PHILADELPHIA — The City today announced that preliminary estimates for the Fiscal Year 2022 budget (starting July 1, 2021) show a $450 million budget gap could occur for its General Fund operating budget. This gap represents the difference between the projections for anticipated revenues and available reserves ($4.7 billion) and expected costs to provide current services (over $5.1 billion).
“This pandemic and the economic downturn it caused led to new costs, higher costs for the services we’ve always provided, and a staggering drop in our tax revenues.” said Mayor Jim Kenney. “Unfortunately, as we work with the City’s economists to look ahead, the picture for the coming budget is bleak.”
The potential budget gap was reported in the Quarterly City Managers Report (QCMR) released today. The QCMR updated revenue and spending projections for the current fiscal year. Tax collections were downwardly revised by $40 million, primarily due to worse than expected collections from the Wage, Amusement and Parking Taxes. The City will recognize $76 million in reimbursements from the federal CARES Act and will use the funds for the ongoing COVID response, for items like quarantine and isolation spaces, a surge nursing facility, and personal protective equipment.
“Philadelphia needs flexible federal relief delivered directly to the City to replace lost revenue in order to support core government services and pandemic response efforts,” said Finance Director Rob Dubow. “We’re optimistic about the proposed relief package from President Biden, which includes funds for state and local government; but the timing, scale, and details of how funds will arrive and can be spent remains undetermined. Even with a one-time infusion from Washington D.C., Philadelphia could face years of budget stress as the economy recovers. This will likely require painful budget choices that could make the region’s economic recovery more difficult.”
The City expects to end Fiscal Year 2021 with just $29 million in its fund balance, less than three days’ worth of City spending and down from $438 million at the end of FY19. The Government Finance Officers Association recommends that municipalities maintain a reserve equal to two months of spending, which would be about $800 million for Philadelphia.
“For the coming year, we want to provide quality government services and infrastructure while maintaining the City’s long-term fiscal health,” said Budget Director Marisa Waxman. “We need diverse voices and insights to develop a spending plan that reflects the needs of our community. Using a new survey for residents to provide input on Budget priorities and other channels, we aim to address racial disparities and institutional racism perpetuated by prior budget decisions — even as we have fewer resources available than in the past.”
On April 15, 2021, Mayor Kenney will propose a budget to City Council for FY22. There will be difficult budget choices due to the possible $450 million budget gap, while Philadelphians have more needs than ever before. Before the City finishes drafting the budget, the Budget Office wants to hear from Philadelphians about how the City should focus its spending. Residents and business owners can share their thoughts through a 10-minute survey about Budget priorities and preferences by February 28, 2021:
- Philadelphia Budget – Priorities and Preferences
- Presupuesto de Filadelfia – Prioridades
- Preferencias · Ngân sách Philadelphia – Ưu tiên và Ưu đãi
- 费城预算 – 优先事项和偏好
For more information, Quarterly City Managers Reports and City budget documents are available at phila.gov/finance/reports.html.