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Pa. Senate passes bill that would appoint committee to sell off public assets of underwater municipalities

A bill in Pennsylvania that would empower the governor to appoint two members to a management board that would have the authority to influence collective bargaining agreements and arbitration, and force the liquidation of public holdings, passed the state Senate Tuesday. It awaits a vote in the House as lawmakers scramble to pass the state’s budget and ancillary amendments.

Sen. Jeffrey Piccola proposed Senate Bill 1151 after Harrisburg officials balked at a list of recommendations brought to them by a state-appointed committee charged with finding cuts to a struggling city’s budget. The committee indicates in its report that Harrisburg owes $220 million despite its 2011 General Fund budget just barely exceeds $55 million.

Piccola’s plan would obviate the authority of Harrisburg elected officials, with the management board acting alone in clearing city structures and services. The state committee appeared before the Harrisburg City Council earlier in June, proposing the city outsource waste management, sell a local incinerator, raise property taxes, order public employee layoffs and negotiate contracts to freeze wages and restructure health benefits. The full 418-page document can be found here.

If passed, the legislation would amend the state’s 1987 Municipal Financial Recovery Act (Act 47). Originally, Act 47 was a process by which distressed communities could receive state financial support after accepting the terms of an Act 47 team.

Collective bargaining agreements that were finalized before an Act 47 team prepares its recommendations cannot be overruled. However, the bill places limitations on labor negotiations between public workers and the municipality that occur after a debt resolution proposal is issued:

A distressed city shall execute contracts and collective bargaining agreements in compliance with the plan. If a management board has been appointed, the distressed city shall execute contracts and agreements only with the approval of the management board.

On wage and fringe benefits for public workers, the bill states the board will consider:

[r]elevant market factors, such as the financial situation of the distressed city, inflation, productivity, size of work force and pay and benefit levels in economically and demographically comparable political subdivisions.

The bill also straightjackets municipalities seeking bankruptcy protection:

Notwithstanding any other provision of law, including section 261, no distressed city may file a petition for relief under 11 U.S.C. Ch. 9 (relating to adjustment of debts of a municipality) or any other Federal bankruptcy law, and no government agency may authorize the distressed city to become a debtor under 11U.S.C. Ch. 9 or any other Federal bankruptcy law.

SB 1151 contends its language supersedes the 1987 law if contradictions arise. The original legislation permitted the municipality to pursue “municipal debt adjustment action pursuant to the Bankruptcy Code.”

Chapter 9, Title 11 of the United States Code, under which SB 1151 forbids a municipality to seek relief, was the legal code used to restructure Orange County’s debt in California in 1994. At the time, the Los Angeles Times noted the county was the largest municipality in U.S. history to go bankrupt.

In Michigan, a statewide law was passed that is similar to Piccola’s SB 1151. Commonly called the Emergency Financial Manager legislation, it gives wide powers to an independent authority to order the sale of city assets and nullify collective bargaining agreements, while also merging emergency service response units like police and fire into a single group. The Michigan Messenger, a sister site of The American Independent, has reported extensively on that law and the decisions EFMs have made to resolve municipal debt.

Asked whether Piccola drew inspiration from Michigan’s Emergency Manager law, his office replied, “[n]o we didn’t – SB 1151 is based on current laws regarding the cities of Philadelphia and Pittsburgh.”

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