Philly's Finances are on the Mend as City Passes 2020 Budget

(Image: PICA)

City Council passed a $5 billion 2020 budget on Thursday, with a $300 million increase in spending that will primarily go toward salary and benefit increases and various anti-poverty initiatives. Claudia Vargas reports that the budget will also include a first-ever contribution to the City's Rainy Day Fund, as a result of higher than expected tax collections. 

Fixed costs such as pensions and health care have also gone up, together by nearly $200 million. Payroll has increased by more than $250 million, in part due to raises negotiated with labor unions. And Kenney has increased the city’s contribution to the School District by $122 million [...]

Neither the administration nor Council proposed tax-rate increases this year, but property reassessments resulted in automatic property tax hikes for many.

Most departments saw their funding rise in the last four years. Some of the most significant bumps were to the Police Department, which has seen a $90 million increase since the 2017 budget, and the Fire Department, which got $76 million more in funding over the last four years.

It also includes a first-ever $34.3 million contribution to the City's Rainy Day fund, along with similar amounts for other Kenney five-year plan initiatives targeting the opioid crisis, violence prevention, and policing. 

In prior years, revenue collections had been just low enough for the administration to avoid being required by state law to pay into the Rainy Day Fund, but this year's revenue collections came in unexpectedly high by quite a bit.  

The May PICA report found revenues grew at nearly twice the rate the City had projected year-over-year. 

The City has collected $3.408 billion in tax revenue through May of FY2019, an increase of $218.9 million, or 6.9 percent over the same period last year. Year-to-date increases were realized in every tax category except the real estate transfer tax, as previously mentioned. Increases were seen in the the BIRT (22.2 percent), and amusement (22.0 percent) taxes, while other miscellaneous (8.6 percent), real estate (7.3 percent), City sales (6.8 percent), and total wage, earnings, and net profits taxes (4.2 percent) also increased.

In terms of FY2019 projections, only the realty transfer and City sales taxes fell short of the City’s most recent estimates, as shown in Table 1. Again, current year to-date totals have increased by 6.9 percent, well ahead of the City’s projection of 3.7 percent.

As Vargas notes, the increase in revenue in this budget made it possible to increase spending without also increasing tax rates. The latest property assessments brought in additional net real estate tax revenue, but this was a result of the underlying property values growing rather than a rate increase. 

These are all positive signs, even if the future doesn't look quite so rosy over the next few years, with big payments to pensions and schools coming due. Healthy year-over-year revenue increases without rate increases is what we should be aiming for, and this mostly low-acrimony budget season demonstrates the political benefits to elected officials of how a policy focus on growing the local economy can deliver increased funding for popular services without requiring votes for unpopular tax increases. 

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