Fall Conference 2020The Impact of the COVID-19 Pandemic on State and Local Governments November 18, 2020Pennsylvania Intergovernmental Cooperation Authority
The Impact of the COVID-19 Pandemic on State and Local Governments Fall Conference 2020 Agenda Welcome Kevin Vaughan, PICA Board Chair Introduction Harvey Rice, Executive Director, PICA National & Regional Economic Update Ryotaro Tashiro, Regional Economic Advisor Federal Reserve Bank of PhiladelphiaNovember Economic & Revenue Update Matthew Knittel, Ph.D., Executive Director Independent Fiscal Office Philadelphia Budget Update Marisa Waxman, Budget Director City of Philadelphia___________________________________________ Discussion
The Impact of the COVID-19 Pandemic on State and Local GovernmentsA s in other economic downturns, the pandemic has reduced state and local revenues, but this time is different. We project that state and local government revenues will decline $155 billionin 2020, $167 billion in 2021, and $145 billion in 2022—about 5.5 percent, 5.7 percent, and 4.7percent, respectively—excluding the declines in fees to hospitals and higher education. Whilefederal aid to state and local governments this year has exceeded projected revenue losses, that aidis only one-time, and state and local governments are expected to face shortfalls for many years. -Brookings.edu, October 24, 2020 Presenters R yo Tashiro travels across the Third District as a regional economic advisor, speaking to groups about the economic outlook and the functions of the Federal Reserve. He tries to avoid using economic jargon so that those with all backgrounds can participate in the conversations. Many of the research topics Mr. Tashiro has pursued were inspired by conversations with the public, including his two main areas of focus, labor economics and demographics. Prior to joining the Bank, he was a business analyst for Bloomberg, where he conducted research on issues related to equity data quality. Mr. Tashiro has a master’s degree in economics from the University of Michigan–Ann Arbor and a bachelor’s degree in economics from Kenyon College.M atthew Knittel was formerly employed as a financial economist by the US Department of Treasury and an economist by theMichigan Department of Treasury before joining the IndependentFiscal Office. Mr. Knittel holds a M.A. and Ph.D. in Economics fromMichigan State University and a bachelor’s degree in Economics fromHope College in Holland, Michigan. Mr. Knittel has taught coursesat George Washington, Johns Hopkins, and Penn State Universitiesand published several articles in the National Tax Journal, theNBER and US Treasury’s Office of Tax Analysis working paperseries. He has served as Executive Director since September of 2011. M arisa Waxman is the Budget Director for the City of Philadelphia, overseeing more than $8 billion in capital and operating spending each year. Previously, Ms. Waxman served as First Deputy Revenue Commissioner concentrating on revenue policy, regulation, and programs; and has also held positions with the City of Philadelphia’s Office of Property Assessment and Office of the Director of Finance. She began her career with the City of Philadelphia in the City Controller’s Office. Ms. Waxman holds a Bachelors degree and Master of City Planning from the University of Pennsylvania and is a proud member of the 255th graduating class of Central High School.
Ryotaro TashiroNational & Regional Economic Update
PICAFALLCONFERENCERYO TASHIRO*REGIONAL ECONOMIC ADVISORNOVEMBER 18, 2020 www.PhiladelphiaFed.org | @PhiladelphiaFed *The views expressed today are our own and not necessarily those of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.
GDP Growth by Sector• Q2 saw the largest Annualized quarterly growth (SAAR) annualized economic 100% contraction on record.• The U.S. economy showed strong 50% recovery in Q3, but we are still below pre‐ pandemic levels. 0%• Consumer spending and business investments were the -50% main drivers of the contraction as well as growth. Real GDP Consumption Investment Exports Imports Government Source: BEA via Haver Analytics Last quarter included: 2020:Q3 (advance estimate)
Presentation Outline – Key Questions• What has been the overall impact of the crisis to businesses?• How have the consumers reacted so far?• What can we expect in the near term?
What Has Been the Overall Impact of the Crisis to Businesses?
