Editor's note: An earlier version of this story incorrectly stated the projections of an earned income tax reduction. If there is a 3% reduction in earned income tax over the next two years, Lancaster city would collect $5 million less for the tax over five years.
Lancaster city Mayor Danene Sorace joined other city leaders Tuesday to plead for direct aid from the federal government to help them withstand large budget shortfalls due to lost revenue from the economic impact of the coronavirus pandemic.
Lancaster city is “one emergency away from financial catastrophe,” Sorace said, as part of her plea to congressional officials to send aid directly to Pennsylvania cities.
Sorace joined officials from Pittsburgh, Altoona, Philadelphia, Easton and Pittston for a virtual press conference organized by the Pennsylvania Municipal League, an association of municipalities across the state. Each of the members said the situation is dire for their cities, and that public safety and quality of life services will have to get cut if they don’t get federal assistance.
These cities rely on earned income taxes, real estate transfer taxes, parking, building permits and property taxes as their main sources of revenue. With all those income sources likely to be reduced, Lancaster city -- and its already high property taxes -- has few options to raise revenue other than to cut police and firefighters, Sorace said. The city already furloughed 12% of its staff in April, with the Public Works department taking the hardest hit, she said.
Lancaster city, with an annual budget of approximately $200 million, has stocked up a “rainy day fund,” but Sorace said it will not last through another emergency and the upcoming recession for which the country is bracing.
Pittsburgh, which has a $600 million annual operating budget, is expecting a 20% budget shortfall, or $100 million, Mayor Bill Peduto said. City officials are considering cutting 400 jobs including police and firefighters, which would only make up a quarter of the shortfall, he added.
Rick Schuettler, the executive director of the Pennsylvania Municipal League, would not give an estimate on how much money Pennsylvania municipalities need from Congress.
“We’ve got nothing to date,” Schuettler said. “The CARES Act has not trickled down to us… The state hasn’t allocated anything. We need to have direct funding from the federal government to help our communities.”
Ahead of Tuesday’s press conference, U.S. Sen. Pat Toomey released a statement pointing out that much of the congressional coronavirus relief package sent to Pennsylvania remains unspent. According to a July 23 report, only 26.7% of the $5 billion sent to the state to cover any costs associated with COVID-19 responses had been spent.
“Of this allocation, Pennsylvania is still sitting on over $1 billion and large counties, like Allegheny, have spent a fraction of what was directly given to them by the federal government. Every dollar that was spent through the CARES Act was either borrowed or printed,” Toomey said in the statement. “Before Congress spends even more money it doesn’t actually have, states and counties should allocate their existing allotments so we can thoughtfully determine what needs remain.”
The county received $95 million in federal coronavirus money, and Lancaster city got $339,714, of that aid County Commissioner Josh Parsons said.
Parsons said the city also received approximately $2 million in community development block grants and emergency solutions grants made available by the federal stimulus package that are going “directly right back out the door,” Sorace said.
For Lancaster city, the aid money they’ve already received likely isn’t enough. If the earned income tax revenue drops by 3% in the next two years -- which is half of what it declined by during the Great Recession -- the city would collect $5 million less in the tax over five years, Sorace said.
“That may not sound like much in Washington, D.C., but here… in Lancaster city that is a huge, huge hurdle that we will never be able to clear with the tools available to us,” she added.
Toomey supports removing restrictions on the unspent coronavirus relief funds so cities could use them to fill budget shortfalls, which is currently prohibited under the law. U.S. Rep. Lloyd Smucker could not immediately be reached for comment.
While Toomey supports changing current restrictions as the best option, the city officials were indifferent about whether it would help them stay afloat. Overall, the officials said they need their own direct aid made available to them by the federal government.
“If there are changes to the guidelines for the utilization of those [dollars], by all means let’s use those dollars,” Sorace said.