Butkovitz Issues Opinion on City’s Revised Five-Year Plan

Audit Date: August 23, 2012
Audit Categories
  • Financial
Controller: Alan Butkovitz

Executive Summary

For Immediate Release:
August 23, 2012

Contact: Harvey Rice

Butkovitz Issues Opinion on City’s Revised Five-Year Plan
City Controller says City’s revised Budget Plan meets PICA ACT criteria
but cautions PICA on significant risks contained in the Plan

PICA Transmittal Letter – August 23, 2012

Opinion on City’s Revised Five-Year Plan

PHILADELPHIA – City Controller Alan Butkovitz today released his opinion on the City’s Revised Five Year Budget Plan that indicates the plan is reasonable but cautions the Pennsylvania Intergovernmental Cooperation Authority (PICA) on sensitive assumptions.

“The City of Philadelphia’s revised Plan demonstrates sufficient expenditure reductions to cover the cost of the International Association of Fire Fighters Award (IAFF) should the City ultimately have to pay the award as seems likely. As I stated on August 8, 2012 it is unrealistic for management to assume it will prevail in its current appeal of the arbitrated IAFF award after the same arbitration panel decided against the city twice before,” said Butkovitz.

“Moreover, because it may take several years before a decision on the current appeal will be rendered, management may be needlessly assuming the risk that it will be required to make a very substantial retroactive payment if the city loses on appeal,” Butkovitz said.

Butkovitz added, “Likewise, I believe the City’s inability to reach a settlement in its ongoing negotiations with its non-uniformed workers may have a similar devastating effect on the city’s budget.”

“Because these employees have been working under the terms of an agreement that expired more than four years ago, future settlements may include retroactive wage and benefit payments which the city has not planned for and may not be able to afford without large tax increases or further expenditure reductions.”

Despite those concerns, using professional accounting standards, Butkovitz has determined that the City’s revised plan allows for the contingency of having to implement the IAFF award.

The Controller’s review of the Plan’s expenditure reductions notes the following items warranting PICA’s attention:

• The possible deactivation or brownout of full-and/or part-time Fire Department Medic Units as well as Engine and Ladder companies to reduce forecasted expenditures by $3.4 million to $8.4 million. Audits by the Controller’s Office have repeatedly found that the City’s Emergency Medical Services are strained and not responding in a timely manner. It is unreasonable to propose a further reduction in the number of paramedics.

• The reduction of certain classes of expenditures for the Philadelphia Prisons System by $1.9 million to $3.6 million are based upon the City’s prison population; a factor which is clearly beyond the City’s ability to control.

• The elimination of Public Defender positions while the District Attorney’s Office, which prosecutes these cases, continues to receive sufficient funding to maintain its current staffing levels.

“I again urge PICA to strongly consider the potential effect of these matters. In addition, it should consider the uncertainties of the financial situation facing the Philadelphia School District and the forecasted $90 million of debt service payments over the life of the Plan that may never materialize,” said Butkovitz.

This opinion follows an earlier opinion issued by Butkovitz on August 8, 2012, which called on PICA to reject the City’s Five Year Plan. As a result, the Plan was postponed and PICA requested the Revised Plan.