Mayor Nutter today said the city has stopped paying most of its bills until the state budget situation is resolved in Harrisburg. The city's cash will be used only for employee compensation, debt service and emergencies. All new city capital projects -- building and repair jobs -- will also be under "stringent review," Nutter said.
Nutter and City Council have asked the state General Assembly to approve two changes key to closing a $1.4 billion deficit in the city's five-year spending plan – a 1 cent increase in the sales tax for five years and some changes to how the city pays into its pension fund. Those two measures would give the city $250 million in new money and savings for the fiscal year that started on July 1. Without approval of those issues, Nutter said the city’s cash flow is in peril.
"If they are approved in the very near future, the city will be able to avoid this cash crisis," Nutter said.
State lawmakers have been battling over the their own budget for weeks, with Republicans staunchly opposing any tax hikes to deal with a $3.2 billion deficit. Gov. Rendell has proposed a temporary 16 percent increase in the state's personal income tax, a notion that has not found strong political support. That standoff continues today as state House Democrats are expected to try to pass a $29.1 billion budget that leaves unanswered how to fund $1.3 billion in higher education issues.