Mayor Jim Kenney

Mayor Jim Kenney’s proposed fiscal 2022 budget projects revenue will rise 13.4%, mostly from federal aid.

— WHYY photo/Emma Lee

Mayor Jim Kenney proposed a $5.18 billion budget with no property tax increases owing to anticipated revenue rebounds to near-coronavirus pandemic levels and the federal stimulus package.

Kenney’s sixth proposed budget would boost year-over-year spending by 7.8% ($375 million). Revenue is expected to jump by 13.4% compared with the current fiscal year, with the bulk coming from the American Rescue Plan ($575 million), which passed last month.

Before the passage of the federal stimulus package, Finance Director Robert Dubow said the city was facing an “ugly budget” with at least a $450 million spending gap that would have called for “major cuts to our departments” and “significant tax increases.” The federal funding won’t fully make up for revenue losses stemming from the pandemic but staves off cuts and layoffs.

“It would have been a devastating budget without the federal money,” Dubow said on Wednesday during a budget preview with news reporters.

During his budget address to legislators on Thursday, Kenney said his proposed plan for fiscal year 2022 would improve the lives of Black and brown residents.

“And across every investment in this plan,” Kenney said during his virtual address, “we will target our dollars and our policy change to reverse the impacts of structural racism, and to make concrete improvements in the lives of Black and brown Philadelphians — in their safety, their health, and their economic well-being.”

The proposed budget estimates that tax collections will reap $3.3 billion, buoyed by anticipated year-over-year increases from the city’s wage tax (7.1%), property tax (2.6%), realty transfer tax (1.4%) and sales tax (3.1%).

The pandemic’s effect on Philadelphia’s economy during the last year was significant. Business closures and stay-at-home orders led to massive revenue declines in several city revenue sources, including the wage, amusement and sales taxes.

Tax collections weren’t expected to reach pre-pandemic levels until at least fiscal year 2023, said Marisa Waxman, the city’s budget director. The city plugged a $750 million budget hole last year, resulting in cuts to services.

“It’s going to take some time to fill that in,” Waxman said.

The city will receive an estimated $1.4 billion through the federal stimulus package, which will be used through fiscal year 2025. The pandemic’s effect on the economy is expected to reduce city revenues by $1.5 billion over the next five years.

In the first spending plan since the citywide protests over police brutality and racism after the police killing of George Floyd in Minneapolis, Kenney’s plan won’t reduce the police department’s budget. The mayor would keep police spending flat at $727 million at the current level — the highest budget of any city department.

The city’s new Citizen Police Oversight Commission, whose parameters and responsibilities have yet to be finalized, would get $1.9 million in the budget. The proposed budget for the commission would represent an increase of $950,000 over the current budget for the Police Advisory Commission, which the new commission will replace.

The increased revenue would allow for the resumption of several services that were cut in the last budget, and fund new programs.

The Free Library of Philadelphia would return to five-day-a-week service. Yet the library will not be able to move to six-day-a-week service, which was planned before the pandemic.

The proposed budget would restore the street sweeping program. While the Kenney administration did not have details about the extent of the programs or which neighborhoods would be covered, the mayor pledged during his budget address that the program will “focus on Black and brown communities that are often hit the hardest by illegal dumping.”

The Kenney administration also intends to spend more than $13 million to create a 911 triage unit, mobile crisis unit and co-responder program to better assist individuals experiencing behavioral and mental health crises.

The proposed plan also offers relief to residents, non-residents and business owners.

The spending plan calls for putting planned reductions in the city wage tax and the business income and receipt tax back on track with pre-pandemic timelines, which extend over the next four years. Planned cuts for those taxes were frozen last year due to the pandemic. The wage tax reductions amount to the largest single-year decrease since 2009.

The Kenney administration also will forgo new property assessments for a second year in a row for most properties. These reassessments can result in property tax increases for some.

The proposed budget includes dedicating $18.7 million in new funding toward anti-violence efforts, bringing the total investment to $35 million. The funding would help expand ongoing violence intervention programs, transitional jobs programs and more. Some of the funding increase makes up for cuts to anti-violence programs from last year.

The proposal makes investments in education for students in pre-kindergarten through college, which Kenney said was the key to lifting Philadelphians out of poverty and the city’s long-term growth.

The city’s subsidy to the Community College of Philadelphia is proposed to increase by more than $4 million over last year to reach $48 million, some of which will pay for tuition-free college for certain students. The city’s free pre-kindergarten program is expected to increase by 700 seats in the coming year.

Driving new costs for the city are boosts to mental health services and police reforms ($140.8 million); employee benefits ($132 million); pension costs ($109 million); and a $25 million labor reserve for upcoming contract negotiations for the city’s major unions, all of which have expiring contracts this year.

The proposed budget anticipates a $109 million fund balance, or surplus, by the end of the fiscal year on June 30, 2022. Amounting to 2% of the city’s overall budget, the fund balance is far below the 17% recommended by the Government Finance Officers Association.

The city won’t contribute anything to its rainy day fund, known as the Budget Stabilization Fund, because of its projected low fund balance. The Kenney administration exhausted its rainy day fund last year to help plug its budget hole.

Kenney’s proposed capital budget dedicates $132 million toward street paving, a year-over-year increase of $100 million. The funding is expected to pay for paving 115 miles of road.

Legislators react

Some legislators were unimpressed with Kenney’s budget plan.

“We need to have a bolder vision for our city,” at-large Councilman Derek Green said.

Green, chairman of the legislative finance committee, said the infusion of $1.4 trillion from the federal stimulus package is a “once in a lifetime investment.” Officials, he said, have an opportunity to do things differently in order to better fund community organizations and encourage the growth of minority-owned businesses.

Councilwoman Cherelle Parker, the chamber’s majority leader, warned Kenney that any proposed tax cuts must have a measurable boost for workers, especially low-wage workers. She also called for prioritizing the preservation of the city’s existing affordable housing stock and encouraging homeownership.

Councilman Kenyatta Johnson, chairman of the legislature’s special committee on gun violence prevention, pressed for the city leaders to be “bolder and more aggressive” in fighting rising gun violence, which will stymie Philadelphia’s recovery from the pandemic. He called for more investments in anti-violence efforts, including tapping into the federal stimulus funds.

“We must do for gun violence what we have done for COVID-19,” Johnson said, adding: “As long as gun violence remains out of control, our economic recovery will be weak and slow.”

At-large Councilman Allan Domb said the city’s reliance on wage and business taxes to primarily fund its budget was not working, noting the significant revenue shortfall Philadelphia had faced before the passage of the federal stimulus package.

“We need to dramatically change what we should be doing going forward,” Domb said.

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