IN FEBRUARY, Mayor Nutter handed out roses to City Council members during his first budget address. Soon after, Council approved his $4 billion spending plan with very few changes.
Now, it appears those roses have sprouted some thorns. Worsening economic conditions have resulted in a $34 million shortfall for this fiscal year. According to Nutter, that number could grow into a $450 million deficit over the next five years.
This isn't good news, but it isn't surprising either. Cities and states are staggering under a tsunami of national economic woes driven in part by the subprime-mortgage meltdown, the soft housing market and turbulence on Wall Street.
Until now, the city has been staying relatively dry during this wave. Our housing market never reached "bubble" proportions, so values have remained relatively stable. Also, the sectors that have remained relatively strong nationally - tourism, health and education - are part of the foundation for Philadelphia's economic base.
And yet, we can't help wondering if the city might have been more conservative in the optimistic spending plan Nutter got passed in February.
Then, when the city was braced for Nutter's first budget to identify some of the hard choices we knew were bound to come, it was instead a happy party with candy and balloons for the kids: a new arts-and-culture office, new money for the parks, rec centers and cops.
Later, the union contracts were settled undramatically with one-year contracts - which included $14 million in ratification bonuses. These bonuses helped get the deals done, and in the long run are less expensive than raises, but knowing what we know now, was it the right time for them?
One big factor in the current woes is the pension-obligation bond that Nutter proposed early on that would have provided $50 million in spending. Because the bond market has become so bad, this solution has been put on hold.
But even under the best circumstances, the pension-obligation bond was a risky thing. Should there have been a Plan B?
A mayor's first budget is a telegraph of his agenda. So we're not begrudging a new mayor's right to budget for what he wants to accomplish, especially since those goals are so worthy.
But now's the time for reality to collide with optimism. The cutting that will go on in City Hall over the next six weeks, after which the mayor will unveil his plan, will mean ending some programs, slowing tax cuts, and potentially laying off city employees. It must lead to a leaner city government without unduly sacrificing services.
Many of these services are going to be more critical than ever, given how few are escaping the country's economic woes, especially those at the bottom of the economic ladder - a large part of our population.
In addition to cuts, the business-privilege tax, the main culprit behind the latest shortfall, should be reformed. This tax, whose revenues can fluctuate wildly, is far too complicated. Rewriting the code might make it less onerous on business, important if cuts to the tax slow down.
None of this will be easy. Nutter will need help from all quarters, including Council. We hope Council steps up to the plate and helps, by focusing on the city's bigger challenges, like full-valuation real-estate assessment. This may not bring in much more money, but will help rebalance the city's tax burdens. Council should realize that issues like menu labeling are not a priority when few can afford to even look at a menu anymore.
(Go to www.ourmoneyphilly.com for more on the budget.) *