Philly cigarette tax revenue will likely fall $26M short of projections: City controller

Philadelphia’s $2-per-pack tax on cigarettes will fall well below its projected revenue for the fiscal year, the Office of the Controller said.

The tax, which the state approved in 2014, is meant to provide money to the city’s cash-strapped district. Despite the expected shortfall, city school district officials said their portion of the funds would not be affected.

City Controller Alan Butkovitz’s latest report, released Wednesday, found tax revenues arenearly $26 million short of initial projections for fiscal year 2017, which runs from July to June.

Butkovitz said Philadelphia’s decline in cigarette sales is nearly twice that of the state’s since implementing the tax, likely a result of people going out-of-county to purchase packs.

From July through December, the city collected about $25 million, and for the next six months it is expected to add about the same amount, for a total of nearly $50 million.

Before implementing the tax, the city expected to rake in $77.5 million in fiscal year 2016. By fiscal year 2019, it was supposed to dip slightly to about $73 million.

But actual collections for the first three years of the tax have not reached $60 million, according to the report.

Prior to the passage of the tax, superintendent William Hite told Newsworksthat the district would have to consider drastic layoffs or truncating the school year to save money.

The district said Thursday that the revenue shortfall doesn’t affect the School District of Philadelphia at all.

“We’re not affected in any way, shape or form,” spokesman Kevin Geary said.

That’s because of a provision approved by state legislature last summer that created a permanent floor. If the city fails to bring in $58 million from the tax, the state will make up the difference.

“If there are $57,999,999, we get $1,” Geary said, adding that the revenue shortfall creates no financial exposure for the district.

Geary said the tax revenue goes toward the district’s general operating budget.

The controller’s report comes just five days after the city implemented a distribution tax on soda and other sugary drinks, revenue which will also aid education programs in the city. It’s expected to raise about $91 million annually, and will help fund prekindergarten programs, create community schools and improve parks and recreation centers.