On August 19, the City submitted to PICA a proposed revision to the Five-Year Financial Plan for Fiscal Years 2015 through 2019. Under the PICA Act, if the City executes a labor contract that is not in compliance with the approved Five-Year Plan, it must submit a proposed Plan revision that “demonstrates that revenues sufficient to pay the costs of the contract..will be available in the affected fiscal years of the plan.” The August 19 Plan revision was required due to two recent arbitration awards: a July 30 award for the Fraternal Order of Police covering FY15 through FY17, and an August 6 award covering court employees represented by District Council 47 Local 810. Both awards resulted in costs in excess of amounts projected in the version of the Plan approved on July 21. In addition to increased labor costs for Police officers and court employees, the revised Plan also includes increases in pension cost projections due to revised actuarial assumptions adopted by the Board of Pensions and Retirement, and other revisions based on the most recent FY14 estimates. The proposed Plan revision is available here.
Fiscal Year 2014 General Fund tax collections through June increased 3.3 percent over the prior year and appear likely to meet or exceed the City’s current FY14 projections
General Fund tax collections totaled $166.5 million in June, according to the City’s preliminary revenue report, an increase of $31.6 million from June 2013. Overall FY14 tax collections total $2,818.5 million, an increase of $90.5 million (3.3 percent), as compared to the previous fiscal year. The current FY14 tax revenue estimate, contained in the PICA-approved Five-Year Financial Plan for FY15 through FY19, is $2,788.7 million. Actual collections for most taxes are at or above the current estimate. Final reported revenues will reflect end-of-year adjustments required under the City’s modified accrual basis of accounting. Based on collections through June, however, it appears likely that the final revenue amounts will meet or exceed the City’s current estimate. The full report on revenues through June is available here.
On July 21, the PICA Board voted unanimously to approve the City of Philadelphia proposed Five-Year Financial Plan for Fiscal Years 2015 through 2019. The Plan was submitted to the Authority for its consideration on June 26. The PICA Staff Report on the Plan contains an analysis of revenue and expenditure projections, an assessment of financial risks faced by the City, a discussion of spending trends by City agencies, and a review of key indicators of financial health. The report also includes brief discussions of key policy and management issues that affect City finances, including the Administration’s proposed sale of the Philadelphia Gas Works, the municipal pension system, and strategic planning. The report is available here.
Under the PICA Act, within 45 days of the end of each fiscal quarter, the City is required to submit to PICA “reports describing actual or current estimates of revenues and expenditures compared to budgeted revenues and expenditures…” The City fulfills this requirement by submitting a Quarterly City Managers Report (QCMR). The most recent QCMR, covering the third quarter of FY14, was submitted to PICA on May 15. The report is available here.
The QCMR projects an end-of-year FY14 General Fund surplus of $119.8 million, compared to a projection of $78.4 million in the initial FY14-FY18 Five-Year Financial Plan approved by PICA in September 2013. The PICA Staff Report on the QCMR describes reasons for the changes in projected General Fund revenues, expenditures and fund balance in FY14. It also discusses key financial and management issues including labor contracts, pension plan changes, and performance measures. The Staff Report is available here.
On June 26, the City submitted to PICA its proposed Five-Year Financial Plan for fiscal years 2015 through 2019. Significant changes from the version of the Plan proposed by the Mayor in March include: (1) changes to assure consistency with the FY15 budget adopted by City Council; (2) updated projections of tax revenues in FY15 through FY19 based on a $9 million increase in the current projection for FY14; and (3) revisions to the reserve for future labor contract costs.
Notably, the Plan projects a $24.6 million contribution to the City’s Budget Stabilization Reserve Fund in FY19, reflecting a projected FY19 fund balance that exceeds 3 percent of appropriations. This is the first time that a Five-Year Financial Plan submitted to PICA has included a contribution to the Reserve Fund, which was created by an amendment to the City Charter approved by the voters in 2011. The fund is designed to provide additional revenues to the City in the event of lower-than-budgeted revenues, or when necessary to prevent a disruption in services or fund emergency programs.
Under state law, the PICA Board within 30 days of the Plan’s submission must determine whether the proposed Plan “projects balanced budgets, based upon reasonable assumptions…for each year of the plan…” The Plan as submitted to PICA is available here. The cover letter of the City Budget Director to the PICA Executive Director is available here.
The PICA Act requires that as long as PICA bonds are outstanding, the Mayor shall submit a proposed five-year plan to the Authority at least 100 days prior to the beginning of the fiscal year. On March 6, Mayor Nutter submitted to PICA the City’s proposed Five-Year Financial Plan for Fiscal Year 2015 through Fiscal Year 2019. The full Plan document is available here. Additional schedules that provide support for the revenue estimates in the proposed Plan are available here.
The submission of the proposed Plan by the Mayor is the first stage in the annual Five-Year Plan process. The PICA Act requires that the Plan be consistent with the Council-enacted operating and capital budgets. Accordingly, after final passage of the FY15 budget, the City will revise the Plan to reflect the approved budget, and may make other changes to reflect legislative or economic factors that impact revenues or expenditures. The revised Plan will be submitted to PICA, and the PICA Board will then have 30 days to determine whether the revised Plan meets PICA Act criteria.
The PICA statute requires the Authority to file an annual report with Commonwealth and City officials “describing its progress with respect to restoring the financial stability of assisted cities and achieving balanced budgets for assisted cities…” The annual report for year ended June 30, 2013 includes an overview of PICA and its role, a discussion of PICA’s work during FY13, goals for FY14, and long-term goals. The report also includes FY13 financial statements and a report of independent auditors. The report is available here.
Guide to the Budget
Philadelphia’s General Fund Budget: A Citizen’s Guide is designed to better inform the public about the City of Philadelphia’s budget. The City’s General Fund supports the core operations of government and is primarily financed through tax revenues. It accounts for all resources except those for which a dedicated fund has been created.
The budget planning process begins in December, seven months before the beginning of the new fiscal year. The process concludes when PICA approves the Five-Year plan.