Net Revenue of Small Businesses Percentage Change from 2019• Percent change compared to baseline 10 figures from 2019. 0• Small businesses -10 -24.3 experienced sharp -20 -25.8 decline in revenue in -30 -26 -26.5 April. -40• While we have seen -50 some recovery, the -60 pace of recovery has -70 slowed down in PA NJ DE US Apr 2020 recent months. Jan 2020 Jul 2020 Oct 2020 Source: Womply via Opportunity Insights/Haver Analytics Weeks plotted: Jan. 13, 2020 to Oct. 30, 2020
Change in Monthly U.S. Payroll Employment Change in payroll employment (thousands, SA) Oct 2020: 638• Black lines indicate 5000 annual averages (in thousands). 191.8 250.3 226.7 195.4 192.8 177.8 175.8 0 -962.5• Labor market -5000 deteriorated in April. -10000• Data since May showed some improvement, but -15000 the situation continues to be far -20000 below pre‐pandemic levels. Jan 2014 Jan 2016 Jan 2018 Jan 2020 Source: BLS via Haver Analytics Months plotted: Jan 2013 ‐ Oct 2020 Black lines indicate annual averages.
Tri-State Metro Area Employment Growth A = Allentown‐Bethlehem‐Easton MSA• Year‐over‐year B = Altoona MSA C = Atlantic City‐Hammonton MSA D = Bloomsburg‐Berwick MSA percentage change E = Camden Metro Division F = Chambersburg‐Waynesboro MSA (3‐month moving G = Dover MSA H = East Stroudsburg MSA average) I = Erie MSA J = Gettysburg MSA K = Harrisburg‐Carlisle MSA L = Johnstown MSA• Areas with higher M = Lancaster MSA N = Lebanon MSA dependency on more O = Montgomery‐Bucks‐Chester County MD P = Newark Metro Division Q* = New York‐New Jersey‐White Plains MD severely affected R = Ocean City MSA S = Philadelphia‐Delaware County MD sectors suffered T = Pittsburgh MSA larger job losses. U = Reading MSA V* = Salisbury MSA W = Scranton‐Wilkes‐Barre MSA X = State College MSA Y = Trenton‐Princeton MSA Z = Vineland‐Bridgeton MSA AA = Williamsport MSA AB* = Wilmington Metro Division AC = York‐Hanover MSA AD* = Youngstown‐Warren MSA * Also includes counties not shown on map. Source: Calculations from BLS data via Haver Analytics.
Annual Employment Growth by Sector• Year‐over‐year Total change, seasonally Total Private adjusted Mining, Logging & Construction Manufacturing• Most sector suffered Trade, Trans & Utilities net loss from a year Information ago. Financial Prof & Bus Services• Leisure and Education & Health Services hospitality sector has Leisure & Hospitality been hit the hardest Government in terms of -40.0% -30.0% -20.0% -10.0% 0.0% employment. US PA Philadelphia-Delaware County Metro Division Source: Calculations from BLS via Haver Analytics. Last month included: US (Oct 2020); PA and Philadelphia‐Delaware County Metro Division (Sep 2020)
Change in Most In-Demand Jobs in Pennsylvania• PA job postings: Occupations with Sharpest Increases occupations with Occupation # of Postings in 2019 # of Postings in 2020 % Change from 2019 largest changes in Stock Clerk and Order Filler 953 5,817 510% number of postings, Laborer and Freight Mover 1,793 6,188 245% Sept 2019 vs Sept 2020. Veterinarian 52 179 244% Personal Care Aide 807 2,192 172%• Occupations with Packaging/Filling Machine Operator 61 153 151% largest increases are in Occupations with Sharpest Drops the logistics as well as Occupation # of Postings in 2019 # of Postings in 2020 % Change from 2019 in dependent/pet care Medical Transcriptionist 84 8 ‐90% sectors. Skincare Specialist 98 10 ‐90% Non‐Computer Office Machine Operator 73 15 ‐79%• In contrast, demand for Social Science Research Assistant 54 12 ‐78% client‐facing services Compensation/Benefits Specialist 521 147 ‐72% occupations dropped sharply. Source: Calculations using data from Burning Glass Technologies. Occupations with fewer than 50 postings are excluded from the lists.
How Have the Consumers Reacted So Far?
