Philadelphia faces $450 million budget deficit after financial hardship caused by COVID-19

Philadelphia faces a $450 million deficit following a year of fiscal hardship stemming from the financial impact of the COVID-19 pandemic. 

Last Tuesday, city officials projected that Philadelphia will soon only have enough money in its reserves to run the city for three days, The Philadelphia Inquirer reported. Officials speculated that it could take years to recover to pre-pandemic fiscal conditions, and that major cuts could be included in the budget proposal Mayor Jim Kenney is expected to present later this spring.

This year’s budget process marks the second deficit since the city has been devastated by the COVID-19 pandemic. Last year, the city faced a $750 million deficit in the budgeting process, The Philadelphia Tribune reported.

The city may be able to benefit from a new federal COVID-19 relief package proposed by the Biden administration that would deliver direct aid to cash-strapped local and state governments, though Kenney warned that federal aid won't solve the budget crisis, the Inquirer reported.

"We're hoping that the feds will come somewhat to the rescue, but we have to prepare in the interim," Kenney said during a press conference.

Kenney’s budget proposal was expected to be presented at the beginning of next month, but was delayed to April 15 to allow officials more time to consider the impact of a federal relief package, the Inquirer reported. 

Last year, the city dipped into its reserve in order to soften the blow dealt by the $750 budget deficit, but still needed to take other measures to balance the budget, including laying off over 400 city employees, hiking parking and wage taxes, and cutting spending for several other city departments, according to the Inquirer.

This year, the city does not have the cushion in its reserve that it relied on last year, making more severe measures to balance the budget more likely. Officials have not yet determined how they expect to fill the gap in the budget that will exist once the next fiscal year begins in June. 

The city’s budget director Marisa Waxman told the Inquirer she believes Philadelphia will likely need to implement changes to make its budget more sustainable even if the city does receive a bail-out from the federal government.

“Even if we got plenty of stimulus in the coming year, that’s one-time money," Waxman said. "But we have real structural problems and we need to sort of stretch that out.”