The Budget We Got: Selling Philadelphia, selling us out
Philadelphia is in crisis. People across the city are feeling the effects of the global economic downturn and wondering what the future will bring for them and their families. The city has finally resolved a long, drawn out, and deeply unsettling budgeting process, and it feels now like the dust has finally settled. But even though massive service cuts and layoffs are off the table for now, this economic crisis is far from over, and we in Philadelphia now have a clear idea of the kinds of solutions our city government is willing to present.
The lesson we can learn from a year of repeated deficit announcements, “civic engagement” budget workshops, and political negotiations, is that the poor and working people of the city are paying for this crisis. In a city rife with both wealth and poverty, its clear that our government's primary agenda is to attract and protect business, and not to make sure that the wealth generated here meets the basic needs of Philadelphia's residents. If the city government continues down the path it has chosen, it can only lead us to a broken state that exists to serve business need before public need, abandoning the interests of the majority of Philadelphians. The only solution to the crisis we are currently facing is an independent politics that addresses the real roots of our situation.
Balancing the Budget on the Backs of Working and Poor People
Over the summer, Mayor Nutter spent months telling us that he would be forced to close every local library, recreation center, and public park in the city, lay off 1,000 police officers and 2,000 municipal workers, scale back trash collection to twice a month and turn 1,000 street lights to blinking, not to mention shutting down some of the city’s essential functions, such as the courts, the Commerce Department and the City Planning Commission. This “Plan C” or “doomsday” budget was on the table because the Republican controlled state legislature was holding off on approving Nutters first plan, consisting of a sales tax increase and a deferral on municipal worker’s pension payments. If the state didn't approve these measures, Nutter told us, the city would be unable to close a $700 million deficit projected over the next five years, and it would be forced to gut itself of several essential services.
So, we didn’t get the “doomsday budget”, but what we did get is a significant political precedent for the tough years ahead. We also got two measures that balance the budget on the backs of those who can least afford it.
In its own words, the city is "deferring" payments into the pension fund for municipal workers for 2 years, money which it is scheduled to pay back, with interest, in 2013. Basically, this amounts to the city borrowing money from its own worker's retirement fund to close its budget gap. This also will make the already unstable city pension fund even less viable down the road. At the same time, the city is currently in the midst of embroiled contract negotiations with its municipal employees.
Nutter also raised the sales tax temporarily from 7 to 8 percent, for the next five years. The last increase in the sales tax was also scheduled to last only five years, but was never rolled back. These increases may not seem like a lot, but they are but one of many, many measures that "fix" the economy by taking from those at the bottom. People who have plenty of resources may choose to shop elsewhere to avoid paying a tax that drops just outside the city limits. But what about those of us who are already barely getting by? A sales tax is a regressive tax, which means it takes a greater share of the resources of those who have less ability to pay, unlike other measures that distribute the tax burden according to wealth. The increases in sales tax may not seem like a lot, but they are just one of many, many measures that "fix" the economy by taking from those at the bottom.
In the fall of 2008, when the recession put Philadelphia in the red, Nutter spoke of the need for "shared sacrifice" in the face of plunging tax revenue and the declining value of the city’s investments in the stock market. But the option of businesses and the wealthy sharing the burden was never really on the table. From the beginning, the mayor’s plan put balancing the budget on a tight rope between levying regressive sales and property taxes, cutting city services that are used most by poor and working people, and scaling back city workers’ hard-earned benefits. And all of these plans pitted city workers against the financial security of the city. In "tough economic times", the city's answer is to take from those who can least afford it.
The contest over the budget between the state legislature and the city is nothing new. It’s become routine for both legislative bodies to be at odds about how the city should collect revenue, and about how much money the state allocates to the city. City Dems have tried to keep our eyes focused on the evils of their partisan opposition, but the hold up on the city budget is not just about Republicans wanting to gain political points by putting Philadelphia's back against the wall, or City Dems taking noble actions to defend the people’s interest. The measures that the city Dems asked for hurt the same people that would have felt the proposed massive service cuts. This set of solutions – regressive taxes, cuts to services, and cuts to city workers is an unprecedented combination. It is important to understand that the budget we did get calls for the sacrifices to come from city workers and the half of the city who is already struggling to put food on the table.
What about sharing the burden? All the options that the city kept off the table were ones that would have really done this. The city could have raised the real estate transfer tax, the tax on the buying of property. Nutter could also have put an end to the ten-year tax abatement, gaining millions of dollars of revenue from taxes on new construction. It could haveincreased the business privilege tax, the tax on business profit, but Nutter did not and of course big business praised the plan. The city could have also asked the state legislature to approve measures such as increasing property taxes with an exemption for the poor. But instead Nutter chose to increase a regressive tax, and then he asks us to be thankful that the state obliged.
