Nutter and the Big Budget Gap

Activists ready to fight Nutter on 2011 budget.

By Daniel Denvir
Add Comment Add Comment | Comments: 7 | Posted Mar. 2, 2010

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Photo by Robyn John

It’s fiscal Groundhog Day for Philadelphia and the rest of the nation, with state and municipal budget gaps filled one year only to creep back to life the next. City Hall anticipates a budget shortfall of between $125 million and $150 million for fiscal year 2011, which begins July 1. Like last year, tax revenue is down. And the absolutely surreal quantity of winter precipitation that has befallen our cursed lot adds insult to injury, with plowing and whatnot costing the city at least $11.5 million. The gap is smaller than the $257 million that fueled last year’s great library wars and warnings of nigh-apocalyptic cuts to social services and to our police and fire departments. But there’s not much left to cut without cutting deep.

Mayor Nutter gives the 2011 budget address tomorrow, and City Council must deliver its seal of approval by May 30. If cuts are on the table, activists at the Coalition for Essential Services vow to defend city programs and workers.

“We will have a presence at the mayor’s budget address,” says Coalition activist Sherrie Cohen. “We hope that the mayor has learned his lesson from the people of Philadelphia: Don’t balance the city budget on the backs of poor and working people; fix revenue problems with equitable revenue solutions, not detrimental spending cuts that would hurt the most vulnerable.”

Last year, the Coalition for Essential Services and the allied Campaign to Save the Libraries raised a ruckus when Nutter proposed cuts to libraries and pools. It was nail-biting, down-to-the-wire drama until Nutter, two months late, finally secured Harrisburg approval for a sales-tax hike and a change in pension payments. The final budget largely kept these services intact. According to Nutter spokesperson Luke Butler, a repeat of last year’s Harrisburg drama is unlikely: There will be no property-tax hike while the Board of Revision of Taxes (BRT) awaits its likely voter-approved defenestration; increasing the wage or business-privilege taxes is off the table because of business opposition; and we’ve already upped the sales tax.

So what to do? “Once you take away all of that spending, further cuts result in cuts to programs and services,” says Butler. “The budget in ’10 is as difficult as ’09, if not more difficult because there are fewer options available.”

Indeed. The city has already eliminated more than 800 jobs and gotten rid of 500 vehicles, so new cuts mean direct reductions to social programs and/or the police and fire departments—an ethically and politically unappetizing scenario for Nutter. The mayor has hinted that he will propose a $5 per-week trash-collection fee and a tax on soda to close the shortfall. Whatever the final result, Nutter’s decision-making is taking place for the most part behind closed doors. Last year’s budget workshops drew more than 1,700 Philadelphians, but this year’s community dialogue is limited to a few small “kitchen table” meetings.

While Nutter gets to skip out on supplicant, flesh- pressing missions to Harrisburg, uncertainty still reigns. The mayor’s budget will likely presume millions in projected savings from yet-to-be-decided contracts with three out of four city unions, so those projected savings could become costs. In December, an arbitration panel awarded city police a contract that Nutter says will cost a hefty $80 million over five years, but will create big savings over the long haul.

The drama and intrigue of local politicking notwithstanding, there are serious problems at the state and federal level that are fueling the crisis.

Federal aid and stimulus funds allocated to Pennsylvania ensured that the state’s 2010 budget crisis would be tormenting rather than world-ending. That federal money has now dried up, and Pennsylvania is expecting a shortfall of up to $500 million. Gov. Ed Rendell has a largely progressive proposal to keep things solvent: expanding the sales tax to a bizarre potpourri of items that are currently exempt (from newspapers to candy and legal services) and lowering the overall rate; taxing the profit-hungry energy companies primed to extract billions worth of natural gas from the state; and closing the so-called Delaware loophole that allows mainly big, out-of-area businesses to avoid paying taxes here. Republicans in Harrisburg have, of course, balked.

The state crisis, in turn, is compounded by federal inaction. States around the country want more federal assistance, something that many economists support. But given Democratic timidity and Republican obstructionism, it’s not clear what, if anything, can be expected.

Philly depends on a good deal of state money for everything from drug and alcohol treatment to programs for the elderly and disabled. And there is of course the small issue of the state refusing to obey a 23-year-old court order mandating they fund the municipal court systems.

Philadelphia, like cities around the country, tends to get the short end of the stick, since suburbanites benefit from residing in a thriving metropolis without paying into much of the schooling and services for the area’s poor. An economic crisis makes this inequality immeasurably worse.

“The fiscal crisis in Philadelphia is endemic to cities around the country and in Pennsylvania,” says Sharon Ward of the progressive Pennsylvania Budget and Policy Center. “Many of the third-class cities, the Readings and Allentowns, are really experiencing fiscal distress. It’s rooted in the fact that cites have a higher share of tax exempt properties, and the concentration of services that need to be delivered and of lower-income people than the surrounding suburbs.”

Cities like Philadelphia are often treated the way the IMF treats indebted Third World countries: paternalistically. Granted, Philadelphia is plenty corrupt. Witness city counselors—whose own budgets are unique in not being up for discussion—shamelessly bilking the public by simultaneously collecting a salary and a pension through the DROP program. There’s also the patronage jobs mill operated by the city’s row offices. And the estimated $35 million—40 percent over budget—the city expects to pay out in legal settlements: a sad cost of doing business with a police department that violates civil rights with near impunity.

