ao CITY OF PHILADELPHIA ICE OF BUDGET & PROGRAM EVALUATION ea hdr ‘Sena tome Sporn Steiger June 7, 2018 ear Members of city Council, ‘This memorandum iin response to several inquires from City Coun offces about the impact ofthe budget bill moved out of committe on Tuesday. ‘The Mayor's Proposed FY19 Budget in March aimed to increase funding for School Distt of Philadelphia to provide long term financial stability and to continue to Buld upon the Distriet’s recent ‘rogress and momentum, while also providing protections for homeowners. We are very pleased that Council has moved forward bilsto provide a significant increase in funding to the District, though short ‘ofthe amount proposed by the Adminstration, and to give relief throughan increased homestead exemption. \We are, however, very concerned that while Council supplied over $530 milion in funds to the Distt, {the gap in funding between Council and the Administration’ proposal forthe Districts roughly $240 milion. While the additional funds in Counci's current proposal allow the District to make a portion of needed investment in eary tracy, cassroom supports, and CTE and other high school programming, the District wil lack the abit to accelerate or expand efforts to improve he condition of its buildings and facilites. The District wll also face budget shortfalls within several yeas. Under the Mayor's rozosal, the District would have positive balances through FY23 and be able to start planned building improvements sooner, and add addtional projects tots five-year capital plan, Unfortunately, without additional funds beyond the amounts included inthe Counel package, the District willbe une to ‘borcow an adeltional $150 milion to fund the folowing additional investments. ‘+ Accelerate and expand its lead paint abatement program, which would have permited the District to begin immediately seeking contractors to remove peeling, crumbling and flaking paint aligned withthe Environmental Protection Agency's (EPA) Lead Renovation, Repair nd Painting Program. ‘+ New projets including major renovations at the needles schoo! bulldings (those with a Facility Condition index sore of 60% ur higher, bathroom and ste renovations to meet the Americans‘ith Disables Aet (ADA) requirements, playgrounds at elementary schools, and upgrades to ‘major mechanical and electrical systems that moderate temperatue and provide comfort. In additon to the lower amount of addtional funding forte Distt, the amended bil made several, adjustments tothe Mayor's Proposed Budgetin March. Most ofthe adjustments are budget-neutral ‘expendhure class transfers within and between departments. The budget also included adjustments ‘that we'e negotiated between Cty Council andthe Administration and that increase appropriations for the Offi ofthe District Attorney, the Indernities budget, Employee Benefits, a new Labor Reserve for {ture labor agreements, the Office of Homeless Services, and forthe City Commissioners. (Other than the negotiated changes mentioned above, Counci's funding package decreased the Department of Prisons’ budget by $25 milion for F¥29 and $20 milion annually for FY20-23, and increased the Schoo! District's budget by $15 milion and $20 milion accordingly, The Administration was intending to reduce the Prisons’ budget due to the House of Corections planned closure (oy ‘proximately $11 milion in FY39, and $15 milion in FY20 and thereafter), but reinvested a portion of those funds within the criminal justice system, to permit the continuation of reforms. The adjustment prevents the Administration from making intended investments inthe Prisons System ‘that would allow for inmates to receive access to out-of-ell behavioral heath therapy, discontinue Medical Asistance Pre-release Enrollment for continuity of care (leading toa potential increase In ‘emergency room usage, discontinue post release appointments for chronically an seriously mentally ill, inmates and eliminate the expansion of naloxone distribution. Moreover, savings from the closure of ‘the House of Corections was intended to permit investment in programs that continue the sucessful ‘reforms more broadly in the criminal justice system. Savings from the closure were intended to pay for 2 day-eporting pot, Police Asisted Diversion, and allow the Ch to eliminate the cash bal revenue, Without negative impacts on the City's budget. Italo was intended to enable the City to pay for $25, milion mandeted inreases in Court-appointed counsel fees. The bill maved out of committe didnot sufficiety increase the appropriations inthe Managing Director's Office that would have allowed these investments, “Moreover, the Administration intended toad funding to permit the increased costs related to an ‘arbitration award for Correctional Offices, and unfortunately the change thatthe Administration had Prepared allowing for that, was inadvertently removed from the bl that Council voted out of committee. We respectfully request that the Prisons’ budget be adjusted to compensate forthe costof ‘the award, which i neutral othe City's fund balance, as the funds were included in labor reserve, In addition to providing the District with less resources than were included inthe Mayors proposal, the Council funding package includes some revenue assumptions that we don't think we ean include in our budget end projected FY19-23 Five Year Pan. The proposed package includes $69 milion in aeltional ‘revenues based on the expansion ofthe sequestration project. While the Department of Revenue fully Intends to expand that project an to generate addtional revenues through that expansion, we are not yet confident enough in how much revenue it would generate to include those revenues in our Pla,‘Based onthe bil woted out of committe yesterday (and assuming the correctional ofier increase 35, Per the labor arbitration), the Citys fund balances would fal to dangerously low levesin the later years ‘ofthe Plan. As these fund balances are not fiscally sustainable, the bil s passed, the Administration ‘Would need to reexamine every element of the budget. Please fel free to call me directly if you have questions, Kind regards, Nvcdfons Budget Director