Mayor’s Plan Gets “F” Grades

After much delay and some brinksmanship, the Mayor has provided the city’s state-established fiscal oversight agency with his revised plan to raise and spend public money for the next five years.  The revisions were necessary because the original plan just didn’t add up.  Despite tax revenues coming in stronger than expected, a recent spending spree by the Mayor and City Council created even more holes.  Given that it is graduation time, it is appropriate to give the Mayor final grades for his revised Five-Year Financial Plan:  all Fs for Finks, Fudges, Faith, and Fiction which is how he balances his books.

As Budgetwatchers know, ever since the city flirted with bankruptcy in the early 1990s, the city administration has been required to prepare a Five-Year Financial Plan to show that the budget would not just balance for the next year, but for the next five years.  Each year, the city submits its budget and Five-Year Financial Plan to the state-appointed Pennsylvania Intergovernmental Cooperation Authority (PICA) for review and approval.  If PICA refuses to approve the Plan, the city would be cut off from various revenue sources and would plunge into a budgetary crisis. 

So now that school is out…here are the grades.

F is for Fink.  One way that the Mayor balances his Plan is to fink on deals he made with City Council about spending initiatives.  During the past budget season, Council threatened to slash some of the Mayor’s pet programs until the Mayor agreed to increase funding for agencies like Fairmount Park, the Free Library, and the Recreation Department.  After the budget is passed, it is one of the powers reserved to the Mayor to determine how — or how not — to actually spend budgeted funds and now that the budget is passed, the Mayor has decided to simply ignore the wishes of City Council and not spend the additional money.  This helps balance his Plan, but represents low character.  If cuts are to be made, they should be made during the budget season, with the advice and consent of the people’s representatives on Council.

F is for Fudges.  Another way the Mayor balances his Plan is to alter some growth assumptions in tax revenues.  Budgetwatchers may recall that Philadelphia Forward predicted in January that tax revenues would come in dramatically higher than estimated by the city administration.  They did.  Now, the Mayor will use the extra revenues from this year and additional projected revenues in the future to close the holes caused by his free spending.  The administration usually underestimates tax revenues before the budget season, then wrings its hands about being unable to afford any increases in funding beyond what the Mayor wants, and then finally recognizes the increased tax revenues later in the year when the Mayor wants to spend on pet projects.  Unfortunately, the public never gets to have a debate on civic priorities informed by a realistic estimate of the revenues available so we can best determine how to spend our public dollars.

F is for Faith.  One more way the Mayor balances his Plan is to ask us to believe that something will happen in the future (when he is no longer Mayor) to close additional holes.  So the current Mayor counts on the next Mayor to generate certain new revenue streams and follow through on creating some managerial savings to pay for today’s spending.  It is wonderful that the Mayor is betting on the future, but it is much better fiscal policy to pay as you go.  More troubling, where Budgetwatchers have consistently relied on knowing that some money was stashed in various places throughout the budget, the Mayor is raiding many of these hidey holes on his way out the door, which will make it more difficult to find flexibility in future budgets.

F is for Fiction.  The Five-Year Financial Plan is simply a plan, not a fact.  In past Plans, Budgetwatchers could easily see plenty of areas where revenues were underestimated and expenditures were overestimated as well as plenty of areas where funds were “stashed” just in case.  This Plan is much tighter than previous ones and has much less wiggle room for the future, but the fact is that the Plan is just not reality.  For example, the Plan’s assumptions on the costs and revenues associated with the coming of casinos to Philadelphia are questionable and the Plan includes no funding for the work of recently established, voter-approved Commissions.  Most important, it makes no provision for increased funding that will surely accompany new contracts for the city’s unionized workforce next spring. 

Philadelphia Forward calls on PICA to give the Mayor the failing grade he deserves and to send his Plan back for additional revisions.  Given the unique circumstance of a lame-duck Mayor trying to balance today’s spending binge on tomorrow’s taxpayers, PICA should demand that the Plan be balanced on cuts made today, not in the future, and that a reserve for future contingencies be established that recognizes the fact that the city will have to fund increased costs resulting from new contracts with the municipal unions.

In the end, this latest Five-Year Plan will be approved and then things will change in the coming weeks and months that will dramatically affect city spending.  Then, the next Mayor will enter office in January with his own set of priorities and his own agenda that he will incorporate into the next Five-Year Plan.  Hopefully, that next Five-Year Plan will win A grades for Agreement, Accountability, and Accessibility.