Mayor Nutter today announced that the city faces a $450 million funding shortfall over the next five years, due to lower than expected business privilege tax revenues and poor performance by the city pension fund.
"National economic problems have come to the front doorstep of the city of Philadelphia," Nutter said. He said that all city departments will be asked to review spending and find places to cut. "Everything is on the table, including the future scheduled tax cuts."
Nutter said all city hires will be closely reviewed from now on. But he called layoffs a last and final resort.
Finance Director Rob Dubow said the city is asking for different levels of reductions depending on department. The range goes from one percent to ten percent, he said. The city wants to complete a savings plan by the end of October.
Dubow said revenues for wage, sales and property taxes have remained on target for fiscal year 2008. But the business privilege tax came in at $404 million -- $34 million less than anticipated.
The city pension fund suffered a 3.7 percent loss in fiscal year 2008, compared with a 17 percent gain in the previous year. The loss means the city will have to pay more into the pension fund than anticipated to maintain required funding levels.
Nutter stressed that the $450 million shortfall could grow.
"This number is likely to grow because there are many other costs like energy and gasoline costs that continue to have an impact on the city budget," he said.
"National economic problems have come to the front doorstep of the city of Philadelphia," Nutter said. He said that all city departments will be asked to review spending and find places to cut. "Everything is on the table, including the future scheduled tax cuts."
Nutter said all city hires will be closely reviewed from now on. But he called layoffs a last and final resort.
Finance Director Rob Dubow said the city is asking for different levels of reductions depending on department. The range goes from one percent to ten percent, he said. The city wants to complete a savings plan by the end of October.
Dubow said revenues for wage, sales and property taxes have remained on target for fiscal year 2008. But the business privilege tax came in at $404 million -- $34 million less than anticipated.
The city pension fund suffered a 3.7 percent loss in fiscal year 2008, compared with a 17 percent gain in the previous year. The loss means the city will have to pay more into the pension fund than anticipated to maintain required funding levels.
Nutter stressed that the $450 million shortfall could grow.
"This number is likely to grow because there are many other costs like energy and gasoline costs that continue to have an impact on the city budget," he said.
Posted by Catherine Lucey @ 3:19 PM
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26 comments
A good start would be the abolishment of the entire CHIPS department. Our area streets look like a pig sty, but they drive around writting tickets for people having their own trash bags and cans on their own propeerty. We also have people who throw their trash on the corner making it imposible to walk on that side of the street.
Tax revenues go up when tax rates are lowered. Too bad the city is operating in emergency mode instead of thinking long term. heritage.org/research/features/budgetchartbook/fed-rev-spend-2008-boc-R2-Federal-Government-Tax-Revenue.html
Comment removed.
billyvee - I think you mean C.L.I.P, this is not a 70's TV Show.
billyvee the city could make a bundle if we actually fined people $300.00 for littering, which is the city regulation. just put a camera at each entrance and exit to 95 we would make up the budget short fall in about 6 months.
IMPEACH JOAN KRUJEWSKI FOR WANTON DISREGARD FOR THE PUBLIC BY ABUSING THE PENSION PROGRAM. THEY ARE MASTERS AT SPENDING OPM. INSTEAD OF THE REPUBLICANS DOING SOMETHING ABOUT KRUJEWSKI'S ROBBERY OF THE CITY PENSION PLAN, FRANK RIZZO DID THE SAME THING. SOMEONE PLEASE CALL THE MEEHAN GANG AND ASK THEIR OPINION!!!!!!!!!!!!!!
how about they stop paying cops to sit in their cars at every single street in South Philly during Phillies and Eagles games? I'll bet they are earning OT.
E Plebnista- fyi, Heritage doesn't have the best record for impartiality (not making any comments about the record of anyone else). Taxes revenues going up as rates go down is not a universal truth. 1- It is very market and climate dependant. 2- Economic theory (see: laffer curve) indicates revenues will go up as rates go down to a point, then revenue will go down. So it's blanketly clear what raising or lowering rates will do in any given situation. My 2 pennies.
Larry The cops are not payed ot for the games. they take the officers from other districts. the detail has been effect for decades and has been challanged many times, only to loss to the political powers of s.philly. most ot earned by cops are reimbursed by the people requesting it,if u dont know ask!
DCExpat- it sounds as though you are in agreement. I understand that if taxes are reduced too much, that revenue decreases. However, philly is known for having some of the highest taxes in the nation. If other cities can operate on less, and be less dirty, and dangerous, then so too should philly.
How bout some cuts in the bloated patronage salaries at every democratic controlled city agency???
It is time for the city to do away with the 10 year tax abatement. We simply can't afford it. We pay taxes every year and new luxury homes get a 10 year tax abatement. What's wrong with this picture?
blanket statements about supply side economics: Tax revenues go up when tax rates are lowered.
real world numbers: http://en.wikipedia.org/wiki/Laffer_curve#The_Neo-Laffer_curve
the major fallacy commonly committed with the Laffer curve, namely the assumption that the middle is a smooth, concave function merely because the two extreme endpoints are well-defined. A realistic tax curve would most certainly not resemble a smooth parabola or even any other simple function, but rather a very complex curve with many peaks, valleys, and multiple local maxima. Inside the middle, a wide range of various economic factors confound any simplistic attempt at this interpolation.
The pension issue comes as no surprise at all. For over the 35 years that I've been in the industry the "Philly" pension fund has been controlled by the same group of patrongage hacks with limited ability in the investment area but contacts out the wazoo. Their primary agenda is to place the funds in whatever investment will make them the most money.....not an investment which is appropriate and inexpensive for the pension fund. Get rid of the bozos who run this thing and bring in some real investment expertise Mayor Nutter.
dc, laffer was wrong. tax revenues go up every time tax rates are lowered. numerous examples.
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