The state of Pennsylvania continues to take half-ass measures in resolving the budget crisis in Harrisburg. New legislation fails to address two badly needed action items.

Please consider Harrisburg Might Get a Receiver Thanks to Pennsylvania Bill

Harrisburg may become Pennsylvania’s first municipality to fall under receivership.

The City Council in July and August rejected fiscal rescue blueprints from consultants hired by the state and Mayor Linda Thompson. Today, The state House of Representatives voted 185-9 for a bill that would let Republican Governor Tom Corbett name a receiver. The Senate still must consider the plan.

The capital city of 49,500 faces a debt burden five times its general-fund budget because of an overhaul and expansion of a trash-to-energy incinerator, which doesn’t generate enough revenue to cover the obligations. It avoided defaulting on general-obligation bonds in September and last year by getting advances on state aid.

The vote “sends a strong message” to elected officials in Harrisburg and elsewhere not to dawdle with recovery plans, Representative Glenn Grell said on the House floor.

Grell, of Hampden Township in Cumberland County, and Senator Jeffrey E. Piccola of Susquehanna Township in Dauphin County, both Republicans, are pushing the legislation. The bill would allow Corbett to declare a fiscal emergency in Harrisburg and name a receiver who would develop a recovery plan.

The manager, technically appointed by the Commonwealth Court and paid by the state, would have the power to implement the steps, such as selling assets, hiring advisers and suspending the authority of elected officials who interfere. Unlike in Michigan, the receiver wouldn’t be able to change union contracts.

There is no point in reading further. The facts as presented show why the crisis will linger on and on, at taxpayer expense.

  1. Harrisburg is bankrupt. It’s time to recognize that simple fact, announce bankruptcy, and force the bondholders to take a loss.
  2. Without power to force changes in union contracts and pensions, any new receiver will have not one but two hands tied behind his back in putting Harrisburg back on a path towards fiscal sanity.

Strong Message Legislature is Clueless

Representative Glenn Grell said “the vote sends a strong message to elected officials in Harrisburg”.

Actually it sends a strong message the Pennsylvania legislature is clueless about what needs to be done.

Harrisburg has numerous problems, and untenable union wages and benefits are a huge part of that problem. Once again, it’s time to stop Fantasyland dreams and Take The Loss.

Bondholders and unions alike have losses to take. Until they do, the crisis in Harrisburg will linger on.

For needed loss-taking in Europe, please see Merkel Prepares Market for Bigger Haircuts; Split opens Over Greek Bail-Out Terms; Needs vs. Fantasies.

Mike “Mish” Shedlock
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