Archive: May, 2009
Link: The good, the bad and the budget [Daily News]
WE BREATHED a sigh of relief when the fierce budget battle between Mayor Nutter and City Council ended on Monday with the announcement of an agreement on how to close the $1.4 billion budget gap.
That's not to say there aren't a few hiccups at the end of that breath.
Link: Pa. lawmakers hold key to city budget hopes [Daily News]
The budget deal struck by Mayor Nutter and City Council spares residents from temporarily paying extra property taxes.
But if Harrisburg lawmakers don't approve several key proposals in the plan, the city could be forced to make devastating cuts beyond those already threatened in the backup "Plan B."
Link: $3.2 billion schools budet goes to City Council [Daily News]
"The governor has proposed . . . funding levels and we have also proposed a balanced budget that incorporates these levels of support for public education. But it is up to the state legislature to act, and until they do, we will not know that the budget that we have represented to you is fully funded," said Michael J. Masch, the district's chief business officer.
At issue is $300.7 million that Gov. Rendell included in his budget proposal but which was left out of the state Senate's own proposal approved last week. The state House of Representatives is wrestling with that proposal.
Link: A stumble for the mayor [Daily News]
The result: A stunning political loss as Nutter gave up yesterday on his plan to raise property taxes for two years and embraced instead Council's proposal to raise the city's sales tax for five years.
The lesson: A mayor needs a working relationship with Council and must carefully pick his battles when that isn't enough.
Flanked by ten members of City Council, Mayor Nutter announced a tentative plan to deal with the “terrible fiscal storm” that threatens to shipwreck city government. The new proposal relies on changes in the city's pension fund and a five-year sales tax. In a major victory for City Council, increasing property taxes has been removed from the budget plan.
Instead of seeking a two-year increase in property taxes, Nutter will try to get state approval for a five-year increase in the sales tax from 7 percent to 8 percent. Combined with changes to the rules governing city's pension fund, the tax increase should prevent any major cuts in city services.
The plan looks very similar to the alternative offered by City Council two weeks ago. However, instead of borrowing against future sales tax revenue, the city will defer a portion of the payments to the pension fund for two years. That will free up about $230 million in revenue. That money, plus interest, will be paid back into the pension fund during the final two years of the plan with revenue from the sales tax.
Although the new budget plan represents a major political breakthrough, Mayor Nutter is not out of the woods yet. The state will have to authorize the sales tax increase and actuarial changes to the city's pension fund. If either is rejected by the state legislature, Nutter will be forced to make drastic budget cuts across city government. His plan also relies on $125 million in savings through contract negotiations with city workers, which is far from guaranteed.
What do you think? Is this a good compromise?
Until this morning, City Council was scheduled to hear from several city departments that had provided incomplete information during budget hearings. The callbacks promised to be contentious, but it looks like the day of bickering has been transformed into kum-bi-ya. Mayor Nutter and Council are apparently on the verge of announcing a budget deal.
The details are still being ironed out, but the biggest shocker is that the property tax increase has been abandoned. Instead of relying on two years of property tax increases and hiking the sales tax by 1 percent for the last three years, the new plan will seek sales tax increase from 7 percent to 8 percent for all five years. This means the compromise looks very similar to the alternative proposal offered by Council two weeks ago.
One difference: The Council plan involved either floating a bond or securing a bank loan to cover the budget shortfall in the first two years. Nutter criticized that aspect of the proposal as being too risky and potentially harmful to the city's bond rating, which would make it more expensive to borrow money. Instead of going through Wall Street, the city will generate the cash by further stretching out payments to the pension fund.
Here is how it will work: Nutter's original budget proposal sought changes to the pension fund that lowered the assumed rate of return from 8.75 percent to 8.25 percent and spread out the amortization schedule from 20 to 40 years. The new deal apparently defers payments to the pension fund during the first two years, saving $270 million that will be repaid from the cash generated by the last two years of the sales tax increase.
Head spinning yet? We'll have more details as they become clear throughout the day. Also, check out the posts from Philly Clout and Heard in Hall.
Link: How about this: No pay until budget is in [Daily News]
Revive legislation from last session that says if the budget's late - as it's been every year Gov. Ed's been in office - elected officials don't get paid.
Not the governor, not lawmakers. And they don't get paid until there's a budget. And they don't get retroactive pay once a budget is in place. (I suggest for lawmakers no per-diems either.)
How many enemies does one Mayor need?
Two months ago, I wrote that Mayor Nutter seemed to be shifting his political strategy. In the early part of his administration, he was unwilling to pick any major fights. He talked tough about reform, but rarely backed up those words with concrete action. That changed with his budget proposal, which targets municipal unions, City Council entitlements, and seeks to hike property-taxes by double digits.
Now, I'm starting to wonder if Mayor Nutter has bitten off more than he can chew. The latest example? His call for the members of the Board of Revision of Taxes resign. Nutter's statement, which was rejected by the BRT almost immediately, came in response to a series of Philadelphi Inquirer stories exposing widespread patronage and corruption within the agency.
Of course, Mayor Nutter is right. The BRT is a complete mess and needs to be radically overhauled or abolished. But being right doesn't always translate into being politically smart. For a variety of reasons, this latest battle could prove to be a major misstep.
Nutter has no real power over the BRT. He can't force any of the board members to resign (they are appointed by city judges) and has limited options to impact their budget. Both Nutter and City Councilman Bill Green have proposed legislation to dissolve the agency, but that could take months to become law. As a result, the mayor could look weak at a time when he needs to be strong for his fights with City Council and the municipal unions.
However, the failure to reform the BRT through press conferences might have a far more dire consequence: It could significantly damage Nutter's proposal to raise property-taxes. If the BRT cannot be trusted to fairly asses property values, how can the city rely on closing the budget gap by increasing such an unfair tax? Voicing no confidence in the BRT but absolute confidence in increasing real estate taxes seems to be a troublesome position at best. The recent revelations about the BRT could be used as a loaded gun to shoot down the proposal.
There would have been nothing wrong with Nutter simply criticizing the BRT and even calling for major reform. However, his went nuclear on the board and demanded their resignation. By putting the bar so high, Nutter may be setting himself up for failure in more ways than one.
What do you think? Has Mayor Nutter picked the wrong fight? Or can he handle it all?