The City of Philadelphia has revised its Fiscal Year 2022 – 2026 Five Year Financial and Strategic Plan. Since the Plan’s approval by PICA in July 2021, the City has experienced major changes to its budget including having new labor agreements with three of the City’s labor unions. These changes have caused the Plan to become unbalanced, which means our spending totals more than our revenues and reserves. Because state law requires the City to annually develop a balanced five-year financial plan and to submit a revised Plan when entering into new collective bargaining agreements, the City submitted a revised, balanced, plan last week.
Reasons for rebalancing the Plan
There are multiple reasons behind the need to rebalance the existing FY22-26 Five Year Plan. These include:
- Increased Labor Costs – The City has received an arbitration award for the FOP, reached collective bargaining agreements with DC33 and DC47 and is working on agreements with its other collective bargaining units. The award and the agreements already reached cost more than $600 million, which exceeds the Plan’s previously budgeted labor reserves and therefore must be added to the revised Five Year Plan.
- Unavoidable New Costs – Various City departments have unplanned spending. Among the added costs were increased medical, screening and testing costs at the Prisons, cybersecurity costs and costs related to the Philadelphia Nursing Home.
Who was involved in rebalancing the plan?
Given the Kenney Administration’s continued focus on stakeholder engagement and equity in the budget process, meetings were held with City departments, the Mayor’s Office, and the City’s Budget Equity Committee to discuss how to rebalance the Plan. The following goals were kept in mind when revising the Five Year Plan:
- avoid tax increases,
- minimize service reductions,
- cover all added costs and some new investments, such as fuel costs for City vehicles and three community evening resource centers among others,
- and maintain fiscal stability.
How was the FY22 – 26 Plan balanced?
The following were used to balance the FY22-26 Plan while continuing to provide previously agreed upon investments:
- Higher than previously projected FY21 revenue collections
- A larger than expected FY21 fund balance and other reserves
- Natural savings through reduced costs, vacancies, and hiring delays
- Reductions to departmental spending
The City presented the revised Plan to PICA on October 29.