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Philly state delegation wavers on whether the city faces Plan B
Submitted by MrLuigi on Wed, 07/01/2009 - 12:32pm.
Perhaps they don't get the idea that even if the deadline for state budgets are apparently elastic, that the PICA rules that apply to the city are binding and unforgiving.
Philly has already passed its budget and its either Plan A - sales tax increase, some cuts including a few tough ones, a plan (yet to be worked out with municipal unions) to get significant savings out of reoraganized health and retirement benefits - or Plan B - dramatic slashing to every the city department, massive layoffs - including to cops and firefighters. There is no "re-do" on the city budget - if the city does not get state approval for sales tax revenue (love it or hate it), "doomsday" Plan B cuts kick in immediately
According to the Daily News an astonshing number of members of the state legislature right from Philadlephia itself however are too preoccupied with the state budget and have not decided whether the city gets Plan B or not.
"The state's budget problem is the big elephant in the room of the city's budget resolve," [Sen. Vince] Hughes said. "Right now, Republican senators are not talking about any kind of tax increases anywhere. We could be out for a long time to get this thing resolved."
Rep. Mike O'Brien seems particularly out of touch about how out of scale the revenue the sales tax in crease needs to bring in starting now - $580 million over five years - vs. what the two casinos will contribute indirectly and directly - roughly in the neighborhood of $40 - $50 million a year at the most enthusaistic estimates (I'm sure someone will correct me and lower this number significantly momentarily) and not really starting till 2012.
Rep. Mike O'Brien, who is opposed, said that he'd prefer to see the city use gaming revenues to plug the budget gap. Though the city has said that this isn't an option, O'Brien said that he wasn't convinced.
If I were a city worker, as concerned as I might be about ongoing negotiations with Nutter, I'd be a lot more concerned about members of the state legislature from their own districts are not taking seriously the threat of imminent layoffs under Plan B.
Another part of the problem is Plan B is too vague
Council and the Mayor approved Plan B without spelling out specifics of how dire and where the cuts would be, either to PICA or to the public. With no specifcs, the public, the state reps, even the municipal unions are not visualizing what 10 -15% layoffs (bare minimum) in every city department could translate onto the street level, I fear.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
A and B, no C?
Some folks are saying that the city can't adopt an alternative budget with different taxes if the sales tax is not approved. I'm not sure why that is so. Is there some reason the city can’t adopt other taxes if the sales tax is rejected Is it a city charter issue? Is it some state regulation? Is there not some possible way around this rule, say a charter change at the November election? If someone knows the answer to these questions, I'd love to hear them.
I am pretty sure that on
I am pretty sure that on Radio Times, Councilman Kenney said that if the tax was rejected, Council would go back into session to consider other taxes, etc.
Aren't the PICA timelines for state reimbursement firm?
They can pass new taxes hypothetically I suppose but the PICA statute as I understand it is firm. It has to be passed on the start of the fiscal year and that document stands once the fiscal year starts - if they city wants to receive state reimbursements (and city government would shut down without them). The budget at this point really is Plan A and Plan B. In order to receive state reimbursements, they have to stick to the schedule of the fiscal year or they don't get state reimbursements - period.
I listened to that Radio Times interview as well but strictly speaking Kenney was incorrect as I understand it - there is no post-budget budget. The ship has sailed and gone.
I think what happens in that circumstance is the draconian cuts and layoffs in Plan B go through, if Council gets an urge to, they can raise more money through additional means and that new money becomes a new "surplus" that the Mayor would be able to patch and repair holes as he saw fit. But its the Mayor's call to spend any post-budget new revenue whatever way he wants to. Its hard to imagine Council acting in a unified way under such circumstances and any post-Plan B budgetary "repairs" are likely to be sloppy and half-hearted at best. They are likely to be more focused on the politics of blaming the Mayor or the state legislature to cover themselves with constituents than focus on working in unison to make a new fix-it budget.
