Saturday, February 13, 2016

Sam Katz is doing strange things at PICA (updated with comment from Katz)

The Pennsylvania Intergovernmental Cooperation Authority (PICA) has a difficult, but relatively clear job: It tells the city of Philadelphia whether it has enough money.

Sam Katz is doing strange things at PICA (updated with comment from Katz)

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The Pennsylvania Intergovernmental Cooperation Authority (PICA) has a difficult, but relatively clear job: It tells the city of Philadelphia whether it has enough money.

PICA is a state board that looks at the city's projected revenues, and at its spending plan, and decides whether the mayor and council are being reasonable about their expectations. If PICA's board members decide the city isn't being reasonable, they can vote to reject its five-year plan, and withhold state funding as a result.

PICA's job is not to tell the city how to spend its money. If Philly wants to put aside $3 million to breed pink elephants, as long as it budgets the appropriate funds, it can do so.

So we were confused to read about yesterday's PICA board meeting, in which new PICA chair Sam Katz (recently appointed by Gov. Corbett) and board member Joseph DiAngelo said they might vote against the mayor's five-year plan because it includes funding for DROP.

Look. You might think DROP is the worst thing in the world. You might think it's a violation of the public trust, an abuse of the public coffers, and a worse investment than pink elephants. But the city has put aside the money to pay for it.

Whether the city has put aside enough money to pay for other pension obligations is a trickier question, but even on that point our understanding is that Philadelphia has met state requirements.

PICA is a valuable institution because of its credibility as a neutral, apolitical arbiter of financial questions. We worry about that credibility if the board starts using its power to back policy preferences.

We've got an email out to Katz and will most certainly update if he gets back to us, so check back in.

UPDATE: Katz checked in to pose this question to us (we're paraphrasing): PICA is all about judging whether the city's assumptions are reasonable. Is it reasonable to assume that a city with a $5 billion unfunded pension liability, which is already spending a big chunk of its budget each year on pensions, and just saw voters respond angrily to a pension-related program, will be able to address the long-term implications of that liability?

(It's meant to be an open question.)

What we misunderstood about Katz's comments from yesterday is that he is questioning DROP not because the math on the program doesn't add up, but because he worries it augurs bad things for the city's ability to deal with its long-term pension problem. The criticism is still subjective, we think, but it's about a more realistic threat to the city's fiscal health.

Katz also emphasizes that he hasn't taken any action here, only raised questions.

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Every year, city government spends slightly more than $4 billion. Where does all that money come from? More importantly, where does it go? Are we getting the most bang for our tax buck? “It's Our Money” is a joint project between Philadelphia Daily News and WHYY, funded by the William Penn Foundation, designed to answer these questions.

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