Butkovitz Issues Opinion on City’s Five Year Plan

Audit Date: July 21, 2011
Audit Categories
  • Financial
Controller: Alan Butkovitz

Executive Summary

For Immediate Release:
July 21, 2011

Contact: Harvey Rice

Butkovitz Issues Opinion on City’s Five Year Plan
City Controller says City’s budget plan is reasonable
but cautions PICA on sensitive assumptions

Click here to view audit on five-year plan

Click here to view letter to PICA

PHILADELPHIA – City Controller Alan Butkovitz today released his opinion on the City’s Five Year Budget Plan. While Butkovitz says the Five Year Budget Plan is reasonable, he cautions that several sensitive assumptions and uncertain conditions could dramatically impact the City’s financial future.

“While our independent audit report indicates that the City’s assumptions used in the plan were reasonable, the forecasted statement includes particularly sensitive assumptions which PICA should consider when assessing the plan,” said Butkovitz.

The FY12-16 Forecasted General Fund Statement of Operations is prepared by the City’s Finance Office and then submitted to the Pennsylvania Intergovernmental Cooperation Authority (PICA). The Controller’s opinion provides approval for the City’s budget plan but warns PICA about two sensitive assumptions contained in the forecast:

-The city is assuming that $59.5 million in wage and benefit savings will be realized over the five years, but civilian labor negotiations and an arbitration award to the International Association of Firefighters Local 22 (IAFF) are still not settled.
-The city estimated savings related to self-insurance of $202.5 million over the five-years of the forecast. These savings are based on previous premium-based amounts due to the uncertainty in the timing and outcome of the appeal of the IAFF arbitration award.

“I strongly urge PICA to be vigilant in analyzing and evaluating the impact of these assumptions on the Plan,” Butkovitz said.

In addition to the sensitive assumptions in the Plan, Controller Butkovitz cautions about other uncertainties which could dramatically impact the plan’s effectiveness. These uncertainties include:

-Potential federal budget cuts that could affect City programs and services have not been incorporated into the financial plan.
-Future increases in additional School District funding.
-Impact of implementing Actual Value Initiative, which could create a real estate tax burden on senior citizens and low-income taxpayers.

“While the budget debate in Washington rages on, it would be naïve to believe that the city would be unaffected by any reductions in the current level of federal financial assistance,” said Butkovitz.

“It would also not be prudent to not consider additional funding requests form the School District. Unless the School District takes necessary steps to operate within its budgetary constraints and eliminate the uncertainty regarding its future funding requirements, the possibility of further shortfalls will remain, placing additional strain on the City,” Butkovitz added.

“I urge PICA to be cautions when using the forecast because of the unpredictability of the assumptions and uncertainties, because as with any forecast, events and circumstances frequently do not occur as expected,” said Butkovitz.