I know CES and other folks would like to imagine a grand "redo" for FY 2009-2010 but thats not likely how it would play out. State Republican leadership on the PICA board will hold them to the Plan B budget if either the sales tax or the pension fund refi is shot down at a state level. Council will no doubt work in fractious and un-unified way to raise some new revenue and patch some holes, but its unlikely at that at that late date that Council are going to strike out into a bold new direction with Stan's GRT plan and its likely court challenges. Council will fight and disagree and ineptly attempt to repair the budget with a patchwork of new flat fees similar to the small business trash fee everyone is just discovering or things like parking going up to $4 an hour or permit fees doubling across the board. Its hard to see them going with property taxes without big changes at the BRT, changes they have not shown a lot of stomcah for so far. You end up with a regressive badly cobbled together version of Plan B that maybe isn't quite as bad as its first version but does not match Plan A (which already has cuts in it) by a long shot.
The time to get a real "Plan C' for FY2009-10 came and went. Honestly strategically I would focus your efforts on the following fiscal year and hope the state legislature doesn't screw us on the sales tax - even if we all agree that sales tax is regressive and not our first choice anyway.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
PICA approval is a one time deal I believe
PICA approved the five year plan. That is what is needed to receive tax revenues (the revenues set aside to pay back PICA bonds) under state statute. (I don't think any other revenues are involved but I could be wrong.)
And once PICA approves the five year plan, it doesn't matter if lots of things change. Last year, for example, the assumptions behind the budget went kablooie and PICA and a small surplus in the fund balance became a huge deficit. PICA said nothing about cutting off tax revenues. And, while I'm sure the Nutter administration sent a copy of the mid-year "rebalancing plan" with a new five year budget, PICA did not have to approve it.
There may be something in the PICA legislation that limits the city's ability to raise taxes after the fiscal year has begun. But if it is only in legislation--and not in covenants with bondholders--then it can be changed by legislation.
As for all the strategy stuff you mention, I've been out of touch with CES for about a month as I've been a little busy with my day job. So I don't know what anyone is thinking with regard to Plan B or C.
Correct me if I am wrong
but new "taxes" on the fly by the state constitution for the current year are verbotten. "Fees" are OK as temporary solutions and there may be some complicated legalities about adjusting rates on existing taxes, but I think the PA Constitution imposes some legal limits - at least from what I understand.
You are right that PICA only approves the budget once but by the same token that budget has basically been approved. I guess the question revolves around how elastically stop-gap revenue measures can be defined legally.
And then there is the question of how much say Council has over how the money gets spent. Council can say in a normal budget process "we want this much for the rec department" and trust it means that it translates to the rec center in their district not being closed. They lose that ability to guide how "surplus" revenue to the Mayor in Plan B gets spent and I think it puts limits on how hard you can expect them to fight.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
Working without a safety net
If there is a constitutional barrier to raising taxes after the start of a fiscal year, then that is a barrier to any plan B that includes new revenues. Do you know where the Constitution says this, Sean?
And if so, one two things are true.
1. The Mayor and Council have been irresponsible in creating a budget that is subject to the whim of a Republican State Senate that is so opposed to tax increases.
or
2. The threat of Plan B is so severe that the Philly house members who are wavering about voting for a city sales tax increase (and if they won't vote for it, why should Joe Scarnatti?) and the Senate Republicans simply have to vote for it.
Some people who walk on tightropes say that working without a net is safer because it forces one to be at the top of one's game all the time. Others say that even the best tightrope walker can make a mistake and that, wihtout a safety net, the result can be catastrophic.
We'll see which is true in this case. I'm a little concerned because somehow I don't see the thraet of massive social service cuts in Philadelphia as all that motivational for Senator Scarnatti.
BTW, there really isn't a Plan B, is there? That is, has Council passed a Plan B et of outlays or will it just punt the cuts over to the Mayor to make, as it did last year?
