Municipal Sustainability

Within Pennsylvania’s borders is a diverse collection of communities where employers set up shop, residents raise families, and tourists visit. The success of our Commonwealth is directly tied to the strength of its communities, and public policy should help communities thrive.

The Commonwealth comprises over 5,000 local government units, including counties, cities, towns, townships, boroughs, school districts, and local authorities. While local elected and public officials certainly play an important rolein our national system of shared power; Pennsylvania’s labyrinth of local governments can inhibit economic competitiveness, as too many small governments with limited resources and inconsistent or conflicting policies can inadvertently discourage development and job growth.

Moreover, the financial well-being of many Pennsylvania municipalities is often harmed by antiquated and unbalanced state laws and regulations, which may necessitate higher costs and inefficient spending. Ultimately, this burden falls on Pennsylvania residents and businesses, many of whom may already live and operate in financially distressed communities.

The PA Chamber supports efforts and legislation to help local governments improve and sustain their financial condition. Municipal sustainability can be effectuated by:

• Improving delivery and administration of municipal services: Eliminate legal barriers and provide
assistance to local governments to deliver services in ways that make practical and financial sense; allow
and encourage municipalities to enter into public-private partnerships that benefit taxpayers, provided
they are entered into in a transparent and equitable manner, direct and provide tools for local governments
to establish clear processes and streamlined permitting to help both the Commonwealth attract business
and current Pennsylvania employers compete with those in other states.

• Encouraging municipal cooperation and consolidation: Streamline procedures and incentivize local
governments to consolidate; encourage municipalities to collaborate on the delivery of services, pursuit of
funding opportunities; and policies related to land use, permitting, zoning, or any process through which
businesses must go to locate or expand.

• Public Pension Reform: Post-employment benefits, including outmoded retirement plans, are increasingly unsustainable, which can financially strain local governments and may lead to instability for future beneficiaries. In order to mitigate rising costs in the near term and address unfunded liabilities, the PA Chamber supports and encourages local governments to transition employee retirement plans to a defined contribution retirement plan, which mitigates the risk assumed by taxpayers and is more sustainable. Moreover, as most local retirement plans serve a small number of employees, municipalities should evaluate the consolidation opportunities available that could modernize the existing system and create economies of scale that save both taxpayers and plan participants significant money. Whether or not municipalities are able to adjust post-employment benefits in order to evolve with the times, they should emphasize transparency to taxpayers, including administration costs, assumed rates of return, and true
financial health.

• Reforming binding arbitration: Current state law provides for binding arbitration in the event of a contract dispute between police or firefighters and their municipal employers, and, in exchange, these uniformed public employees are prohibited from going on strike. While binding arbitration can be useful to resolve disputes, the current system does not sufficiently protect the interests of the municipality or the public from adverse decisions rendered through binding arbitration, which can significantly increase costs. Especially problematic are those decisions imposing unfunded future benefit obligations without full public disclosure of the long-term costs. The PA Chamber supports reforms to make binding arbitration more balanced while ensuring that police and firefighter rights remain protected, including requiring both sides to share the costs of arbitration, expanding the list of potential arbitrators, and requiring evidentiary hearings to be open to the public.

Revised by the Policy Committee in February 2024. Approved by the Board of Directors on May 10, 2024