- He sets aside a specific amount of money for city contract negotiations with unions--no more--while relying on a bond to deal with city pension obligations.
- He proposes cuts to the net income portion of the Business Privilege tax.
"It is a creative solution, and that's a good thing, but there are lots more questions that need to be answered before we know if it'll work, when it'll work," said Uri Monson, executive director of the Pennsylvania Intergovernmental Cooperation Authority, which oversees the city's budget.We also don't know what the city employee unions are going to be asking for just yet, and without the knowledge, it seems a bit inflexible to name a dollar figure now. Remember, the city is the largest employer, and any drastic change to the livelihood of its employees can have a big impact on our entire region's economy. The problem with the second point--and Jennifer and Dan pointed this out last week--is it is hard to support cuts to the net income tax without knowing how it currently impacts businesses in real numbers. I am sure the Mayor knows of course--since he is privy to data from the department of Revenue that would indicate how the tax is affecting different kinds of businesses--but we, the public, do not.
In the spirit of Mayor Nutter's "new day, new way" approach to open records and transparency in government, Jennifer wrote a letter to the Department of Revenue requesting this data. After all, there is growing evidence that for the very largest corporations, despite a real or perceived high business tax burden here, other factors like proximity to roads, train stations, cultural events, restaurants, etc. have been more important factors in making decisions about business relocation. And, perception often trumps reality when in comes to the free-market, and Nutter sent a pretty strong message that will change the perception of Philadelphia when he said this at a Chamber of Commerce luncheon:
"The doors at City Hall are now open," he said, in a silent nod to the strained relationship prevalent during the Street administration. "You will always have a friend at City Hall."That's not to say that business taxes do not matter--and I think we all agree that our business tax structure seems uneven at best. But without a public release of the data, it's hard to know how serious of a problem this is, without relying solely on anecdotal information. Despite these potential problems, you have to give credit to Nutter for proposing a budget which:
- expands single-stream recycling
- gives $3 million to city health centers
- $4 million a year to CCP to expand its reach
We don’t walk into this process under the assumption that we have a monopoly on ideas, but we believe the proposals set forth here today will put us on a course for a safer, cleaner, greener city, where our children are protected and educated, where government performs its tasks in an open, honest and efficient manner and where performance is measured, improvements are made and services are delivered.And until we see the line-item budget, that sounds good enough for now.
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Nice post, Ray. I have some
Nice post, Ray.
I have some random thoughts as well:
First, I don't get totally get how the bond issues work. But, given the low value of the dollar these days, does it make sense to offer a bond now, as opposed to just starting to pay down the pension deficit every year? Someone with a deeper understanding of the ins and outs of bond issues might be good to hear from.
Second, the after school programs will be in the budget when all is said and done.
Third, money for recycling, and parks is wonderful. And 311. Congratulations, Jim Kenney.
Fourth, I am happy that the budget is based in reality. For example, let's talk about taxes. Nutter is lowering business taxes, so, he is slowing the decline of the wage tax, and raising the parking tax. Why? Because, things cost money, and cutting taxes do not magically produce revenue. Seems sort of obvious, and not to be a jerk, but, some of our debates on the BPT called into question whether everyone really agreed on that principle.
Fifth, the closing of Camp William Penn is pretty sad. For those who don't know, the City owned some land in the woods, and ran a camp that let poor City kids actually get out of the City in the summer, see some nature, be away, etc. It is a little sad to see that chance go away. Hopefully something can be done to make up for that absence.
Sixth, generally and overall, it seems like a good start. Now, City Council will have their say.
The nuts and the bolts
My understanding about the bond issue to cover the pension fund is that legally, the city must fund the pensions at a certain level. The debt service, on the other hand, we can pay back at a much slower rate. So it's something like the difference between paying 15% of what's owed annually vs. paying 6%. Kind of like refinancing your student loans to pay them back over 30 years (and at a slightly lower rate) rather than 10. Debt of that size always makes me nervous, but there are very few good alternatives there.
It strikes me as a strong, nuts-and-bolts budget. Look at the increases for infrastructure spending -- that's a whole-grain issue, not a sugar-rush.
Slowing the reduction of the wage tax and raising the parking tax seem to me to be very smart and responsible ways to shore up the numbers. The wage tax bears the overwhelming brunt of the revenue burden for the city, about three times either the BPT or property taxes, and they've shown steadily increasing receipts despite cuts. This budget keeps that revenue stream stable, while Nutter can still say that he's cut the rate below 4% when he runs for reelection in 2011. And a bump in the parking tax potentially reduces congestion, and is rarely born by people who can't afford it. Both taxes are also eminently collectable.
