue under a three-year exit plan from Act 47, one of several ways it can escape the program.

But because the city can't count on the extra revenue past that date, the mayor said Harrisburg is instituting a hiring freeze immediately.

Positions that haven't yet been filled, he explained, won't be, nor will future positions that open up. 

The city has a handful of jobs that are currently open and projects more will become vacant as people retire throughout the year.

The job freeze could compound into significant savings for the city - not enough to fill the $12 million budget gap - but potentially $1 million or more, the mayor said.

In addition to the hiring freeze, the city is also placing a freeze on "non-essential spending" which includes several capital projects that have not yet been funded. The mayor said he wasn't able to specify which projects will be affected.

Of the city's $60 million annual budget 56 percent goes to wages, 15 percent goes to health care, another 15 percent goes to debt service and 6 percent goes to pensions, the mayor said.

The remaining 8 percent goes for supplies and services, such as utilities.

"I have to sign off on every purchase order in the city. I’ll have to make a judgement whether that’s money that can be saved or money that has to be spent," the mayor said.

If Harrisburg is able to maintain its taxing authority, it would remain on a sustainable path, the mayor said.

"We would not need to raise taxes further. We would be able to live within our means, and we would be able to continue to grow," he said. "But you can’t expect to fill a $12 million gap with five years’ worth of growth. It’s a project that’s going to take a generation," Papenfuse said.

 There is still time for a better solution, the mayor suggested.

"A new recovery plan does not have to be adopted until the end of September. The legislature will be back in early September. There is time to work together on this," he said.

Rep. Greg Rothman (R-Cumberland County) announced Monday he will introduce a bill to review Harrisburg's status as a distressed city. 

"Should Harrisburg remain in Act 47 or not? That is the question,” Rothman said in a statment. "My legislation will allow the legislature to look into what’s going on in the city and make an educated decision."

Rothman is drafting legislation that would allow Harrisburg to exit Act 47 while ensuring the city’s pension obligations and Other Post-Employment Benefits Trust (OPEB Trust) remain funded. The OPEB Trust was created as part of Harrisburg’s recovery plan approved under Act 47.

Harrisburg has been operating under Act 47 oversight since 2013 and is eligible to have its status as a financially distressed municipality lifted by one of four options. The options under current law are the termination of distressed status, municipal disincorporation, fiscal emergency or a three-year exit plan. 

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Shelby White

Shelby White covers banking and finance, law and Lancaster County for the Central Penn Business Journal. For tips, email her at swhite@cpbj.com.

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