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Nutter presents Phila. budget today

Mayor Nutter today will present to City Council a $3.84 billion budget and a five-year plan that seek to solve the city's worst fiscal crisis in decades through steep, and temporary, tax increases and a full frontal assault on city workers' salaries, health-care, and retirement benefits.

Mayor Michael Nutter at Beer Week earlier this month. Today, he'll announce a budget plan to hammer back spending and grapple with the city's fiscal woes. (John Costello / Staff Photographer)
Mayor Michael Nutter at Beer Week earlier this month. Today, he'll announce a budget plan to hammer back spending and grapple with the city's fiscal woes. (John Costello / Staff Photographer)Read more

Mayor Nutter today will present to City Council a $3.84 billion budget and a five-year plan that seek to solve the city's worst fiscal crisis in decades through steep, and temporary, tax increases and a full frontal assault on city workers' salaries, health-care, and retirement benefits.

There will also be spending cuts - including the elimination of 250 city positions - and an assortment of new fees. Some of the reductions have potent symbolic value, among them an overall 22 percent cut in administrative costs and a 500-vehicle reduction in the city's fleet.

But the cuts, totaling $300 million, are tiny relative to the fiscal problem: a five-year deficit of nearly $1.4 billion, up from $1 billion in January.

By far, the biggest pieces of the mayor's five-year plan are tax hikes totaling $613.3 million and employee pay, health-care, and pension proposals that would save $637 million.

None of what the mayor wants is a sure thing, but if the plan is approved, it would result in preserving many city services, including library branches, health centers, homeless shelters, and after-school programs.

Council has yet to vet the budget, and many of the mayor's proposals are subject to union negotiations or approval by the state legislature.

Although most major elements of his budget proposal have been widely reported for more than a week, Nutter confirmed many of the details for the first time yesterday, including a plan to increase the sales tax from 7 percent to 8 percent for three years.

On Monday, Nutter proposed increasing the property tax by 16 mills in 2010, or about 19 percent over the 2009 rate. The increase would decrease somewhat in 2011, to 14.5 percent.

If they are approved, the tax hikes would be by far the largest in Philadelphia since the 1970s.

"No one likes to propose raising taxes," Nutter said at a news conference yesterday. "It's not the most comfortable place to find myself, but the alternatives are worse."

Nutter has vowed that the increases in sales and property levies would be temporary. The legislation authorizing them would include provisions that phase the property-tax hikes out within two years and eliminate the sales-tax increase within three years.

The mayor's other principal target is the benefits-and-compensation package of city workers. His workforce proposals include:

No pay increases for the next five years. The mayor's plan would eliminate $180 million that had been set aside for raises. Union leaders, obviously, will fight him on this vigorously as they negotiate contracts with the city this spring and summer.

$125 million in savings on health-care benefits. Given that health-care costs are rising everywhere, any plan that seeks not just to limit the growth of expenses but reduce them ambitious, and likely to be fought vigorously by city workers' unions.

Actuarial changes to the city's pension fund, which would provide short-term relief - $332 million over five years - by spreading city pension payments out over a longer period of time.

Although the actuarial adjustments would not diminish the benefits paid to retirees or change the contributions made to the pension fund by workers, the Nutter administration said yesterday that it would also pursue "structural changes" to the pension system.

Administration officials would not explain what those changes might be, saying the news would wait until the mayor's address today at 11 a.m.

Taken together, Nutter's initiatives show he is trying to balance the budget not by cutting services but by cutting the cost of delivering those services.

Indeed, at his news conference, Nutter touted all the services that his budget and five-year spending plan would preserve, including:

Keeping open all libraries.

Maintaining the hours of all recreation centers.

Maintaining all eight community health centers.

Retaining 3,390 slots for after-school programs.

Retaining all services for abused and neglected children.

Maintaining funding for homeless shelters.

Previously, Nutter considered big cuts in each of those areas.

In addition, through private and public funding, Nutter said the city would be able to open 46 outdoor pools this summer, up from a previous plan to open only 10, and four indoor pools instead of two.

If Nutter does not get the approval he is seeking from the legislature for changes to the pension fund and the increase in the sales tax, deep cuts would be immediately back on the table.

"It is absolutely a place where none of us wants to go," he said at the news conference.

About 100 protesters from a coalition of unions, homeless advocates, churches, and antipoverty groups had mixed reactions to yesterday's announcements.

Many were relieved that there would not be cuts to the city's homeless system or community health centers.

But some saw a higher sales tax as too punitive to the city's poorest residents. According to the administration's calculations, the increase would cost a family with an income of $25,000 about $81 a year, while a family earning nearly $50,000 would spend an extra $115 a year.

Some members of the group, which calls itself the Coalition for Essential Services, would prefer Nutter raise the wage tax or business taxes.

The mayor has steadfastly refused to touch those levies. Raising them, he has said, would do long-term damage to the city's competitiveness.