DHS Article

Moving the DHS Money

The Department of Human Services expends more than half a billion dollars annual to assist the most vulnerable Philadelphians. Much (roughly 85%) of the funding comes from state and federal sources, so uncertainty about whether future funding will materialize has a significant impact on both the DHS and entire General Fund budgets. The Pennsylvania Intergovernmental Cooperation Authority has voiced concern that the Mayor’s budget proposal included $80 million in funding from other governments that isn’t yet in the Commonwealth of Pennsylvania budget. This poses a risk that Philadelphia’s budget could be hurt if the dollars don’t come in from Harrisburg. By removing $70 million from the Department of Human Services budget in the General Fund, City Council minimized some fiscal risks for the city. By placing appropriation power for the $70 million in the Grants Revenue Fund (where the City budgets much of the money that may or may not come in from philanthropies and other governments), DHS will have the budgetary authority to spend the money if it does arrive from Harrisburg.

 

Breaking the Bank?

Beyond removing potential risky DHS revenues from the General Fund, Council shifted $16 million among various departments. This typically means there are winners and losers. For the most part, it seems that the losers are some of the Mayor’s economic development initiatives and the Productivity Bank. Although funds are being cut from a variety of departments (everything from the Police to the Law Department), $8.5 million-worth of the reductions comes from eliminating some departments’ repayments of loans from the Productivity Bank. The Productivity Bank is a revolving loan fund that provides departments with upfront cash for projects that are expensive in the short-term but will save money over time. Departments are expected repay the loan overtime with the savings the project generates. Similarly, imagine a homeowner who wants to install solar panels on her house. It is expensive now, but she will have lower energy bills in the future that will more than make up for initial cost. The homeowner will have room in her budget to repay the initial loan once she sees her energy bills drop. If she doesn’t repay the loan, she has more money in her pocket, but the loan fund will be depleted and neither she nor her neighbors will be able to borrow for new projects in the future. Weighing those options is similar to determining whether or not it is good public policy to suspend debt repayments to the Productivity Bank and redirect those funds to other purposes.

 

The departmental reductions that eliminate Productivity Bank repayments are designed to lower costs without affecting services. For example, the roughly $200,000 removed from the Police Department budget should not impact the number of officers on the street, but rather just remove the Department’s obligation to repay funds it borrowed in the past. Some departmental reductions, however, go beyond the elimination of Productivity Bank repayments and may impact city service delivery.

 

What’s Next?

Now that City Council voted the budget with their amendments out of committee, the next step is for the budget bill to come up for a full vote. Once that happens, the approved bill will be sent to the Mayor. The Mayor can accept the budget with Council’s amendments or veto it. To learn more about how the city’s most important policy document becomes law, check out the Roadmap to the Philadelphia Budget Process.