Sunday, July 13, 2014
Inquirer Daily News

Gold Standard: The Key Budget Number Now is Nine

It's been more than 10 weeks since Mayor Nutter presented his nearly $4 billion 2011 budget to City Council, which has spent more than 100 hours over 21 days of budget hearings with more than 60 departments and agencies and members of the public.

Gold Standard: The Key Budget Number Now is Nine

It's been more than 10 weeks since Mayor Nutter presented his nearly $4 billion 2011 budget to City Council, which has spent more than 100 hours over 21 days of budget hearings with more than 60 departments and agencies and members of the public.

Now, with a final budget due by the end of the month, the real work begins, not in Council chambers but in private, among Council members and the administration itself. It's the give and take, the horse-trading, that brings closure to the months of window-dressing that's taken place publicly.

And regardless of what numbers have been tossed about during the public hearings, whether in hundreds, thousands, millions or billions, the only number that matters now is nine. That's the number of Council members - a majority - the mayor has to round up to get a budget agreement.

Since much time has passed since the mayor lobbed his budget over to Council, let's refresh our memory on what he proposed to close a $150 million budget gap.

He chose to balance the budget by seeking more revenues rather than slashing the size of government. His two primary measures went by fancy names. There was the "Healthy Philadelphia Initiative" (a 2 percent tax on sugar-sweetened soda), and a $300 fee to pick up trash, the "Clean Philly Initiative."

Two-and-a-half months later, the trash fee has been trashed and come back as a real-estate tax hike. The sugar tax has been skimmed back so much it looks like it's been to Weight Watchers and may not survive at all.

Since the charter requires the city to have a balanced budget, Council and the administration are left with three choices: 1.) Close the gap by eliminating more than $120 million in costs, in short, laying off thousands of city employees. 2.) Raise taxes and fees. 3.) A combination of 1. and 2.

What's transpiring behind closed doors is finding the right balance between tax hikes and cost cuts that can attract nine votes.

When it was clear that the mayor's revenue proposals weren't flying, Councilman Frank DiCicco proposed a 12 percent increase in real-estate taxes. Then, when Council choked on a double-digit hike, it was scaled back to 9 percent. Last week, Councilman Bill Green proposed a 5 percent increase that could go away as the economy improved.

To minimize the size of a tax increase, Green proposed cutting the budget by $47 million more, mostly by not filling vacant jobs.

Nutter quickly responded: No more than $17 million in reductions, of which $1 million should come from Council's budget.

Another component of this debate is how much of a surplus should be left at the end of the year. The mayor is calling for $68 million, Green $20 million.

The lower the planned surplus, the less is needed in taxes or spending cuts. But for the Nutter administration, the higher the number, the more protection it has against unforeseen events or to fund union contracts. The last thing any administration wants to face is a cash-flow crisis, and a surplus is its security blanket.

But by this late in the process, the issue is not so much policy as it is politics. This could well be the last budget Council will vote on before it faces the voters in next year's primary. While a new budget will be proposed by then and hearings held, a final budget vote may not have to occur until after the votes are cast.

Do Council members want to face voters as tax-and-spenders? Or do they significantly reduce the budget and run the possible wrath of constituents who could blame every service lapse on too many budget cuts?

Nutter, likely to run unopposed in the Democratic primary, has opted for taxes over cuts. Even though he will have increased taxes far more than recent mayors - a 2 percent sales tax last year and whatever happens this year - he is relying on his reputation as a tax-cutting city councilman to serve as his Teflon. Besides, he can always say the devil - the recession - made him do it.

COUNCIL members will have more primary opposition than Nutter, and Council as an institution is not very popular. Some members may have already decided their best Election Day protection comes from standing with the well-financed mayor.

Others are still tossing numbers in the air. Increase taxes 12 percent, 9 percent, 5 percent; cut costs $17 million, $25 million, $47 million; maintain a surplus of $68 million or $20 million or something in between.

Before too long, some of these numbers are going to have to add up to nine.

Phil Goldsmith writes "The Gold Standard" column for It's Our Money (www.ourmoneyphilly.com). He was city managing director from 2003-2005.

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About this blog
Every year, city government spends slightly more than $4 billion. Where does all that money come from? More importantly, where does it go? Are we getting the most bang for our tax buck? “It's Our Money” is a joint project between Philadelphia Daily News and WHYY, funded by the William Penn Foundation, designed to answer these questions.

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