Consumer Confidence Indexes Index (U Mich: 66Q1 = 100, Conference Board: 1985=100)• Consumer confidence has dropped sharply since April. 120• These indexes are 100 100.9 unlikely to return to 80 81 pre‐pandemic levels 77 until the labor 60 market recovers. 40 20 Univ of Michigan Conference Board CB Mid-Atlantic Jan 2000 Jan 2005 Jan 2010 Jan 2015 Jan 2020 Source: University of Michigan and Conference Board via Haver Analytics Months plotted: Jan 2000 to Nov 2020
Personal Saving Rate, United States• Sharp increase of As a percentage of disposable personal income, seasonally adjusted personal saving rate 35.0% in April due to shut down of businesses. 30.0%• Personal saving rate 25.0% stayed at historically 20.0% high levels despite partial reopening of 15.0% 14.3 % businesses. 10.0%• Households are 5.0% saving in uncertain environment. 0.0% Jan 2000 Jan 2005 Jan 2010 Jan 2015 Jan 2020 Source: Bureau of Economic Analysis Months plotted: Jan 2000 to Sep 2020
Food and Beverage at Home vs. Away from Home Billions of USD, Seasonally Adjusted• Households are spending differently, both voluntarily and $80 involuntarily. $70.74 $60• Spending at $55.63 restaurants likely to drop as we approach $40 winter months. $20 $0 Food and beverage stores Food services and drinking places Jan 2000 Jan 2005 Jan 2010 Jan 2015 Jan 2020 Source: US Census Bureau Months plotted: Jan 2000 to Oct 2020
Share of e-Commerce in Retail Sales Seasonally Adjusted• As a percent of total retail sales. 16.1 % 15.0%• Pandemic has accelerated the relative importance 10.0% of e‐commerce in retail. 5.0% 0.0% Jan 2000 Jan 2005 Jan 2010 Jan 2015 Jan 2020 Source: US Census Bureau Quarters plotted: 1999:Q4 to 2020:Q2
Commuting Patterns During COVID-19 Pandemic• How we work has changed dramatically since the beginning of the pandemic.• Close to a quarter of respondents are now working from home every day.• Share of those commuting every day dropped from three‐ quarters to half.
What Can We Expect in the Near Term?
U.S. Economic Growth Projection• Forecasters’ projection for economic growth in 2021 is moderately optimistic as of mid‐ November (“Current”).• Pace of recovery is expected to slow down overall; however, there is a considerable variation in these projections. Source: Federal Reserve Bank of Philadelphia Survey of Professional Forecasters, Fourth Quarter 2020
Third District Future Business Outlook Diffusion index (% reporting increase less % reporting decrease)• 6‐month outlook among firms in the 70 Third District continues 62.7 60 to be somewhat optimistic. 50 47.3 40• Level of optimism may 30 be dependent on 20 specific sectors, with 10 manufacturing firms 0 being more optimistic -10 than their non‐ -20 manufacturing Manufacturing Non-Manufacturing counterparts. Jan 2010 Jan 2015 Jan 2020 Source: FRB Philadelphia via Haver Analytics Last month plotted: Oct 2020 Blue shade represents recession months.
Current and Past Recession Payroll Employment Recovery• Employment relative 0.0% to pre‐pandemic peak.• In the aftermath of the Percentage below peak -5.0% Great Recession, the U.S. labor market took -7.00% almost 80 months to fully recover. -10.0%• While the recovery in the current recession -15.0% has been solid, the pace has been slowing COVID-19 Recession 2007 Great Recession 2001 Dot-Com Recession 1990 Recession 1981 Recession down in the recent 0 20 40 60 Months After Pre-Recession Peak months. Source: Calculations from BLS via Haver Analytics Each period's peak determined individually.
