Heard in the Hall

Plan C averted, city gets its budget

Philadelphia City Hall and political coverage from the Philadelphia Inquirer City Hall bureau.

68 comments

Plan C averted, city gets its budget

POSTED: Thursday, September 17, 2009, 3:32 PM

Patrick Kerkstra

After months of agonizing delays, state lawmakers granted final approval today to a temporary Philadelphia sales tax hike and a two-year reprieve on city pension payments, a pair of critically needed measures that plug the final $700 million hole in a multi-year deficit that once stood at $2.4 billion

The legislation, which was just approved by an 32 to 17 vote in the state Senate, will, at least for now, bring Philadelphia’s budget and five-year plan fully into balance, ending a political and fiscal drama that has consumed City Hall for over a year.

The bill — which Gov. Rendell is expected to sign shortly — eliminates the need for Mayor Nutter’s fallback budget, better known as Plan C.

That plan would have closed the $700 million five-year gap through cuts alone. As many as 3,000 city workers would have been laid off under Plan C, and basic services such as sanitation and police and fire protection sharply reduced.

If Harrisburg had not acted today, layoff notices for those 3,000 workers would have been delivered tomorrow. With the vote, their jobs are preserved, and the libraries, recreation centers, courts and facilities that they staff will remain open.

The legislation raises the sales tax in Philadelphia from seven percent to eight percent for a period of five years. The eight percent rate will be two points higher than the sales tax in every other Pennsylvania municipality except for Pittsburgh, where the rate is seven percent.

The other crucial pieces of the bill are pension related. One addresses the city’s immediate cash flow crunch, permitting it to defer payments for the next two years. Those deferrals have to be paid back, with interest, beginning in 2013.

Another key pension provision extends the amortization period from 20 years to 30 years, in effect spreading the city’s pension burden out over a longer period.

Unlike earlier version of the bill, the legislation passed today does not include any statewide pension reforms, nor does it cap or cut back on retirement benefits for current or future Philadelphia employees. Labor leaders had campaigned vigorously against those provisions, and succeeded in convincing the House to delete them from the bill.

Minutes after the vote, Nutter and Philadelphia legislators called senior city officials in Philadelphia. Addressing over 40 of his managers on a speakerphone, Nutter proclaimed: "Plan C is terminated." The managers in Philadelphia erupted in thunderous appaluse.

Moments later, Nutter appeared overcome with emotion as he thanked his staff.

Asked about it by reporters after he hung up, Nutter acknowledged that he was indeed choked up.

“When you think of the magnitude of a what could have happened tomorrow … the magnitude of it is astounding and I think quite honestly that’s why so many people seem to have difficultly grasping what Plan C was all about,” Nutter said.

He said the “greatest thing that has happened is there is a renewed relationship between Philadelphia and Harrisburg.”

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68 comments

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Comments (68)

0 like this / 0 don't • Posted 8:29 PM, 09/17/2009

It's time for this city (and state) to seriously step back and create a budget that responsible citizens live by. It's quite simple: don't spend what you don't have. The city of Philadelphia needs to permanently get rid of any vacant jobs, don't hire any more Streets Dept. workers or any other bogus positions that aren't necessary, don't open any pools or rec centers next summer, get rid of the BRT and DROP; etc. etc. Crisis averted and they're now celebrating in the streets. I'd like to know what the city plans to do to avoid the same situation next year. Citizens of Philadelphia, wake up and know where your candidates stand on issues before voting a straight party ticket. It's time for change in this city and people need to stop stand with their hands held out expecting the Government to support them.

— Kristin M.

0 like this / 0 don't • Posted 8:51 PM, 09/17/2009

Those who can move out of Philly are doing so. Taxes will be raised again. Services will be cut.

— Roy Philipose

0 like this / 0 don't • Posted 8:59 PM, 09/17/2009

Since when have 95% of the people who post here ever read up on the facts before polluting with their low Philly-bred IQ?

— niceguy19125

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0 like this / 0 don't • Posted 5:31 PM, 09/18/2009

The PA senate totally dropped the ball on this. They had a chance to restructure union pensions and allow the city to be financially sound again but they let it slide...as usual. They made a temporary fix for a permanent problem. We'll be going through this same issue sooner rather than later.

— hopster

0 like this / 0 don't • Posted 6:44 AM, 09/19/2009

its funny, well not that kind of funny, that people, politicians, workers(a pic was shown) celebrating this as a 'victory' helps in our problems. There is still the threat of layoffs(see new articles), the contracts are not settled and revenue from a sales tax hike is a guesstimate, speculation...people still got to buy in order for them to make $10 mil./month. Layoffs and cuts are still there and on the table, they never left...its just Plan C was not a real budget and this is theater. You think this last minute buget approvals for the State and City, averting Plan C was not planned and just coincidence?

— uandwhosearmy