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Philly cigarette tax revenue coming in at $26M below projections

The levy will still bring in $49 million earmarked for city schools.

The city of Philadelphia is expected to generate about $50 million this fiscal year through its two-year-old cigarette tax — that’s about $26 million short of original projections, according to a report released today by the City Controller.

The $2-per-pack cigarette tax in the city of Philadelphia is used to fund the School District of Philadelphia, and when it was implemented, the city estimated it would bring in $75.1 million in fiscal year 2017. But City Controller Alan Butkovitz wrote in today’s monthly economic report that at the halfway mark of the current fiscal year, the tax generated $24.8 million for the district.

That works out to an average of $4.1 million per month and an annual projection for the end of the fiscal year in June at $49.6 million, or $25.5 million short. Those figures could come in even lower, as experts have said cigarette sales are often lower in the second part of the fiscal year when temperatures are lower, on average.

Butkovitz’s office also wrote that the total is $5 million short of what the district budgeted for the current fiscal year, which was lower than the city’s original projections. However, state law includes a provision that stipulates that district will get the cash it budgeted.

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Office of the City Controller

The figures could mean two things, both of which were expected when the tax was implemented: 1. People in the city are quitting smoking as to avoid the $2-per-pack tax and 2. Some are leaving the city to buy cigarettes elsewhere.

The Controller’s office wrote that both the state and the city have seen declines in cigarette sales, but Philadelphia has seen a steeper decline than the state at 23 percent compared to 11.5 percent, respectively.

When the city formulated its original projections of how much money the cigarette tax might bring in, it based them off of a regional health survey showing the number of smokers in the area and how often they purchase cigarettes. At the time, officials said the number of smokers in the city was expected to declined by about 5 percent in the first three years solely due to people quitting. They also took into account a higher rate of black market sales.

The $2-per-pack cigarette tax in Philadelphia will last until at least 2019.

The news from the Controller’s Office comes just days after the city fully implemented a soda tax, becoming the first major city in the nation to do so. That tax, which is going to the city government and not the school district, is projected to bring in about $90 million per year.

Butkovitz’s monthly report also noted that unemployment in the city continues to decrease, consistent with national trends. Here’s the full report:

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