Mobility and Engagement Index• Index: Index: Jan/Feb, 2020 = 0 10 January/February, 2020 0 = 0. -10 -20• The index has -30 -40.9 -40 -43.1 essentially stayed the -50 -49 same since July. -60 -61.8 -70 -80• Consumer mobility -90 dropped even prior to -100 state/local government -110 shut down orders. -120 -130 -140• Consumer activities are unlikely to return to US NJ PA DE pre‐pandemic levels Apr 2020 Jul 2020 Oct 2020 until the disease is under control. The FRB of Dallas via Haver Days plotted: Jan. 18, 2020 to Oct. 31, 2020
Tri-State Cumulative Business Bankruptcy Filings• Business bankruptcy filings, specifically those for Chapter 11 (reorganization), have been increasing at a fast pace.• As businesses look to reorganize their debts, they may be hesitant to commit to large investments. Source: Li, Tashiro, and Tarlin, 2020.
Household Debt Forbearance Rates• While we are not seeing higher rates of personal bankruptcies or defaults yet, households are struggling to repay their debts.• If not for the CARES Act, the share of household loans in nonpayment status could have gone up even more. Source: Li, Tashiro, and Tarlin, 2020.
Uncertainty: Factors Affecting the Outlook• Timeline of development of vaccine as well as effective treatment• General understanding of the virus and the disease – Potential spike in cases during winter months.• Decisions by business owners in post‐reopening of the economy – Some businesses may have difficult time implementing social distancing policies. – Some firms may choose to not reopen until things are less uncertain.• Change in consumer behavior – Uncertainty about labor market could lead to less spending.• Additional support from the government – if, when, and how much – Many of the relief programs established by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) have expired by the end of the summer.
Summary• What has been the overall impact of the crisis to businesses? – While we are starting to see some signs of recovery, most sectors were negatively impacted – in particular, the leisure and hospitality sector suffered notable damage.• How have the consumers reacted so far? – Lower consumer confidence has resulted in significantly less spending on certain goods and services.• What can we expect in the near term? – The pace of recovery has slowed down in recent months; as we head into winter months, we may face greater uncertainty both in terms of the spread of the disease and economic activities.
Contact Information Ryo Tashiro Ryo.Tashiro@phil.frb.org Request a Fed Speaker:http://philadelphiafed.org/sbformFollow us on Twitter @philadelphiafed @philfedresearch Like us on Facebook
Matthew Knittel, Ph.DNovember Economic & Revenue Update
November Economic and Revenue Update PICA Fall Conference 2020 Matthew Knittel, IFO Director November 18, 2020
PA Economic Forecast and Latest Quarterly DataOctober 2020 Annual Forecast 2018 2019 2020 2021Real GDP 1.9% 2.4% -4.6% 3.0%Wages-Salaries Paid 4.3% 4.3% -2.0% 3.7%Net Job Gains (000s) 68 54 -450 100Philadelphia CPI-U 1.3% 2.0% 0.9% 1.5%Latest Quarterly Data 2020.1 2020.2 2020.3 2020.4Real GDP -5.8% -34.0% -- --Wages-Salaries Paid 3.7% -6.5% -2.6% -1.0%Net Job Gains (000s) 28 -849 -506 -440Philadelphia CPI-U 2.6% 0.0% 0.4% --Source: U.S. Bureau of Labor Statistics, U.S. Bureau of Economic Analysis. Forecasts by IFO. Net Job Gains using quarterly datarepresent annualized amount and exclude self-employed. All rates or changes are year-over-year except Real GDP.November 18, 2020 1
PA Income Support Greatly Reduced in 2020 Q4 $24.3 FPUC $15.9 billion $25 PUA $7.0 billion state and federal UC + LWA $1.7 billion economic impact payments Other $1.4 billion $20 State UC $5.2 billion $14.3 Impact Payments $11.0 billion $15billions of dollars $12.6 $10 $7.0 net impact $5 $3.6 $0 Q2 Q3 Q4 -$2.8 -$5 lost labor income -$7.4 -$6.4 -$10 -$11.7 -$15 Note: Lost labor income includes wages ($20.8b), self-employed income ($3.2b) and tips ($1.5b). IFO estimate.November 18, 2020 2
