CITY COUNCIL TESTIMONY

of Catherine G. Scott, President, AFSCME District Council 47

May 9, 2009

Good morning President Verna and members of City Council. My name is Catherine Scott and I am President of AFSCME District Council 47. I welcome the opportunity to provide testimony today.

As we all are aware, Philadelphia like the rest of the country faces many challenges over the next few years. How we approach these challenges will say a great deal about what we value, what principles we hold important when we face adversity, how we treat our most vulnerable residents, and our vision for Philadelphia.

Last year the Mayor said that two issues were driving the budget crisis, the investment performance of the pension fund and the reduction in the business privilege tax receipts. There appeared to be very little analysis of the City’s taxing policies and City services. The Mayor’s “rebalanced” budget was focused on halting planned tax cuts and cutting City services. At that time the Mayor stated “Everything is on the table - program reductions, changes in services, and scheduled wage and BPT tax cuts”.

Unfortunately, when the Mayor presented this FY 2010 budget, it became clear that everything was not on the table. Increased sales and property taxes were on the table. Cutting employee jobs and benefits were on the table. Cutting city programs were on the table.

What wasn’t on the table was an honest discussion of our taxing policies which got Philadelphia into this fiscal crisis. Talking about the historic under-funding by the City of its pension plan and what would be an honorable way to address resolving the issue was not on the table. So, I would like to suggest some points for discussion by City Council as it deliberates the FY 2010 budget.

For more than a decade the City has pursued a plan to reduce both wage and business taxes but I will limit my remarks concerning the cumulative effects to the period FY 2000 through 2009. The cumulative loss in wage tax is $914.2 million and gross receipts is $335.9 million for a total of $1.25 billion. As I understand it these reductions are based on the premise that they will stem the tide of loss of residents and businesses. I would ask the administration and City Council to define what success is. How do you know if wage and business tax reductions are working?

What we do know is that basic City services are being reduced and at an alarming rate. Phil Goldsmith, a former City Managing Director, clearly laid out the reduction in City employees in City departments in an article earlier this year. Also, we know that tax reductions do not work in attracting businesses and residents unless services do not decrease. We know that City services are being significantly reduced. Library services are the most obvious but there are many others. Since 1975 the city has lost 17% of its residents but reduced City employees by 25%. For the pundits who allege that the City has not reduced its workforce these statistics belie those assertions.

District Council 47 has made many suggestions about raising revenue, collecting money which is owed and saving money which the City can ill afford to waste. Let me cite a few examples:

1. The City should increase its cash flow by making payments more tax payer friendly. It should stop charging a fee to pay bills by credit card. It should permit tax payers, who opt to do so, to pay their real estate taxes on a monthly basis. This would eliminate the need to borrow in the Fall of each year at high interest rates to have sufficient money to keep the City running.

2. The City is owed in excess of $400 million in back taxes. It should develop an aggressive plan to collect what is owed and identify what is uncollectible. What is uncollectible should be written off and it should collect what is collectible. In excess of $1 billion is owed in unpaid bail. The City should develop a plan to identify what is collectible and take the necessary action to collect what is owed.

3. The City, with the 1st Judicial District, should consider releasing non-violent sentenced offenders to probation with the appropriate rehabilitation needed. This would reduce prison overcrowding, unsafe working conditions, and costs, by more than $20 million per year. By hiring eleven (11) probation officers at a cost of $600,000, non-violent offenders would be supervised and could become productive tax paying residents adding additional revenue beyond the savings cited.

4. The city should cease contracting out, especially where it is more expensive to contract out than hire City employees. For example, the City could save over $12 million per year in the Health Department alone by hiring Civil Service employees to do work presently contracted out. City Council could transfer out of Class 200 to Class 100 the amount of these contracts which would force the administration to act on this issue. Further, the City could mirror the rest of the health industry and hire physicians assistants and nurse practitioners rather than only physicians and save even more money than the $12 million I cited.

5. The City could streamline its revenue collection procedures and coordinate the issuance of building permits and other licenses with guaranteeing that businesses have business licenses and that they are current on their taxes. Estimates are that between $5 million and $20 million could be raised each year if this were done.

6. The City loses almost $100 million per year in revenue presently because non-profit companies are exempt from paying real estate taxes for property which they own. It should develop a plan to lobby the State legislature to permit “Payment in Lieu of Taxes” (PILOT) for non-profits. If PILOTs were implemented at 40% of the present taxable amount the City would be paid $37.5 million per year. As large non-profits such as the University of Pennsylvania, Drexel University and Temple University continue to acquire real estate, the real estate tax base shrinks and it shifts more of the burden on to home owners who cannot afford large real estate tax increases.

These are a few of the suggestions our Union has made to the administration and City Council members to raise revenue, collect revenue more effectively, or save money. Sadly, none of these suggestions have been agreed to by the Administration nor acted upon.

On Monday, May 4, the City had its initial meeting with our Union and presented its contract proposals. These draconian proposals would place the balancing of the City budget on the backs of its workers. A brief summary is no wage increase for four (4) years, reductions in pay through layoffs, furloughs, no longevity payments, no step increases, increased contributions to existing pension plans, a new pension plan with no specifics, undefined reductions in health benefits and increased cost to employees and work rule changes with no explanation for why. In his budget the Mayor listed $25 million annual savings from employee benefits. When asked, the City stated that District Council 47's portion was $3.5-$4 million annually. However, the City team stated that even if those savings were achieved there was no assurance that our Union would benefit from them since “other factors” may require the City to apply those savings to other than our contract.

When asked what savings the City would achieve from its proposals, on each item the City stated it has not costed it out and it would have to get back to us. And the contract expires June 30.

I commend City Council members for asking probing, focused and thoughtful questions of department heads as they presented there budgets. I believe the media has not covered your hearings with the attention they deserved. The City is at the cross roads of important tax policy decisions about who funds City services and what are the appropriate levels of services. Should rolling back the wage tax to the 2007 rate of 4.25%, which would cost $165 for a person making $50,000 a year, be off limits? Should rolling back BPT rates to 2007 rates of 0.1540%, which costs $154 for a business grossing $100,000 a year, be off limits? My answer is a resounding NO especially when in just one of its contract proposals the Mayor is asking my members to give up longevity payments of between $625 and $2,225 each year for 4 years.

Our members who work for the City or the 1st Judicial District are all City residents. As taxpayers, voters, and consumers of City services they have an interest in the financial health of the City as well as the City’s commitments to its residents. I have 3,500 letters from our members to you as their elected officials expressing their concerns. So your budget choices will say what your values are. Our members and all of Philadelphia is depending on you to be fair and equitable in your vote and not to support an unknown contingency budget.