From my BPT armchair, I'm still a fan of leaving gross receipts at .10% in 2011 rather than eliminating it by 2016, while possibly dropping net profits to 6% by 2013 or 2015. Also, there's nothing in the proposed budget about changes to the property tax abatement program and nothing specific on caps on property tax increases, both of which Nutter campaigned on.
I am probably the only person in Philadelphia who thinks that property taxes are too low, but it is frustrating to me that despite a residential and commercial real estate boom, we're collecting less in property taxes in adjusted-inflation dollars than we did over a decade ago. We receive less in revenue from property taxes than we do from the state of Pennsylvania. Nor do our property tax revenues cover our police department alone -- not to mention schools, fire, gas/water infrastructure, courts, etc., aka the basic municipal services serving and protecting property which are usually covered by a property tax. If we really want to do some heavy lifting to shore up the city's infrastructure and core services, I think property owners need to do their part.
The bond issue
I just posted something over at The Next Mayor about this issue. I think most people understand what the situation with the City's pension plan. Here is a little more about bonds:
Nutter's wants to issue a $4.5 billion pension obligation bond to fund retirement benefits. This is the largest bond in the history of Philadelphia. The money will be placed into the pension fund and then invested into the stock market. The mayor believes that this will free up some money for the general fund in the short term and lock pension payments into a predictable schedule.
However, there are some who see it as a potentially risky proposal. In 1999, Philadelphia tried issuing a pension bond for $1.25 billion. The deal wound up costing the city millions because it was poorly structured and the city pension plan lost money in the stock market.
It will be interesting to see how the troubled national (and international) economy impacts the bond proposal. Markets are volatile, the bond insurer market is very troubled, so there are many questions: Will Philadelphia be able to secure a good interest rate? Does it make sense to put a huge infusion of cash into the stock market while things seem so shaky?
comments on
Due to a glitch, comments were disabled on this post inadvertently.
Good, so I won't get in trouble
for talking about Israel and Mumia and not Ray's awesome wonderful post.
Unfortunately even though comments are re-enabled all I got is the totally not-surprising "I agree with Ray and Dan."
I sort of disagree on Econ Development
Ray, I think you missed a MAJOR jobs and economic development story. I have to take my hat off to Nutter on this one.
Community College of Philadelphia gets $4 Million increase in Nutter's budget
It's the first time in 20 years that fees and tuition won't be going up there. Wow. GOOD stuff.
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This Too Will Pass, treating grave matters lightly and light matters gravely, since 2001.
see above
It is really cool.
Ummm... yeah, well, so what?
I just wanted to draw MORE attention to it Ray. I mean, duh. Like, obviously. Sheesh. It was all part of my plan.
I thought some of these losers might have missed it, you know? Since only a loser would have missed that. Sheesh. I'm just making sure the skimmers don't miss anything you know.
I mean, obviously.
Seriously, though... don't you think that counts as Economic Development? It's job readiness.
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This Too Will Pass, treating grave matters lightly and light matters gravely, since 2001.
Increase in CCP funding
I was very happy to see the increase in CCP funding (double what CCP President Stephen Curtis had asked for), but not surprised given Mayor Nutter’s past support for CCP. The increase demonstrates Mayor Nutter’s commitment to investing in our citizens.
CCP students have born the brunt of the city’s failure to fully fund CCP. For many, it has been a struggle to cope with the yearly tuition increases which have made CCP one of the country’s most expensive community colleges.
This has been particularly burdensome for those students who are working full-time and attending CCP. Their income in many cases is too high to qualify for Pell grants available to low-income students, but too low to easily afford CCP’s tuition. If CCP had continued to increase tuition, many of these students would have had to forego their dream of a career which would provide them with job satisfaction and pay a living wage.
I share Helen’s concerns about public education and I am very happy she is there keeping the pressure on to adequately fund our public schools. CCP is a much smaller operation than the school district and 4 million can make a huge difference. The city just doesn’t have the money to make a huge difference in public education, but I expect Mayor Nutter will be working hard to get the money to end the disparity in resources between city and suburban districts.
This is a sensible budget which puts meeting the city’s core obligations--its agreement to fund 1/3 of CCP’s operating expenses and its commitment to retired city workers--ahead of special projects intended to build a mayor’s reputation/ legacy.
It really is a new day!
I noticed
This budget does not include the money from State gaming revenue. That is estimated to be almost $100,000,000.00 this year. Makes me wonder where that money is intended to go. I like the idea that we aren't plugging that money in right away and can, potentially, use it to think bing.
Also, philly.com is reporting, and I don't know this, that the gaming related wage-tax deductions are on top of wage tax deductions in Nutter's 5 year plan.
