PHILADELPHIA – City of Philadelphia Finance Department officials today released their analysis of budget measures revised this week by City Council’s Committee of the Whole.

“We are very pleased that Council has moved forward bills to provide a significant increase in funding to the District, though short of the amount proposed by the Administration, and to give relief to homeowners through an increased homestead exemption,” said Budget Director Anna Adams. “We are, however, very concerned that while Council supplied over $530 million in funds to the District, the gap in funding between Council and the Administration’s proposal for the District is almost $240 million.”

Impact on the School District of Philadelphia:
Council’s Committee of the Whole approved the great majority of the Administration’s funding package for the School District, including a slowing of planned reductions to the wage tax to generate $340 million over five years, and an increase of the City’s General Fund contribution to the School District by $20 million dollars for each of the next five years, totaling $100 million.

However, changes to other portions of the funding package would result in the District receiving nearly a quarter-billion dollars less over five years than the Mayor had proposed.  As a result, the District will lack the ability to accelerate or expand efforts to improve the condition of its buildings and facilities beyond what had previously been planned. The School District will also face budget shortfalls within several years, threatening the future of the District’s Action Plan 3.0 — a plan that has generated early successes in literacy, college and career readiness, and staffing.

Specifically, without additional funds beyond the amounts included in the Council package, the District will be unable to borrow an additional $150 million to fund the following additional investments:

  • Accelerate and expand its lead paint abatement program, which would have permitted the District to begin immediately seeking contractors to remove peeling, crumbling and flaking paint aligned with the Environmental Protection Agency’s (EPA) Lead Renovation, Repair and Painting Program.
  • New projects including major renovations at the neediest school buildings (those with a Facility Condition Index score of 60% or higher), bathroom and site renovations to meet the Americans with Disabilities Act (ADA) requirements, playgrounds at elementary schools, and upgrades to major mechanical and electrical systems that moderate temperature and provide comfort.

Other Budget Concerns:
The funding package announced by Council this week is of concern to the Administration in two key respects: it mandates cuts to the City’s prisons budget; and it projects additional tax delinquency collections that the Administration does not believe are reasonable.

Prisons Budget:
The Administration had proposed reducing the Prisons’ budget due to the House of Corrections planned closure (by approximately $11 million in FY19, and $15 million in FY20 and thereafter), but reinvesting a portion of those funds within the criminal justice system, to permit the continued reforms.  Council’s funding package decreased the Department of Prisons’ budget by $15 million for FY19 and $20 million annually for FY20-23, with those funds going instead to the School District.

The Administration was intending to make the following investments in the Prisons System from the savings from the closure of the House of Corrections:

  • allow for inmates to receive access to out-of-cell behavioral health therapy
  • continue Medical Assistance Pre-release Enrollment allowing for continuity of care (leading to a potential increase in emergency room usage for healthcare needs),
  • continue post-release appointments for chronically and seriously mentally ill inmates
  • expand distribution of naloxone upon release.

Moreover, savings from the closure of the House of Corrections were intended to permit investment in programs that continue the successful reforms more broadly in the criminal justice system. Savings from the closure were intended to pay for a day-reporting pilot, Police Assisted Diversion, and allow the City to eliminate cash bail revenue, without negative impacts on the City’s budget.  It also was intended to enable the City to pay for $2.5 million in mandated increases in Court-appointed counsel fees.

“A great collaborative effort by Philadelphia’s criminal justice stakeholders has led to a 36% reduction in the City’s jail population since 2015,” said First Deputy Managing Director Brian Abernathy.  “But that success must be sustained — and that requires reinvesting currents savings back into the reform efforts.  Council’s plan threatens that progress.”

Delinquency Collections:
The proposed package approved by Council committee includes $69 million in projected additional revenues based on the expansion of the Department of Revenue’s sequestration project for enhanced tax collection.  Administration officials believe those projections are not firm enough to include in the Five Year Plan, which is subject to approval by the Pennsylvania Intergovernmental Cooperation Authority (PICA).

“While the Council package includes our aspirational goals for this planned expansion of the sequestration effort, we are not yet confident enough in how much revenue enhanced sequestration would generate to include those revenues in our Five Year Plan,” said Finance Director Rob Dubow.

In addition, under the measures approved by Council’s Committee of the Whole, the City’s fund balances would fall to dangerously low levels in the later years of the Plan.  As a result, if the bill is passed, the Administration would need to reexamine every element of the budget.