This morning, Philadelphia City Council unanimously passed Mayor Michael Nutter's $3. 8 billion budget. The vote comes after an extremely contentious budget process and major changes to Nutter's original proposal. While Mayor Nutter may be grateful that budget hearings have ended and the proposal passed, the saga is far from over. Below are the next acts for Mayor Nutter in the ongoing drama of the city financial crisis.
Help from Harrisburg. The budget approved by City Council requires authorization from the state for two major parts. First, the city will need permission to hike the sales tax from 7 percent to 8 percent for five years. Second, Nutter is seeking to delay about $230 million in payments to city's pension fund and extend the amount of time the city has to pay unfunded pension liabilities from 20 to 30 years. Both of these measures will require the legislature and governor sign off.
Passage is far from certain. Already, one member of the Philadelphia delegation-- freshman State Representative Brendan Boyle from the Northeast-- has said he will vote against the sales tax increase because it's unfair to businesses located close the city's border. More than Democrats, Nutter needs to worry about the Republicans who control the State Senate. The GOP is locked in a battle with Gov. Rendell over the state budget and they might refuse to help Philadelphia as a matter of anti-tax ideology.
Plan for the worst. If Harrisburg refuses to pass the enabling legislation, the city will be in serious trouble. It will be impossible to raise taxes mid-year and city government will be forced to cut hundreds of millions of dollars in an extremely short amount of time. That could mean layoffs of thousands of city employees, including police officers, firefighters, libraries, and other personnel. City facilities, such a libraries and health centers, might also be slated for closure. It's not entirely clear if City Council will have to approve these reductions, but you can sure there will be a lot of political fallout from such major budget cuts.
Battle with the unions. The upcoming negotiations with the city's four municipal unions are critical. Employee compensation-- salaries and healthcare benefits-- account for nearly half of the city budget. Mayor Nutter will be seeking major concessions from unions at the bargaining table. His budget includes no pay increases for city workers, higher contributions to healthcare and pension plans, and major changes in work-rules.
One of the biggest complications is that the outcome will be outside of Nutter's control. Contract awards for police and firefighters are decided by a process called binding arbitration, where a panel of three people hears testimony from both sides and then makes an award. Historically, these panels have usually award increases in pay and benefits to uniformed employees.