Philly’s budget negotiations, explained in four charts

Mayor Cherelle L. Parker on Thursday unveiled her $6.7 billion proposal for the next city budget, kicking off three months of negotiations between her administration and City Council over Philly’s taxing and spending plans.

Parker this year wants to cut the wage and business taxes, increase spending on housing and drug recovery, and continue investing in her first-year priorities of public safety and street cleaning.

Council members will hold a series of hearings examining her proposal from late March to early May before negotiating the final deal. If Council follows its normal rules, lawmakers must approve the budget before their June 5 meeting.

Here’s what you need to know about the city budget in four charts.

Negotiations between the mayor and Council over what ends up in the final budget deal are a big deal in City Hall. But when you look at the big picture, not much changes between when the mayor unveils her budget proposal in March and lawmakers vote on it in June.

That is not to say that the amendments Council members push for are not important — an extra couple of million dollars can make a huge difference for important programs. But it’s also important to remember that those changes are usually drops in the bucket compared with the overall budget.

» READ MORE: Winners and losers from the first city budget in Philly’s Parker-Johnson era

Philadelphia has an unusual tax structure, and it all comes down to the city’s wage tax.

Most major U.S. cities’ funding relies primarily on property taxes, which are relatively low in Philadelphia. Instead, Philly’s budget depends on the wage tax — currently 3.75% of earnings for city residents and 3.44% for people who live outside Philadelphia but commute into the city — which is by far the city’s largest source of tax revenue.

It is the highest flat-rate municipal income tax in the country, and it is often blamed for driving jobs out of the city and making the tax code more regressive, or more burdensome for lower-income people than the wealthy.

» READ MORE: No tax on businesses? The Philadelphia Tax Reform Commission is calling for a major change

Since the 1990s, city leaders have worked to reduce Philly’s reliance on the wage tax by adopting small annual cuts. Parker paused that effort for her first year in office, but has embraced it this year by proposing rates of 3.74% for residents and 3.43% for commuters.

Parker this year is also proposing cutting the business income and receipts tax rate, which she hopes will spur job creation. And as part of her new housing initiative, the mayor wants to increase the real estate transfer tax and eliminate the construction tax.

During budget season, Philadelphia’s city departments used to spend much of their time fighting for extra positions. But since the onset of the pandemic, they have struggled to fill the jobs they are already budgeted for.

One of the many unexpected consequences of the coronavirus pandemic has been a nationwide shortage of municipal workers, and Philly is no exception. City leaders are hopeful they are starting to turn the corner on recruitment and retention, but there are still thousands of open positions, sidelining many of the questions that used to dominate budget talks, such as how many police officers the city needs.

» READ MORE: Nearly a quarter of Philly city jobs are still vacant, but Parker’s team believes it’s ‘turning a corner’

Another factor is Parker’s decision last year to require nearly all city employees to work in person five days a week, which made Philly an outlier among other large cities and has led to questions about whether the policy will impede recruitment.

From picking up the trash to opening shelters for people experiencing homelessness when the temperature drops below freezing, city government does a lot. But one of its biggest jobs is ensuring public safety, and that is reflected in the city budget.

Four of the 10 operational departments with the largest budgets for the 2026 fiscal year are dedicated to criminal justice and emergency response.

» READ MORE: An ‘unapologetic’ Mayor Parker proposes $872M police budget with money for forensics, tech upgrades, and recruiting

The Philadelphia Police Department remains by far the largest city agency, and Parker is asking lawmakers to approve an $872 million budget for it next year.

Staff writer Anna Orso contributed to this article.