Pennsylvania Intergovernmental Cooperation Authority

Last updated
Pennsylvania Intergovermental Cooperation Authority logo.jpg

PICA History

The Pennsylvania Intergovernmental Cooperation Authority, or PICA, is the financial oversight board for the City of Philadelphia. It was created through the 1991 legislation, "Pennsylvania Intergovernmental Cooperation Authority Act for Cities of the First Class," or the PICA Act. PICA was created to provided financial assistance to the City of Philadelphia during a severe financial crisis. At that time, Philadelphia faced a growing operating deficit, mounting overdue bills, and credit ratings which were dropping below investment grade. The City had instituted a municipal hiring freeze and the quality of municipal services was eroding as a result.

Contents

PICA was founded to "foster the fiscal integrity of cities of the first class...and provide for proper financial planning procedures and budgeting practices." [1]

PICA Bonds

At its inception, PICA had the power to issue bonds to benefit the City of Philadelphia, an important early role. These bonds were intended to provide funds so the City could avoid insolvency and continue with essential capital investments. Where as the power to issue bonds for these original purposes has expired, PICA remains authorized to issue refunding bonds, the proceeds of which can be granted or loaned to the City. PICA has made available $1.138 billion in direct assistance to the City through debt issuance and capital program earnings. This funding was allocated to deficit elimination and indemnities, capital projects, and retirement of certain high-interest debt. Currently, PICA's bond issuance powers are limited to refinancing existing PICA debt

Board Composition

The PICA Act established the PICA Board as a governing board of five voting members, and two ex-officio non-voting members. Elected State officials (Governor, President Pro Tempore of the Senate, Minority Leader of the Senate, Speaker of the House of the Representatives, Minority Leader of the House of the Representatives) appoint the voting members of the Board, while the ex-officio members are Philadelphia's Director of Finance and the Budget Secretary of the Commonwealth of Pennsylvania. The current voting Board members are

Oversight Authority

PICA was designed to assist the City of Philadelphia with short-term financing, while overseeing a long-term financial planning process in order to restore the confidence of residents, public officials, and investors in the ability of the City to maintain financial stability. The PICA Act charged the City to exercise efficient and accountable fiscal practices, such as managerial accountability, consolidation and/or elimination of inefficient programs, re-certification of tax-exempt properties, privatization of services, increased collection of City taxes, sale of City assets, improvement of procurement and competitive bidding practices, and review of compensation and benefits for City employees. The legislative intent of the Act was to assure that Philadelphia is prepared to manage not only the financial pressures the City was experiencing at the time of PICA's establishment, but to avoid such situations in the future while safeguarding for their consequences.

Thus, the PICA act provided PICA with certain financial and oversight functions over the City. In this capacity, PICA has the ability to exercise certain advisory and review powers with respect to the City's finances, in addition to its primary function of reviewing and approving annual five-year plans prepared by the City and monitoring the City's compliance with those plans. Should the City fail to adhere to the requirements of the PICA Act and/or become out of compliance with its five-year financial plan, PICA may instruct the Commonwealth of Pennsylvania's Budget Secretary to withhold substantial State financial assistance, as well as the proceeds of the PICA tax (a portion of the City's wage, earnings, and net profits tax that is returned to the City after PICA debt service has been deducted).

PICA Agreement

PICA and the City of Philadelphia entered into an agreement based on the PICA Act, known as the Intergovernmental Cooperation Agreement. It provides PICA with broad access to the City's financial data. The underlying principle of the agreement and the Act was to provide PICA with a wide purview over City financial data so it can conduct independent audits, examinations, or studies of the City's finances in order to facilitate Philadelphia's fiscal integrity.

Five Year Plan Review

The PICA Act requires the development of an annual five year financial plan, to be submitted to Philadelphia City Council and PICA by the Mayor's finance officials. PICA staff reviews the plan and issues a staff report, which contains a recommendation to the Board on whether to approve or reject the plan. The plan is required to include projected revenues and expenditures for the current fiscal year and subsequent five fiscal years. Components of the plan must:

All projections of revenues and expenditures in the plan are to be based on consistently applied reasonable and appropriate assumptions and estimation methods, and revenues are to be recognized in the accounting period during which they become measurable and available. The plan is also required to include debt service projections, a payment schedule for legally-mandated services due over the life of the plan, and a schedule showing the number of filled and unfilled City employee positions, with estimates of employee wages and benefits costs.

