FY25 Year End General Fund Balance Projection Lowered by $58.2M from Q1

Compared to the adopted FY25-29 Five-Year Plan, projections at the end of the second quarter of FY25 anticipate additional spending of $294.8M, bringing the total to $6.66B. Revenues of $6.27B are $11.7M more than earlier projections. The growing structural deficit is possible because of a $315M boost to the FY24 year end fund balance primarily from underspending on personnel. The FY25 fund balance is projected to be $15.9M higher than the adopted Plan, but $58.2M lower than projected in Q1. With a widening operating deficit and uncertainty at the federal level, the City should remain cautious, particularly while reserves are below the GFOA-recommended level.

FY25 OT Projections Increased by $15M in Second Quarter

At $153.2M through Q2, Citywide overtime spending was $19.2M or 14% higher than the same period in FY24. The City updated its projected overtime spending for FY25, increasing the total by $14.9M from the Adopted Plan to a projected total of $300M for FY25. Through the second quarter of FY25, overtime spending has been driven by persistent vacancies, the November 2024 election, the addition of a City holiday the day after Thanksgiving, and contract increases for City employees.

PICA's 2025 Economist Forum

Each February PICA convenes economists at the Federal Reserve Bank of Philadelphia to discuss the revenue estimates that will form the backbone of the City of Philadelphia's upcoming FY26 Budget and FY26-30 Five-Year Plan. The theme that emerged from this year's conversation was uncertainty at the federal level. While it's clear that many of the federal government's proposed policies would likely have a detrimental impact on the national and local economy, what's less clear is the extent to which these policies will be enacted. Although current economic indicators are generally in good shape, economists advised that the City should add a dash of pessimism to its projections in the face of the current uncertainty.

Graphic created with ChatGPT's DALL-E and edited by Rob Call.

Fiscal Stability and Intergovernmental Cooperation Hearing

PICA Executive Director Marisa Waxman testified at City Council's Fiscal Stability and Intergovernmental Cooperation hearing on February 26th (it was right up our alley). She highlighted ongoing improvements to the City's fiscal health, including improved Pension Fund condition and credit ratings, but cautioned that Philadelphia's reserves remain well below recommended levels, especially in light of significant tax revenue and grant disruptions from recent federal policy changes.

PICA's FY26 Budget

It's budget season in Philadelphia! PICA's budget for the following fiscal year must be approved by March of the prior fiscal year. PICA's FY26 budget was approved by the Board at their February 25, 2025 meeting. For the first time, it includes a year end fund balance in line with GFOA recommendations.

The next PICA Board Meeting will be held on March 18, 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.

$466 Million

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