Nutter asks again for federal help

Mayor Nutter submitted some written testimony today for a U.S. House hearing on a possible economic recovery package. In it, he again asks for federal help: to help cities close their pension fund gap, to provide bridge loans, and to fund infrastructure projects.

The text of his testimony is below.

Mr. Chairman and Members of the Subcommittee:

Thank you for your interest in hearing from America's cities, and I especially thank my long time friend and champion of cities, Chaka Fattah, who asked me to submit this testimony.

As you know, on Monday the US Conference of Mayors, under the leadership of Mayor Manny Diaz, came to Washington, D.C. to implore Congressional leadership to provide direct aid to America's cities as part of any economic stimulus package. I fully support these efforts.

In November, I came to Washington, D.C. to lay out the economic concerns of the Cities of Philadelphia, Atlanta, and Phoenix and others, in light of arguably the worst economic and financial crisis since the Great Depression. The impact on the recession on cities is impossible to ignore, and I would respectively suggest that it is vital to ensure that cities are part of any discussion of an economic stimulus plan. Current census data show that the top 100 metropolitan areas are home to 68 percent of America's jobs and are the origin of 75 percent of the nation's gross domestic product. Cities are the population centers and engines of innovation of this nation and their success during these economic times will ensure that our country emerges from this crisis with a stronger and more vibrant economy.

The economic contraction is causing unprecedented revenue losses and erosion in our budgets, forcing us to make dramatic cuts to the services we provide in order to balance our budgets.

At the same time, we have witnessed significant losses in the value of our pension systems. The Philadelphia pension system lost over $650 million in the first 9 months of this year. That loss increased our projected budget costs for pension contributions by $300 million between FY10 and FY13. Our latest information shows that our pension fund lost an additional 12% in October alone.

Cities like Philadelphia are required by state law to balance their budgets. But, the actions we must take to do so are pro-cyclical. These re-balancing efforts will actually undercut the purpose of the economic stimulus package -- to create jobs and help families -- because we are forced to lay people off, cut services and halt spending that creates jobs, provides service and stimulates the economy.

Reduced spending by government as well as workforce reductions will further dampen personal income and consumer spending. In addition, people who lose their jobs will place an additional burden on state and federal programs, through increased demands for state funded medical assistance and unemployment insurance.

In Philadelphia, my administration has been working to close a budget gap that measures more than $108 million this Fiscal Year, and more than $1 billion over 5 years. To balance our budget, we have had to make some very tough choices.

We raised revenue by increasing business fees. Scheduled wage and business tax cuts were frozen. And we identified efficiency savings across government. I am taking a 10% pay cut, along with my Chief of Staff, and leading members of my Administration will take a 5% pay cut. Further, many government employees making more than $50,000 per year will take five unpaid furlough days this fiscal year and the next.

However these measures only closed around 55% of the budget gap. We needed to make some very difficult service cuts while preserving core services, protecting our most vulnerable populations, and being mindful of the long term financial and economic implications of our actions. The most difficult decisions included: eliminating about eight hundred full time positions; closing eleven city library branches; and opening only 12 of our more than 80 city swimming pools .

Cities are willing to do our part. We have balanced our budget by making some of the most difficult and extraordinary cuts imaginable, at a time when we need to be boosting the economy and helping our families.

Other cities have been engaged in a similar process. Philadelphia has had numerous conversations with other cities, including hosting a conference call with representatives from approximately 20 of the most populous cities in the U.S. We have heard the following issues: pension losses are significant; revenues are rapidly eroding; stimulus dollars are welcome, but may come too late to be counter-cyclical; and finally, current federal proposals do not provide relief for operating budgets, which are bearing the burdens of economic downturns and causing the pro-cyclical layoffs, pay and service cuts and fee increases.

Philadelphia and cities generally, need the federal government to recognize the severity of the issues confronting city and state governments. But please bear in mind that any assistance you provide to state governments will not necessarily translate into immediate relief for cities and metropolitan economies.

Last week, Philadelphia and other cities around the country sent a list of infrastructure projects to the U.S. Conference of Mayors as part of the Main Street Stimulus initiative. The list from Philadelphia provided information on projects that are needed, ready to go and which would create over 30,000 jobs.

As President-elect Obama has called this the most severe economic crisis since the Great Depression, any congressional stimulus, I believe, should provide direct funding to cities for infrastructure and, as the Mayor of one of America's largest cities, I ask federal policy makers to take the following actions to stimulate America's metro economies and prevent municipal budget balancing actions from deepening the recession:

Ensure that a share of federal infrastructure funds goes directly to cities. Funneling all infrastructure investments through the States would both delay and dilute their impact on the economy, jobs and continued vibrancy of America's cities.

Provide cities with comparable pension relief as corporations. As stock market and pension fund values have plummeted, corporations and cities are struggling to fund their pensions. Moreover, the current credit crisis has all but eliminated the ability of cities to borrow in private capital markets to cover their pension liabilities. Congress is expected to include pension relief for corporations in the federal stimulus package and should include comparable relief for cities. Because municipal pensions operate under different rules than corporate pensions, municipal pension relief should be provided through loans to cities that operate pension systems to cover their unfunded accrued actuarial liability. The loans would be repaid at the 30-year Treasury rate plus 100 basis points. Like the proposed corporate pension relief, this municipal pension relief would therefore save money and jobs at no cost to taxpayers. By allowing us to borrow to meet ballooning pension liabilities, we will be able to preserve services and jobs, actions that will temper the worse impacts of our current economic challenge.

Ensure cities can continue to borrow to cover their cash-flow needs. Most cities borrow to smooth their cash flow but the current credit crisis has created uncertainty about the continued ability to borrow. To prevent a crisis, cities should be given the ability to borrow directly from the Treasury at 50 basis points above the 1-year Treasury rate. This would generate revenue for the federal government while both providing relief to cities and preventing a crisis.

This is a partnership that will move us forward. Thank you for your consideration.

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