Butkovitz Report Examines Impact of Cuts in State Revenue

Audit Date: November 24, 2010
Audit Categories
  • Financial
Controller: Alan Butkovitz

Executive Summary

For Immediate Release:
Nov. 24, 2010

Contact: Brian Dries

Butkovitz Report Examines Impact of Cuts in State Revenue
Controller’s report focuses on a potential decrease in funding
from Harrisburg for City’s services

Click here to view report

PHILADELPHIA – City Controller Alan Butkovitz today released a report entitled, “Philadelphia’s New Funding Reality,” that examines the potential impact on Philadelphia, as a new administration takes over in Harrisburg — along with a crop of new state legislators committed to drastic reductions in state spending.

Under the current FY2011 budget, the state provides the City with $1.8 billion to fund all services and programs provided by city departments. Of this total amount, $1.2 billion is provided in special revenues, mostly consisting of grant monies, with the majority of the funding for health and human services.

A potential five percent state cut in special revenues would amount to a $53 million reduction in funds for the Office of Behavioral Health and Mental Retardation Services. A 30 percent cut would reduce the funding by $319 million for these services.

“The possibility of cuts in state funding for essential services would require the City to find alternative revenue sources or be forced to reduce current service levels or eliminate some programs altogether,” said Butkovitz. “The City has already reduced services and raised taxes under the last two budgets to maintain current levels of service and programs for its citizens.”

The City currently receives $595 million from the state for general fund revenues that includes money for city departments to cover basic operating costs. The Department of Human Services receives $390 million of these state funds and a 30 percent cut would reduce its budget by $117 million, almost equal to the cost of Juvenile Justice Programs that provide adjudication, placement and support for youths offenders.

While most of the City’s revenues are for state mandated programs such as health and human services, state legislators could amend the law to change eligibility requirements and funding formulas as a means to reduce overall costs.

“The prevalence of a vocal budget slashing contingent of new lawmakers in Washington as well as Harrisburg puts all programs on the table as far as cuts go,” said Butkovitz. “Discretionary funding will be the first to go because there is less resistance when eliminating it as a budget line item.”

Discretionary funding cuts for Philadelphia’s Police Department could result in reductions ranging from $118,000 to $705,000, which is the cost to put 12-to-15 police officers on the street.

Along with cuts to special and general revenues, the state could also reduce its current $1.5 billion funding to the School District of Philadelphia. Almost $1 billion of this is provided through the Basic Education Subsidy, which could be reduced if lawmakers changed the funding formula and reduced the allocation from the state’s budget.

“If comments that are being made in Harrisburg ring true, the School District should brace itself and prepare contingency plans to operate with less funding from the state,” said Butkovitz. “School districts throughout New Jersey are being forced to deal with this new funding reality, and Philadelphia should expect to deal with a similar financial reality in the next year.”