I'll take option 1
with the caveat that it was Councilman Green who generally gets most credit for this particular sales tax plan and that Nutter is generally viewed as having caved to Green and Council in order to save political capital for other things - like the municipal union negotiations.
Plan B is very, very vague. Council went through the formality of having the Fire Department and Police department go through the gesture of saying "If we have to cut our workforce by 10% it will not significantly impact public safety" - which many observers said was laughable - and that was about it.
But yeah in Plan B, Nutter gets to make all the really tough choices and Council talked their way out of responsibility for exactly how the shit hits the fan - which seems to suit them just fine, for the most part. But hey there are more important things - like plastic bags and chewing tobacco bans to focus on. Ouch, did I just say that?
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
BLAME JOHN DOUGHERTY PT II
I wonder if any City contracts with IBEW Local 98 might be adversely affected by the economic crater left by Plan B.
Treasonous for a business manager to cost his union business, don't you think?
I dunno
Maybe all those big political contributions to suburban Republicans from the IBEW will cause the state GOP to suddenly rethink their anti-Philly sales tax agenda and save the day for Councilman Green and Co. Maybe he's crazy like a fox.
I wouldn't be real happy about the odds if this were a bet, however.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
BLAME JOHN DOUGHERTY PT III
As a regular contributor to the campaigns of such Harrisburg Republican swing votes as Ted Erickson, Tom Gannon, Nick Micozzie, Denny O'Brien and (hee, hee) John Perzel, Doc would be well-advised to a) send Mike O'Brian back to mixing the blacktop for Sugar House and stop calculating tax revenue for the current year from future (awful) projects b) get on the non-nuclear side of this issue by standing on a dais with a few of his Republican buds and announce their support of the penny tax hike the City needs to stay afloat.
Turn blame to thanks real fast that way.
No new taxes
City Council cannot pass new taxes after the start of the new fiscal year, which was July 1st. City Council could raise tax rates for the next fiscal year, but that would still leave a huge hole for THIS year. That's why cuts be massive and have to happen very quickly if Harrisburg doesn't pass the sales tax increase.
--
Check out "It's Our Money"
That's what folks are saying Ben. But why?
If there is some requirement that no new taxes be passed, then the requirement exists in some form which may or may not be changed by some action. So is the requirement found in (in increasing difficulty of being changed: a city ordinance; a state ordinance; the home rule charter; the Pennsylvania constitution?
The budget is closed
City government shuts down without state reimbursements and PICA is inflexible on dates. Yes the city can try to raise some new revenue piece meal but its not a "big solution". The politics of that piecemeal fee to patch the hole method are not the type of situation Council is likely to do well with. PICA is a state ordinance that the state legislature is unlikely to ever release Philadelphia (or any of the other cities with similar, later ordinances) from.
There may also be state constitution complications on new "taxes" for the current fiscal year. Like the limits on current year "pay raises" the state legislature controversially stepped around, there maybe semi-legal ways to skirt the constitution but stuff like that goes to court and how likely are court cases to be settled before July 1, 2010 rolls around?
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
Thanks for the correction, Ben
I'm not sure if worse case scenario it allows for some fix-it fees as I suggested above (I legally suspect it does) but those fees will never replace the whole sales tax hole at best and at worst its a horribly innefective way to budget - fee wantonly to create a small "surplus" the mayor has total say on how it gets spent and council gets no say on.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
for Marc's question
Rereading the relevant parts of the PA Constitution it says that the state is required to make budget on time, that Governor is required to make 5 year plans, that there are limits to how the state or cities can incur debt but I honestly don't see anything that says they can't raise taxes during the middle of the current fiscal year. I thought it did. Maybe I missed it.
In fact, in terms of state government:
Anyway it looks like virtually all the rules regarding tax collection, debt, etc. go out the window in case of insurrection so maybe thats the solution for Philly - to declare a civil insurrection and then it can write its own budget rules. Only downside is it also suspends many of other civil rights and election laws. ; )
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
Thanks, Sean
This wouldn't be the first time that something everyone knows to be true turns out not to be. That's why people ask questions.
