THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY EARLL, SCHWANK, EICHELBERGER, YAW, VANCE, SMUCKER, BLAKE, FOLMER, PICCOLA, ROBBINS AND FONTANA, OCTOBER 31, 2011

AMENDED ON THIRD CONSIDERATION, JUNE 4, 2012   

AN ACT

Amending the act of July 10, 1987 (P.L.246, No.47), entitled "An

act empowering the Department of Community Affairs to declare

certain municipalities as financially distressed; providing

for the restructuring of debt of financially distressed

municipalities; limiting the ability of financially

distressed municipalities to obtain government funding;

authorizing municipalities to participate in Federal debt

adjustment actions and bankruptcy actions under certain

circumstances; and providing for consolidation or merger of

contiguous municipalities to relieve financial distress," 

further providing for definitions, for contents, for plan not

affected by certain collective bargaining agreements or

settlements, for filing municipal debt adjustment under

Federal law and for collective bargaining agreements,

furlough of employees and disputes.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 103 of the act of July 10, 1987 (P.L.246,

No.47), known as the Municipalities Financial Recovery Act, is

amended by adding definitions to read:

Section 103.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Arbitration settlement."  An adjustment or settlement of a

collective bargaining agreement or dispute. The term includes a

final or binding arbitration award or other determination.

* * *

"Plan" or "recovery plan."  A recovery plan developed under

this act.

* * *

Section 2.  Section 241(1) of the act, amended June 30, 1992

(P.L.336, No.69), is amended and the section is amended by

adding a paragraph to read:

Section 241.  Contents.

A plan formulated by the appointed coordinator shall be

consistent with applicable law and shall include any of the

following factors which are relevant to alleviating the

financially distressed status of the municipality:

(1)  Projections of revenues and expenditures for the

current year and the next [two] three years, both assuming

the continuation of present operations and as impacted by the

measures in the plan. The projections must include an

itemization of the following:

(i)  Projected revenues, including:

(A)  Local taxes.

(B)  Licenses, permits and fines.

(C)  Sales and rentals.

(D)  Federal, State and county grants and loans.

(E)  Any other sources of projected revenue.

(ii)  Projected expenditures, including:

(A)  Debt service.

(B)  Workforce.

(C)  Elected and executive officials.

(D)  Financial management.

(E)  Infrastructure costs including highways,

roads and wastewater systems.

(F)  Maintenance costs, including recycling and

trash collection, disposal and removal.

(G)  Other professional services.

(H)  Public safety.

(I)  Community and economic development.

(J)  Any other applicable expenditures.

* * *

(11)  Notwithstanding any other provision of law, limits

on projected expenditures for individual collective

bargaining units that may not be exceeded by the distressed

municipality, giving due consideration to the projection of

revenue and expenses under paragraph (1).

Section 3.  Sections 252, 261 and 408(a) and (b) of the act

are amended to read:

Section 252.  Plan not affected by certain collective bargaining

agreements or settlements.

[A] (a)  General rule.--Except as provided in subsection (b),

a collective bargaining agreement or arbitration settlement

executed after the adoption of a plan shall not in any manner

violate, expand or diminish its provisions.

(b)  Arbitration settlements for policemen and firemen.--An

arbitration settlement rendered under the act of June 24, 1968

(P.L.237, No.111), referred to as the Policemen and Firemen

Collective Bargaining Act, may deviate from the plan, but only

if the arbitration settlement:

(1)  except as set forth in subsection (b.1), will not

cause the distressed municipality to exceed any limits on

expenditures for individual collective bargaining units

imposed under the plan;

(2)  will not further jeopardize the financial stability

of the distressed municipality, as measured by the criteria

set forth in section 201; and

(3)  is not inconsistent with the policy objectives set

forth in section 102(a) to relieve the financial distress of

the distressed municipality.

(b.1)  Exception.--Subsection (b)(1) shall not apply to a

limit on expenditures for an individual bargaining unit that is

determined to be arbitrary, capricious or established in bad

faith.

(c)  Hearing before board of arbitration and expert

testimony.--The issue of whether an arbitration settlement

deviating from the plan satisfies the criteria under subsection

(b) and any exception under subsection (b.1) must be determined

by a board of arbitration appointed under the Policemen and

Firemen Collective Bargaining Act and reflected in findings of

fact that are supported by substantial evidence and consistent

with this section. During the hearing, the testimony of experts

in municipal finance, called by the distressed municipality or

the collective bargaining organization, is admissible as

evidence before the board. An arbitration settlement deviating

from the plan must be supported by the credible testimony of an

expert in municipal finance that the arbitration settlement

satisfies the criteria in subsection (b) and any exception under

subsection (b.1). For purposes of this subsection, the term

"expert in municipal finance" means an individual holding an

advanced degree who has at least eight years of experience in

issues relating to municipal finance.

