Big chunk of soda tax money not going to pre-K

Mayor Jim Kenney (left) and City Council President Darrell Clarke

NOTE: This story has been updated to reflect the actual amount of money raised by the bill and how much would be spent on Pre-K instruction.

While Mayor Kenney pitched his sugary drink tax as needed to fund early childhood education, it turns out that nearly 20 percent of the money raised would go to other city programs and employee benefits.

The additional spending - never mentioned while Kenney was selling the tax to the public - was added on during talks with Council on the proposed tax, according to the administration.

"These changes are the result of weeks of negotiations between City Council and the administration," said Mike Dunn, spokesman for the administration. He said the changes include $81.4 million, over five years, in funding for items that either Council members requested or that the administration favored.

Those items include:

$6.7 million for employee benefits, primarily for disability settlements.

$4.4 million for programs within Health and Human Services, including the Philadelphia Nursing Home, youth homelessness, and feeding the homeless.

$1.6 million to cover the costs of resentencings for about 300 juveniles who were sentenced to life without parole, a penalty ruled unconstitutional by the U.S. Supreme Court.

$1 million to Community College of Philadelphia.

$915,000 to cultural institutions, including the African American Museum and Historic Philadelphia.

Dunn said many of those annual increases would be recurring in the city's five-year plan.

A spokeswoman for City Council President Darrell L. Clarke said Clarke was not aware that those programs would be funded through drink tax revenues. "They have not communicated that to us," Jane Roh said.

What is not in dispute is that out of $91 million that would be generated annually through the 1.5-cent-per-ounce tax on sweetened drinks and diet beverages that passed out of a Council committee last week, at least $16 million would go to previously unadvertised spending. By year five, the administration said, it would be spending more than the $91 million generated by the tax to fully fund all of its initiatives.

Kenney originally sought a 3-cent-per-ounce tax on sugary beverages to fund expanded early childhood education; community schools; improvements to parks, recreation centers, and libraries; increase in funding to the city’s pension fund and an energy efficiency project for government buildings. The latter two were eventually dismissed by Council, according to Dunn.

The compromise bill would raise $409.5 million over five years. About $300 million would cover expanding pre-K, community schools, and fixing parks, rec centers and libraries. Also, $4.5 million would go toward a healthy-beverages tax credit.

The $81.4 million in additional spending could be found in the last of the six lines of the tax revenue breakdown spreadsheet handed out to Council members Wednesday.

Councilman Allan Domb - a key vote last week - said he asked about the changes last week.

"I didn't get that much detail, but they did mention there were different requests from other Council people and an issue with employee disability lawsuits," Domb said.

Some experts in municipal finance said they were not surprised by the additional spending.

"City Council tends to get stuff when they give something," said Sam Katz, former chairman of the city's fiscal watchdog, the Pennsylvania Intergovernmental Cooperation Authority. "It was probably part of the horse-trading to get the votes."

Michael Masch, city budget director under Mayor Ed Rendell, saw nothing "unusual or objectionable."

"Of course it's funding in exchange for the soda tax," Masch said. "Why would Council vote for the tax and at least not attempt to negotiate for their own priority?"

Dunn said there was no quid pro quo for votes. Council members and staff also denied trading their votes for funding.

Several members said they were aware of, and in some cases upset by, the administration's funneling tax revenue to other purposes. Others called it a nonissue, saying that once tax revenue is raised, it can technically be spent by the administration on anything.

Councilman Mark Squilla, who voted for the tax, said all that matters is that the administration delivers on the programs it said the tax would fund, like expanding pre-K. "This happens every year," Squilla said. "It's nothing unusual."

David Oh, a Republican who voted against the sugary drinks tax, called the funding mechanism somewhat deceiving. "This is not the narrative that had been told to the public," Oh said. "The public had been told that we don't have the funds - we need the funds, and the reason we need the funds is to implement a universal pre-K program and to fund the rebuilding and repairs of community centers, rec centers, community schools. . . ."

Oh said the tax would bring in far more than the administration needs and thus offered a way to pay for administrative needs and Council requests without finding money in the budget.

"It's not that it won't be used for good purposes," Oh said of the additional money. "It's just that it's not part of the democratic process. You're just giving the mayor extra money, of which we don't know what it's for."

Dunn said that the budget amendments would not take away from the mayor's plan for pre-K, schools, and rebuilding.

"The administration feels these investments are all going toward very worthy programs that will directly benefit Philadelphians," he said.

Councilwoman Jannie L. Blackwell, who became a surprise supporter of the tax last week after initially coming out against it, said she had no idea revenue from the tax was targeted for other purposes.

"You mean all of this is coming out of the sugar tax?" Blackwell said while looking over the list of additional items. "Very interesting."

Asked if the change would affect her vote Thursday, Blackwell said only that she had a lot of remaining questions. "In politics, you just have to keep your options open and see what happens," she said.

cvargas@phillynews.com

215-854-5520@InqCVargas

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