I am working to elect Larry Farnese to the General Assembly. Unless otherwise expressly stated, this and every comment or blog I post on YPP and any action I take hereon is solely attributable to me and not Farnese or Friends of Farnese
I didn't know how to feel about that quote either
But according to Cathy Lucey he was up there quoting Che Guevara as well!
What the hell is going on down there anyway?!? (I am in Allentown for a race)
no increase for osh
in his campaign budget nutter suggested he'd:
but in his five year plan:
dissapointing, though he has said some encouraging things about his committment to improving the treatment of those on the street:
8 million
Am I reading this wrong? It looks like OSH is getting about a $1.6 million annual bump -- so something like an additional 8 million over 5 years? It's not 20 but it is a boost.
but we are already in FY08
so this years "current target budget" is 41,555 and subsequent years are 40,210. am i right?
how is the FY08 adopted different than the 'current target'? who controls that? brett? laura?
I believe the "adopted
I believe the "adopted budget" is the budget already approved by council, while the target budget is what Nutter's proposing for this year. I could be wrong.
At any rate, we were in fiscal 07 when Nutter was running in the primary, so the bump from what we were spending then is considerable.
disappointment about schools message
From the Inquirer:
When a legislative study shows that Philadelphia public schools are underfunded to the tune of $1 billion a year I would say that money, if it's not the answer, is certainly the reason for a lot of our problems. Problems like:
-- why we can't afford to hire teachers to reduce the highest class size in the Commonwealth;
-- why we can't afford to pay teachers and principals salaries competitive enough with surrounding suburban areas;
-- why we can't fix decaying school buildings or even get working water fountains in schools;
-- why we feed our children junk instead of looking at food service as a cost cutting measure;
-- why our high schools are loaded with surveillance and technical machinery but lack the adult personnel and supports that make a school appealing and safe
Last December, Mayor Street requested (in a politically poor move) $10 million in the assumption of city services for the school district -- something voted on by Council the previous June. Council rejected Street's request wholesale. But the District is counting on that $10 million in-kind delivery, and half a year has gone by with the $10 million sitting on the District's revenue books threatening to add to a $30 million deficit that's nearly doubled since the fall.
It remains to be seen what the Mayor will actually do, but the message implying that money isn't foremost isn't the best either way.
sort of overwhelming
It definitely isn't the best message, but that figure of $1 Billion is sort of overwhelming. Where do you even start? Can you even make a crack at it? Not saying you shouldn't, but it's such a monster, you know?
Hopefully he'll find a way to kick the snot out of the PPA so that it starts delivering for schools. I can't help but think a lot more money should be coming from there.
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This Too Will Pass, treating grave matters lightly and light matters gravely, since 2001.
City needs a funding plan for the schools
To me, there was a minimum to the school funding statement -- and that's the fact that the Mayor knows that the District is counting on $10 million in city services to balance its 07-08 budget, $10 million the City has yet to deliver since promising last June. A minimum would have been to say the District is getting that $10 million.
I agree that throwing around the $1 billion is overwhelming -- but I personally think Nutter's comment (though it may have been taken out of context) is equally unproductive if not worse. The $1 billion after all is based on studies. Nutter's comment plays mostly to the political and economic crowd. And maybe it's not even a good political message, since state legislators are going to be grumbling about whether they'll throw $80 million to Philly in the Governor's new budget while the Mayor's on record saying the city doesn't plan to kick in any more.
In either case, an aggressive plan for funding schools needs to happen immediately. The Governor's pie in the sky plan currently is to drum up about half of that $4 billion over six years, meaning Philadelphia is going to be asked to find $500 million just to get to adequacy as of 2007 (never mind growth/inflation over the next six years). It's too early to pass judgement until the budget is really released, but his budget overview on education doesn't match the lofty promises made about halving the high school drop out rates.
The BPT breakdown (the simple part)
Indeed, the BPT breakdown of net profits vs. gross receipts is in the five-year plan proposed budget, page 25. Here's how it's worked:
In case you're wondering about the root trends, let's also look at total income and total profit. Extrapolating from the figures above, we get this picture:
There's no net profits/gross receipts breakdown, but here are the real and projected total BPT numbers for FY06-FY13:
The schedule of cuts to gross receipts taxes stops at 2012, but according to the highlights section, the gross receipts BPT will be cut to "0.08% by FY2013 leading to the elimination of the tax in 8 years." Likewise, there is no schedule listed for cuts to the net receipts BPT apart from the cut to 6.4% in 2009 and the goal of 6.0% in 2013 -- as you can see, this averages to reduction rate of a tenth of a percentage per year.