Summary
The Federal Funds and Fiscal Cliffs issue brief assesses Philadelphia’s use of pandemic-related federal relief funds, which provided essential support during revenue downturns but are now set to expire. The City strategically stretched its $1.4 billion in federal aid across multiple years to ease the transition, yet projections indicate that by FY28, fund balances will be critically low. The report warns that Philadelphia faces difficult choices in addressing a potential fiscal cliff, including tax increases, spending cuts, or reliance on reserves. The City’s current Five-Year Plan anticipates drawing down reserves to offset lost federal revenue, which may not be sustainable beyond FY28. The report stresses the need for proactive financial planning, urging the City to identify alternative revenue sources and reassess spending priorities before federal support fully phases out. Ensuring that structural balance is maintained will be critical in avoiding disruptive budget crises.