In its first full year of existence, Philadelphia’s $2-per-pack cigarette tax brought in less money than first anticipated — but it nearly met projections on which the School District of Philadelphia based its budget.
City Controller Alan Butkovitz released an economic report for the city this week and noted the cigarette tax, which went into effect in October 2014, brought in $58.8 million in the last fiscal year that stretched from July 2015 to June 2016. That falls far short of original projections, which state officials had pegged at $77.5 million for fiscal year 2016 when the city was fighting for its passage.
Despite those figures, the School District of Philadelphia that benefits from the city-only cigarette tax formulated its budget based on much more conservative estimates. In last year’s budget, it projected it would bring in $59.5 million in this fiscal year, a difference of $700,000.
That’s a drop in the bucket for the school district that operates on a $2.6 billion annual budget. And in the middle of fiscal year 2016 as it was preparing for next year’s budget, the district decreased its projections to $58.5 million. In that respect, true revenues actually slightly exceeded projections.
The revenue brought in by the cigarette tax is slightly less on a month-by-month basis than what was made in fiscal year 2015. In its first nine months of existence, the cigarette tax in Philadelphia — which is tacked on in addition to other state taxes — brought in $50.2 million.
Projections were based on a regional health survey of thousands of adults, and the city’s Department of Public Health has estimated that about 275,000 adults — or 23 percent of Philadelphians — smoke on a regular basis. But a decrease in revenue coming in from the cigarette tax was expected, even from state officials who originally said the tax would bring in upwards of $70 million per year. Experts anticipated some smokers would quit due to increased prices, while others would buy smokes outside the city or turn to “loosies” sold illegally.
The District didn’t respond to a request for comment, but an official told The Daily News in April it expects to bring in $55.9 million in fiscal year 2017, $54.2 million in 2018, and $53.3 million in 2019. Fiscal year 2019 is the final year of existence for the temporary tax, unless it’s renewed by the legislature.
Philadelphia’s cigarette tax was instituted in October 2014 after a debate in the state legislature, which had to approve the levy, lasted several years. Former Mayor Michael Nutter largely pushed for the tax that was then introduced in the state Senate by Sen. Anthony Williams, a mayoral candidate himself in 2015. It came in addition to the renewal of a 1 percent sales tax within city limits that also goes to the district and brings in about $120 million a year.
While the District remains strapped for cash, it didn’t request additional funds from the city this year. Mayor Jim Kenney recently signed into law a 1.5-cent-per-ounce soda tax that would fund pre-Kindergarten programming and the development of community schools.