By Mike Dunn

PHILADELPHIA (CBS) — The state agency that oversees the finances of the City of Philadelphia today okayed Mayor Nutter’s long-range budget despite misgivings over the slim surpluses and the looming cost of new union contracts.

The five members of PICA -– the Pennsylvania Intergovernmental Cooperation Authority -– voted unanimously to approve the mayor’s five-year spending plan.  But they did so despite the fact that the city controller and PICA staff had urged the board to reject the plan because of the plan’s very narrow projected fund surpluses -– the cushion of cash that mayors need for emergencies.

PICA board chairman Sam Katz says assurances from the mayor’s aides that those fund balances will improve was enough to satisfy him.

“Having very narrow projections of margins which were in this plan was a source of discomfort,” Katz said today, “and had we not identified a possible way in which that would be immediately eliminated, I think there would have been a ‘send it back and do it again.’ ”

Rob Dubow, the mayor’s finance director, said the fund balances will end up healthier, in part because of improved business tax revenues.  In fact, he said, the current year’s surplus is likely to end up about $20 million higher than expected.

Still, Katz had a warning for the mayor: settle the long-running contract talks with the two non-uniformed city worker unions:

“It’s a good time to settle because this is an administration that doesn’t have to satisfy any political constituency in the process of doing so,” Katz noted.  “And the (mayoral administrations) that will come behind it will have to satisfy every political constituency.”

The two unions, District Council 33 and District Council 47, have been working without a contract since 2009.  The mayor has gone to court, asking a judge to declare an impasse in talks to allow him to impose terms without agreement.

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