(d)  Review by coordinator.--An arbitration settlement

deviating from the plan under subsection (b) must be provided to

the coordinator by the chairman of the board of arbitration

within 48 hours of issuance. The coordinator shall review the

arbitration settlement to determine whether it violates this

section.

(e)  Appeal.--The distressed municipality, collective

bargaining organization and the coordinator or secretary have

the right to appeal to Commonwealth Court from an arbitration

settlement which deviates from the plan under subsection (b).

(1)  An appeal must be commenced not later than 30 days

after issuance of the arbitration settlement.

(2)  The record of the arbitration settlement becomes

part of the record on appeal. The court may also supplement

the record.

(3)  To the extent an appeal alleges that an arbitration

settlement violates this section, the standard of review

governing an appeal from an arbitration settlement governed

by this section shall be de novo. The court shall not be

bound by the factual or legal conclusions of the board of

arbitration. Nothing in this subsection shall be construed to

otherwise affect the scope or standard of review applicable

to certiorari review of arbitration awards.

(4)  The coordinator's decision setting a limit on

expenditures for an individual collective bargaining unit

under section 241(11) shall not be disturbed on appeal unless

the limit is determined to be arbitrary, capricious or

established in bad faith.

Section 261.  Filing municipal debt adjustment under Federal

law.

(a)  Authorization.--In the event one of the following

conditions is present, a municipality [is hereby authorized] 

<--

must to apply to the department to file a municipal debt

<--

adjustment action pursuant to the Bankruptcy Code (11 U.S.C. §

101 et seq.):

(1)  [After recommendation by the plan coordinator

<--

pursuant to section 241(6).

(2)]  Imminent jeopardy of an action by a creditor,

<--

claimant or supplier of goods or services which is likely to

substantially interrupt or restrict the continued ability of

the municipality to provide health or safety services to its

citizens.

[(3)] (2)  One or more creditors of the municipality have

<--

rejected the proposed or adopted plan, and efforts to

negotiate resolution of their claims have been unsuccessful

for a ten-day period.

[(4)] (3)  A condition substantially affecting the

<--

municipality's financial distress is potentially solvable

only by utilizing a remedy exclusively available to the

municipality through the Federal Municipal Debt Readjustment

Act (48 Stat. 798).

[(5)] (4)  A majority of the current or immediately

<--

preceding governing body of a municipality determined to be

financially distressed has failed to adopt a plan or to carry

out the recommendations of the coordinator pursuant to this

act.

(b)  Majority vote.--This authority may be exercised only

upon the vote by a majority of the municipality's governing

body.

(c)  Secretary.--Upon application under subsection (a), the

secretary shall, within 30 days, determine whether to approve or

<--

deny the application on the basis that one of the criteria under

<--

subsection (a) has been met. Failure to act within the time

period under this subsection shall be deemed an approval a

<--

denial of the application.

Section 408.  Collective bargaining agreements; furlough of

employees; disputes.

(a)  Collective bargaining contracts, agreements or

arbitration [awards] settlements.--A collective bargaining

agreement or contract in existence in a municipality or an

arbitration [award] settlement in effect in a municipality prior

to a consolidation or merger shall remain effective after

consolidation or merger until the contract, agreements or

[awards] settlements expire. After the expiration of the

contracts, agreements or [awards] settlements, a subsequent

collective bargaining agreement, contract or [award] settlement 

shall not impair the implementation of a plan adopted pursuant

to this act.

(b)  Reduction in existing work force.--Subsequent to

consolidation or merger, the consolidated or merged municipality

may, in accordance with existing contracts or arbitration

[award] settlement provisions and consistent with applicable

laws, reduce the number of uniformed and nonuniformed employees

to avoid overstaffing and duplication of positions in the

consolidated or merged municipality. If a consolidated or merged

municipality determines in its discretion that it is necessary

to increase the number of uniformed or nonuniformed employees,

employees of the constituent municipalities shall be reinstated

in the order of their seniority if they had been previously

furloughed.

* * *

Section 4.  This act shall take effect in 60 days.