Kenney’s budget would use stimulus money to cut taxes and return Philly to pre-pandemic spending

Mayor Jim Kenney’s proposed budget for the next fiscal year would use an infusion of federal stimulus money to get the city back on track as it recovers from the coronavirus pandemic by restoring some services cut last year, reducing wage and business taxes, and borrowing money for large projects.

The budget plan also sets the stage for a debate over police funding, which Kenney has proposed keeping at the same level as the current fiscal year. His budget includes new funding for police reforms that would be funneled through a different city department, including $13.2 million to overhaul how the city handles 911 calls for people experiencing mental health crises. Activists and some City Council members are pushing for greater cuts in police spending.

Kenney’s budget proposal in many ways represents a return to normal after a turbulent year in which tax collections shriveled as much of the economy shuttered, forcing the administration to make painful decisions including layoffs. But officials said Wednesday that it could take years for city tax revenue to return to pre-pandemic levels, and they predict 15% of suburban commuters may never return to city offices — potentially leaving a permanent hole in wage-tax revenue.

Kenney’s $5.18 billion budget would return the city to pre-pandemic spending levels. But to restore some services and make new investments, Kenney’s budget plan includes 5% cuts to several departments, which city Budget Director Marisa Waxman said would affect mostly “back-office functions” and not direct services to residents.

Council members said Wednesday there were few surprises in the budget, and several said they wished the administration had presented a more ambitious plan.

“We’re making new investments. We have no new taxes. We’re hoping for a good recovery,” Councilmember Maria Quiñones-Sánchez said. “It’s called a safe budget.”

The mayor will formally deliver his budget proposal Thursday to City Council, which will hold a series of hearings this spring and can make changes before approving a budget by the end of June.

Quiñones-Sánchez said she will use the budget hearing process to push the administration to find efficiencies and press for bigger changes on issues like affordable housing.

“I’m looking for more innovation and more creativity that leads to better outcomes,” she said.

Councilmember Cindy Bass said the budget didn’t do enough to fund reentry services for formerly incarcerated Philadelphians and to create job opportunities for young people who are most likely to be the perpetrators and victims of gun violence.

“There is no plan to move people from being on a corner or being involved in negative activity to employment that takes you out of that negative space,” she said. “I think there’s a lot to be desired in the current proposal.”

» READ MORE: Kenney had plans. Then the pandemic hit. Can he avoid lame-duck status and get Philly ‘back on track’?

Kenney plans to reopen city pools this summer, restore five-day library service, and begin some of the street-sweeping programs he promised before the pandemic. He is also proposing catching up on annual cuts to wage and business taxes that were paused last year, and accelerating the annual reductions in wage taxes.

And the plan includes $270 million in new borrowing — the largest amount in at least 20 years — for big projects, including $132 million in street paving, $10.5 million for city vehicles, and a $10 million revamp of FDR Park in South Philadelphia.

Without money this year from the newly enacted $1.9 trillion federal stimulus package, the city would have faced a $450 million budget hole that officials warned could have required significant layoffs and cuts to city services.

The budget approved by City Council last June included layoffs for 450 city employees, tax hikes, and cuts to several city departments to close a $750 million pandemic-related budget hole. It also depleted the city’s reserves, leaving few options for the upcoming budget if the federal aid had not come to fruition.

Of the $1.4 billion Philadelphia is receiving from the federal stimulus package, $700 million will be available for spending this calendar year and the other half will become available next year. Kenney is proposing to use $32 million in the current fiscal year, which ends in June, and $575 million for the fiscal year that starts July 1. That means more than 10% of next year’s $5.18 billion budget would come from the federal government.

Finance Director Rob Dubow said the city’s projected deficit over five years without any federal aid would be $1.5 billion, meaning that even spreading out the stimulus money doesn’t entirely cover that shortfall.

“We can’t go back to where we were before,” Dubow said. “We have to make tradeoffs as we go through the budget.”

And not all of last year’s cuts are restored in Kenney’s plan, which increases funding for the Philadelphia Cultural Fund, the city’s prime support for hundreds of organizations, by $1 million to a total of $2 million. That figure is still 33% less than pre-pandemic levels. The African American Museum of Philadelphia is slated for $150,000 in city support, down from $231,000 last year.

Amid calls to “defund the police” last year, Kenney and Council reached a deal to cancel a previously proposed $19 million increase in the Police Department budget. Kenney does not support reducing the size of the police force and has noted that reforms require investments.

Proposed police reform initiatives in Kenney’s proposal would be funded through the managing director’s office and include police training, a 911 co-responder program, and 75 civilian dispatchers. Kenney is also proposing additional funding for violence intervention and a new police oversight commission.

Changing the city’s response to 911 calls for people experiencing mental health crises is a key component of reforms proposed by racial justice activists who say health professionals, not police, should respond. About $7.2 million of the $13.2 million budgeted for that initiative would go toward expanding the Philadelphia Crisis Line. The other $6 million would fund a 911 triage and “co-responder” program to roll out citywide over the next year, with a pilot beginning within weeks. A crisis intervention-trained police officer and a behavioral health specialist would respond to mental health-related calls.

That reform comes after two officers killed Walter Wallace Jr., a 27-year-old Black man, firing more than a dozen shots in West Philadelphia in October. Wallace was wielding a knife and ignored the officers’ commands to drop the weapon as he approached them while experiencing what family described as a mental health crisis.

Kris Henderson, executive director of the public interest Amistad Law Project, said the group — which has called for reducing police funding and diverting more money to social services — wants the city to fund crisis response teams that operate completely outside law enforcement.

“These two [officers] show up maybe with Tasers or better training, something different might have happened,” Henderson said of the Wallace killing. “But what would have ensured something didn’t happen is if police didn’t show up at all.”

Councilmember Jamie Gauthier said she’s happy to see Kenney looking to make new investments, given the flexibility that the infusion of federal funding provides. But Gauthier said she was disappointed the administration appears focused on getting back to where the city was before the pandemic, instead of using the crisis as an opportunity to reimagine the budget.

“While I’m glad and can appreciate that the Kenney administration didn’t bring us an austerity budget,” Gauthier said, “I definitely think there are ways that we can be bolder as we rebuild and pay special attention to the communities that have been suffering the most.”

-Staff writer Stephan Salisbury contributed to this article