The Kenney administration is expecting $1.4 billion in federal funding from the new coronavirus stimulus for the city’s coffers.
But the American Rescue Plan also will put more money in the majority of Philadelphians’ pockets and boost funding for low-income residents, among other things.
More than 1 million residents are eligible for a $1,400 direct payment as part of the federal stimulus, which President Joe Biden penned into law on March 11.
An estimated 300,000 children will be eligible for the expanded child tax credit — or 9 out of 10 of the city’s children, said Sarah de Wolf, the city’s deputy finance director for policy and practice, during a Tuesday news conference.
The federal stimulus includes a slew of other assistance funding, which will continue the pandemic unemployment benefits of $300 a week through Sept. 6; expand the earned-income tax credit; boost Supplemental Nutrition Assistance Program; and provide rental and homeowner assistance.
How the federal stimulus package will ultimately affect the city’s 24.3% poverty rate remains unclear, Kenney administration officials said Tuesday.
Finance Director Robert Dubow spoke in general terms about whether the stimulus package will reduce poverty. The stimulus funding will provide more resources for low-income residents, which “will have a really positive impact on reducing poverty,” he said.
“It will give people money to spend which will help the economy recover more quickly than it would have [without the stimulus package],” Dubow said. “So that’s really good for everyone in the city.”
Philadelphia’s poverty rate remains the highest among the largest U.S. cities. More than 333,000 children are in poverty, of which approximately 100,000 are children under 5 years old, according to 2019 data from the U.S. Census Bureau taken before the pandemic.
In a separate interview, Maari Porter, deputy chief of staff for policy and strategic initiatives, said she believed the changes to the child tax credit and earned-income tax credit could be “transformational” in reducing Philadelphia’s poverty rate — with the caveat that Congress make them permanent.
The increase in benefits for the child tax credit and Earned Income Tax Credit are only for tax year 2021. Porter added that residents must file their taxes to receive the credits.
The stimulus package boosted the child tax credit from $2,000 to up to $3,000 per child, or $3,600 for each child under the age of 6, and broadened eligibility by eliminating the requirement that families must have taxable earnings of at least $2,500. The Internal Revenue Service could start paying out installments of the child tax credit to families this summer.
The stimulus package also broadened the earned-income tax credit by as much as $1,000 and expanded eligibility, according to the Biden Administration. This tax credit helps earners at the lower end of the income scale, such as cashiers, food serves, and home health aides.
The anticipated $1.4 billion in federal funding for the city will go toward the city’s operating budget, which Dubow said was “desperately needed.”
The city is facing a $450 million budget gap going into the new fiscal year, which begins July 1.
The upcoming fiscal year’s budget should be “much less painful than what we were looking at without this funding,” Dubow said, referring to budget cuts.
Dubow cautioned the federal funding’s one-time boost would not solve all of the city’s fiscal problems. The economic fallout from the pandemic has created “structural issues” in the city’s upcoming year’s budget and city’s five-year fiscal plan, he said.
“Overall, really positive but we still have significant challenges as we put the (city’s five-year fiscal) plan and budget together,” Dubow said.
The Kenney administration continues to explore how the anticipated federal funding will affect the city’s upcoming budget and five-year fiscal plan, he said.
Last month before the stimulus package was passed, Dubow said the budget hole could force the Kenney administration to make “really painful decisions” and another city official said all options were on the table to plug the budget gap, including raising taxes. The Kenney administration closed a $750 million budget hole last year through budget cuts.
De Wolf said the federal funding coming to the city remained preliminary as federal agencies hammer out final details and restrictions over how the money can be spent.
The Kenney administration is expected to receive the first half of the funding within 60 days and the other half 12 months after that, de Wolf said.
Dubow recalled that in the fallout of the Great Recession of 2008, the city did not receive “this type of huge influx of federal money for our operating budget,” which he called a “very big difference.” (Dubow was appointed finance director in January 2008.)
Mayor Jim Kenney will introduce his annual budget plan April 15, a month later than usual.