Is Non-Profit Payment Non-Attainable?

The idea was probably germinating for a long-time, but in September of 2009 the County Executive announced that he would be seeking $4 million from non-profit agencies in the County to help with the budget in 2011 (the Executive stated "it is not in my budget until 2011" and that requests would start with hospitals "because they’re the largest [nonprofits] in the region. It doesn’t mean we’ll stop there").

The line-item for the contribution did indeed make it into the 2011 County budget: in the section titled "Revenue by Object Code with Character Sub-Totals" under Local Unit Revenues there isa line item of $4 million from "non-profits", right below money from the Regional Asset District, the City of Pittsburgh, and the Airport Authority.

Last year as the 2011 budget was being assembled printed reports detailed the scant and secretive details. To the best of anyone’s knowledge that money is not available. In September it was reported that "No deal has been reached to provide those funds, but [the Executive] pledged that an agreement would be signed by year’s end and the money would be available for 2011. He declined to identify any of the nonprofits with whom his administration is talking". In November it was reported the Chief Executive "has been closed-mouth about the status of any negotiations with nonprofits, [but that Council’s finance chair] said he expected the money eventually would be there."

Now state-level changes (the state funds a healthy portion of law enforcement and health and welfare functions in all counties) mean a $15 million gap in the 2011 budget and the status of the $4 million from unidentified non-profits makes that shortfall even more pronounced.

Budget Fantasyland

The Mayor’s recently released budget wanders into the world of fantasy, delusion and denial. A trifecta seldom seen. With the prospect of PMRS taking over the pension plans in January and the failure to lease the Parking Authority assets, Pittsburgh faces a large increase in pension contributions in a year or so.

With the first pass at the budget rejected by the Oversight Board because of inadequate credible revenue prospects, the revised budget for 2011 will make up the difference by using the reserves in the fund balance. No cuts in spending or other revenue enhancements are planned. For 2012, the Mayor projects $20 million in non-profit contributions. Currently the City is receiving $1.7 million. What’s more, the County is also projecting significant revenue from non-profit contributions. In both cases there is no evidence whatsoever the money will be forthcoming. In all likelihood, if the Oversight Board holds firm in its position regarding the need for credible revenue forecasts, the out year budget proposal will be denied.

Moreover, the Act 47 team will undoubtedly be dismayed by plans to use up the City’s reserves in coming years. It too, will-or should-send a very strong denunciation of the Mayor’s budget plans.

Beyond the financial oversight organizations’ justifiable opposition to the reckless nature of the budget proposals, there is a more salient point. Why is there no talk of expenditure cuts? Have the Mayor and Council so poisoned the well of cooperation with the rejection of each other’s proposals to utilize parking assets that further conversation about contracting out, asset sales, and consolidating services with the County are completely off the table? If so, Pittsburgh can expect some very rough sledding and a very probable tightening of state mandated financial control. This is especially true in light of the coming financial crunch at the Pittsburgh School Board where repeated refusals to make substantial operating expenditure cuts are digging a deep fiscal hole.

Using up reserves is nothing more than a delaying tactic in hopes that a miracle will occur and some benevolent Legislature or Congress will bail out the City. Afraid not. The City must get past this fantasy.