City Budget Transfers — Most Missed Moving Money

While most Philadelphians were busy with holiday shopping, walking off Thanksgiving turkey, or practicing their Mummers’ strut, our elected officials considered some changes to the city budget.  On the off chance that you didn’t notice the changes, this recap will fill you in.

Although City Council approves a budget each spring that sets forth the projected revenue and spending for the coming fiscal year, circumstances change and adjustments are made.  After the budget has been passed into law, changes can still be made to the budget in the form of what is essentially an amendment to the budget law that must be passed by City Council and signed into law by the Mayor, called a transfer ordinance.  Money can be transferred from agency to agency (from the Police Department to the Fire Department) or from lump sum to lump sum within agencies (from Police Personnel to Police Materials and Supplies).  Money can even be transferred from one budget “fund” to another (from the Grants Revenue Fund to the General Fund).   Despite the fact that these adjustments may represent shifts in policy, these changes usually receive very little public scrutiny. 

On Thursday, December 7th City Council held a hearing to make adjustments to both the fiscal year that ended June 30th, 2006 and the current fiscal year, FY 2007.   One transfer ordinance (referred to as the “year-end transfer ordinance”) documents the final clean up of the Fiscal Year 2006 General Fund budget to make the books agree with the actual spending that occurred last fiscal year.  Sure, it would have been nice to get approval to change the budget before actually spending the money, but these alterations are pretty standard occurrences that happen every year.

A total of 31 transfers in the City’s General Fund (which funds services most citizens associate with city government from trash collection to police protection and most everything in between) are memorialized.  These changes, representing $20.9 million, include 17 net changes between departments, and 14 changes within departments to move funds from various spending categories (for example, from materials and supplies to salaries within the Treasurers Office).   The bulk of the excess money is in the Department of Human Services.  Funds not needed there are being moved to cover higher-than-expected water and sewer bills, increased workers’ compensation costs, growth in criminal justice spending, and other needs.  Similar bills move money within the City’s Aviation and Water Funds (which fund the Airport and Water Department, respectively), and another moves funds from the City’s Community Development Fund to support salaries associated with the Housing Trust Fund.

In addition to these fairly routine bills, two other proposals brought up issues of broader importance than merely cleaning up the City’s books.  The City’s ongoing effort to reorganize the alphabet soup of housing agencies was at the center of debate on one bill.  This bill will transfer spending on contracts to spending on salaries within the Community Development Fund for Fiscal Year 2007 at the Office of Housing and Community Development (OHCD) to spending on salaries at OHCD.  As part of the overall reorganization, jobs would be transferred from the Redevelopment Authority (RDA) and Philadelphia Housing Development Corporation (PHDC) to OHCD.  The bill gives OHCD the spending appropriation needed to hire people to staff the positions that are being transferred from the RDA and PHDC.  Concerns about the impact of the reorganization upon current employees remains and some council members feel that giving OHCD the resources needed to hire staff is premature. 

Changes in spending patterns are not the only modifications that impact the City’s annual budgets.  Following the realization that City revenues will be higher than expected this Fiscal Year, as a result of a larger-than-expected starting fund balance and strong revenue collections in the first quarter of the year, a proposal was made to spend some of the unanticipated revenues on sorely needed repairs to Police, Fire, and recreation facilities.  At the beginning of the budget process the Mayor — and the Mayor alone — sets the total amount that can be spent in the City budget.  It is within that constraint that the Mayor and City Council prioritize spending.  With the new information about greater resources, another transfer seeks to move appropriation power in the amount of $30 million that is not needed in the Grants Revenue Fund to City Council’s budget within the General Fund.  Companion bills would then move the $30 million to the Capital Budget, to be divided equally between Police, Fire and Recreation facilities.

However, even if Council changes the budget to reflect increased appropriations for facilities, the decision to actually spend the money remains with the Mayor, who opposes this extra spending.  The Mayor cannot spend money without Council’s approval, but Council cannot force the Mayor to spend money he doesn’t want to spend — those are just the rules of the game and the powers of the players.

None of these changes, if enacted, represent significant shifts in city policy and priorities.  But it is important to remember that the annual budget process, and the assumption and priorities that shape it, are not frozen in time.  Philadelphia’s elected officials can restructure the budget — the city’s most important policy document — through the transfer ordinance process.  Now you know.