State legislative gridlock has cost Philadelphia the opportunity to collect roughly $20 million to date in potential sales tax revenue. The failure of lawmakers in Harrisburg to adopt measures to help city coffers balance the budget for the current year has forced city officials to now craft a revised budget that includes 3,000 layoffs and spending cuts.
Philadelphia has until Aug. 31 to submit an alternative budget to the Pennsylvania Intergovernmental Cooperation Authority, which oversees the city's finances. The city's original budget was balanced based on temporarily increasing the sales tax to 8% from 7% and making lower pension contribution payments this year and next to match revenue with expenditures. Those two initiatives require legislative approval.
While Philadelphia officials anticipate Pennsylvania lawmakers will pass the measures by the end of the month and that would allow them to avoid implementing the 3,000 layoffs and cutting the budget by $250 million, the soonest the city can begin the sales tax hike is Oct. 1. Officials expect to lose $20 million in August and September in sales tax revenue due to the delay, which may result in some of the layoffs and cuts in the doomsday budget taking effect.
To offset the $20 million, Mayor Michael Nutter yesterday announced immediate layoffs and spending cuts, including delaying a cadet class in the police department scheduled for the fall.
The city's five-year spending plan also relies upon additional sales-tax revenue and pension changes to generate $700 million toward budget balance. Nutter yesterday urged Senate members to move on the issue.
"There are real consequences to inaction," Nutter said in a press release. "Every week that passes without Senate approval costs the city millions of dollars, forcing ever deeper cuts to services."
PICA last month said the city must receive by Aug. 15 state approval of the sales tax increase and pension changes or submit a revised budget absent those initiatives by Aug. 31. Senate President Dominic Pileggi sent a request to PICA, asking to extend the deadline to mid-September. PICA executive director Uri Monson said the authority has not responded to the request. PICA's board meets today and could take up the issue of pushing the city's deadline to September, Monson said.
HB 1828, which includes the two Philadelphia measures, currently sits in the Senate Finance Committee after House members passed the bill earlier this month. Senate Republicans control the upper chamber while Democrats have the majority in the House.
Philadelphia has already postponed a $275 million tax and revenue anticipation note deal as it cannot issue the short-term debt, due to higher borrowing costs, until its budget is balanced.
Along with HB 1828, the city is waiting on an estimated $120 million of state aid for fiscal 2010 as Pennsylvania has yet to pass its complete fiscal 2010 budget. Earlier this month, Gov. Edward Rendell signed an $11 billion "bridge budget" to meet payroll and maintain essential services.