Fund Balance is significantly higher than initially projected

PHILADELPHIA –  The City of Philadelphia today released its Fiscal Year 2022 Annual Financial Report that showed that the City ended the year with a $775 million fund balance, which is the difference between the money allocated vs. spent for the City’s Fiscal Year 2022. 

The $775 million is higher than the amount included in the approved FY23-FY27 Five Year Plan primarily for two reasons. The first is underspending, as the City, like many other employers, has struggled to attract and retain staff amid a complicated landscape in the labor market in the wake of the pandemic; funds had been budgeted for salaries for positions that have stayed vacant. The second significant factor was higher than anticipated tax collections, notably from two taxes—the volatile Business Income and Receipts Tax (BIRT) and the Wage Tax.

“The higher fund balance is crucial. It will help us prepare for the economic slowdown that many predict is coming while giving us some resources to cope with increasing inflation that we already face and that has created challenges for the City,” said Rob Dubow, Finance Director. “It is also important to note that, even with these new numbers, our fund balance is still lower than what financial experts recommend for a major city.”

With the higher fund balance, the City is preparing to take two approaches to a mid-year ordinance that was transmitted to City Council: make targeted but essential investments now across a number of areas including education, public safety, Parks and Rec and the Free Library, cultural institutions, infrastructure investment, and homeless services. At the same time, the City will use a significant portion of the funding to build reserves to address the ongoing impacts of inflation and the next potential economic slowdown, which economists and businesses are preparing for.