PA Consumer Spending Holds Up, But Recent Weakness Source: tracktherecovery.orgNovember 18, 2020 3
PA Jobs Recover Through July, Then Moderate YOY Number Change (000s) YOY Percent Change Apr Jul Sept Apr Jul SeptTotal Payroll Employment -1,062 -539 -477 -17.5% -8.9% -7.8% Construction -104 -19 -15 -40.1% -6.8% -5.6% Manufacturing -77 -38 -36 -13.3% -6.6% -6.3% Retail-Wholesale Trade -155 -86 -62 -18.9% -10.3% -7.5% Administration-Waste Man. -53 -33 -27 -16.8% -10.3% -8.3% Education (exc. local SDs) -42 -9 -36 -16.1% -4.3% -15.0% Healthcare -89 -39 -34 -10.9% -4.7% -4.1% Social Assistance -31 -16 -8 -13.3% -6.7% -3.2% Arts-Entertainment -58 -34 -21 -60.9% -27.3% -19.5% Accommodation-Food Service -280 -138 -128 -58.6% -28.2% -26.8% Other Services -86 -42 -33 -32.8% -15.9% -12.8% All Government -17 -15 -27 -2.3% -2.2% -3.7% All Other -71 -71 -50 -5.8% -5.7% -4.0%Note: Data not seasonally adjusted. Sept data preliminary. Does not include self-employed. YOY is year-over-year. Source: U.S. Bureau of Labor Statistics. November 18, 2020 4
Drilling Down: PA Job Gains/Losses by Sub-Sector YOY Number Change (000s) YOY Percent Change Apr Jul Sept Apr Jul Sept Full Service Restaurants -158 -63 -58 -79.5% -31.4% -29.3% Limited Service Restaurants -67 -32 -27 -40.9% -18.7% -16.9% Accommodation -32 -29 -23 -54.1% -41.5% -37.7% Colleges and Universities -17 -5 -27 -9.6% -4.1% -16.5% Local Government -20 -17 -25 -4.4% -3.9% -5.5% Employment Services (temps) -30 -21 -22 -26.1% -18.3% -18.4% Personal Care-Dry Cleaner -46 -22 -20 -64.7% -31.0% -28.3% Clothing and Accessory Stores -27 -21 -19 -65.1% -50.5% -48.0% Federal Government 2 3 9 2.5% 3.4% 8.9% Home Health Care 0 3 3 0.1% 3.7% 3.8% Retail – Building/Garden Supply -4 1 3 -9.1% 2.3% 5.6% Couriers and Messengers 1 3 2 3.7% 8.1% 4.2%Note: Data not seasonally adjusted. Sept data are preliminary. Does not include self-employed. YOY is year-over-year. Colleges and Universities excludesstate system which is included with state government. Source: U.S. Bureau of Labor Statistics. November 18, 2020 5
COVID-19 Produces Permanent Structural ChangesTelecommuting and remote working Gasoline consumption down ~10% | ~$1.5 billion spending (redirected) Excess supply in commercial real estate rental market Less business travel, accommodation and dry cleaning servicesNew spend patterns, more on-line sales and productivity gains = job loss Grocery spending up ~+10% June to Sept | but employment down -4% Rapid acceleration to on-line sales | e.g., retail clothing jobs down -48% US labor productivity up +10.6% (Q2) and +4.9% (Q3) | avg +1.5% 2018-19How many of the ~475k PA job losses in September will be recouped? Do consumer spending patterns revert? Do individuals rejoin the labor force, or get by with less?November 18, 2020 6
Revenues Are Up First 4 Months of Fiscal Year Mitigation Recovery Period Period Mar to Jun Jul to Oct NotesGeneral Fund Tax -9.2% 0.4% year-over-year growth rate Corporate Net Income -12.3% -5.2% much better than expected Sales - Non-Motor -7.1% 3.2% UC payments, lack of travel Sales - Motor Vehicle -33.6% 20.6% March-June lost sales recouped Income - Withholding -4.4% -2.4% lower wage and part-time jobs Income - Other -8.9% -6.6% S&P500 up ~+10% for year Cigarette -39.2% 8.6% processing issues Inheritance 5.9% -11.7% Realty Transfer -30.9% 6.2% All Other Tax -7.7% 2.0%Note: Growth rates control for revenue shifts for tax relief and miscellaneous one-time transfers. Excludes non-tax revenues.November 18, 2020 7
