A fiscal oversight board Friday granted Philadelphia additional time to receive legislative approval for initiatives that would help the city balance its fiscal 2010 budget and avoid massive layoffs and service reductions.
At the same time, state legislators announced a bipartisan agreement that, if passed, would end Pennsylvania’s 10-week fiscal 2010 budget stalemate. However, though there is a strong possibility that Gov. Edward Rendell could veto the plan, since he believes it would generate budget deficits, according to Rendell spokesman Gary Tuma.
Pennsylvania is the only state that does not have an approved fiscal 2010 budget.
“Most significantly, it does not bring in sufficient revenues to balance the budget this year and to balance the budget next year,” Tuma said. “We think their revenue projections on many of their items that they’ve included in this plan are overly optimistic and it would leave us with about a $500 million deficit this year and at least a $1 billion deficit as we look at fiscal 2011. And the governor finds that unacceptable.”
The potential compromise involves a $27.94 billion spending plan that would not implement broad-based tax increases, but would contain one-time revenue boosts to help offset sluggish tax receipts, according to a Senate Republican press release. Both the House and the Senate could vote on the budget this week.
“We intend to honor the budget agreement that has been reached, and we fully expect the House to do the same so that this budget will be passed to the governor,” Republican Senate Majority Leader Dominic Pileggi said in a prepared statement. “I’m confident that after some reflection, the governor will realize that Pennsylvanians have waited long enough for a budget, and he will be able to set aside his ideological differences and support this bipartisan, bicameral compromise.”
Rendell’s fellow Democrats control the House while Republicans have the majority in the Senate. The one-time revenue increases include a 25-cent-per-pack increase on cigarettes, incorporating table games at state casinos, and a slowdown of the phase-out of the capital stock and franchise tax.
Along with the state budget impasse, lawmakers have yet to approve Pennsylvania’s capital act for fiscal 2010, which includes $2.32 billion of new-money debt. In addition, the state anticipates selling tax and revenue anticipation notes this year, the first time the state will issue short-term debt since 1998.
In looking at Philadelphia’s budget woes, the Pennsylvania Intergovernmental Cooperative Authority, which oversees the city’s finances, approved “Plan B,” contingent upon Pennsylvania’s legislature approving HB 1828. That bill contains a one percentage point sales tax increase for the city and pension contribution deferrals this year and next.
While Plan B includes raising the city’s sales tax to 8% from 7% for five years and delaying $235 million of pension contributions, that budget plan reflects needed modifications and spending cuts since the city expects to lose roughly $20 million in additional sales tax receipts because officials have been unable to impose that increase.
If lawmakers do not approve HB 1828 by Friday, Mayor Michael Nutter must then file by Sept. 25 “Plan C,” which would implement 3,000 layoffs, including 900 police officers, close recreational centers and libraries, and reduce the city’s trash collection to twice a month. Plan C would reduce the fiscal 2010 budget by $250 million and the five-year operating budget by $700 million.
This is the second time that PICA has given the city additional time to gain legislative approval on HB 1828. House members Friday approved an amended version of the bill, which the Senate could vote on today.
“What the board did today was, because there’s been progress at the state, was approve Plan B but conditional on state approval being passed by Friday the 18th,” said PICA executive director Uri Monson, “in part because that’s the day that layoff notices would go out under Plan C.”
Philadelphia earlier this month tapped into a $275 million line of credit from JPMorgan in order to make good on late payments to its vendors and suppliers. The interest rate on the loan is 3% and officials plan to repay it with a tax and revenue anticipation note sale before the rate increases to 8% on Dec. 1.
The city will head to market with the Tran deal after the legislature passes HB 1828.