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No relief in sight for District’s troubled finances

Most additional funding has been on a one-time basis, so a gaping budget hole is likely yet again for next school year.
  • p 4 darrell clarke at city council harvey finkle
    Photo: Harvey Finkle

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This story will appear in the Notebook's forthcoming print edition focusing on school funding, due out on Dec. 2.

 

Nearly three months into the school year, the School District of Philadelphia is still navigating treacherous fiscal waters, having made little progress in convincing state and city lawmakers to provide financial relief and stability.

Faced with a $304 million budget gap for this fiscal year, the District had sought $180 million in new revenues from the state and city and $133 million in labor concessions. As of mid-November, it had received $112 million in increases from the state and city, but just $17 million of that is in recurring funds. And it had reached no agreement with its unions.

As a result, it is still operating schools with shrunken staffs, sparse instructional materials, inadequate counseling services for students, and classes at their contractual maximum. 

Parents United for Public Education and the Public Interest Law Center have collected almost 900 complaints from more than 80 schools documenting cases where they say the District is not providing legally mandated services to students, including those in special education.

After school opened – with 24 fewer District schools and 3,000 fewer employees than last year – the District got some relief when the state released $45 million that it had been withholding pending certain “fiscal, operational, and academic” reforms, including changes to the teachers’ contract. Although there had been no agreement with the teachers, Gov. Corbett in October said that enough overall progress had been made toward the goals to release the funds.

The District used the bulk of the $45 million for special education teachers and one-on-one aides ($15 million), 80 counselors ($8 million), instrumental music and winter and spring athletics ($8 million to $9 million). Another $5 million brought back several dozen assistant principals and other positions including secretaries, school operations officers, conflict resolution specialists, and a few more teachers.

“The remainder we have yet to allocate,” said Chief Financial Officer Matthew Stanski. 

Officials have said they are concerned that charter school enrollments are higher than budgeted, because District enrollment is 4,000 students lower than expected. But until staff members complete an enrollment audit, officials are unwilling to report how many more students are in charters and what the additional costs to the District will be. 

And so the new revenue was still a long way from solving the District’s problems. 

“Based on our demographics and student needs, we should be spending more money to educate our students, not less, and we should be expanding resources, not limiting them,” Stanski told a group of mostly unsympathetic City Council members in November. “Our schools and students require additional resources and support, and we still do not know whether we will be able to access recurring revenues next school year.”

Bleak outlook

The District is facing a deep hole again in 2014-15, because this year’s budget has been balanced with well over $100 million in one-time measures, like spending down its reserves. That includes the $45 million payment from the state and another one-time payment of $50 million from the city. Both were designed under Gov. Corbett’s “rescue” package to be replaced next year by revenue from an extension of the 1 percent temporary sales tax increase. But that is still the subject of dispute.

“Right now we are in a funding situation where we are unable to provide basic educational services for students,” Stanski said. 

And the picture for 2014-15 is likely to get even worse, he added, to the tune of $75 million to $100 million in higher pension costs, health benefits, utility expenses, payments to charter schools, and salaries.

The $17 million in new, recurring money comes from a $2 million increase in the state basic education subsidy beyond what was expected and $15 million from improved city property tax collection, which officials now think they can count on permanently.

These funds, along with the $50 million infusion from the city, were allocated in August to bring back positions that had been eliminated, including some counselors and noontime aides.

But it took until October for Mayor Nutter and City Council to resolve a dispute about how the $50 million would be raised. Their solution actually relies on the District’s own resources. The city is helping the District market its excess property and is advancing those dollars in anticipation of District proceeds from sales of closed buildings.

Meanwhile, a standoff continues between City Hall and Harrisburg – not to mention squabbles within City Hall itself – over who is most responsible for the School District’s solvency and who should act first.

“Given the crisis facing Philadelphia schools and students, neither City Council nor the General Assembly should wait for the other to act,” Michael Churchill of the Public Interest Law Center of Philadelphia, told Council in November. “Students cannot wait; they are in school now.” Other education activists reiterated that message.

However, legislators both in Philadelphia and Harrisburg have been unable to agree, and the District’s efforts at convincing both City Council and the General Assembly for more predictable funding streams going into the future have so far yielded meager results. 

Sales tax stalemate

Last spring's pleas by the District for $120 million in additional funding from the state did not fall on entirely deaf ears. But instead of increasing its subsidy to Philadelphia schools or restoring slashed education line items, like charter reimbursement, the General Assembly passed legislation allowing City Council to extend the city’s 1 percent surcharge on the sales tax and give $120 million of that revenue to the schools.

City Council cried foul, because it was eyeing a sales tax extension to help the city government defray ballooning pension costs. As a result, it has yet to pass the sales tax extension. It wants Harrisburg to amend the law so that it can split the revenue between the School District and the city. Harrisburg is balking.

City Council also wants to raise the cigarette tax by $2 a pack, which it says could bring in $40 million this fiscal year and $80 million a year in the future. But the General Assembly, which needs to authorize the move, has so far declined.

The only new revenue initiative was Nutter’s call for private contributions to a modest pool of funds for education supplies for high-poverty schools, managed by the United Way. The $480,000 headed to District schools is for consumables. 

Charter legislation 

The future is further clouded by pending charter school legislation. One way the District has sought to keep costs down is by enforcing enrollment caps on charters and freezing any charter expansion. But an overhaul of the charter law now under consideration would ban enrollment caps, allow universities to authorize charters, and let some charters switch their jurisdiction from the District to the state. 

All these things would constitute a “runaround” of the District’s power, said spokesman Fernando Gallard. “We would have no control.”

If charters can grow without limit, and there is no change in how they are funded, it would spell financial disaster for the District, he said, a point also made by Lori Shorr, Nutter’s chief education officer.

She told Council that the state’s funding formula for school districts and its charter funding mechanism work at cross purposes. The state doesn’t give school districts money based on actual student enrollment, but school districts must pay charters on a per-pupil basis.

“This lack of a student-based funding formula pits the District against charter schools,” Shorr said. “While the funding to charters has to flow from the District to the charters on a per-pupil basis, it does not flow from the state to the District in the same manner. This forces the District to make decisions about charter growth always in relation to its budget and not necessarily on the expansion of high-performing schools.”

As for the teachers’ union, its leaders have taken the position that seeking deep concessions from them is unwarranted and counterproductive, demoralizing the existing workforce and making it harder to attract the best teachers to Philadelphia. Negotiations have dragged on in the fall with no end in sight and no report on any progress.

“It is a well-publicized fact that the School District and state think that our educators’ pockets should be the primary source of funding to fix our current deficit,” said Hillary Linardopoulos, a Philadelphia Federation of Teachers staffer, delivering testimony before Council on behalf of PFT president Jerry Jordan. “Reducing educators’ salaries to fix a deficit is a short-term fix that will have long-term consequences for our schools and our students.”

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Dale Mezzacappa

@dalemezz
Dale is a contributing editor at the Notebook. She has reported on education since 1986, most of that time with The Philadelphia Inquirer.