On August 1, the City of Philadelphia’s Covid-19 Recovery Office published its 2022 Recovery Plan Performance Report, which provided the most extensive overview of the City’s use of nearly $1.1 billion in State and Local Fiscal Recovery Funds (SLFRF) to date. Based on the report, the City continues to exclusively utilize SLFRF to replace lost general fund revenue that resulted from the negative economic impacts of the pandemic. Without these funds, the City “would have been facing another $450 million budget gap in Fiscal Year 2022 and a $1.5 billion gap” within the next five years, according to the report.

The $350 billion SLFRF program, which sent direct aid to every state, territory, county, and municipality throughout the United States, was created by the American Rescue Plan Act of March 2021. Governments may spend SLFRF on broad categories, including efforts to “fight the pandemic and support families and businesses struggling with its public health and economic impacts, aid to respond to the Covid-19 public health emergency, alleviate the economic harm of the pandemic; maintain vital public services, even amid declines in revenue resulting from the crisis; and build a strong, resilient, and equitable recovery by making investments that support long-term growth and opportunity,” according to the U.S. Treasury Department’s website. To date, Philadelphia has exclusively used SLFRF to offset declining revenues.

Philadelphia’s most recent annual Recovery Plan Performance Report, which is required by Treasury Department regulations, largely mirrors the first report last August. In the prior report, Philadelphia indicated it was using approximately $26 million to cover revenue shortfall. Based on the City’s own budget projections, SLFRF will only be used for this purpose until December 2026, which is when all funds must be expended. Even with the $1.1 billion influx of federal dollars, Philadelphia may remain unable to close a $1.5 billion revenue shortfall projected by its 2022 to 2027 Five-Year Fiscal Plan.

According to the recovery report, using funds to replace revenue is necessary to continue government operations without disruptions or cuts in service. For example, the report states Philadelphia would have been required to close the budget gap by laying off city employees, discontinuing grants that support homeless shelters, decreasing current levels of fire and EMS services without SLFRF or a “significant tax increase”.

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The report also notes SLFRF allows the city to continue new anti-violence and police reform programs, particularly the Group-Violence Intervention (GVI) program and Community Crisis Intervention Program (CCIP). GVI “is an evidence-based approach to reducing gun violence that involves engaging the small percentage of individuals who are driving gun violence by offering support to make changes or swift consequences for ongoing connection to violent activity.” CCIP “uses credible messengers from neighborhoods vulnerable to gun violence to engage and disrupt violence by reducing tensions and mediating conflicts among those most likely to be victims of shootings or shooters themselves.”

The 2021 and subsequent 2022 report devote space to the benefits of both programs and the City’s ongoing efforts to curb increases in violent crimes. Despite these efforts, Philadelphia is currently on pace to surpass 2021’s record homicide rate by a small amount. The report provides no indication if either of the programs are achieving their goals.

The “Promoting Equitable Outcomes” section of the 2022 report also highlights Mayor Jim Kenney’s priority “to expand the City’s focus on diversity, equity, and inclusion.” For example, “The City of Philadelphia is committed to an equitable recovery from the Covid-19 pandemic, and to using federal recovery funds to support and expand its efforts to promote racial equity.” 

The report further states, “[City] departments [are] committed to improving hiring, retention and promotion of diverse employees; allocating time and resources to racial equity objectives; and working with historically marginalized communities to create new policy solutions and improved outcomes.” Central to these goals is the Office of Diversity, Equity and Inclusion, which “has engaged individuals at every level of government in a coordinated effort to center equity as a process and an outcome.”

Despite these assurances, little information is provided in the most recent report about how SLFRF will achieve the goals, other than stating that “[Philadelphia] learned during the Great Recession that cuts to local government services can take many years to recover while slowing down regional economic recovery and disproportionally impacting Black and brown residents.” 

Since Philadelphia has thus far exclusively used SLFRF to close revenue shortfalls, it can be concluded SLFRF are allowing the administration and the Office of Diversity, Equity and Inclusion to continue their efforts without reductions in budget or cuts to service.

When contacted, Kenney’s office stated, “The City is drawing down $250 million in American Rescue Plan funds in FY22 into the General Fund to support existing programs and priorities and enable crucial investments made even more important by the impact of the pandemic.” The response went on to note, “Diversity, Equity and Inclusion is an intrinsic part of everything the City does because it is critical that we ensure that all of the dollars we spend help promote racial equity in Philadelphia, a city with deep and historical racial inequities; it’s important to point out that the federal government has encouraged local governments to promote diversity, equity, and inclusion in their services, programs, and practices. The City would fall short in providing basic services if we didn’t identify, address and overcome existing inequities in service delivery that stem from systemic institutionalized racism. By centering racial equity, the Kenney Administration is advancing an intentional strategy to dismantle internal institutional barriers that have historically repeated patterns of exclusion and perpetuated disparate outcomes for our residents. To be very clear, the funding is not dedicated to fund the Office of Diversity, Equity, and Inclusion itself.”

Philadelphia’s next Recovery Plan Performance Report must be made publicly available and provided to the Treasury Department by July 31, 2023. Before then, Philadelphia must provide Treasury with four quarterly Project and Expenditure Reports, which Treasury makes periodically available to the public.

Seth Higgins, a native of Saint Marys, Pennsylvania, specializes in bringing conservative thought to local government. Seth is a former Tablet Magazine Fellow and is currently a Krauthammer Fellow with The Tikvah Fund.

One thought on “Philadelphia uses Covid money to fill budget shortfalls, fund diversity initiative”

  1. …why is this news? Are we supposed to believe that an “equitable recovery” is bad for some reason? Would the right be happier if we had an inequitable recovery?

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