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Mayor Jim Kenney Proposes $4.4 Billion Budget for the City of Philadelphia

3/23/2017

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After endorsing a string of new anti-business taxes and regulations, Mayor Jim Kenny delivered his budget address to Philadelphia’s City Council on March 2nd, during which he made note of the fact that the city ranks first in poverty and last in job creation among the top 10 major U.S. cities. The Mayor’s $4.4 billion budget proposal increases spending by three percent, but will not impose any additional taxes on businesses and families already struggling under his new sweetened beverage tax.

Revenue collected from that tax has already been promised to pre-K and community school programs, as well as to parks, recreational centers, and libraries. At this time, funds collected are being held in reserve pending the court challenge against the sweetened beverage tax, of which PFMA is a challenger. The city began officially funding the new pre-K program in January, starting with 2,000 new pre-K seats, but depending upon the court’s decision, the city would like to add 1,000 more seats in the fall. However, projections for full fiscal year are more than $92 million, and that will be a hard target to hit if consumers continue choosing to make purchases outside city lines. 

The Mayor used his address to blame distributors and retailers for the higher prices, but profit margins are so low they have had no choice but to raise prices. Businesses are reporting sales losses as high as 30 to 50 percent, and Pepsi has announced it will be laying off a portion of its workforce as a result of the tax. If current trends continue in the private sector, the area will face additional layoffs, closed stores, and have a major impact on the city’s fiscal policy and decision making, and could affect thousands of families, workers and businesses in the city.

Similarly, the city has reported lower than expected collection rates for the Mayor’s new $2 per-pack tobacco tax, which brought in just under $13 million less than predicted for the first six months. If this trend continues, the city will only generate $49.6 million, a far cry from the $75 million expected. Fortunately for Philadelphia and its budget — and unfortunately for every taxpayer not living in the city — last year’s state budget included a provision that requires the Commonwealth to make up the difference (potentially $25.4 million) for the city. Thanks to that provision, the failures of the cigarette tax will not prevent Philly’s schools from being fully funded. 

The Mayor has expressed concern over other sources of state funding and federal funding, which Philadelphia stands to lose as a so called “sanctuary city.” State Senate Bill 10 (Senator Reschenthaler), known as the Municipal Sanctuary and Federal Enforcement (SAFE) Act, has already passed the Senate, and is awaiting consideration by the House of Representatives’ Judiciary Committee. 

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