The More Things Change, The City Budget Cannot Remain The Same

Some say, "the more things change, the more they remain the same."  Budgetwatchers have often been frustrated with city budget documents in the past because when things change, they do tend to remain the same.  For example, in recent years, the city has budgeted to increase spending on programs to reduce homelessness, but the Five-Year Financial Plan, which is created to project revenues and expenditures for future years, did not budget for the programs’ success and a corresponding future decrease in the need for services to homeless individuals.  Things DO change and that is why budgets and financial plans must be dynamic documents that account for change.

Investments made in initiatives today should create results in future years.  If we do not believe in the initiatives enough to budget for their positive results, we should be spending our scarce public resources in other ways.  This applies equally to those who would advocate increased city spending and those who would advocate tax reductions.

Activists often come before City Council or petition the Mayor to expand funding for city departments or agency initiatives.  Their argument boils down to a simple point:  increase spending and things will change.  Sometimes that change is articulated in positive terms (expand recreational funding and more young Philadelphians will be engaged with positive opportunities in their communities).  Other times, that change is articulated in negative terms (if we fail to increase recreational funding, then more young Philadelphians will turn to less positive activities and increase crime). 

Budgetwatchers might look at either argument in terms of its effect on future budgets — if we improve quality of life in city neighborhoods, property values and future Real Estate Tax revenues should increase; if we fail to give young Philadelphians positive recreational activities, we might expect to pay more in future crime-fighting costs; if we expand the positive recreational opportunities, we might expect to pay less in future crime-fighting costs. 

Similarly, the case for tax reform is often made in terms of improving the city's competitiveness and its ability to attract and retain jobs and neighbors.  Therefore, in positive terms, if taxes on wages and business activities are decreased, the city economy should improve and the city should add jobs and residents (or lose fewer jobs and residents than it otherwise would).  Alternatively, in negative terms, if the city fails to reform its taxes, the city should expect to lose more jobs and residents than it would with an improved economy. 

Therefore, Budgetwatchers would expect reductions in Business Privilege Tax rates to result in increased Wage Tax revenues (from an improved employment climate) and Real Estate Tax revenues (from an increase in the value of commercial property due to the reduction in tax costs). 

Candidate Michael Nutter's AN HONEST BUDGET NOW: THE NUTTER PLAN TO BRING FISCAL INTEGRITY TO CITY GOVERNMENT correctly notes:  "The current budget process does not tie performance to spending, and therefore we have little ability to judge what would happen to services if we increase or decrease spending on a given department or program."

In the position paper, candidate Nutter declares, "As Mayor, I will lead City government through the process of changing our budget process toward outcomes."

Budgetwatchers will be looking at Mayor Nutter's first budget and first Five-Year Financial Plan closely and we will be hoping to see a dynamic budget that is focused on creating positive outcomes.  More important, we will want to see those outcomes explicitly incorporated in the assumptions for the budget and the Five-Year Plan.  If there are cuts to the Business Privilege Tax, then there should be assumptions about how those tax cuts will improve the city economy and increase other tax revenues.  If there are increases for park funding, then there should be assumptions about how that expansion of spending will increase property values and decrease the need for other human- and social-service related spending.  

We want to see faith — demonstrated in the numbers — that city spending will create positive results and we want to see integrity — expressed in the figures — to show that our actions today are connected to our future plans.  Then, in future years, we will be watching to see if the Nutter Administration will expand investments in programs that are making a difference and reprogram funding away from policies that are not creating positive results.  Such a strategy will not only recognize that things change, it can help ensure that our scarce resources are best used to make Philadelphia a preferred place to live, work, and visit.

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