Yet if we’re measuring guilt by an institution’s per capita indictments, the state Legislature still pulls out ahead.

Short of the major changes—like regional tax sharing—needed to fix this structural problem, the state and city government do have tools at their disposal. Activists says the city should consider increasing the gross-receipts tax and exempting small businesses and replacing the wage tax with a comprehensive income tax. On the state level, Rendell’s proposals to tax natural gas, reform the sales tax and close the Delaware loophole will also raise much-needed cash. It would certainly be of benefit to future budgets and society as a whole to spend money now to curb recidivism and to keep at-risk youth out of trouble. But Rendell’s budget contains $1.9 billion in prison spending, double what it was just 10 years ago, and the city is spending millions more than expected on court-appointed lawyers and payments to the Sheriff’s Office for driving prisoners around.

Activists are optimistic that Nutter will move to avoid a crisis in the short run, but want to ensure that the wealthy carry the bigger burden.

“While we want preservation and expansion of essential services, we also want revenues to be raised equitably and progressively—in accordance with one’s ability to pay,” says Cohen. “Thus, rather than nickel and diming poor and working class folks with regressive soda and trash fees, we’d like to see corporate loopholes closed, tax breaks ended for big business, and large hospitals and universities pay their fair share.”

To be fair, many progressive public-health experts do support a tax on soda. Regardless, the cash-desperate state is pursuing many short term and arguably shortsighted solutions, from environmentally risky natural-gas drilling to socially malignant gaming—the virtuoso new Foxwoods investor Stephen Wynn now promises “the cutest casino you have ever seen.”

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Comments 1 - 7 of 7
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1. Anonymous said... on Mar 3, 2010 at 10:02PM

“Personally I think the soda tax is a great idea. We should tax all the unhealthy foods, like if an item contains more than a certain percent fat or sugar or contains high fructose corn syrup then give it a 3% tax. It would raise a ton of money and would force people to eat healthier which would save the city money in the long run. Also, after a student has accumulated more than 15 absences we should fine their family $20 per absence unless they have a legitimate note from a doctor.”

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2. Tom Young said... on Mar 3, 2010 at 10:29PM

“Go ahead raise taxes, keep doing it, continue to drive out businessses and anyone that actually works for a living. I grew up on Philadelphia and almost every person I grew up with has left the city, tired of paying for the give away programs for those who refuse to work. The only problem will be who will be left to tax after anyone with any sense moves out of the city. As far as anonymous's plan its none of the government's business what anyone eats.taxes are to pay for needed services not for punishment.”

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3. CJ said... on Mar 4, 2010 at 10:30PM

“Tax revenue will ALWAYS be down when you over-project it. CUT SPENDING! CUT waste in city government. More than enough ways to reduce the deficit rather than taxing the over-taxed ppl already. Nutter, thought you were about "Change"?”

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4. CJ said... on Mar 4, 2010 at 10:33PM

“The soda tax is STUPID. Where will it stop. If ppl stop drinking soda, like the city says it want...then it gets no tax $. Pretty STUPID. Everyone knows what is good/bad for you. Its no secret anymore, its NOT the cities job to police what we eat/drink. Thats Fascism. Cut the bloated city spending, and there will be no budget problems. Else, people will continue to flee to the suburbs..bad enough theres an outrageous WAGE TAX”

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5. Rumy said... on Mar 5, 2010 at 01:02PM

“Soda loving citizens will experience the pain of cost to assist them to reconsider the privilege of soda drinking. What a great tax incentive to lose weight and get healthy. Kudos to Mayor Nutter!”

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6. Anonymous said... on Mar 8, 2010 at 01:12PM

“I find the soda tax stupid. I myself don't drink soda. The government thinks it can just start taxing anything that someone says is bad for you. They tax cigarettes. The funny thing is that they say some of the money will go for medical, it never does. Just politicians filling their pockets. We pay property taxes, city taxes, state taxes and they still want to close the libraries, pools, rec centers. Service is not that great in Philly to be asking people for more money. Why don't we tax anyone that wants to hold office in Phlly.”

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7. Blatant said... on Oct 9, 2010 at 12:57PM

“We all remember the TV show “Roots” could this have been the real inspiration for AmeriChoice Health. The 101 Dumbest Moments In Business 2003 EDITION Whiffed pitch No. 6: blatant stereotyping. By Mark Athitakis April 1, 2003 (Business 2.0)– GRAND PRIZE WINNER, DUMBEST MOMENT OF 2002
In September, insurance company AmeriChoice brings trucks to blighted neighborhoods in New York City and gives away coupons for free chickens as an incentive for the underprivileged to switch their Medicare coverage. New York state senator Carl Kruger files a complaint with the state attorney general. The 101 Dumbest Moments In Business 2003 EDITION – April 1, 2003 Apr 1, 2003 … Just don’t tell him about the “Chinese health balls.” ….. In September, insurance company AmeriChoice brings trucks to blighted … New York state senator Carl Kruger files a complaint with the state attorney general….. Falling on his sword, Welch announces he’ll give up most of the perks,…

2009 and 2010 $120,000 from your tax do”


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