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Philadelphia's Financial Health Given Failing Grade


The Philadelphia skyline. Sean Pavone |

HARRISBURG PA (January 2020)--A new report by government finance watchdog Truth in Accounting (TIA) has named Philadelphia as one of four cities to receive an F for its poor financial health.The TIA report "Financial State of the Cities," which found widespread debt in city halls across the nation, cited Philadelphia as having the fourth largest taxpayer burden at $25,500, behind Honolulu at $26,400, Chicago with $37,100 and New York City with the largest taxpayer burden in the nation at $63,100.

Pittsburgh wasn't dramatically better, finishing 12th worst with a taxpayer burden of $15,600.

The taxpayer burden, according to TIA, is the amount that each local taxpayer would have to contribute for their city government to pay off all its bills.

TIA notes that the study sheds new light on exactly how much debt will fall into future taxpayers’ laps.

The report looked at the 75 most populous U.S. cities and found that Philadelphia was one of four that accumulated taxpayer burdens more than $20,000.

Calling the findings a "catastrophic challenge for city lawmakers," TIA analysts took their data from the fiscal 2018 audited Comprehensive Annual Financial Reports, which are on file in city halls across the country, and TIA says "are not analyzed on this scale by any other organization."

“Taxpayer Burdens occur when politicians decide to make promises on paper without fully funding the programs,” said TIA founder and CEO Sheila Weinberg. “We need to fix the wording of balanced budget requirements so civil servants can count on their retirement programs, and future generations are not forced to pay for our bills.”

The report says that Philadelphia’s substantial taxpayer burden is related to poor budgeting practices that have allowed the elected officials to claim they are meeting the city’s balanced budget requirement while putting the city more than $14 billion in debt.

Billions of dollars of earned and incurred compensation costs, TIA explains, were related to pension and retiree health care and have not been included in the budget calculation. In essence, benefits were promised, but elected officials have chosen to use money that could have been used to fund these benefits for other purposes.

Pittsburgh came under similar criticism from TIA.

"Pittsburgh’s financial problems stem mostly from unfunded retirement obligations that have accumulated over the years," the report stated. "Of the $1.8 billion in retirement benefits promised, the city has not funded $915.2 million in pension and $408.6 million in retiree health care benefits."

Weinberg added that all "75 cities studied have balance budget requirements for very good reasons … They are intended to avoid the crushing debt Philadelphia now has and to promote accountability by not allowing elected officials to push current costs onto future taxpayers.”

As a result, Weinberg says, some 63 cities, including Philadelphia, have used misleading budgeting practices to circumvent the intentions of its balanced budget requirement and the result is a per taxpayer burden of $25,500, which future taxpayers will shoulder unless government services and benefits are cut.

Moreover, a consequence of the city's shoddy budgeting means that citizens have not had the "information needed to be knowledgeable participants in Philadelphia's financial decision-making processes," she added.

However, TIA says that it's not all gloom and doom in Pennsylvania's two largest cities.

"The good news," Weinberg says, "is that Philadelphia and the other cities studied are now reporting all of their retirement debt on their balance sheets."

New government accounting standards required state and local governments to start reporting their pension liabilities on their balance sheets three years ago and their retiree health care liabilities last year.

Weinberg concludes, “This is a huge step for government transparency, because elected officials and citizens can now go to their Comprehensive Annual Financial Report and get a more accurate picture of their government’s finances.”