The financial impact of the coronavirus pandemic on Philadelphia could include budget cuts of as much as 20% to city departments — including cuts in staffing and services — and a $1 billion budget hole for the School District over the next five years, officials warned Thursday.
The School District is now projecting a $38 million deficit for its 2020-21 budget,chief financial officer Uri Monson said Thursday. The estimate represented a stark contrast to a prior projected fund balance of $167 million for 2021.
Those grim numbers contain no provisions for new contracts for the city’s teachers and blue-collar workers’ unions, both of which have contracts expiring this summer. And, Monson said, “there’s no fund balance to manage unforeseen events,” such as the environmental crisis the district was confronted with this school year.
Mayor Jim Kenney’s administration, meanwhile, is asking departments to trim their budgets by between 15% and 20% as budget officials scrap a previously proposed $5.2 billion spending plan. Kenney is scheduled to present a new budget to City Council next week.
While officials did not provide specifics on potential cuts to the city or School District budgets Thursday, they have warned that the financial situation is more dire than during the Great Recession, when the city was forced to tighten its budget in all departments and reduce services, decreasing spending by 11% between fiscal years 2009 and 2012. Some cuts, such as the closing of firehouses, were not restored until last year.
And for the School District, Thursday’s bad budget news conjured uncomfortable memories of doomsday budgets of years past, when officials ordered billions slashed from school budgets, and laid off all school counselors, secretaries and assistant principals to make ends meet.
“This is just the beginning of what’s going to be a grueling process,” said Joyce Wilkerson, president of the Board of Education.
City Commissioner Omar Sabir said the commissioners were told that the city was asking its departments for up to a 20% budget cut and asking independent offices like his if it could operate with 20% less funding. The commissioners had been slated to receive a huge increase in their budget — about 84% over the current $12.2 million — to prepare for and run elections.
“It would be very difficult right now in this climate, very difficult to do that," Sabir said. "We need as much funding as possible with this new election and how we’re voting.”
Mike Dunn, a Kenney spokesperson, declined to comment Thursday on details of the new budget or the size of potential cuts, but said, “We’ll make difficult decisions on city spending, the likes of which have never before been needed."
In an email obtained by The Inquirer, Jim Engler, Kenney’s chief of staff, told city employees Thursday: “This sudden change in the city’s financial position is going to require difficult reductions in city services and staffing."
The city will focus on “keeping Philadelphians safe, healthy, and educated, particularly vulnerable Philadelphians," Engler wrote, and “minimizing the disruption for city employees.”
Kenney has said education remains a priority, and Monson said the city has not signaled that it will cut its annual grant to the district.
“Everyone here remembers the devastation our schools suffered less than 10 years ago.… We cannot afford to repeat this dire situation,” Wilkerson said during a budget hearing Thursday.
Though the worst effects of the economic downturn are to come, the School District will more immediately lose $64.3 million in expected revenue through June — money it would have received from the city’s use and occupancy tax, liquor-by-the-drink tax, and other local funds. Its fund balance will be able to cover that shortfall, Monson said. The district is also planning for a $108 million cut in state funding, he said, given Pennsylvania’s projections of a shortfall of billions.
Superintendent William R. Hite Jr. said the pandemic "has the potential to erase all of the progress we have made over the last eight years.”
Hite and Wilkerson said that they believed school-level cuts can be avoided or at least minimized if they and the public begin aggressively advocating at the state level.
Councilman Mark Squilla said he had heard the city was looking to cut 20% of its budget across the board, but noted that it would be a challenge for every department to cut that much and continue offering needed services.
Reducing the current $5 billion budget or the $5.2 billion proposed budget by 20% would result in a $1 billion reduction in city spending. But Squilla noted that spending will need to increase in some areas to respond to the pandemic.
“This is something we’ve never experienced before,” Squilla said.
Kenney has increased spending during his first term in office, but Councilman Allan Domb said the city must now reconsider all of those budget hikes.
“There’s no luxuries in this budget,” Domb said of what he expects to hear next week. “It’s necessities and survival.”
Controller Rebecca Rhynhart said her office has offered up a 6% cut.
“We’re coming off of years and years of increases in the budget and there are areas of savings, overtime management, a variety of different things that can get you over $200 million in savings. I think that there are ways to not impact core service," said Rhynhart, a former city budget director.
The city has already frozen new hiring of staff, with the exception of positions needed for the city’s response to the pandemic, and reduced nonessential spending. But those actions alone would not suffice, Engler wrote, even as the city holds out hope for federal reimbursement for some coronavirus-related spending.
“The federal funds will not make up for the vast majority of the impact on the city’s and School District’s budgets,” he wrote.