Transcripts of full meetings of the council.

But there are tax revenue issues related to funding public education that must be addressed, and I'll discuss those shortly.

And we still have a variety of other challenges in front of us. Our

total tax revenue in FY15 as compared to

FY14 is down about $41 million, which

translates to 1.5 percent below FY14's

projections. This projected decrease in

FY15 is due to the expiration of the 1

percent Philadelphia Sales Tax and

reforms in the Business Income and

Receipts Tax.

This budget, which balances lower tax revenue projections with rising employee costs, takes a prudent approach to addressing both the long-term challenges we face and the immediate needs of our citizens and our City departments.

Just last night, District Council 47 overwhelmingly ratified an eight-year contract agreement that adds $122 million in costs to our Five Year Plan. Our hard-working City employees deserve the wage increases in this contract just as taxpayers who foot the bill deserve the cost-saving labor reforms in this agreement as well.

This contract includes vital

reforms in the areas of pension,

healthcare, and overtime, while members

of DC47 receive multiple wage increases

over three years that they need for

themselves and their families, starting

30 days from today.

As I've said many times, I want contracts for all of our municipal unions, and I certainly know that City Council feels the same way, but those agreements, in my view, also have to be fair to the financial interests of our citizens and our public servants.

This remains my goal as we continue our negotiations with District Council Union 33, which unfortunately is now the only group of public employees that doesn't have a contract that provides raises for our workers.

I want to give DC33 raises, and I need reforms as well. Let's get a contract for our DC33 workers soon.

We're also concluding the

arbitration process with our Firefighters

Union, whose members received raises last

year, and entering the arbitration

process with members of the FOP, who

received multiple raises in their

five-year contract.

Therefore, in our FY15 budget,

we're setting aside some of our fund balance for future labor contract agreements, just as we did in the FY14 budget.

We are committing more than $44.3 million for potential obligations with District Council 33, Local 22, Lodge 5 of the Police, and non-represented employees and for the new DC47 contract in our FY15 budget. Over the span of the Five Year Plan, we are reserving more than $375 million for contract costs, including the full cost of the contract with District Council 47.

I am hopeful that all of our union leaders understand that my Administration wants fair multi-year

contracts with all of our union

employees. But, again, fair contracts

must include work rule changes,

healthcare cost savings and, most

importantly, pension reform.

We must control our costs of

operating the City government while

providing high-quality services and while also seeking opportunities to strengthen our financial picture and reduce financial risk. We must also explore new economic and job growth opportunities for our city, and that is why we have spent the last few years exploring the possible sale of PGW and the incredible business growth and job generation that this proposal could create.

I know that members of City Council and all Philadelphians appropriately have questions regarding the proposed sale of PGW to UIL Holdings, but let me restate my analysis, because I believe this is the right decision for us, for PGW customers, and for PGW


The proposed agreement will

freeze rates, gas rates, for three years.

That means no rate hike for three years,

and any new owner cannot raise rates

after that time without the approval of

the Pennsylvania Public Utility

Commission, just as PGW operates right now.

The agreement will maintain PGW's discount programs for low-income families and seniors and will position PGW to take full advantage of the abundant supply of natural gas in Pennsylvania, offering our city and region the opportunity to become a prime energy hub and job creator in America.

In addition, UIL's commitment to accelerating investment in pipe replacement, LNG facilities, and the expanding shale gas operations means more jobs for Local 686 and our building construction trades. This is about jobs and economic growth for our city.

The proposed agreement also

protects the interests of PGW workers,

which is very important to me. All PGW

workers will be offered employment at

UIL. There will be no layoffs. All

pension benefits earned through the sale

date are assured in the future. That

means that PGW workers will receive their PGW pension whenever they retire. Whether it's two years or two decades from now, you will get your PGW pension.

In addition, each year, our own City pension costs grow, straining our resources, resources that could be spent improving service delivery or reducing taxes. And now the City is doing all that we can to ensure the long-term financial security of our own City pension fund, but we must be honest, it is still less than half funded.

Sale of the Philadelphia Gas Works could go a long way to rejuvenate our severely underfunded pension fund. The $1.86 billion agreement with UIL

Holdings could infuse between $420

million and $630 million into our pension


In the coming months, I know

that City Council will do its own due

diligence and carefully weigh all of the

elements of a potential sale of PGW. My

Administration is looking forward to working with Council, answering your questions, and hopefully ultimately completing this sale.

Let me take a few moments to discuss the paramount issue that I know every member of Council is concerned about - public education for our kids.

Our children deserve a high-quality education, period. But prolonged fiscal challenges at the School District have truly impeded our ability to provide a rich learning experience for our young people. Our Administration and City Council have time and time again shown leadership, increasing annual, recurring education funding by $155

million over the last three years.

Despite increased funding from

the City and making tough decisions to

reduce costs and implement savings, the

School District is operating under a

significantly constrained budget because

it did not receive the full funding it

needed for its current budget.

Recently, the District requested an additional $320 million in recurring funding. That number is in addition to the $120 million that would be generated by the extension of the 1 percent Philadelphia sales tax currently a topic of conversation in City Council.

Now, because we're required to budget revenues consistent with existing law for measures that have already been enacted, our budget assumes that the District will receive that $120 million. But let me be very clear, and I have been consistent in publicly stating on this issue, we are in agreement that a 50/50 split of the 1 percent sales tax

extension, coupled with the

implementation of the cigarette tax, is

vitally important for the financial

stability of the School District and the

fiscal health of our City pension fund.

And I will continue to be an aggressive

and strong advocate for change in the

sales tax extension legislation in Harrisburg.

Two weeks ago, Dr. Hite announced that the District would need an additional $320 million for Action Plan 2.0. I said that I support his broad request for additional funds and that I would certainly do whatever I could within our own budget constraints to ensure that the District had additional funding that they needed from us.

Specifically, the District has now made a direct request for $75 million in recurring annual funding from the City to support District-managed and charter schools. To meet the funding request, I am again calling on the General Assembly

to authorize the $2 per pack cigarette

tax, as already approved by this City


In its first year, the

cigarette tax would generate $83 million

in education funding, assuming a July 1,

2014 start date. And even in the out

years of the tax -- and smoking rates more than likely will decrease, which quite frankly is a good thing for the health and wellness of our citizens -- it will still provide more than $70 million of dependable, annual education funding. All it requires is the General Assembly to simply pass authorizing legislation, which, again, I will continue to actively and aggressively push for in Harrisburg.

Once again, let me thank the members of City Council for passing the cigarette tax 16 to nothing, trying to provide local funding support for educating our children. But there is still so much work to do to support high-quality education and the children

of this city. The School District of

Philadelphia has a structural funding

deficit that is caused by a consistent

underfunding problem. It's not getting

the funding that it needs or deserves.

Most importantly, we need

substantial and sustainable long-term

funding. The School District of Philadelphia needs a statewide, student-weighted funding formula, a formula that takes into account the number of students in the District and the needs of those students. Pennsylvania is one of only three states in the United States of America that does not utilize a student-weighted formula. The time for one is now. Our children need it.

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