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.