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State Rep. Jewell Williams D-Philadelphia www.pahouse.com/williams

Philadelphia's House delegation backs measure to stabilize city pension system, finances

HARRISBURG, Aug. 5 – In a move aimed at closing Philadelphia’s nearly $2 billion budget deficit, the state House today approved a measure (H.B. 1828) that would authorize the city to take actions to manage its pension obligations and impose a five-year temporary 1 percent increase in the local sales tax.

The bill would provide a total of $700 million in new revenue and savings over the life of the city’s five-year financial plan.

State Reps. Jewell Williams and Dwight Evans, both D-Phila., co-sponsored the bill, which they said is critically important to the short and long-term fiscal health and viability of the city of Philadelphia. It passed the House in a vote of 112 to 85. The legislation now goes to the Senate for consideration.

"Philadelphia has acted responsibly to manage its own fiscal house, and there are clearly shared sacrifices by city workers, city residents and city businesses," said Williams, who serves as chairman of the Philadelphia Delegation. "It was time for us to do our part and take action for the city."

Williams added that all members of the Philadelphia Delegation supported the measure.

"House Bill 1828 provides the city with essential tools to help the city help itself," said Evans, who serves as chairman of the House Appropriations Committee. "It does not cost the state one dime, but it’s extremely valuable to the future of our nation’s most historic city."

House Bill 1828 would permit the city of Philadelphia to:

• utilize a 30-year amortization period for its pension fund instead of a 20-year period;
• defer a portion of city pension contributions in fiscal year 2010 and fiscal year 2011;

• defer $150 million of over $447 million in city pension contributions in fiscal year 2010;
• defer $80 million of over $538 million in city pension contributions in fiscal year 2011;

• repay deferred amounts with interest in total by fiscal year 2014;

• repay the entire $230 million deferral amount in fiscal year 2013 and fiscal year 2014;
• pay 8.25 percent interest on the amounts deferred during fiscal year 2010 through fiscal year 2014; and

• increase the sales tax by 1 percent for five years and earmark revenue from the increase to city pension payments.

Williams and Evans said that if the measure is not enacted by the legislature, the city will be faced with no choice but to dig deeper and make painful cuts in programs and services. According to the mayor’s office, these actions would require eliminating almost 1,000 positions in the city's police department and 200 in the fire department, closing two health centers, reducing trash collection from weekly to two times a month, and closing entire service departments, including Parks and Recreation, the Free Library, Planning and Commerce.  

"The damage that would result from those cuts would leave the city beyond recognition, and the impact of these cuts would be felt by the entire southeastern Pennsylvania region and the ultimately the whole Commonwealth," Williams said. "Thousands of workers commute to the city each day for their job; they will be affected. Thousands of conventioneers and tourists visit Philadelphia each year; they will be affected. Thousands of people from the region spend evenings and weekends in the city enjoying the art museum, the zoo, Fairmount Park, the Kimmel Center, the Italian Market, the Constitution Center, and the Liberty Bell; they will be affected. Thousands of college students are enrolled in the 26 colleges and universities in the city; they will be affected. And hundreds of vendors who provide the city with supplies and services will no longer have any business opportunities with the city; they too will be affected."

Williams said the global economic crisis has hit local governments hard. He added that declining tax revenues, dramatic losses on earnings in pension funds, and soaring interest rates on long-term debt are forcing cities, counties across the country to cut costs, find efficiencies and seek new revenue to balance their budgets.

Philadelphia is the only city in the state that is both a municipality and a county. As such, Philadelphia taxpayers must pay for both municipal services, including police and fire departments, streets and recreation, and state-mandated county functions, such as courts, child welfare and mental health/mental retardation services. This affects Philadelphia’s ability to respond to this economic crisis in a manner not experienced by other cities, Williams said.

"The city, under the leadership of Mayor Nutter and Philadelphia City Council, has worked responsibly and aggressively to respond to their fiscal crisis," Williams said. "Yet the magnitude of the problem is hard to fully grasp."

Williams said Philadelphia had to close a $2.4 billion hole in its budget and five-year plan. Through a series of actions, the city has reduced this deficit by $1.7 billion.

Some of these actions included:

• stopping wage and business tax reductions;
• increasing a wide variety of fees and fines;
• eliminating nearly 1,100 full-time and 2,000 part-time positions;
• reducing overtime citywide and reduced the number of city vehicles by 335;
• enhancing delinquent tax collection efforts;
• deactivating five engine and two ladder companies in the fire department;
• reducing library services from six days to five days a week;
• mandating five furlough days for exempt employees; and
• stopping longevity and pay increases for civil service employees.

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