The PICA Act requires PICA staff solicit an opinion on, or certification of, the plan from the City Controller, prepared in accordance with generally accepted auditing standards. The PICA Act does not require the PICA Board to act in accordance with the Controller's opinion.

A qualified majority (four of five voting members) of PICA's Board is needed to approve a five-year plan. Once a plan is approved, the City must stay in compliance with the current plan. If the City comes out of compliance with a currently approved plan, City officials must submit to PICA an explanation, remedial action plan, and supplemental reports until the City comes back into compliance with the plan. Reasons for coming out of compliance with a plan could include extraordinary contracts (contracts not contained in the current plan), collective bargaining agreements, arbitration awards, or other unforeseen variances in revenues or expenditures. Collective bargaining agreements and arbitration awards often require a proposed revision to the current plan. In this event, the City must submit for consideration of the PICA Board a revised plan within a statutorily determined time frame.

PICA Staff

In keeping with fiscal responsibility and efficient government, PICA employs a small staff of four to manage the day-to-day operations of the office, review the City of Philadelphia's five year financial plans, produce various publications and issue papers, and report to the PICA Board. Current staff members include:

Publications

In addition to an annual Staff Report on the City of Philadelphia's five year financial plan, PICA staff also issues a quarterly report on the City's Quarterly City Managers Report (QCMR), and a monthly report on the City's tax revenue collections.

Issue Papers

PICA staff frequently publishes issue papers on financial and performance issues affecting the City of Philadelphia. Currently, PICA staff tracks overtime usage and management across City departments, issuing a quarterly Staff Report on City of Philadelphia Overtime. Recently, PICA has issued a report on the cost of Philadelphia's Deferred Retirement Option Plan (DROP), and staff reports on the City's pension system and departmental performance. Past reports include a report on the Philadelphia Fire Department, and a staff report on the expansion of the Pennsylvania Convention Center.

See also

Related Research Articles

<span class="mw-page-title-main">Social Security Trust Fund</span> Type of trust fund in the United States

The Federal Old-Age and Survivors Insurance Trust Fund and Federal Disability Insurance Trust Fund are trust funds that provide for payment of Social Security benefits administered by the United States Social Security Administration.

<span class="mw-page-title-main">Government budget balance</span> Difference between revenues and spending

The government budget balance, also referred to as the general government balance, public budget balance, or public fiscal balance, is the difference between government revenues and spending. For a government that uses accrual accounting the budget balance is calculated using only spending on current operations, with expenditure on new capital assets excluded. A positive balance is called a government budget surplus, and a negative balance is a government budget deficit. A government budget presents the government's proposed revenues and spending for a financial year.

<span class="mw-page-title-main">National debt of the United States</span>

The national debt of the United States is the total national debt owed by the federal government of the United States to Treasury security holders. The national debt at any point in time is the face value of the then-outstanding Treasury securities that have been issued by the Treasury and other federal agencies. The terms "national deficit" and "national surplus" usually refer to the federal government budget balance from year to year, not the cumulative amount of debt. In a deficit year the national debt increases as the government needs to borrow funds to finance the deficit, while in a surplus year the debt decreases as more money is received than spent, enabling the government to reduce the debt by buying back some Treasury securities. In general, government debt increases as a result of government spending and decreases from tax or other receipts, both of which fluctuate during the course of a fiscal year. There are two components of gross national debt:

<span class="mw-page-title-main">2004 California Proposition 58</span> 2004 California ballot proposition

Proposition 58 was a California ballot proposition on the March 2, 2004 ballot. It passed with 4,535,084 (71.2%) votes in favor and 1,841,138 (28.8%) against. It was officially called the California Balanced Budget Act. It requires the state legislature to pass a balanced budget every year, which means that budgeted recurrent expenditure, including repayment of past debt, does not exceed estimated revenue. The act does not require that capital works programs be funded out of current revenues. The California Constitution has always allowed bond issues for specified capital works, above a certain value. Bond measures must be approved by a statewide ballot.