Maybe there is something in the charter? I don't have time to look. But a charter change is possible if something is put on the ballot for November. I'm pretty sure Council can act in August in time for that to happen.
If it's an state law, than it might still be hard to get the legislature to act to give Philadelphia the right to raise its own taxes after the start of a fiscal year. But that may be an easier vote than a vote to raise a specific tax.
Don't know if I'm looking in the right place
but what I see in the Home Rule Charter says the mayor has the ability to cut expenditures if revenue falls short. It doesn't say anything about raising new revenue. The language says the mayor "may" cut expenditures but by contrast it doesn't say anything about indicating he "may" suggest new taxes in case of budget shortfalls.
It also sets July 1 as the start fiscal year and says Council can move the start day only after its been "thoroughly studied".
Actually now I found it.
Under the section regulating Council, it says explicitly they have one budget and one budget only, due 30 days before the beginning of the fiscal year and no other ability to raise revenue (and they can't by law tweak the mayor's projections to "predict" more money). Actually it says in more than one place that Council is specifically prohibited from making revenue assumptions different from the Mayor's (who it specifically assumes will be more conservative) and that projections also have to be approved by the Controller as legitimate.There are specific exceptions for new taxes, including a few odd ones
So my question is this. Can Plan B be "an emergency which could not be anticipated" if they specifically anticipated and passed it already? I doubt it. An earthquake or hurricane might be "an emergency which could not be anticipated" but the idea that Harrisburg's budget process might be a mess is by contrast the utmost in predictable.
Perhaps Council can begin a special emergency "councilmanic investigation" whether or not laying off cops can really keep the crime rate from shooting through the roof for the duration of exactly one fiscal year. ; )
Otherwise rewriting the charter to fix the budget is probably a tougher order than you make it out to be, Marc.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
I saw the passage you quoted
I saw the passage you quoted but it seems to apply to appropriations, not taxes. And then I aw this:
which requires revenue measures being passed at the same time as the budget ordinance but doesn't seem to explicitly prohibit a second tax bill. Now the case Stan points to, does explicitly prohibit a second tax bill.
I believe the legal implication is
that they can only appropriate on the set date in relation to the fiscal year. In theory if the budget is not ballanced they could say only the later budget counts but then there is all the language about the fiscal year (which they can't move without "throrough study"). Even without the court case Stan points out, they already passed a "balanced budget" - a draconian "balanced budget" that lays off swaths of city workers including cops and fire fighters - but Plan B already got voted on and completes the legal requirement. "No later than the passage of the budget ordinance" means no later than 30 days before July 1.
It seems like the single operating budget ordinance train is complete so sales tax or no there is no redo - even without the court case Stan points out.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
There's a PA Supreme Court case that nixes interim taxes
The case is Mastrangelo v. Buckley. It was decided in 1969 after Mayor Tate decided he needed more cash, mostly for a labor deal. It holds that all authority to tax comes from state law, and that any authority the state gives must be strictly construed. The Court noted that there is no state law that authorizes more than one tax act per year in Philadelphia, although there are some that authorized it explicitly in other places. Therefore, the Court held, even in emergencies such as those contemplated by the Charter Section cited by Sean, Council cannot increase taxes after it enacts the annual budget ordinance. Interestingly, the Court upheld the right of the City to increase fines and penalties after budget enactment since those increases would be exercises of the police power, not the taxing power.
Personally I think an argument can be made that the statute creating PICA may constitute interim tax enabling legislation since it contemplates budget revisions after a fiscal year starts, and doesn't limit those revisions to budget cutbacks. But the common wisdom around town among the movers and shakers is that Mastrangelo is still good law, and that interim taxes are a no-no..
Based in state law? Changeable by state law?
