PICA approves Philly 5-year budget plan, with concerns

Philadelphia’s financial watchdog unanimously approved Mayor Michael Nutter’s five-year budget plan Monday.

However, that doesn’t mean members of the Pennsylvania Intergovernmental Cooperation Authority are in love with the plan.

Michael Karp, vice chairman of PICA, ticked off several causes for concern: the city’s woefully underfunded pension system, cash-strapped schools and unresolved labor contracts. He also raised questions about the fact that Nutter’s plan assumes that the City Council will approve the sale of Philadelphia Gas Works and use the proceeds to fund the pension system. Oh, and Karp thinks the city should create a rainy-day fund, which it can tap into during a financial emergency, through “belt-tightening.”

“It’s still a reality you’re going to have a recession at some point,” said Karp. “You should set aside money for that inevitability.”

Rob Dubow, Nutter’s finance director, said the city has tightened its belt throughout the last several years and that additional cuts would hurt city services. He said it is too early to say whether next year’s budget will have a rainy-day fund.

“We’re always looking at ways to lower our costs without impacting service,” he said.

In 2011, Philadelphia voters approved an amendment to the city charter that requires the administration to set aside money into a rainy-day fund if its budget surplus reaches a certain amount (3 percent of the city’s annual spending). So far, that has not happened.

Despite his misgivings, Karp said he believes Nutter and City Council will be able deal with the upcoming challenges. 

“My personal confidence is that the Council and the Mayor, when they’ve had to in the past, during the terrible times of the bad recession, did work together, did cut expenses, did raise taxes, did what they had to do to keep the city afloat,” he said, “and I personally feel they’ll do what they have to do.”