What's in the Proposed FY26-30 Five-Year Plan?

On March 13, 2025, Mayor Parker gave her second budget address and released the Administration’s proposed Five-Year Financial Plan for Fiscal Years 2026 through 2030 (FY26-30). It details the City’s expected revenues, spending, staffing levels, new borrowing, and more over the next five fiscal years. As budget deliberations for FY26 take shape, the proposed Five-Year Plan will change. Following City Council’s adoption of an FY26 budget, a final version of the Five-Year Plan will be presented to PICA. The PICA Board will then have 30 days to vote on whether to approve the Plan or ask the City to make revisions. If the City is unable to deliver an acceptable revised Plan in the allotted time, and the Board votes against approving the Plan, state funds are withheld from the City until revisions are made.

Key Takeaways:

• The General Fund balance is projected to fall from $514M in FY26 to a low of $41M in FY29, falling short of the City’s goal of 6-8% of revenues in four of five Plan years.

• Revenues are projected to grow by 9.6%, reaching $6.9B in FY30, while expenditures are expected in increase by 1.9% over the Plan.

• The City anticipates operating deficits for FY26-29, with an operating surplus projected in FY30.

• New contributions to the Budget Stabilization Reserve (BSR) are expected to total $119M, bringing the BSR total to over $280 million, with contributions being made in two of five Plan years.

• The FY26 Capital Budget authorizes new borrowing of $337 million, $9 million more than FY25’s notably high GO borrowing.

Budgeting for Staff Vacancies: Triangulating between Aspirations and Reality

In FY24, the City of Philadelphia spent $130 million less on salaries for City employees than it had originally budgeted, and in FY23 it spent $81 million less on these costs. This variance stems in large part from ongoing difficulty retaining and hiring staff, a challenge that many local governments have faced since the onset of the COVID-19 pandemic. The reality of the City’s ability to retain and hire staff has diverged from its ambitions for filling positions, creating a significant gap between planned and actual spending on Personal Services, the wages paid to employees as salaries and overtime.

Philadelphia’s recent payroll actuals have been about 5 percent lower than budgeted. Given the size and share of spending on employee wages, this variance represents significant funds that could have been redirected during the fiscal year. Instead, the underspending has resulted in higher than projected fund balances at the end of the year. Even with these unplanned increases in fund balance, the City’s reserves have remained below recommended levels, warranting evaluation without being inherently problematic.

Graphic created with ChatGPT's DALL-E and edited by Octavia Geiger.

Fact Sheet: City of Philadelphia's FY24 Annual Comprehensive Financial Report (ACFR)

The Annual Comprehensive Financial Report (ACFR) is published by the Office of the Director of Finance each year by the end of February. This report is a full set of financial statements for the City, produced in compliance with Generally Accepted Accounting Principles (GAAP) in adherence to Government Accounting Standards Board (GASB) standards. The ACFR is audited by the City Controller and intended to present a transparent view of the City’s finances for elected officials, residents, businesses, and current and potential investors. In addition to being a best practice for local governments, producing these annual audited financial statements keeps the City in line with the U.S. Securities and Exchange Commission’s (SEC) continuing disclosure requirements and able to access capital markets.

Key Takeaways:

• The City's FY24 Annual Comprehensive Financial Report (ACFR) received an unmodified opinion from the City Controller.

• On a budgetary basis, no further adjustments from the Annual Financial Report (AFR) were made to actual General Fund revenue, expenditure, or fund balance totals for FY24.

• From FY23 to FY24 the City's General Fund balance shrank by 4 percent.

PICA Board Recommends Consolidation of City Row Offices (again)

At its March 18, 2025 meeting, the PICA Board voted to recommend that the Mayor and City Council of Philadelphia take steps to eliminate the offices of the Sheriff and the Register of Wills as independently elected offices and consolidate their functions into the appropriate agencies of the City or the First Judicial District.

This is not the first time PICA has made such a recommendation. Sixteen years ago, PICA issued a report detailing the costs of independently elected row offices to the City, recommending that row offices be consolidated. Since the issuance of that report, the functions of the Clerk of Quarter Sessions, a former independently-elected row office, have been consolidated into City government.

This most recent recommendation by the PICA Board comes as the City continues to face the issues highlighted so many years ago, like indemnity costs from improper hiring and firing practices and unresponsiveness to PICA requests for meetings and information.

The next PICA Board Meeting will be held on April 22, 2025 at 12:15PM. Members of the public are invited to attend either virtually via Zoom, or in person at our Walnut Street office. Registration is open now! The agenda will be published one week prior to the meeting.

What We're Reading

This month we're using our newsletter to highlight another newsletter that we find helpful and informative in keeping a finger on the pulse of the City's fiscal condition.

The Economy League of Greater Philadelphia's Leading Indicators

This edition of Leading Indicators highlights the launch of the Philadelphia Baseline series, where the Economy League uses data-driven insights to link individual outcomes, neighborhood trends, and citywide economic shifts to inform equitable growth and resilience strategies.

The initial entry in the series examines household income trends across cities and racial groups to illustrate how Philadelphia's economic baseline is reflective of both national patterns and unique structural barriers.

$507 Million

www.picapa.org