So the General Assembly could by statute give Philadelphia the right to pass a second tax law when, say, changes in circumstances leads to a deficit.
This might be an easier vote than a vote for a sale tax increase.
Edit: Answering my own question, I just looked at the case. It is clearly based in statute not in either the State Constitution or the Home Rule Charter. It looks to me like the General Assembly could give Philadlelphia the right to enact interim taxes either in general or under certain conditions.
Carefully crafted state legislation
could probably overcome Mastrangelo. But what do we want, and what do we expect Council to deliver, by way of interim taxes? Even assuming we all agreed on the CES BPT proposal, that would raise "only" about $350 million over 5 years. The rest of what the City needs would have to come from wage and/or real estate taxes. I'm told the City is still not eligible under the gaming law to raise the wage tax, so to go there would require still another state law change. As to the r.e. tax, it is horribly regressive, and in order to make it less so would require still more state legislation.
To a great extent the situation we're in is a result of there being no one in Philly that has lobbied Harrisburg effectively for progressive tax policies. It's never been a "sexy" issue and no one has been funded to deal with it. Thus, now when we desperately need revenue, we also need the legislature to bite off more than its even willing to think about, much less chew and swallow.
Without getting details we don't agree about,
about this one, we do:
It's hard to believe Ed Rendell -- who probably is the governor in recent history most open to the idea -- is going to finish his second term before any State legislator from the City ever even attempted to make tax policy more progressive.
Watch this space next year. Philly needs progressive leadership in Harrisburg. The status quo is not getting the job done.
We need to elect new people to the House and Senate.
Right now however, we need to avoid a Plan B meltdown. Real suffering must be averted.
And mark my words, those who stand in the way of avoiding Plan B should be the first to suffer consequences in upcoming elections.
The Real Estate tax is only regressive because of
of the awful way real estate values are set. If we move to full valuation with the values proposed by the BRT, things are better. If we replace the BRT and improve on their work, they are much better.
The real estate tax, however, will always be a problem for people on fixed incomes in gentrifying areas. There are fixes for that which we've talked a lot about--circuit breakers and other schemes--and those we've not talked about as much--figuring out responsible ways for aging people to borrow on the increase value of their homes.
Suppose we move to Plan B--I'm not hoping for this by the way--maybe we could get Council to come back to work for the summer and actually grapple with the BRT and the Real Estate tax. It would be sort of a special session dedicated to one very critical topic.
Maybe--and please let's not get started on another long debate right now--they will even consider moving to an LVT while we are at it.
Reform that, and the Real Estate tax is fairly progressive
I'm now curious about the state action, Stan
Why does Stan thinks the state action is required to make real estate taxes less regressive?
I was also under the impression that deferments and caps could be enacted without state action. Its sort of important because the BRT is deeply broken, full valuation is the easiest, simplest way to fix it but Council will never make progress on implementing them however without political cover of some system of caps and deferments, never mind if its fairer or not.
Council is not want to touch real estate taxes with a ten foot pole, yet the status quo in terms of real estate taxes is in itself both corrupt and regressive as it is now.
I was under the impression caps and deferments were possible without the state getting involved. Whats the legal issue with the state?
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
I never want to say never when it comes to anything legal
because case law can always be overturned or distinguished. But as is, the uniformity clause would seem to be in the way of one fundamental reform, a circuit breaker, and statutory law in the way of another good reform, a homestead exemption. (A circuit breaker would cap a homeowner's tax at a percentage of his/her income; a homestead exemption would omit some dollar portion of one's assessment from the tax.)
Deferments might be more readily defendable without additional state law because the entire tax would eventually be paid. But even with those, a uniformity clause issue might well arise because not everyone would be entitled to them. About 20 years ago the State passed a special law, authorized by a Fumo-written amendment to the uniformity clause, allowing deferments to certain properties in gentrifying neighborhoods. (It has many restrictions, and it only goes into effect if Council passes an ordinance implementing it, which it hasn't so far.) That suggests that the Legislature, at least, believes that even in the area of deferments, some kind of state action is needed.
