February 1, 2008
In his first major policy speech as Mayor, Michael Nutter presented his FY 2009 budget proposal to City Council on February 14, 2008. The budget is organized to achieve results in six core areas:
Each can be measured in various dimensions so that the Administration and citizens can track performance. This shift to linking the budget with performance is a more holistic approach focused on outcomes, such as improved public safety, rather than solely on outputs, such as the number of cops on the street. (For more information about how Philadelphia’s budget process could be improved, click here.)Issues To Watch
Collective Bargaining All four of the city’s municipal unions have contracts that must be negotiated before the start of the new fiscal year on July 1, 2008. Past negotiation year budgets assumed no wage increases for city workers; funds were stashed in other places within the budget to act as a cushion against increases, not exactly the most transparent manner of approaching negotiations. In contrast, Mayor Nutter has allocated $24 million for salary and benefit increases in FY 2009.
Pensions City employees’ benefits costs have been consuming a growing share of the overall budget to the extent that funds available for services for all citizens are stagnant at best. At the same time, the City’s pension fund has remained woefully under funded, representing a huge financial burden for future generations of Philadelphians. Mayor Nutter suggests borrowing $4.5 million to bring the pension fund to an acceptable level and lowering annual debt service and contribution costs currently borne by the General Fund. Opinions differ as to the wisdom of this proposal. To learn more about how it is that the situation became this critical and for alternative steps that could remedy it, read The Quiet Crisis, a joint report issues in January 2008 by the Economy League of Greater Philadelphia and The Pew Charitable Trusts.
Citizen Engagement Mayor Nutter’s budget proposal envisions new ways for Philadelphians to interact with city government, including a 311 system to manage non-emergencies, more extensive citizen surveys and sharing of data, and broadcasting a greater array of public meetings via television and the web. For even more ideas about how citizens can be engaged in the budget process, check out the IssuesPhiladelphia article, Having Our Say.Revenues Facts for FY 2009
No matter how the coming months of budget negotiations may alter how the city prioritizes spending, the Mayor’s revenue estimate provides its upper limit. For the coming fiscal year, the Mayor anticipates that the city will raise $3.97 billion from a combination of taxes, fees, state and federal aid, and other sources, a 2.4% or $90 million increase over this fiscal year.
More than one-third of the city’s General Fund revenues come from local tax dollars. Turmoil in the real estate market led the Administration to set projections for the Real Estate Transfer Tax collections below FY 2006 levels, to $199 million, while other taxes are expected to rise modestly. The proposal anticipates a less than 1% increase in funding from the Commonwealth of Pennsylvania for the city. The Governor’s budget proposal does include significant increases for the School District of Philadelphia.
Spending Facts for FY 2009
The Mayor’s FY 2009 General Fund budget proposal anticipates spending that $3.97 billion, a $55 million or 1.4% increase over FY 2008 estimated expenditures. Employee benefits, including pension contributions and health care, account for roughly $1 out of every $4 the city spends. Public safety departments, including Police, Fire, and the Prison System, are slated to receive budget increases, even before any adjustments stemming from new union contracts. The budget also includes funds for reopening of the Office of Arts and Culture and enables a $2 million increase in annual funding for the Cultural Fund, which makes grants to local institutions. There is no new city money going directly to the School District, however there is expansion of programs for children, including $5 million for the Youth Violence Reduction Partnership.
Beginning on February 26th, City Council will hold hearings and may make amendments to the Mayor’s proposal, with the goal of passing the budget by the end of May. For a full description of the budget process, check out the Roadmap to Philadelphia’s Budget Process.