FRAUD — Tentative Budget Deal Is A Sham

(May 2010)

Fraud.  That is the only word that can describe the tentative deal reached by the Mayor and City Council to resolve the city’s latest budget impasse.  The Mayor and Council propose to “balance” the budget with a tax increase that is completely unfair and potentially illegal; spending “cuts” that are not truly reductions at all; and a series of new revenue streams that spare those with the connections and a willingness to play “let’s make a deal.”  What’s worse?  In the end, the budget is still out of whack in the short term, and potentially doomed in the long term.

Just before he introduced his budget and proposed balancing his spending plan with a new tax on sugary drinks and trash collections, Mayor Nutter made a series of remarkable campaign donations from his “Nutter For Mayor” fund.  Even though members of City Council are not up for re-election for another year, Nutter’s campaign account donated $10,600 — the maximum amount permissible by law — to a number of Council members in the days leading up to his budget address.  At best, this looks like an attempt to “buy” votes.  I guess I don’t know what it looks like at worst except to say that the irony is that recent history has demonstrated that Nutter would have an easier time getting Council members to pass a kidney stone than he would have getting them to pass his budget proposals.  Despite the Mayor’s extraordinary campaign largesse, Council (again) marched to the beat of a different drummer extending their long-term streak of not giving the Mayor what he wants.

Council decided to enact a 9.9-percent Real Estate Tax increase (hoping that we forgot how to round decimals and would not notice that this is a double-digit tax increase).  We all understand that the values upon which the Real Estate Tax is levied are so woefully out of whack that we are about to get rid of the agency in charge of the mess.  It is a huge problem that we continue to kick this can down the road and have successfully avoided fixing this system in recent years.  It is a disgrace that, knowing what we know of the fatal flaws in real estate assessment in Philadelphia, we would press on with a tax increase based on this unfair, and almost certainly illegal, foundation.

If anyone is counting, this is the third year in a row, that Mayor Nutter and City Council have increased taxes.  In a city with one of the nation’s most uncompetitive and burdensome tax structures, this is not a proud streak.

Our leaders also decided to “cut” a number of areas in the budget, but those cuts do not actually represent spending reductions.  They have chosen to not reserve $4 million for unanticipated expenditures, to reduce an increase in Council spending by $1 million which still leaves Council’s budget too fat by another $1 million, and to reduce budgets for Police-overtime and Prison-related spending to reflect successful management initiatives already underway. 

In other words, NOTHING more was cut.  The hackocracy continues to employ too many patronage employees, our Row Offices continue to operate unthreatened by modernity, and our government continues to operate in so many ways as if no belt-tightening were in order.

It would be wonderful to credit City Council — in rejecting the Mayor’s call for a tax on sugary beverages and trash collection — with a principled stand for the citizenry.  It does not seem to be the case.  Media outlets have reported that the city’s beverage-industrial-complex honchos have offered to launder a $10 million “donation” toward new “worthy” initiatives through a local foundation to make the soda tax go away.  So it looks like it will just disappear like “New Coke.” 

Talk about soda jerks — PEW, that stinks. 

But, given the clusterformation of inappropriate relationships that drives everything in our fair city, we should expect little more.  Unable to come up with the juice to avoid tax increases, the city’s tobacco purveyors will get hit with a tax on cigars and chewing tobacco (see…this is why I munch on sunflower seeds when I play baseball — they remain blissfully untaxed as food), and the city’s small businesses will get whacked with an increased fee for trash collection.

I wish I could end this missive by declaring that the moves proposed by the Mayor and City Council — flawed or fraudulent as they may be — at least balance our budget and put us on the road to long-term fiscal stability.  This may be the biggest fraud of the whole debacle.  While the city is almost certainly still hiding money by underestimating future revenues, the current budget and future Five-Year Financial Plan only balance if we assume that, somehow, negotiations with the city’s firefighters, white-collar workers, and blue-collar employees will conclude with the unions accepting no raises and making concessions worth $25 million each year over the next five years.  Buckle your seatbelts.  We are in for more budget turbulence in the coming months and years.

Our leaders have stumbled through another budget without tackling any of our long-term challenges.  Our city’s costs are still rising faster than our revenues can keep up.  Our costs/fees are still too high compared to the benefits offered by city government.  Our city is still one of the only jurisdictions anywhere without a formal Rainy-Day Fund.  Our you-scratch-my-back-I’ll-scratch-your-back civic culture rules.

Maybe the biggest fraud is expecting any better.





I was asked by the Daily News’ It’s Our Money blog to give a once-over-lightly on how I would resolve the budget crisis.  Visit ( if you want to see what I would do.