This all needs to be looked into more thoroughly by someone with access to Lexis or Westlaw. That no longer includes me.
If your neighborhood gentrifies and you own, you do get wealthy
its just not wealth that you can use (except as borrowing power) while you live in the house. Deferments properly tax an economic benefit you recieve from living in a neighborhood where property values are going up, they just don't force people to pay now for "unrealized wealth".
A Prop 13 style cap is neither fair and progressive, nor good fiscal policy - as California's current budget woes and high sales taxes (with no food or clothing exemption) underline.
Your circuit breaker is not the same thing but it does in effect charge one person who really does actually gain real wealth they can get out when they sell, or borrow against, or pass to their heirs less than their next door neighbor in the identical same row house. I think that would face problems with the uniformity clause, rightly, and it is in effect an unfair give away to those who say are house rich based on inheritance but happen to be cash poor. It also would be sure to stir resentment and class antagonization.
Its easy to hate on "evil gentrifiers" but sometimes neighborhoods go up in value in smaller degrees, poor to slightly less poor, low middle to merely middle and I can see a circuit breaker stirring a lot of resentment over time, a lot of "Oh Mr. Jones pays a lot less property tax than me on his identical house but I see he can afford the Dish network".
Increasing home value is real money that eventually either you or your kids can put in their pocket and spend, its just questionable to overly tax people on that money when its only hypothetical and tied up in the roof over their head.
So not just because of the legal complications of the uniformity clause, I feel deferments that protect against punishing rapid rises, possibly with some income-based homestead exemptions, are the way to go.
-Sean
MrLuigi, my cat, actually only types half as badly as I do.
On election day in April
Bill Greenlee told me Council was pretty adamant about not dealing with the BRT until Fall (I mentioned earlier that he complained about having to deal with it at all).
Full valuation + some kind of deferment or circuit breaker ought to be priorities when Council resumes. Revisiting real estate taxes as a better source of revenue than others (especially if we end up with the sales tax) would not be a bad idea either.
In the meantime, we're still in dire, dire straits. Any Council member who has not personally lobbied his or her local State Reps and Senators, and any other with whom he or she may have influence, in order to avoid Plan B has been seriously derelict in preserving the welfare of the City, I believe.
With potentially draconian cuts imminent, shouldn't someone other than Ben Waxman be ferreting out potential places to cut. Council staffs?
I mean, it's the Mayor and the department managers who will make the cuts, if the State forces them to come, but if I were a Councilmember, I'd be using all my time and all my influence right now to make sure this thing plays out as humanely as possible.
I think these contain legal Pennsylvania tax relief ideas
No debates on LVT right now, I promise. Anyhow, we are celebrating the signature of Governor Rell in Connecticut permitting LVT for certain cities, signed July 1.
Anyway, I submitted this menu of options to help the poor under property tax a while ago. They consciously diverge from the typical rebates because pols love to make it about the seniors, rather than income. Thats is a crucial in my my opinion. Younger families, like single moms are just as deserving as seniors or veteran's for their exemptions, no?
Current statutes are designed to help constituencies rather than citizens.
http://youngphillypolitics.com/files/uploads/Property%20Tax%20Protection...
I agree with Stan that the simplest and fairest amelioration, and the most effective would be deferral until death or sale. It's permissible, and out-of-Philly legislators would see a reason to make it more universal. I'd worry about our gamblin' governor more. Deferral is self-selecting, and let's people off the hook if they don't get wrapped up in the "I want to leave my legacy to the kids."
As you all know by now, I believe that the numbers (both old and especially the new BRT numbers) show a progressive advantage of land value tax; but that's for another day.
Oh, and Prop 13 destroyed California.
Joshua Vincent
www.urbantools.org
www.ourcommonwealth.org
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