The Situation has Deep Roots
From suburbanization and middle-class flight to deindustrialization and job flight, municipalities across the country have been hit hard over the last 40 years. Local governments are seeing their revenue shrink, not just from the impoverishment of their own residents, but also because of declining federal and state revenue. As the residents of urban and rural districts suffered the loss of well paying jobs, governments at all levels have responded by cutting funding to support even the basic needs of their people.
In Philadelphia, unemployment has almost doubled in the last two years, from 6.4% in June 2007 to 10.4% in June of this year. Philadelphia's poverty rate is reported at 24% but is almost certainly higher, considering the current recession, and the fact that the official poverty rate has ignored many people for a long time. Job losses have been felt across the board, from bankers to bus boys, and for many its becoming harder and harder to stay middle class. Something is severely broken, and threats to services or sales tax hikes aren't the extent of the problem, they are a sign that the problem is in fact much bigger.
What else has been going on in our city?
When it comes to casinos, in Philadelphia local government has repeatedly failed to represent the interests of its own constituents, instead choosing to subvert its own democratic processes to hand Foxwoods and Sugar House millions of new customers, and millions of dollars in profit. This despite relentless resistance from communities across the city, despite the fact that casinos have been proven to be drains on local economies and are increasingly generating less revenue, and despite the fact that Foxwoods is in bankruptcy proceedings.
When it comes to healthcare, 13 maternity wards have closed in the last 12 years in Philadelphia, simply because there is no profit to be made off of delivering babies. At the start of the summer we also saw the closing of Northeastern Hospital, one of the few public hospitals left in the city that served a largely uninsured or Medicare-covered population. This closure was also blamed on a lack of profitability. Northeastern was run by Temple University Health Systems which received over $100 million in state reimbursements for the treatment of those less affluent patients and posted a profit of $16 million this year alone. Despite Temple being a publicly funded institution, and despite the mortal danger the public now faces as wait times and travel distances to emergency care soars, the state legislature did next to nothing to save it. All this while Democrats in Washington are selling out any chance for a real public health plan.
When it comes to education, Philadelphia’s public schools have been a testing ground for privatization in the past. Even with proposed reforms to the system, the district is now also facing a deficit, half of the city's students don’t graduate, and the central strategy of the School District to “turn around” failing schools is to hand them over to any outside taker. In our city the whole of the economy seems turned against working and poor people.
The market crash of last September kicked off the loss of over 6.5 million jobs across the country. For most people who are worried about their homes and stacking bills there seems to be less of everything. But there is a serious disconnect between how we experience the crisis on the ground, and what is going on in the rest of our economy. The fact is: there is still more wealth than ever before, and a select few are even profiting off of this crisis. Goldman Sachs, for example, posted its largest quarterly profits in 140 years at the end of June 2009, and gave huge bonuses to its top execs after turning its federal bailout into profit. In Philadelphia, we are being told to get by with less, despite the fact that we are home to a dozen Fortune 500 companies, several large universities, numerous hospitals, and thriving arts and tourism industries. This city has the 5th largest GDP of all US cities, as of 2005, and was ranked 9th out of cities in the world. Anyone who spends time here can see clearly that there is both abundance and abandonment. In this context, we can understand that this crisis has been an opportunity for local government to realign its priorities and continue scaling back its responsibilities to provide for the majority of its citizens.
What We Need
Across the board, the city has chosen to sacrifice the needs of working and poor people in the interests of maintaining a balanced budget and a welcoming place for investment - in short, running the city government as if it were a business, instead of a public service. This last budget cycle has been a lesson in how beholden our city government is to an economic model that prioritizes the interests of large business over the interest of people.
Philadelphia is going down a path of political options that if continued will lead to a broken state. Broken because no city can say it has a functioning government if that government's role is to shut down massive areas of its operations, levy increased taxes on those hurt the most during this economic crisis, and squeeze city workers. There is no democracy in this path for government, and little or no answers to the very real problems of poor and working people in our times.
All this suggests that the solution to this predicament is not just more favorable short-term policies, but the creation of an independent politics, a real movement acting in the interests of the majority of the people in this region, both those who were already hurting prior to this crisis and those who are hurting now. Only such a movement will ensure that the resolution to the current crisis gets at the roots of the problem.
By Milena Velis and Bryan Mercer
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