Questions and answers on Phila.'s budget crisis

Philadelphia has been in a state of fiscal crisis for more than a year. The twists and turns have been difficult to follow, particularly in recent months, as the action has shifted to Harrisburg.

So let's recap:

Why is Philadelphia broke?

Although the city has been in precarious financial shape for years, the collapse of the national economy caused the current crisis. Tax collections plummeted and the city pension fund was hit hard by the stock market collapse.

Thus far, the city has pared $1.7 billion from its five-year spending plans. Even so, Philadelphia is $700 million short of what Mayor Nutter says it needs for the next five years.

How come Harrisburg is involved?

Because the city's plan to close the $700 million gap is based on a temporary sales-tax hike and a two-year deferral of payments into the pension fund. The city needs the approval of state lawmakers for both.

Could the city have solved the problem on its own?

Theoretically, yes. Nutter and City Council could have cut spending further. They could have raised property taxes or business taxes without state approval. They also could have raised the wage tax, although that was unclear at the time a budget deal was reached.

But drawing up a budget in this economic climate without state help would have been extraordinarily difficult. Nutter initially proposed a temporary 19 percent property-tax hike, and even that would have required a sales-tax hike and other state assistance.

Why are state lawmakers taking so long?

The city's budget legislation was not introduced until July 3, more than a month after Nutter and Council had reached a deal. After that, the city's requests got caught up in bigger political debates, such as Gov. Rendell's fight with Senate Republicans over the state budget. Later, the bill became a vehicle for broader statewide pension reforms.

What pension reforms are included?

At this point, not many. The Senate had sought to reduce the cost benefits for future Philadelphia workers and to cap the pensions of current employees. But the House stripped that language out of the bill yesterday. The legislation does, however, still include a ban on participation in the Deferred Retirement Option Plan for future elected officials.

What is PICA, and why does it matter?

The Pennsylvania Intergovernmental Cooperation Authority is a state agency with authority over the city's long-term planning. Its five-member board must approve Philadelphia's five-year plan.