Amid economic downturn, austerity budget preserves core programs

PHILADELPHIA – Just two months after presenting his Fiscal Year 2021 Budget and Five Year Plan to City Council, Mayor Jim Kenney today unveiled a drastically revised spending plan in the wake of the COVID-19 pandemic and resulting economic downturn.

“Even as our operating departments rushed to respond to the virus, I directed our Finance and Budget Directors to start the budget process all over again,” said the Mayor in a recorded address to the city. “They developed a new plan that addresses the unfortunate economic reality we now face.” The Office of the Department of Finance projects that without such changes, the City would face a $649 million dollar deficit in the coming year—at least five times the projected deficit in 2009 after the Great Recession.

This projection led to what the Mayor called “painful” decisions in order to reduce spending. “This budget pares City services down to the most essential, imposes layoffs on hundreds of workers, and reduces or eliminates some programs that are simply no longer affordable,” said the Mayor. “This is not what I want for our residents—and I understand if this leaves many of you angry. Frankly, I’m angry too. But after that anger fades, we must remember exactly what we are dealing with. What we have is both a pandemic and an economic catastrophe.”

The Mayor explained that the process of revising the budget began by first setting clear priorities: “We will keep all Philadelphians safe, healthy and educated while maintaining core municipal services that our residents rely on daily.” With those priorities paramount, a new budget was created in what the Mayor called “a thoughtful, deliberate, and collaborative way” guided by three core principles:

• Learning from the City’s experiences in the Great Recession. One key lesson was that funding cuts for essential services like public safety take years to recover from. Another lesson learned is that Philadelphians care deeply about their neighborhood facilities.
• Ensuring that these decisions were made through a lens of racial equity. The budget intentionally aims to limit the impact of service delays or cuts on people of color, who are disproportionately impacted by the virus and already suffering from decades of systemic inequality.
• A commitment to leverage federal, state, and philanthropic resources. The City intends to reduce its own spending by partnering with others in order to help fund or deliver services.

“We must address both the pandemic and the economic downturn with bold decisions so that this government operates within its means—while at the same time addressing other challenges, like gun violence, poverty, and the opioid epidemic. And we must transform our priorities to best meet the needs of Philadelphians, particularly our most vulnerable residents, under this new reality. We hope that by focusing on core services and maintaining fiscal stability, we will be able to rebound as quickly as possible.”

The result is a new budget that proposes General Fund spending to be $4.9 billion, a $341 million decrease over the original $5.2 billion budget. It reflects the priorities listed above by guaranteeing the following:

• No police or fire layoffs.
• No reduction in emergency medical services.
• All fire stations will remain open.
• All health centers will remain open.
• All recreation centers will remain open.
• All libraries will remain open.
• PHLpreK and Community Schools will be maintained at current funding levels.
• Weekly residential trash collection and single-stream recycling will continue, with some adjustments.
• Using local and federal funding, the City will prioritize keeping Philadelphians in their homes with support for basic systems repairs, preventing mortgage foreclosure and support for renters.

To close the projected deficit, the new FY21 budget calls for salary cuts to most exempt employees and a workforce reduction by eliminating full-time, part-time, seasonal and temporary positions through attrition and layoffs. “To those who are directly impacted by this workforce reduction, I pledge to you that we will offer resources and support to help you through this,” said the Mayor.

The revised FY21 spending plan also proposes an increase in the rate of the School District portion of the Real Estate Tax. “This will enable the District to avoid draconian cuts that we know will set our kids back years and harm the future prosperity of our city,” said the Mayor. There are also a wide range of reductions, revenue enhancements, and increased efficiencies, including:

• A reduction in overtime across government, including police and fire department overtime.
• Reduced investment in vehicles, technology, and other equipment.
• Reduced hours and programming at libraries and recreation centers.
• Reduced support for special events, non-profits, and the arts.
• A reduction in the use of local tax dollars for economic and workforce development, as well as affordable housing and homelessness prevention and assistance. This is possible since federal funds have been approved to support those areas, including direct assistance to businesses, individuals, and unemployed workers.
• Small increases to certain licenses and permit fees, and an increase in the cost of commercial trash pick-up.
• A delay in scheduled reductions of business tax rates and wage tax rates for Philadelphia residents.
• Rate increases for the non-resident portion of the wage tax and for the parking tax.
• Elimination of the one percent discount for paying Real Estate Taxes early.

Despite these painful decisions, the Mayor said he draws hope from “the spirit and grit of Philadelphia that will help us rise to meet this momentous challenge. Together we will rebuild a healthier, safer, and stronger city.”

The text of the Mayor’s address and the budget documents are available here.