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Budget Season

Mayor Cherelle Parker, Philadelphia's first Black woman mayor, proposed a $6.74 billion budget built around five priorities: safer communities, cleaner neighborhoods, economic opportunity, housing, and education. Homicides are down 37%. There is a nurse in every school. The H.O.M.E. Initiative aims to create or preserve 30,000 housing units. But the 120-page document also reveals a structural deficit growing to $421 million by FY2029, driven by rising pension and healthcare costs. Most Philadelphians will never read this document. The ones who do will understand where their tax dollars are going, and where the city is making bets it might not be able to afford.

Philadelphia, PAPhiladelphia FY2026 Budget in Brief (Proposed)

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95% High confidence

Philadelphia FY26 Budget: $6.7B spending, tax cuts, but $421M deficit projected

What changed

Mayor Parker proposed a $6.74 billion FY2026 operating budget, a 2.3% increase ($148.7 million) from FY2025. The plan includes immediate Wage Tax and Business Income & Receipts Tax reductions, with resident Wage Tax dropping from 3.75% to 3.70% and non-resident from 3.44% to 3.39%. Construction Impact Tax would be eliminated. Real Estate Transfer Tax would increase to fund housing initiatives. Budget projects a $421.8 million operating deficit, with fund balance dropping to $514 million (8% of revenues).

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Who is affected

All Philadelphia residents and businesses benefit from wage and business tax cuts. Construction industry benefits from eliminated Construction Impact Tax. Real estate transactions face higher transfer taxes. City employees get $550 million labor reserve for contract negotiations. Housing initiatives target creation/preservation of 30,000 housing units. Public safety investments include $25 million for anti-violence grants.

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What you can do

Budget was proposed to City Council in March 2025. No specific public comment periods, hearings, or deadlines mentioned in this document.

Where the money goes

Total FY2026 budget: $6.74 billion (2.3% increase). Revenue: $6.32 billion (2.6% decrease). Operating deficit: $421.8 million. New investments: $367.6 million including $186.4 million for public safety, $87.5 million for economic opportunity, $36.3 million for housing. Labor reserve: $550 million over five years. Federal funding reserve: $95 million. Fund balance projected: $514 million (down from $900 million in FY2025).

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Context

This is Mayor Parker's second budget as Philadelphia's first female mayor in 341 years, building on her 'One Philly' budget. The city faces financial pressures from end of federal ARPA funds, inflation, and potential federal funding cuts. Philadelphia's unique status as both city and county increases service costs. The budget implements Tax Reform Commission recommendations with historic tax cuts funded by anticipated pension savings when fund reaches 100% funding in FY2033.

“Mayor Parker, serving as Philadelphia's 100th Mayor and the first woman to hold the office in 341 years, has set a bold vision for the city's future: to make Philadelphia the safest, cleanest, and greenest big city in America, with access to economic opportunity for all.”

“Philadelphia's finances remain stable but face heightened risks. External pressures, including inflation, a tight labor market, revenue volatility, and federal and economic uncertainties, present a more uncertain fiscal outlook than the City has faced since it received American Rescue Plan Act (ARPA) funds.”

“Over the life of the proposed FY26‐30 Five Year Plan, the resident and non‐resident portions of the Wage Tax would be reduced from 3.75% to 3.70% and 3.44% to 3.39%, respectively, and the net income and gross receipts portions of the BIRT would be lowered from 5.71% to 5.50% and from 1.410 mills to 1.380 mills.”

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