Federal Funding and Philadelphia’s Fiscal Crisis

By the end of October, the Nutter administration will make public its proposals to respond to a fiscal crisis that could produce a deficit of between $650 million and $850 million over the next five years unless draconian steps are taken to cut spending and at the least to slow the pace of tax reduction to close the fiscal gap.

But on November 4th, the country will elect a President and a Congress that is now poised to pass a new stimulus package of $150 billion that could provide significant help to state and local governments to help stimulate the economy.

When it was clear that the country faced a credit crisis that threatened the viability of America’s financial institutions, the federal government came up with $733 billion to avert what was already becoming our worst economic crisis since the Depression.

Now that it is becoming equally clear that states and cities throughout the country are facing budget deficits of major proportions, a sizeable group in both houses of Congress appear ready to pass a second stimulus package of $150 billion with potentially significant benefits to communities throughout the country. Reports of this second stimulus package have been circulating for several weeks. That Ben Bernanke and the Bush administration itself are expressing support for an initiative of this kind, the question is no longer whether we will have a new stimulus package, but what it will include.

In its present version, the stimulus package will provide significant support to projects throughout the country aimed at strengthening America’s infrastructure. This is the kind of initiative that the Governor Rendell has been advocating as President of the National Governor’s Association. The City’s capital program now calls for $19 million in expenditure for street reconstruction and resurfacing, improvements to transportation facilities, and replacement of water and sewer mains. These are all projects that appear eligible for support under this program.

If Congress were to include a significant increase in support for the Community Development Block Grant–as the most important source of support for strengthening America’s low and moderate neighborhoods–this could be of real benefit to cities trying to prevent a new cycle of inner city deterioration. CDBG cannot be used to replace an existing city service. But 15% of the program still can support public services in areas where development is taking place. It would not take much effort to figure out how funds like these could be used to make up for general fund cutbacks within the framework of these federal regulations.

A $150 billion stimulus package can help us meet the fiscal challenges facing us now. If the new President does turn out to be Barack Obama, there are longer range initiatives that can help us address our fiscal crisis over the next five years. Here are a few examples:

*Obama has  made a commitment to invest in a Prison to Work program parallel to the welfare to work program that has brought between $89 million and $302 million into Philadelphia over the past five years.

*Obama pledges to restore federal support to public housing and community development that can help us reduce both homelessness and the local costs associated with it.

*Obama will work to establish 20 “Promise Neighborhoods” after the Harlem Children Zone that parallels the Empowerment Zones of the Clinton era. The   Empowerment Zone brought $79 million into the   City in 1994 that funded revitalization projects in North Philadelphia, West Philadelphia, and the American     Street Corridor for the next five years.

The Rendell administration benefited a great deal from a sizeable increase in federal support in the 1990’s made possible by the Clinton administration as the city worked its way out of our virtual bankruptcy in 1991. Between 1993 and 2000, federal investment in Philadelphia from HUD, the Justice Department, and Health and Human Services rose from $1 billion to $1.5 billion–an annual increase of $544 million. We ended the decade with a sizeable budget surplus.

Between 2000 and 2007, however, federal investment in Philadelphia from HUD, the Justice Department, and Health and Human Services dropped from $1.5 billion to $1.4 billion, with draconian cuts in Public Housing capital funds, the Community Development Block Grant, the COPS program and local law     enforcement, and social services benefiting low income households. Now we are facing a fiscal crisis of major proportions.

Unfortunately, we have grown so accustomed to annual cutbacks that we have forgotten what it was like when we actually received more money from         Washington every year instead of less. We need to start looking ahead–not behind.

Consider the Philadelphia Prison. Presently, despite the administration’s commitment to reentry, the City is projecting that the budget for the Philadelphia Prison will rise from $218 million in FY2008 to $251 million in FY2014–more than $33 million at a rate of $5 million more each year between now and then.

But nationally,  there is broad bi-partisan support for significant federal investment in a Prisoner Reentry Program that will help states and local governments throughout the country reduce the unacceptable cost of incarceration. Senator Arlen Specter has been a leader in the fight for what is called the “Second Chance Act” supporting prisoner reentry. It  passed earlier this year and will provide the framework for prisoner reentry in the future. Barack Obama has pledged to support a Prison to Work parallel to the Welfare to Work program in the new administration.  TANF funding has brought as much as  $320 million annually  in federal and matching State funding into Philadelphia over the past decade. The number of people receiving TANF has dropped from 67,000 in 1997 to 30,000 today. Reducing the population of the Philadelphia Prison by just 30% could save the City $70 million a year. That is possible. Shouldn’t we working to see that that it happens instead of assuming that it can’t?

The City administration pledges that it will follow the “Blueprint to End Homelessness” developed over the past two years, but the City budget projects that local spending on the homeless will rise from $38 million in FY2008 to $40 million in FY2014. What blueprint is that? If, as is likely, the federal government restores funding for public housing modernization, the Community Development Block Grant, and related housing rehabilitation programs could help us develop enough affordable housing to achieve a significant reduction in our homeless population. Shouldn’t we be working to end the need for locally funded homeless shelters, instead of assuming that we can’t?

These are just two  examples, based on what is being proposed in the campaign and what is already winning support in Congress. While we here in Philadelphia are now developing plans to cut departments that have been cut and cut repeatedly  over the past decade–along with ending support for dozens of non-profits and community groups throughout the City–it is possible that significant help from Washington, DC may be on its way. We should at least hold back on any firm decisions about cutbacks until we see what happens on November 4th and how the President-elect proposes to address the fiscal crisis facing states and cities throughout the country.

So my recommendations are these.

First, whatever cutbacks the administration now proposes should be put on hold at least until we see what happens on November 4th and how the President-elect proposes to address the fiscal crisis facing cities and states throughout the country.

Second, the Mayor Nutter  needs to meet with our representatives in the House and the Senate–all of whom are now exert considerable power in both parties–to work out what they should be advocating to help us meet the fiscal crisis that we now face.

Third, the City administration should be working to design a model Reentry program that modeled after welfare-to-work that can help thousands of residents of   our City become constructive members of our community. It is likely that federal support will be available for demonstration projects in this area in the coming year. We are well positioned to seize this opportunity–which could be worth millions of dollars.

The City needs to work out with the Philadelphia Housing Authority, Project HOME, People’s Emergency Center, and other homeless organizations a strategy not only to fight for an increased investment in affordable housing, but a plan to insure that it will help us significantly reduce the homeless population.  Nearly 20 years, Mayor Wilson Goode told our first homeless czar, Jane Malone, that she needed to cut the number of people in homeless shelters by 300 per month. She succeeded–and by far the greatest number of people from the shelters ended up in public housing. It is clear that something like this strategy has emerged again. We need to take advantage of new resources available in housing to make sure that it happens.

In a period when the best we can expect from the federal government is fewer cutbacks than the President is prepared to make, it is prudent for an administration to build its five-year plan around what we can afford with only local and state support.

But when the federal government is poised to expand its investment in America’s cities, it is imperative that we position ourselves to take advantage of the new initiatives that will be available to us. By 1999, the City of Philadelphia was receiving $550 million more from the federal government than was available to us in 1991. We can do at least as well if there is a ‘new day’ in Washington as there is here in Philadelphia. And there are sophisticated non-profit groups throughout Philadelphia with experience in all the areas where new federal investment is likely that will be more than willing to help.

Yes we can.