Philadelphia Metropolis


Answer to No. 7: City Government

| Comments

The needle has barely moved on city government spending.

The general fund, which pays for most government operations, was $3.452 billion 2008, the mayor's first year in office.  This year, it is $3.473 billion, an increase of less than one-half percent.

This reflects the new realities of city government.  When tax revenue tanked during the recession, the city had to make cuts and raises taxes to make up the difference.  When adjusted for inflation, the city budget actually declined by about $170 million -- a two percent decrease.

But, there's a story within this story.  While the size of the pie remained the same, the size of each slice changed.  During Nutter's first term, the city did what the city has done for the last 15 years -- it cannibalized some government sectors to feed the needsgovt_400.jpg of others.  It is what you have to do when you have a zero sum game -- or less than zero, in terms of tax revenue during the mayor's first two years in office.

Neighborhood-based services (parks, recreation, streets, and libraries) have seen the biggest decline in resources. The money saved went to the two areas of government that kept growing during the recession: debt service, mostly for bonds floated in the past (someone has to pay for those new sports stadiums) and fringe benefits for city employees.

Click here to see what departments and agencies fall into each category.

The joker in this deck is pension costs.  The pension fund has a $4.5 billion deficit, which is not due tomorrow, but it a measure of the shortfall between the money it has on hand and the current and future needs of retirees.

The health of the pension fund is directly related to the stock and bond markets, which is where the bulk of its money is invested.  Last year was a good one for the fund.  It earned 13.1 percent on its investments.  This year, with the market sagging, it undoubtedly will earn less.

Who must make up the shortfall?  The taxpayers.  This is the other near-term threat to Mayor Nutter's second term, capable of blowing a hole in the city budget.


Click here for a note on how we compared the 2008-2012 city budgets to account for accounting changes made by the city Finance Department.

blog comments powered by Disqus
Site by