An annotated list of 20 things you need to know about Philadelphia's city budget.
1. Despite all the storm and stress over the city budget in recent years, the fundamentals remain the same. The trends at work over the last 15 years continue, with one significant exception.
2. Overall, city spending has changed little in recent years. John Street's last budget in 2008 totaled $3.9 billion. The budget for 2011 proposed Thursday (March 4) by Mayor Nutter is $48.7 million less, a decline of 1.24 percent. This is a miniscule amount. City Budget 2008-2011
3. The city did face a crisis late in 2008 as the recession hit Philadelphia. The impact was reflected in local taxes. Collections took a sudden dive, dropping $161 million in one year. City Tax Revenue 2008-2011.
4. The Nutter administration responded by making cuts in the budgets of many city departments. Over the same period, though, spending in other areas of government increased. While changes were significant among departments, the effect on the overall budget was slight. City Budget Increases and Decreases.
5. The Nutter administration made up for most of the shortfall by increasing taxes.
This is the significant exception to trends of the past. During the Rendell and Street administration, wage and business taxes came down - slowly, incrementally - each year. This was scheduled to continue.
6. The administration halted these scheduled reductions in wages and business taxes. This has saved $86 million a year, money it has been able to apply to the budget.
7. Last year, with approval from the state legislature, the administration also increased the sales tax rate in the city from 7 percent to 8 percent. This has raised $104 million a year, money which also could be applied to the budget.
8. This year, the administration is proposing additional increases: a "trash tax" of $300 per household, which will raise $108 million a year when fully in place, and a tax on sugared drinks at a rate of 2-cents-an-ounce. This is expected to raise $77 million a year when fully implemented.
9. City employees are the principal beneficiaries of these tax increases. Without them, government would have had to downsize its payroll, probably through layoffs. As it is, the number of employees has changed only slightly since the end of the John Street era. In Street's last year in office, the city had 23,095 employees. Today, it has 23,101. City Employees Detail.
10. The administration does plan to lower the total of employees over the next year. The plan is to decrease the payroll by nearly 800 employees through attrition. No layoffs are planned.
11. This will not result in a net savings. Increases in the cost of fringe benefits and salary increases will offset the estimated $80 million a year saved by the workforce reduction. Cost of Fringe Benefits.
12. This year, each municipal employee will cost the city $104,400 on average, when you include wages and fringe benefits. The cost of fringe benefits alone averages $43,675 per employee. By contrast, the average income for a household in Philadelphia is $36,222 a year.
13. Today, 65 out of every 100 city workers are employed in the public safety sector. This includes police and firefighters, the courts, the prisons and the district attorneys' office. This sector's share of employees has increased over time. City Employees by Category
14. We said at the beginning that the fundamentals of city spending remain the same today as they did 15 years ago. The question has been and remains: How to pay for government when the cost exceeds the rate of inflation and/or tax revenue?
15. In the last 10 years, public safety and the cost of fringe benefits have risen in excess of inflation. To feed money to these sectors, mayors have reduced spending two major categories: the central bureaucracy and neighborhood-based services. City Spending by Category.
16. Mayor Nutter followed the same pattern when he was forced to make cuts in the recession. Now, he has declared a moratorium on continued service reductions. His budget proposal does not make additional cuts in services. It freezes them at existing levels. Nutter proposes paying for this moratorium with his drink and trash taxes.
17. How long will the moratorium last? Will the mayor have to revert to the previous pattern diminishing the budgets for items such as streets, recreation, libraries and the central bureaucracy in order to pay for rising costs associated with employee benefits, public safety and debt service? The answer depends on several factors.
18. Revenue from the city's major taxes - on wages, business profits and real estate sales - will have to rebound and begin growing again. This is unlikely to happen in 2011 or 2012, however. Projections made by the city are for continued stagnation in these taxes until FY 2013.
19. The cost of fringe benefits is another factor. If the city can contain these costs and keep increases at or near zero, it will be a major accomplishment - and a reversal of past trends. It will be difficult. We know for sure that pension costs are going to rise. Because the city's employee pension plans are under funded, the city is projecting a $336 million increase in pension costs over the next three years.
20. Going forward, the city estimates increases in wages and health coverage costs at or near zero. This is unrealistic. A contract settlement with city unions is likely to include pay increases (The police, the one union that has settled, got pay increases of 3 percent a year.) In the past, health coverage costs have gone up by high single and low double digits. This is likely to continue. Fringe Benefits.
This report was prepared by senior editor Tom Ferrick Jr.
Read: The New City Budget: The Same Old Game