Nutter introduces $3.84 billion budget

Within moments of introducing his $3.84 billion budget yesterday, Mayor Nutter found his plan under attack by City Council members assailing his call for steep hikes in property and sales taxes, and by union members incensed at the exclusion of wage and benefits increases.

Though Nutter labeled his proposal and accompanying five-year spending plan the "People's Budget" - a tribute to the public input that shaped it - he acknowledged the considerable discord surrounding it.

"I don't like having to do some of the things I had to do," Nutter said in an interview in his office after delivering his budget speech in Council chambers. It is "not fun, and sometimes doesn't make you the most popular, but it is a sign of leadership, which is why we're here - to make the tough choices."

Together with the tax hikes, which would be temporary, Nutter's chief deficit-closing tactic is to target the pay, pensions, health care, and work rules of the city's 23,197-member workforce.

His proposals - which would freeze salaries for five years, lower city contributions to union health plans, reorganize the pension system, and reduce holidays, among other steps - would save $637 million over five years if he can clear a series of enormous political and contractual hurdles.

Perhaps the most controversial of these proposals is a complicated plan to sharply limit pensions for all future city employees. Pension costs grew 96 percent from 2000 through 2008.

"There's no magic that can transform our situation into something other than what it is - a time for shared sacrifice dedicated to a vision of a brighter future for our city," Nutter said during his 49-minute speech. "This is the time for all of us to either stand up and be counted or sit down and be quiet."

Later, in a room thick with tension, he issued what seemed a direct challenge to the leaders of the city's four municipal unions, who represent 20,000 city workers. He identified them by name and said: "It's time for leaders to lead, not follow the screaming masses."

Observing afterward that Nutter's speech had stoked many flames, State Rep. Tony J. Payton Jr. (D., Phila.), said, "The boxing gloves are out."

Combined, Nutter's proposals seek to close a five-year, $1.4 billion hole. The administration has already closed a separate $1 billion deficit in November.

His plan calls for a two-year hike in the property tax, specifically a hike of 19 percent in 2010 and a smaller increase, 14.5 percent over the current rate, in 2011. That is estimated to raise $272 million .

In addition, Nutter is seeking approval from state lawmakers to increase the sales tax from 7 percent to 8 percent for three years, generating $342 million.

"There is a strong argument that this may be a new day, but this is an old way," said Councilman Brian O'Neill, the Republican minority leader, who objected to Nutter's reliance on higher taxes.

"The mayor is very well-intentioned," O'Neill said, "but the mayor also has another branch of the government that's allowed to have its own ideas."

Along with the pension proposals, Nutter announced an assortment of new fees - including for commercial trash collection and over-the-counter medications at city health centers - and service cuts totaling $300 million over five years.

While there would be some layoffs - 250 positions would be eliminated next year - not one police officer or firefighter would lose a job.

That announcement elicited the second-loudest round of applause yesterday. The loudest came when Nutter said no recreation centers or libraries would close next year. He also noted that 46 pools would stay open through public-private partnerships.

Among the city agencies that would take hits is the District Attorney's Office, whose budget would shrink by an additional $4 million, to $25 million.

"In times of crisis, it would seem that public safety should be the last service cut," Assistant District Attorney Al Toczydlowski said. He called a reduction of that magnitude "devastating."

The First Judicial District would be dealt a similar $4 million blow, leaving its budget at $99 million.

Nutter is also seeking to cut expenses through unpaid furloughs. Already, civil-service-exempt employees who earn at least $50,000 must take a five-day furlough in 2010. Now Nutter wants the unionized workforce to volunteer.

"If every city and court employee who is not already taking furlough days voluntarily took just one day off, it would save taxpayers more than $4.1 million per year," Nutter pleaded in the packed Council chamber.

That led one heckler to shout: "Why don't you take 365 of them this year?"

Among those in the audience was Nutter's predecessor, John F. Street, there with his Temple University political-science class.

"There's probably not been a more important budget in the last 20 or 30 years," Street said after Nutter's speech.

Though city officials do not expect to confront yet another budget deficit in the near future, they acknowledged the possibility.

"We are trying to get ahead of it but we can't guarantee it," Finance Director Rob Dubow said.

One potential vulnerability is the city's revenue forecasts. Although the budget anticipates that the local economy will contract through 2010, the city's forecasts are not as dire as those drawn up by Moody's Economy.com, which is one of the few forecasting services that makes growth predictions about the Philadelphia economy.

If the city is wrong and Moody's right, new deficits are inevitable.

For now, the mayor can count on political support from the Greater Philadelphia Chamber of Commerce. Chairman David L. Cohen and president Mark Schweiker said businesses would bear their share of the city's property-tax increases, but would oppose any hikes in the wage or business-privilege tax.

"This budget has something that everyone can dislike," Cohen, chief of staff to Gov. Rendell when Rendell was mayor in the 1990s, said in a news release. "But the mayor has proposed a balanced budget that preserves critical city priorities – and if we all simply object to the portions of the budget that impact our individual priorities, we will be left with a bankrupt city government."

Even so, objections quickly arose. For instance, Councilman Curtis Jones Jr. said he disagreed with Nutter's insistence against increasing the city wage tax to generate new dollars.

Council members appeared most miffed, however, by the mayor's request to take away their city-issued cars and exclude them from the controversial DROP pension program. Those requests may have the effect of unifying most of Council against Nutter.

"I don't in any way, shape, or form feel I have to apologize for the use of my city car for work purposes," Majority Whip Darrell L. Clarke said. Thirteen of Council's 17 members drive city cars.

Council President Anna C. Verna, when asked about the cars and DROP, only smiled, jabbed her hand with an imaginary knife, and twisted the invisible blade.

As of now, Councilwoman Maria Quiñones Sánchez said, "I don't see nine votes for any single proposal." Council, which must approve a budget by June 1, will begin hearings next week.

Overall, Nutter's speech struck a somber tone and stood in marked contrast to last year, when he called for "new ideas" and "bold action." Despite the disastrous economic climate, he sought yesterday to assure Philadelphians that his long-term goals remain. "I am that same reformer standing before you today with the same message," Nutter said.

That will likely be a hard sell to the unions. Whereas Nutter in a surprising move last year set aside $400 million for wage and benefit increases, this year he is offering nothing and asking them to give more.

John McNesby, president of the Fraternal Order of Police, laughed off the idea of taking an unpaid day off. "I guess I would have to coordinate our furloughs with the criminals," he said.

Pete Matthews, president of AFSCME District Council 33, the city's largest union, said he was "shocked" by how far Nutter's proposal went. "This actually started negotiations, because I look at this as a negotiation strategy," he said.