The word on next year's District budget: Difficult
Officials say it looks like they will face a gap of at least $144 million. In a doomsday scenario, it could be much larger.
by Dale Mezzacappa
Bit by bit, with the help of expensive consultants, the School District is closing its 2011-12 budget gap. But even under the best-case scenario, it still faces another daunting shortfall of at least $144 million for next year.
That gap represents about 5 percent of the District's total operating budget – and that's the optimistic projection. The budget has already fallen by 15 percent this year.
And the fiscal 2013 gap could quickly rise to $238 million if City Council doesn't approve a property tax change being pushed by Mayor Nutter that would bring in $94 million for the District. That proposal is already drawing opposition.
School Reform Commission Chairman Pedro Ramos said the District has made budgetary "progress." He hopes that next year there will be "more predictability and less chaos" for schools.
But the financial situation is so precarious that failure to get the additional city money in time for next year would be "unthinkable," Ramos said.
As of late March, officials still had to trim about $23 million more in this year's budget, but Chief Recovery Officer Thomas Knudsen said this did not "overly concern" him. The District this year has had to slash its way toward closing an overall gap between budgeted expenditures and available revenues that topped $700 million, mostly due to a sharp drop in state aid and the end of federal stimulus money.
"It is still a very difficult circumstance," Knudsen said. "But now we have much more precision about what's in the budget and the numbers, and we are identifying options … as we go forward."
Despite earlier concerns that the District might run out of cash this summer, Knudsen is confident that he can reach the end of the year without asking for labor concessions.
But next year is a different story. Knudsen said it would be "difficult" to close the fiscal 2013 shortfall "without help from the unions."
Last summer, when the magnitude of the District's budget woes came to light, the Philadelphia Federation of Teachers – by far the District's largest union – agreed to help by postponing $58 million in payments to its Health and Welfare Fund. It also extended its contract by one year, to August 2013, in effect putting off any raises.
As for more possible concessions to help with the District's long-term fiscal stability, "There's nothing to give," said PFT President Jerry Jordan. He said his members have "endured massive layoffs, services are being taken out of schools from children. … My members don't have the stomach for it."
The District's central administration has been cut nearly in half, but schools have borne the brunt of the cuts. During the course of the academic year, schools lost more than $300 million from their budgets and additional operating supports from central office. Some personnel resources were yanked midyear.
Schools have eliminated some teaching positions; they've lost nurses, police officers, and other support staff; they've ended after-school tutoring, dialed back on programs for the gifted, and eviscerated arts, some sports, and other extracurricular activities. Next year looks like more of the same.
"Teachers are spending … out of their pockets every week in order to provide students with fundamental resources such as paper," Jordan said.
Still, the District and the unions have been communicating. The School Reform Commission in March approved a memorandum of understanding with its blue-collar union, District 1201 of SEIU Local 32BJ, that will save $3.4 million.
Knudsen said that he and the army of advisors from the Boston Consulting Group, working feverishly from mid-February until the end of March, have been systematically imposing organizational, administrative, and financial best practices on the system that he said were absent before.
The organization was "in terrible condition," Knudsen said.
The William Penn Foundation is paying the $1.5 million for the initial BCG consultant services. Any additional consultant costs to oversee the transition will also be paid by private funds, not taxpayers, Knudsen said.