Here’s what’s in Mayor Jim Kenney’s final budget proposal

Mayor Jim Kenney is proposing a $6.1 billion budget for the next fiscal year that modestly cuts the city wage and business taxes, freezes property assessments, boosts police spending, and creates a new Transportation Fund, administration officials said Wednesday.

The proposal calls for a significant increase in funding for the Police Department, which is the city’s largest agency. Council last year approved a $788 million budget for the department, but it crept up to an estimated $800 million over the course of the year. Kenney is proposing an $855 million allocation for next year.

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Kenney, who cannot run for reelection, will deliver his final budget address to City Council on Thursday. His proposed budget largely maintains the status quo of the city’s current tax structure and spending practices, an unsurprising move for a mayor who in his second term has shied away from bold policy proposals as his administration struggled to deal with the coronavirus pandemic and ongoing gun violence crisis.

It will also be the last budget season for Council President Darrell L. Clarke, who announced last week that he is not seeking reelection after 12 years as Council’s leader and four decades in City Hall.

The budget address traditionally serves as Philadelphia’s version of a presidential State of the Union address. For the last two years, Kenney recorded his speech as a video message that was played during virtual meetings of Council. The event will return to Council chambers this year.

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Managing Director Tumar Alexander, a top official in the administration, said the proposal focused on funding short- and medium-term violence prevention initiatives and quality-of-life improvements.

“It’s similar to recent budgets, but it also solidifies our commitment to things like violence prevention and ... neighborhood services,” he said, noting the proposal increases investments in street sweeping and illegal dumping enforcement.

Following Kenney’s speech, Council will hold a series of virtual hearings examining departmental budget plans, and lawmakers will negotiate amendments to Kenney’s proposal. The final deal must be approved before the end of June, when the current budget expires.

The administration projected that its plan would leave $524 million unspent, a cash reserve known as the fund balance, which is meant to help the city navigate unexpected shortfalls. That’s just above the city’s goal of leaving 8% of revenues unspent, but well below the Government Finance Officers Association’s recommendation of setting 17% aside.

Finance Director Rob Dubow described the city’s financial outlook as “tentatively stable” thanks in part to an infusion of federal aid in response to the coronavirus pandemic. Dubow said the city “has enough to steel ourself” ahead of the exhaustion of those funds at the end of 2024.

He also said the budget is based on an assumption that there will be an economic downturn in the next fiscal year that will result in tens of millions of dollars in reduced revenues.

“There’s a pretty clear consensus that we’re going to see a mild recession, and that will have an impact on what we see in tax revenues,” Dubow said.

Kenney’s plan calls for using $391 million in funds next year from federal pandemic relief legislation that Congress passed in 2021, and $449 million the following year. Philadelphia received $1.4 billion from the aid package that must be spent by the end of 2024, and the city has already spent or budgeted the rest.

The new Transportation Fund would separate $107 million in revenue from the general fund to dedicate it for expenses such as paving, street lighting, engineering and surveying costs, and crossing guards. Budget director Marisa Waxman said the city is looking to segregate the funds in part to show federal grantmakers that the city has dedicated transportation dollars.

The administration is also proposing an $80 million investment over two years that would provide free public transportation to city employees and at least 25,000 additional residents living at or near the poverty line.

”It really gets us moving in a great direction to make the city more accessible, particularly to folks with income challenges,” Waxman said, “as well as trying to address some of our recruitment and retention challenges.”

The city remains understaffed amid a national labor shortage, with 18% of general fund positions unfilled. The budget proposal calls for increased spending on recruitment, including $1.8 million to the Office of Human Resources for hiring and retention and $1 million over five years for diversity-focused recruiting in the Police Department.

Waxman said that while the vacancies have saved the city money and boosted its fund balance, the city is working to fill all of its budgeted positions.

“These are not good savings,” Waxman said. “These are ones that represent services undelivered and community needs unmet.”

Kenney is calling for continuing the city’s longtime practice of incrementally lowering the wage tax. His plan would lower the rate for Philly residents from 3.79% to 3.7565%.

The plan also calls for lowering the net income portion of the business income and receipts tax from 5.99% to 5.83%.

For the property tax, Kenney is proposing freezing the tax rate and all property assessments for a year to allow the Office of Property Assessment to catch up on reviews requested by property owners following the 2023 reassessment, which was the first citywide reappraisal since 2019 and resulted in an average increase of 31% for residential properties.

The plan includes budget increases of $5 million each for the District Attorney’s Office and the public defender’s association, $14.7 million over five years for police forensics, and $6 million to improve Fire Department facilities.

The $55 million proposed increase to the Police Department budget is for expenses related an improved forensics lab and labor costs. It also includes about $9.2 million over five years for the department to hire analysts to carry out the department’s patrol strategy, also known as “Operation Pinpoint.”

The administration is also proposing a $25 million increase to its antiviolence programs outside traditional law enforcement. The budget was about $208 million last year and the administration is proposing about $233 million. The increase in funding will cover stipends for people who participate in an antiviolence program, as well as trauma counseling for workers.

Kenney is also proposing increasing the city’s subsidy for the School District of Philadelphia to $282 million next year, a $12 million increase.