Thursday, July 30, 2015

IOM editorial: All is not quiet on the fiscal front

Tomorrow, Mayor Nutter delivers his budget address, which doubles as a "state of the city" for Philadelphia. He has already announced that he won't propose any new taxes, and no drastic cuts are expected for the $3.6 billion (projected) budget. All of which suggests that all is quiet on the fiscal front.

IOM editorial: All is not quiet on the fiscal front

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Tomorrow, Mayor Nutter delivers his budget address, which doubles as a "state of the city" for Philadelphia. He has already announced that he won't propose any new taxes, and no drastic cuts are expected for the $3.6 billion (projected) budget. All of which suggests that all is quiet on the fiscal front.

But it's a little TOO quiet, especially given the many looming land mines that could detonate and lead to cuts or, yes, new taxes. Our budget advice to Nutter and Council: This time, get real.

Neither Nutter nor Council got very real with us last year. The mayor lulled the city into a false sense of security by proposing a budget with no tax hikes. Council played along by holding ho-hum hearings through much of the spring - and by postponing the school district's hearing until after the May primary election.

When the district asked for more money to deal with a $629 million budget gap, the city was left with just a few weeks to frantically debate the request before the June 30 budget deadline. Taxpayers ended up stuck with their second property-tax hike in two years. Worse, discussion of how the city should deal with the district's money problems was given short shrift. Not surprisingly, those problems haven't gone away. Which brings us to the first land mine:

The school district: The city and state share responsibility for funding the district's $3 billion budget. The city increased its contribution last year by $53 million because a district deficit forced city officials to choose between ponying up or allowing cuts that would have hurt kids.

But the district needs to find $38 million for this year - by June, and faces a $260 million structural deficit for next year.

The city may hope to get more money for the schools from its ongoing property-tax reassessment, but there's no guarantee that reassessment gets finished on time (more on this tomorrow). The mayor and Council need to get a handle on what the district needs, and debate how the city should respond - preferably before the district's budget hearing on May 8. The time to start that debate is now.

Pensions: The city owes $10.36 billion in pension payments. The pension fund has $4.26 billion. That's a very big land mine.

We got into this mess because elected officials promised retirement benefits to city employees, but put off paying for them or asking for sufficient worker contributions. It's time to stop kicking the can down the road, both by finding more money for pension payments and by reforming the city's pension plans - which can't be done without resolving the city's union contracts. All the municipal unions, save the police, are working without a contract. Wages stay flat, but the pension problem remains unsolved.

Schools and pensions aren't the only land mines facing the city - and they aren't even the biggest. Tomorrow, we uncover two more.

This It's Our Money editorial was also published in today's Daily News.

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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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