Allegheny Institute Studies Johnstown's Act 47

The Allegheny Institute For Public Policy says after 18 years of being under the control of act 47, Johnstown may be getting closer to bankruptcy than it is to being able to get out from under the provisions of the Act. Johnstown entered into act 47 in 1992 and is on its fourth amended recovery plan. The Institute looked at the city’s 2007 finances (the most recent DCED audited numbers) and then compared them to nine other similarly sized cities. Policy analyst Eric Montarti says Johnstown lead the way in many negative categories including low wage and real estate taxes, high employee count, high pension and debt costs and a heavy reliance on state and federal funding. State and federal funding accounted for a quarter of the city’s 2007 budget and Montarti wonders if the percentage grew with the addition of federal stimulus dollars. The only bright spot was Johnston’s low police department costs. The Institute launched the study when Johnstown passed a budget this year that cut the number of employee and raised property taxes. Montarti says at the time, the council noted that it was better to make those moves than to enter into chapter nine bankruptcy. Montarti says, “Johnstown is now in negotiations with its major unions on new labor contracts that might decide whether the Council's prognostication comes true.” He says he wonders why those higher personnel costs and legacy costs were not dealt with much sooner.
Montarti says this study may point to flaws in Act 47 or the way Act 47 coordinators approach their jobs. He says the coordinators must know their limitations and at some point admit, “we cannot solve this problem, we need to go to some sort of bankruptcy, debt reorganization, because what we have in terms of our tools just do not work.” Montarti says another problem may be the clash between powers given to municipal unions and the power of Act 47 coordinators. He says those unions do not have the ability to go on strike but they do have the right to binding arbitration and if the arbitrator does not heed the needs of the coordinators it may leave the municipalities in the same situation they where in when they entered Act 47. Very few of the municipalities that have entered Act 47 since it was enacted in 1987 have emerged. Montarti says maybe this report will serve as a wake-up call for coordinators to allow their municipalities to move into bankruptcy and alow a judge to right some of the problems they have not been able to address. “Something has to happen to right this financial ship, and soon,” says Montarti.
The full report is available at the Allegheny Institute's website.