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.
Nutter said said he hopes city vendors understand that the city is stuck waiting for the state budget impasse to be resolved. He asked those businesses to "work with us" and believe the city will eventually pay up. "We have thousands of vendors," Nutter said. "Everyone is going to feel the impact of that -- small, medium and large."
The city, which has $197 million on hand right now, "can't go into the market to borrow money because we can't demonstrate the ability to pay" because of that impasse, Nutter added.
City Councilman Curtis Jones Jr. joined Nutter at his City Hall conference today. "You know the day they suspended payments to vendors, it's serious," Jones said. "We stand as one with the mayor."