PAYGO is the practice in the United States of financing expenditures with funds that are currently available rather than borrowed.

<span class="mw-page-title-main">Minnesota State Auditor</span> Constitutional officer of Minnesota, United States

The state auditor of Minnesota is a constitutional officer in the executive branch of the U.S. state of Minnesota. Nineteen individuals have held the office of state auditor since statehood. The incumbent is Julie Blaha, a DFLer.

<span class="mw-page-title-main">United States federal budget</span> Budget of the U.S. federal government

The United States budget comprises the spending and revenues of the U.S. federal government. The budget is the financial representation of the priorities of the government, reflecting historical debates and competing economic philosophies. The government primarily spends on healthcare, retirement, and defense programs. The non-partisan Congressional Budget Office provides extensive analysis of the budget and its economic effects. It has reported that large budget deficits over the next 30 years are projected to drive federal debt held by the public to unprecedented levels—from 98 percent of gross domestic product (GDP) in 2020 to 195 percent by 2050.

<span class="mw-page-title-main">Fund accounting</span> An accounting system used for special reporting requirements

Fund accounting is an accounting system for recording resources whose use has been limited by the donor, grant authority, governing agency, or other individuals or organisations or by law. It emphasizes accountability rather than profitability, and is used by Nonprofit organizations and by governments. In this method, a fund consists of a self-balancing set of accounts and each are reported as either unrestricted, temporarily restricted or permanently restricted based on the provider-imposed restrictions.

The Pittsburgh Intergovernmental Cooperation Authority, is a special administrative body that was created by the Commonwealth of Pennsylvania to oversee the finances of the City of Pittsburgh.

<span class="mw-page-title-main">Office for Budget Responsibility</span>

The Office for Budget Responsibility (OBR) is a non-departmental public body funded by the UK Treasury, that the UK government established to provide independent economic forecasts and independent analysis of the public finances. It was formally created in May 2010 following the general election and was placed on a statutory footing by the Budget Responsibility and National Audit Act 2011. It is one of a growing number of official independent fiscal watchdogs around the world.

<span class="mw-page-title-main">Ministry of Finance (Ukraine)</span> Ukrainian government ministry

The Ministry of Finance of Ukraine is the ministry of the Ukrainian government charged with developing and implementing national financial and budget policies, and with defining national policies in customs and taxation. The ministry is responsible for ensuring that the state has enough resources to perform its functions and that financial policies promote economic growth.

<span class="mw-page-title-main">Fiscal Responsibility and Budget Management Act, 2003</span> Act of the Parliament of India

The Fiscal Responsibility and Budget Management Act, 2003 (FRBMA) is an Act of the Parliament of India to institutionalize financial discipline, reduce India's fiscal deficit, improve macroeconomic management and the overall management of the public funds by moving towards a balanced budget and strengthen fiscal prudence. The main purpose was to eliminate revenue deficit of the country and bring down the fiscal deficit to a manageable 3% of the GDP by March 2008. However, due to the 2007 international financial crisis, the deadlines for the implementation of the targets in the act was initially postponed and subsequently suspended in 2009. In 2011, given the process of ongoing recovery, Economic Advisory Council publicly advised the Government of India to reconsider reinstating the provisions of the FRBMA. N. K. Singh is currently the Chairman of the review committee for Fiscal Responsibility and Budget Management Act, 2003, under the Ministry of Finance (India), Government of India.

<span class="mw-page-title-main">Euro Plus Pact</span>

The Euro-Plus Pact was adopted in March 2011 under EU's Open Method of Coordination, as an intergovernmental agreement between all member states of the European Union, in which concrete commitments were made to be working continuously within a new commonly agreed political general framework for the implementation of structural reforms intended to improve competitiveness, employment, financial stability and the fiscal strength of each country. The plan was advocated by the French and German governments as one of many needed political responses to strengthen the EMU in areas which the European sovereign-debt crisis had revealed as being too poorly constructed.

