Governance: Local Government Finance Initiative

As Southwestern Pennsylvania has grappled with the public health and economic challenges caused by the spread of COVID-19, strains in our governmental systems have become increasingly visible. The statewide closure of nonessential businesses has sent economic shockwaves through the region, especially among our most vulnerable communities. Across Pennsylvania, people, businesses, and communities are facing significant economic stresses and, in many cases, long-term economic impacts.

The personal hardships of our region’s residents are also causing a significant decrease in revenue for many local governments. In 2020, the University of Pittsburgh Center for Metropolitan Studies estimated that Southwestern Pennsylvania municipal revenue losses for 2020 are expected to range from approximately $123 million to $485 million. Many local governments in response to these losses furloughed and laid off employees. For our region’s local governments, these revenue losses will have a profound effect on their financial health and ability to deliver effective municipal services.

Fortunately, many municipalities, which depend mainly on earned income and property taxes, have not yet felt the brunt of revenue losses thanks to stimulus measures from the federal and state government. The 2021 American Rescue Plan Act provided additional funding to state and local governments that should offset many of the revenue losses and expenses local governments have experienced during the pandemic. Longer term issues around potential property tax revenue losses from commercial properties reassessments or a potential drawn out economic downturn could create near term revenue impacts for local governments. This delay in lost revenue provides the region with an opportunity to act before municipalities are significantly impacted.

In response to this crisis, the IOP convened its Fiscal Policy and Governance Committee to formulate a coordinated multi-pronged, collaborative response to the loss of critical tax revenue. The Institute envisions taking on a project that will provide local governments with guidance and resources to help inform their financial decision-making in the wake of the COVID-19 pandemic. The committee plans to examine ways to:

  • increase municipal revenue flexibility,
  • foster intergovernmental cooperation,
  • promote basic municipal government standards,
  • and increase local government administrative and budgeting capacity.

Within these areas the Institute will work with its community partners to coordinate technical assistance and educational opportunities. Additionally, the committee will work to create a set of policy reforms to present best practices for municipalities regarding budgeting and municipal shared services, as well as legislative and/or rulemaking changes for the Pennsylvania General Assembly and Pennsylvania Department of Community and Economic Development. The reforms will look to improve the long-term sustainability of Pennsylvania’s municipalities.

The issues to be addressed in this initiative are both timely and critically important to our region. Through the delivery of essential public services, municipal governments give us a unique sense of place and community. Through this initiative and the work of our partners, we hope to preserve the vitality and sustainability of Pennsylvania’s municipal governments. The committee will be releasing its recommendations in a report set to be released in early summer 2021.