Non-Motor Sales Tax Growth: State and Philadelphia Solid collections most PA businesses FPUC ends LWA ends 10% Pre-COVID 19 able to reopen (limited) State 5% $940 m 0%Year-over-Year Growth Jan Feb Mar Apr May Jun Jul Aug Sep Oct -5% -10% non-essential Philadelphia business closures FPUC, PUA -15% and PPP -20% economic impact payments -25% -30% Note: FPUC is Federal Pandemic Unemployment Compensation. PUA is Pandemic Unemployment Assistance. PPP is Paycheck Protection Program. LWA is Lost Wage Assistance. Growth rates control for revenue shifts. Collections partially based on sales from prior month. Philadelphia values for Jan and Feb represent three-month average growth Dec to Feb. November 18, 2020 8
Looking ForwardAnticipated drop off in consumer spending has yet to occur FPUC payments diminish in August, but consumer spending held up October sales tax revenues supported by temporary LWA payments November first real test of strength | but some federal support remainsLong-term unemployment is a major concern High-risk sectors: retail, food service, accommodation, travel Government job losses not fully reflected Hidden: PA labor force contracts by 151,000 in Sept 2020 from prior yearOther relief programs expire at end of year | impact unclear Expiration of rent, mortgage and student loan forbearance Expiration of extra/special federal UC support: PUA and extended benefitsNovember 18, 2020 9
Presentation is Posted to IFO Website Questions? Submit to contact@ifo.state.pa.usNovember 18, 2020 10
Marisa WaxmanPhiladelphia Budget Update
PICA Economist ConferencePhiladelphia Budget Update Fall 2020 1
Fast Facts FY 2021• Starting Fund Balance $291M• Revenues $4.58B • 5.2% less than FY20• Expenses $4.87B • 3.3% less than FY20• Ending Fund Balance $22.8M • Less than 1% of Spending (internal goal=6-8%, best practice=17%) 2
Timeline of COVID-19 Fiscal Impacts on PHL •Mayor Kenney proposed FY21 budget with tax reductions and new March 5, 2020 investments in education and street cleaning •Non-essential City government operations, schools, and businesses March 16, 2020 close to prevent the spread of COVID-19. •Mayor Kenney proposes revised FY21 budget, drawing down on May 1, 2020 reserves, reducing spending, and increasing revenues to close $649M gap •Worse than projected tax collections through May create larger gap in June 15, 2020 FY21 budget (by around $100M, bringing total to $750M) •City Council approves FY21 budget with amendments, including June 25, 2020 reduced Police spending and additional funds for affordable housing and adult education. •PICA approves the Five-Year Plan, with conditions for a Contingency July 21, 2020 Plan, Overtime Analysis, and Monthly Spending Reports. •Updated revenue and spending projections based on FY20 andNovember 16, 2020 FY21Q1 actuals and proposed Mid-Year Transfer Ordinance 3
FY21 Budget Gap ($749M) in $millions Increased Costs, Lower Starting $30 Fund Balance, $134 Reduced Revenue, $585 Lower Starting Fund Balance Reduced Revenue Increased Costs 4
Fiscal Strategies to Close the FY21 Budget GapUtilize/Reduce Reserves • More than $400M in reduced Reserves • $34M in the Rainy Day Fund • Use FY20 Recession Reserves & decrease FY21 Recession Reserve • Recapture $10M in FY20 Capital Pay-As-You-Go Funding • Reduced FY20 & FY21 Fund BalancesService Reductions • More than $300M in net spending reductions compared to original FY21 budget • Net of new labor costs from executed/planned one-year extensions • Includes debt restructuring for Pension Obligation Bonds ($75M)Revenue Increases to Partially Offset Revenue Losses • About $40M • Includes 1 year only increases to Parking Tax and Non-Resident Wage Tax • Freezes BIRT and Resident Wage Tax Rates until FY24 • Early Payment Discount for Real Estate Taxes discontinued 5
The Approach • Service Impacts Racial Equity • Revenue Burdens • Federal $ for COVID ExpensesLeverage $ from • Biz Relief, Homeless Services, Health, Elsewhere Affordable Housing • Philanthropy, Private Sector Efficiencies & • Hiring FreezeCitywide Savings • Exempt Pay Cuts 6
