Lies, Damn Lies, and Statistics in the City Budget

(March 2011)  

Mayor Nutter put forth what he calls a budget the other day, but it is really just a series of placeholder assumptions until we see how anticipated federal, state, and School District cuts will affect plans to raise and spend money in Philadelphia. As lacking and incomplete as the Mayor's budget is, I quickly place it in the "fiction" section of my library for a few tall tales incorporated into the text.

Maybe "fiction" is a strong word. As wonderful as my children are, I sometimes find myself lied to by my otherwise near-perfect offspring. My wife, a much better person in every way, counsels me that the children are not really "lying," rather, they are telling me something they wish were true. Perhaps, then, the best accusation to level at our Mayor and his "budget" is that it puts forth a number of assertions that he wishes were true.

The first assertion I take issue with involves the "temporary" 10-percent Real Estate Tax increase enacted last year. While the tax increase expires next year, the Mayor does not incorporate a corresponding decrease in Real Estate Tax revenues in his revenue forecasts. In Fiscal Year 2010 (July 1, 2009-June 30, 2010), the city collected $402 million in Real Estate Tax revenue. After the 10-percent tax increase, the Mayor anticipates collecting $489 million in the current fiscal year (Fiscal Year 2011) and $487 million next fiscal year (Fiscal Year 2012). But then a funny thing happens: the 10-percent tax increase is legislated to go away, but the Mayor anticipates collecting $487 million in Fiscal Year 2013, $492 million in Fiscal Year 2014, $500 million in Fiscal Year 2015, and $507 million in Fiscal Year 2016.

Either the Mayor's minions cannot read the law that states that the 10-percent Real Estate Tax increase only applies for Fiscal Year 2011 and Fiscal Year 2012, or something more nefarious is going on here. Read what the Mayor had to say about taxes in his budget address:

"There are no tax increases in the budget that I propose today, the temporary 1% sales tax increase will expire in FY15 -- as promised -- and the wage and business tax cuts that we suspended will be reinstated in FY14."

Hizzoner artfully does not mention the "temporary" Real Estate Tax and my sources tell me that the Mayor plans to make that tax hike permanent by using the effort to accurately assess Philadelphia properties for tax purposes as a back-door tax increase. Everyone involved has always asserted that the effort to make property assessments fair, accurate, and legal should be accomplished in a way that is budget-neutral for the city -- that is that the re-assessments should not increase or decrease city Real Estate Tax collections. The Mayor's move to re-set the tax rate after citywide reassessment to reflect collections incorporating the 10-percent tax increase makes the "temporary" tax increase a permanent tax increase.

Maybe a "temporary" Real Estate Tax increase was something the Mayor wishes were true, but his budget tells me it is a lie.

The second assertion I take issue with involves "Anticipated Workforce Savings" that the Mayor incorporates into his budget. By his reckoning, the city will save millions after it completes negotiations with unions representing blue-collar and white-collar city employees. In the budget he put forward last year, the Mayor anticipated that he would be able to save $25 million each year based on his negotiating prowess. He must be reconsidering that prowess because this year's budget reduces those estimates to a little less than $12 million per year.

But the very notion that the city will save money through negotiations with its unions is a questionable one and it is all the more dubious because the Mayor is not actually conducting any negotiations with those unions. In considering the fact that the city's blue-collar and white-collar unions are working without a contract and talks are non-existent, the Mayor had this to say in addressing the Greater Philadelphia Chamber of Commerce last month:

"In the meantime we've saved money as neither wages nor healthcare costs have risen for these employees in the 3 years I've been Mayor."

If, in his heart of hearts, the Mayor truly believes that he can save money by negotiating with the unions, then every second that goes by that he is not at the negotiating table is wasting taxpayer dollars and putting services that could be paid for with those savings at risk. If, however, the Mayor believes that the city is saving money by NOT negotiating new contracts, then he must believe that negotiations will end up costing the city money.

Maybe the $12 million per year in "Anticipated Workforce Savings" is something the Mayor wishes were true, but his budget tells me it is a lie.

But the biggest assertion I question involves the nature of the budget itself. In the documents memorializing his proposed budget, Mayor Nutter outlines a budget procedure that includes "Citywide meetings on the budget held to gather public input" BEFORE the budget is reviewed with senior administration personnel or shared with City Council. Now, I pay attention to things around here but must have missed those citywide meetings. I was also part of a proposal to help the administration gather public input to craft his budget that never came to fruition as the Nutter administration instead chose to shape the proposed budget behind closed doors in its financial bunker.

While running for Mayor, Michael Nutter put forth a policy paper titled An Honest Budget Now where he wrote:

"The budget process in Philadelphia is the ultimate game of inside baseball. Today, the budget process has no meaningful public participation. The budget is prepared by the Mayor and then debated in City Council before citizens ever get to comment and by that point the opportunity to set priorities is long past."

Candidate Nutter promised to revolutionize the budget process by creating a meaningful role for citizen involvement in setting priorities and making choices. In past years, Mayor Nutter was a bit more interested in what we, collectively, had to say. In 2009, the city created a series of public budget workshops that were attended by Philadelphians in neighborhoods across the city. The next year, those workshops were dialed down significantly to a series of kitchen-table talks with carefully selected citizens. This year, the administration has chosen to hold a few invitation-only chats, but has refused to list the events on the Mayor's public schedule lest we the people actually find out about them.

In his Honest Budget Now, Nutter declared "City budgets are too important to be left to the politicians." Maybe the Mayor wishes that his budget procedure started with citywide meetings to gather public input, but his budget tells me it is a lie.

The budget is HIS budget, not ours. The savings anticipated from union negotiations are much more likely to be a hole in the budget. The "temporary" Real Estate Tax increase looks like it is here to stay. To call the Mayor's budget assertions "lies" is admittedly harsh. I wish it weren't true.