The Philadelphia Home Rule Charter reform campaign is a campaign in Philadelphia, Pennsylvania to rewrite the city's 1951 Home Rule Charter. The campaign began in response to several local political scandals, the most recent being City Council members' participation in DROP, a Deferred Retirement Option Plan originally intended for civil service.

<span class="mw-page-title-main">Foreign Account Tax Compliance Act</span> 2010 U.S. tax law

The Foreign Account Tax Compliance Act (FATCA) is a 2010 U.S. federal law requiring all non-U.S. foreign financial institutions (FFIs) to search their records for customers with indicia of a connection to the U.S., including indications in records of birth or prior residency in the U.S., or the like, and to report such assets and identities of such persons to the United States Department of the Treasury. FATCA also requires such persons to report their non-U.S. financial assets annually to the Internal Revenue Service (IRS) on form 8938, which is in addition to the older and further redundant requirement to report them annually to the Financial Crimes Enforcement Network (FinCEN) on form 114. Like U.S. income tax law, FATCA applies to U.S. residents and also to U.S. citizens and green card holders residing in other countries.

<span class="mw-page-title-main">Sixpack (EU law)</span> EU economic governance

Within the framework of EU economic governance, Sixpack describes a set of European legislative measures to reform the Stability and Growth Pact and introduces greater macroeconomic surveillance, in response to the European debt crisis of 2009. These measures were bundled into a "six pack" of regulations, introduced in September 2010 in two versions respectively by the European Commission and a European Council task force. In March 2011, the ECOFIN council reached a preliminary agreement for the content of the Sixpack with the commission, and negotiations for endorsement by the European Parliament then started. Ultimately it entered into force 13 December 2011, after one year of preceding negotiations. The six regulations aim at strengthening the procedures to reduce public deficits and address macroeconomic imbalances.

<span class="mw-page-title-main">Ministry of Finance (Malaysia)</span> National ministry of finance

The Ministry of Finance, abbreviated MOF, is a ministry of the Government of Malaysia that is charged with the responsibility for government expenditure and revenue raising. The ministry's role is to develop economic policy and prepare the Malaysian federal budget. The Ministry of Finance also oversees financial legislation and regulation. Each year in October, the Minister of Finance presents the Malaysian federal budget to the Parliament.

<span class="mw-page-title-main">Budget of the Government of Puerto Rico</span> Proposed by the Governor of Puerto Rico

The Budget of the Government of Puerto Rico is the proposal by the Governor of Puerto Rico to the Legislative Assembly which recommends funding levels for the next fiscal year, beginning on July 1 and ending on June 30 of the following year. This proposal is established by Article IV of the Constitution of Puerto Rico and is presented in two forms:

The Puerto Rican government-debt crisis was a financial crisis affecting the government of Puerto Rico. The crisis began in 2014 when three major credit agencies downgraded several bond issues by Puerto Rico to "junk status" after the government was unable to demonstrate that it could pay its debt. The downgrading, in turn, prevented the government from selling more bonds in the open market. Unable to obtain the funding to cover its budget imbalance, the government began using its savings to pay its debt while warning that those savings would eventually be exhausted. To prevent such a scenario, the United States Congress enacted a law known as PROMESA, which appointed an oversight board with ultimate control over the Commonwealth's budget. As the PROMESA board began to exert that control, the Puerto Rican government sought to increase revenues and reduce its expenses by increasing taxes while curtailing public services and reducing government pensions. These measures provoked social distrust and unrest, further compounding the crisis. In August 2018, a debt investigation report of the Financial Oversight and management board for Puerto Rico reported the Commonwealth had $74 billion in bond debt and $49 billion in unfunded pension liabilities as of May 2017. Puerto Rico officially exited bankruptcy on March 15, 2022.

The Nassau Interim Finance Authority is a New York State public-benefit corporation created to assist Nassau County, a suburban county adjacent to the city of New York on Long Island, emerge from a financial and debt crisis that began in the late 1990s. As of the start of 2022, NIFA, as it is known, was still in place and still supervising Nassau's finances under a control period that resumed in 2011 after a three-year hiatus.

References

  1. Act of June 5, 1991, Pub. L. No. 9, 53, Pa.Stat.Ann section 12720.