A state oversight board is set to vote Tuesday on a plan to dip into Philadelphia's reserves to pay for the city's new three-year police contract.
But the mayor's office says that won't be the final blueprint for funding the $245 million contract. After two other unions get new bargaining agreements, Mayor Kenney's administration will release another plan with budget cuts in other departments — a wave of "belt-tightening," in the words of a city spokesman.
The plan up for vote Tuesday before the Pennsylvania Intergovernmental Cooperation Authority (PICA) would fund the police pact by using all of the city's $200 million in labor reserves and pulling $45 million more from the reserve fund, or the money the city has left at the end of each budget year.
Such a step would significantly reduce the city's reserve funds compared with the plan approved in June by PICA, whose board members at the time raised concerns about a lack of cushion built into the city's bottom line.
But the Kenney administration won't finalize its strategy to cover the costs until after the city's firefighters and white-collar labor union also get new contracts in the coming months, said city finance director Rob Dubow.
"What we did with this plan really is just show the police costs and what impact that has with our really, essentially doing nothing else," he said. "We didn't think it made sense to go through a full plan process now and then have to go through it again."
Dubow said he is in the process of asking city departments to look at reducing their spending below their budgets for the current fiscal year.
Although the administration said the cost of all the contracts will be covered through other means, the cash in the city's reserves remains a topic of concern.
Under the five-year plan up for vote Tuesday, the fund balance will dip to as low as $29.4 million by the end of fiscal year 2020 — which even its top finance officer acknowledges offers little wiggle room.
"That's much lower than we want it to be," Dubow said. "In a perfect world, it would be more like $300 million."
When PICA approved the city's five-year plan in June, as is required each fiscal year, its board members noted that the fund balance should be larger, in the event of fiscal problems or a recession. Ideally, Dubow said, the city would have saved between 6 and 8 percent of the amount in its general fund each year. But it rarely reaches that goal.
This fiscal year, the city projects taking from that fund balance to make up for a projected gap between revenue and spending.
The amount of money in the fund balance was also a topic of conversation among city council members when they approved a tax on sweetened beverages last year.
The tax will go toward expanding pre-K and community schools and improving parks, recreation centers, and libraries. But in the first five years of the tax — as the city launches those programs — some of the tax revenue would go elsewhere. Of the $450 million in projected beverage tax revenue in the first five years, $23.6 million would go into the city's fund balance.
That was a factor that swayed some city council members to vote for the tax. Councilman Allan Domb said at the time of the vote that he was convinced to vote for the 1.5-cents per ounce tax because some money would go into the fund balance, which he called dangerously low.
But he said this month that he did not have concerns about the labor contracts' impact on the fund balance — or about the money put into the fund balance from the beverage tax going toward the contracts.