State overseers ask Street to rebalance the budget

The state agency that oversees Philadelphia's finances yesterday told Mayor Street to submit a revised version of the city's spending plan that takes into account new contracts between for two labor unions.

Joseph C. Vignola, executive director of the Pennsylvania Intergovernmental Cooperation Authority, gave Street 20 days to submit revisions. Under the law, PICA's board must certify that the city's spending plan features a balanced budget.

The agency had been planning to wait until the city finished negotiations with a third municipal labor union before reexamining its spending plans. But talks over a new contract for the 11,000 members of American Federation of State, County, and Municipal Employees District Council 33 have been stalled for weeks, prompting PICA to ask for revisions now.

Passed last summer, the city's budget was precariously balanced even before its firefighters' and white-collar employees' unions won raises and benefit increases.

City Budget Director Dianne Reed said the administration had been working on revising spending projections in light of the contracts and had been meeting regularly with PICA. But she declined to specify new cuts that would make up the costs of the two labor pacts that have already been inked or the contract still to be negotiated with District Council 33.

New costs could be covered by other spending cuts or better-than-anticipated income from taxes. But Vignola said a new spending plan also would need to take into account other unanticipated factors, such as legal proceedings that have held up plans to reduce spending by closing fire companies.

PICA's letter follows a downgrading of Philadelphia's credit rating by New York's Fitch Ratings agency. In a report last week, Fitch said the city's finances were endangered because it had not reduced spending to keep pace with tax cuts.

Contact staff writer Michael Currie Schaffer at 215-854-4565 or mcschaffer@phillynews.com.