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Inquirer's Tom Ferrick: Why, with fewer in city, government costs more

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  • Ed Schwartz
    Note: This is the best explanation of the shifts and increases in City spending since the 1950 s to appear anywhere to date. It s in Sunday s Inquirer, City
    Message 1 of 1 , Feb 2, 2003
      This is the best explanation of the shifts and increases  in City spending since the 1950's to appear anywhere to date. It's in Sunday's Inquirer, City Page, where revealing charts further dramatize Tom Ferrick's point. The charts weren't online, but the text speaks for itself.

      Ed Schwartz

      Tom Ferrick Jr. | Why, with fewer in city, government costs more
      By Tom Ferrick Jr.
      Inquirer Columnist
      The time has come, Mayor Street said last week, to downsize city government.

      He wants to reduce the payroll this year by nearly 600 jobs. Trim the budgets of many city agencies by 2.5 percent. Crack down on city cell phones and cars. Maybe close recreation centers and public pools. A nip here. A tuck there.
      What does it amount to? Several hundred million dollars in savings over the next five years. Not exactly pocket change, but not a big chomp from a multibillion-dollar government with thousands of employees.

      The questions arise, as they do every year when budget time comes: Why can't it be cut more? The city's population has declined by 25 percent in the last 40 years, so why hasn't city government shrunk with it?

      My short answer is: It can, but not without pain. To see significant savings, a mayor would have to go after the biggest, costliest elements in the budget: employee benefits and pay, public safety, and social-welfare services. There's no other way.
      The nip-and-tuck the mayor proposed last week will stop the city from going into the red, which is not a bad thing. But that's about it.

      Let's look at two points in time - 1960 and 2002 - and compare. Begin with these particulars:
      When Mayor Richardson Dilworth presented his proposed general-fund budget for the 1960-61 fiscal year, it totaled $245 million. Adjusted for inflation, that equals $1.5 billion in today's dollars (and all the 1960 dollars used herein have been adjusted to 2002 dollars).
      Last week, when Mayor Street presented his proposal for the 2003-04 fiscal year, it totaled nearly $3.3 billion.
      In 1960, Mayor Dilworth presided over a government with 29,850 full-time employees. Most were paid out of the general fund - then and now the city's main budget, financed mostly through local taxes.
      There were another 2,400 employees at places such as the Water Department, the Parking Authority, and the Philadelphia Housing Authority - agencies that get their revenue from fines and fees collected or grants from other governments.

      This year, Mayor Street is presiding over a government with 25,400 employees paid out of the general fund and 8,500 from other funds.
      Bottom line: Even adjusted for inflation, the budget is double what it was in 1960, and the city has 4,000 more workers.

      To explain why, we have to stop for a moment and peer backward.

      The Dilworth era was before the exodus to the suburbs. Before the Great Society. Before the collapse of the industrial economy. Public-employee unions were in their infancy. High tech was an IBM Selectric.
      Philadelphia in 1960 was a prosperous, but mostly blue-collar, town that was still growing. Or so everyone believed.

      Dilworth saw his job as fostering the continued "rehabilitation and renewal of the city." In 1961, he opened 19 new rec centers and playgrounds, and five libraries. The city was spending millions on infrastructure improvements - new streets, sewer and water lines - so integral, the mayor said, to economic development.

      City government was growing, too. Dilworth proposed hiring 409 new employees in 1960 - more police, street sweepers, and juvenile aides to work on the problem of youth gangs.

      How to pay for it? Increase taxes. Dilworth asked for and got a 7 percent increase in the real estate tax and a 13 percent hike in the wage tax (from 1.5 percent to 1.7 percent). It was, he said, a small price to pay for continued growth and health.

      One reason the mayor needed the new revenue was to raise the pay of city employees.
      Dilworth, a 62-year-old ex-Marine, was a reform Democrat whose party had been in control of City Hall for only nine years. He wanted to rid government of hacks and hire qualified people chosen through merit. But, he complained, wages for city workers were so low, it was hard for the city to compete.
      "Competent employees cannot be obtained and retained if the disparity between city wages and those paid by private industry continues to be as great as it is now," the mayor said.

