So the good news: The city has won approval of John Street's latest five-year plan.
The bad news: The way the city did it was to reneg on Street's promise to give the school district a $10 million bump. This allegedly one-time grant was in addition to the $19 million or so that the district would get yearly in shifted property tax money, thanks to City Councilman Wilson Goode's bill.
OK, "reneg" is a strong word (the Bulletin called it a "reversal"). The Inquirer story explains that the city actually has $2 million of additional money for the schools budgeted, and really, really is going to try super hard to come up with another $5 million by going after delinquent real estate taxes. And they'll have a plan for how to do that ASAP. Promise. (As to the remaining $3 million, that will come from smoke, mirrors and assuming some costs now borne by the district).
Aaargh.
So now we're between the rock of PICA not approving our five-year plan (which could eventually mean the state would withheld some money from the city, particularly $255 million per year in earmarked wage tax revenue) and the schools not getting their much-needed $10 million. Why are we having to make this choice at all? It's like little old ladies having to choose between food and medicine.
How did we find ourselves in the situation of not having even $10 million -- in a $3.8 billion per year budget -- more to pay for schools???
There are lots of fun little wrinkles in this story. For example, note that one reason for PICA's concern was that this sum potentially was more than $10 million that the city was talking about. There was some concern that it might be an ongoing $10 million per year -- and a much bigger budgetary hole. OK, I get that.
But it gets better...
The plan, as approved, has gaping holes that no accountant worth their spreadsheets would stomach. Such as: It is balanced based in part on the assumption that PGW will suddenly find itself in the position to pay back a $45 million loan from the city in 2009. Um, oh-kay...
PICA said the budget was officially balanced, but they made a point of expressing their reservations on that, and on this (as reported by the Inquirer):
More significant, the five-year spending plan includes no money for future pay raises for municipal employees, even though the city's four municipal unions are set to negotiate new four-year contracts next year.
I'm sure there won't be any request for pay raises in the negotiations.
(Wendy ETA:) So, an obvious question: Why did PICA approve the plan after all?
There are some good reasons. This plan (and past budgets) have underestimated the amount of tax revenue the city actually ends up collecting. This happy mistake can make up for things like rising costs in union contracts.
And the plan includes a fund balance of at least $53 million each year -- which is enough to cover the damage when if PGW defaults.
Michael Nutter responded to the issues raised in the Bulletin: "It has been clear for some time that the city financial situation is deteriorating. It is also very clear should I become mayor we're going to have to examine every aspect of the budget as well as any new opportunities to grow our revenues and cut our costs."
"This report makes it clear to the citizens of Philadelphia that responsible fiscal management must be at the forefront of the next administration. Tough decisions must be made."
Yeah, no kidding. If you'd like to start understanding how tough those decisions are for yourself, we highly recommend the report by PICA's staff that's posted here, especially the executive summary that begins on page 3.