(Philadelphia) – Mayor Kenney today unveiled his Fiscal Year 2019 Operating Budget and Five Year Plan that includes revised projections for the Philadelphia Beverage Tax.
Following approval by City Council in 2016, the Philadelphia Beverage Tax was implemented in January of 2017 to fund several key initiatives of the Kenney Administration, including PHLpreK, Community Schools, and the Rebuild program. The tax generated almost $79 million over its first 12 months, allowing over 2,700 three- and four- year old children to access high quality early education and creating 11 Community Schools serving 6,000 students.
“The beverage industry would like folks to think that somehow $79 million dollars in new revenue is a failure,” said Mayor Kenney today in his budget address to City Council. “I suppose when you can spend $15 million over two years just for lobbying, or when you can pay a single CEO nearly $30 million a year, then maybe $79 million seems like chump change. But for residents of Philadelphia who are benefiting from these programs it most certainly is not. We consider that amount a success.”
The Administration is now projecting $78 million for FY19, roughly 85% of the amount initially projected, and matching the amount brought in during CY17. Under the new projections, the tax will bring in $500 million through the end of FY23.
“We have a responsibility to make a reasonable projection, and currently $78 million is the most reasonable amount to project, as it is informed by the first year of collections,” said Philadelphia Budget Director Anna Adams. “We feel this conservative and data-driven approach is best.”
The PBT is the City’s only source of revenue for PHLpreK and Community Schools, which means that the programs it funds will be modified to be consistent with the revised revenue projections. The proposed budget assumes the litigation will not be resolved in time to expand the programs beyond current levels this fiscal year and, therefore, presents a revised roll out schedule over the Five Year Plan. While the number of pre-K seats and Community Schools remain at current levels in FY19, the budget does provide additional workforce supports for existing pre-K providers while waiting for the litigation to resolve.
If the litigation is resolved in the City’s favor, the Administration will:
- PHLpreK: expand the number of pre-k seats each year, funding 3,000 seats starting in FY20 and increasing to 5,500 seats by FY23;
- Community Schools: expand the number of Community Schools each year, increasing to 20 Community Schools by FY23;
- Rebuild: initiate the first of three borrowings in late FY19, likely for reduced amounts that will be determined when the litigation resolves.
“Educational investments from the Philadelphia Beverage Tax have already changed the lives of thousands of Philadelphians,” said Chief of Education Otis Hackney. “Over 2,700 families have been able to access free, quality pre-K for their children, and the PHLpreK program created over 250 new jobs in its first year. Community Schools have helped thousands of students and community members by becoming neighborhood hubs for new services and bringing food access, job training, health services and more to Philadelphia communities. Each PHLpreK seat and community school has a ripple effect across the larger education system and strengthens Philadelphia’s economy. We’re proud of our early successes and look forward to the work ahead.”
A portion of the revenue generated by the PBT has been reserved while the litigation is ongoing. In FY20, assuming the lawsuit is resolved in the City’s favor, those reserved funds will be made available to support professional development, technical assistance and classroom supports for pre-K providers and Community Schools services ($49.6 million and $6.8 million, respectively, through FY23).
Starting in FY21, the costs of the expanded programs will exceed projected revenues, and the General Fund will cover the remaining costs, consistent with the initial approach to funding these initiatives.