      I can tell you that problem has been rectified.
      Which brings me back to the reasons why government costs so much more:

      Reason No. 1:Wages and benefits for city employees.
      Had the average city worker just kept pace with inflation over the last 42 years, he would be earning $536 a week. Instead, he earns an average of $889 a week.

      Dilworth was on target in 1960 when he complained about low pay for city workers. It was 6 percent below the average wage paid to a Philadelphia worker in a private job. Today, it is 30 percent higher.

      In recent years, the pace of pay increases has slowed and, sometimes, even stopped.
      But the cost of benefits continues to rise in double-digits.
      In 1960, the city paid $740 per employee in today's dollars for medical benefits - and it was darn good coverage: Blue Cross and Blue Shield to the max. Now, it costs $8,160.
      Bottom line: In 1960, wages and benefits averaged $32,000 per employee. Today, wages and benefits equal $67,000 per employee.

      City employees in every job category have beaten inflation - except for one.
      In 1960, Richardson Dilworth was paid $25,000 a year as mayor - the equivalent of $160,600 in today's dollars. John Street is paid $135,000.

      Reason No. 2:Social-welfare costs.
      In 1960, state and federal aid to Philadelphia government was a pittance. It amounted to a mere 2 percent of the city's general fund - most of that state money for a new program to defray the cost of foster care.

      Most programs for the poor were on the city's dime. The biggest and costliest was the huge, city-owned Philadelphia General Hospital, on 34th Street and Convention Center Boulevard. It had 2,900 employees.

      Then, along came President Lyndon B. Johnson and an alphabet soup of federal aid to the poor. The figure for state and federal aid in the 1960 budget: $32 million in adjusted dollars.

      The figure today: $601 million. Most of that is used to reimburse the city for social services it offers the poor.
      The city gets more than $500 million in state and federal categorical grants - not included in the general fund - that goes mostly to poverty programs.

      Social-welfare costs are a big part of the reason for the growth in the "other fund" category of employees - from 2,400 in 1960 to 8,500 today.
      Bottom line: The city's social-welfare apparatus is vast and costly - but heavily subsidized by other governments.

      Reason No. 3: Public-safety costs.
      Just our luck. One of Philadelphia's biggest growth industries has turned out to be crime.
      In 1960, police reported 38,853 major crimes. Today, the number is 94,000 a year.

      That means more police and prison guards, more judges and prosecutors, more probation officers and sheriff's deputies.
      I offer only one comparison: In 1960, the District Attorney's Office had 36 full-time lawyers handling criminal prosecutions. Today, it has 300.
      Six out of 10 city employees paid out of the general fund are in public-safety jobs.
      Unlike social welfare, the feds and state haven't stepped in to cushion the blow. Most of it is paid out of city taxes.
      In effect, mayors have shifted jobs and resources from other departments to feed the public-safety sector.

      Take the two dozen agencies that are the core of the traditional bureaucracy. The list includes such departments as Law, Revenue, Finance, Procurement, Records, and Licenses and Inspections.
      In Dilworth's day, they got 25 percent of the budget. Today, their share is 13 percent.
      Number of employees: down 1,070 from 1960.

      Take the city's service agencies: Recreation, the Free Library, the Streets Department, Fairmount Park. Their share of the city budget in 1960 was 20 percent. Today, it is 9 percent.
      Number of employees: down 2,950 from Dilworth's day.
      Bottom line: Even after adjusting for inflation, public safety costs nearly $1 billion more today than in 1960. The increase has been offset in part by cuts in other city departments.

      Which brings us back to the pain part. There's no use pretending the city budget can be reduced significantly without it hurting. Reducing waste, fraud and mismanagement won't do the trick.

      Do you want to trim $300 million from the city budget? I can give you a variety of ways to do it. Here's one: Cut 1,000 police officers; close 30 of the city's 156 rec centers; let go through attrition 1,500 social workers, sheriff's deputies, probation officers, librarians and bureaucrats; and reduce the size of the Fire Department by 10 percent. You are now at the magic number.

      Those are the kinds of decisions that confront mayors and bureaucrats and city residents these days.

      Makes me wish it was 1960 again.
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