What We Prioritized • Reduced Prison funding to reflect reduced inmate population and other reductionsSafety & Justice • Maintain funding for Child Safety @DHS • Police budget reduced by $33M; new funds for oversight. • All Health Centers remain open Health • Sustained COVID response and planning for vaccines • Behavioral Health funding maintained • Small Business Relief Fund: $13.3M to 2,000+ businessesInclusive Growth • $2M Fund for Black and Brown Biz & Recovery • Regional Recharge and Recovery: Chamber-led inclusive economic recovery and growth • $30M increase for the School District • Catto Scholarship + support CCP but delayed/reduced $ from Educated City initial budget • Maintain existing PHLpreK and Community Schools funding • Internet Access & Remote Learning for distance learning 7
Revenue Trends – Smaller Taxes By TypeSource: Data and Research Unit, Department of Revenue 8
Source: Data and Research Unit, Department of Revenue Note: Center City is defined as river to river, Girard Ave. to Tasker St. 9
Revenue Trends – Wage TaxSource: Data and Research Unit, Department of Revenue 10
Revenue Trends – Wage TaxSource: Data and Research Unit, Department of Revenue 11
Revenue Trends – Realty Transfer TaxSource: Data and Research Unit, Department of Revenue 12
Revenue Trends – Realty Transfer Tax Jan – Sep 2019 to Jan – Sep 2020 % Change May 2020 to Sep 2020 % ChangeSource: Data and Research Unit, Department of Revenue 13
Revenue Trends – Use & OccupancySource: Data and Research Unit, Department of Revenue 14
Revenue Trends – Use & Occupancy April U&O Revenue: October U&O Revenue: Percent Change from 2019-2020 Percent Change from 2019-2020 Apr YOY Oct YOY Region Change Change East Center City -37.4% 2.5% Far Northeast -7.8% 2.3% Kensington, Frankford -26.0% 28.2% North -27.7% 16.1% Northeast 23.5% 20.3% Northwest -27.3% 16.0% South 6.7% 9.6% West and Southwest -33.4% 62.6% West Center City -52.1% -8.8%Source: Data and Research Unit, Department of Revenue 15
Continuing Risks Uncertainties • Economic Reopening Pace/Scale • Second Surge of COVID-19 • Additional/Flexible Federal Funds • Changes in the nature of work and residential patterns (Non-resident Wage Tax) 16
Longstanding Challenges FY 2021 • High Fixed Costs • High Poverty • High/Complex Tax Structure • Aging Infrastructure • Violence & Public Safety • Systemic/Institutionalized Racism 17
What’s Next for City Finances Recovery & • Priorities for economic recovery & grant applications Reconciliation • Continuing Consultation with Reconciliation Steering Committee Strategies Monitor FY21 • Monitor revenues & spending Budget • Have Contingency Plan if things are worse than projected • First time in several years we’ve needed short term Short Term borrowing Borrowing • Bond ratings maintained but outlook moved from positive to stable by one rating agency Develop FY22 • Planning starts in December 2020 • Budget introduced in March 2021 Budget 18
Keeping You Posted • Monthly spending & revenue reportsFiscal Information • Quarterly reports on budget + performance • Addressing systemic, institutionalized racism, Reconciliation with a focus on reforms in 4 areas: Police/Public Safety, Economy, Community Engagement, and Health COVID-19 & • COVID Guidance and Updates Reopening the • Reopening with Care Economy 19
Open Questions (aka What Keeps Us Up At Night)• Will there be more aid to local government? Will it be adequate?• Is now the right time to revamp our challenging tax structure or is the volatility to great to have a dependable revenue stream?• How do we know which investments will do the most to reduce racial disparities?• What will the path of the virus be and how will it affect service delivery and revenues?• What shifts should we expect in the nature of work? • Work from Home, Automation, Retail… 20
PICA Economist ConferencePhiladelphia Budget Update Fall 2020 21
PennsylvaniaIntergovernmentalCooperationAuthority 1500 Walnut Street, Suite 1600, Philadelphia, PA 19102 (215) 561-9160 • www.picapa.org PICA Authority @PICA_Authority
