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Mayor Nutter sticks with his plan to borrow $50 million, rejects property transfer idea

By Paul Socolar on Aug 16, 2013 05:37 PM

Mayor Nutter and key staff members came to meet Friday with the editorial team at WHYY and the Notebook to explain and defend his strategy for securing additional funding for the School District.

Both the mayor and City Council have assured the District that it will get an additional $50 million from the city, but they still disagree about how to raise that money. Counting the $50 million, efforts this summer to bring additional revenues to the District have so far generated only $80 million of the $180 million requested by Superintendent William Hite, so most of the cuts made to balance the budget are still in place.

While saying he had no hand whatsoever in developing Gov. Corbett’s rescue plan, Nutter continued to argue that extending the city sales tax surcharge and borrowing $50 million against it is a better plan for raising money than the one put forward by City Council President Darrell Clarke. The mayor questioned whether enough money could be generated this year by selling off District properties. He acknowledged that he needs City Council approval for any borrowing plan.

Here’s what the mayor had to say about the governor’s plan to fund the schools through sales tax revenue, how it came about -- and his own strategy:

While I put forward a path, this is really not my idea or plan. This is using power and authority granted to the city of Philadelphia by the General Assembly in a piece of legislation that was signed by the governor. There’s not a person sitting at this table who was in negotiation on what came out of the legislative process. None of us were in a room anywhere with anyone. I know there have been these thoughts that I somehow signed on to something. This was the ultimate in “This is what you’re getting, put it on the table, you can take it or leave it, but that’s what you’re getting.” …

It happened at the end of the process and I believe we ultimately learned its components literally by reading it on a blog site. … There were rumors, conversations, discussions that things might be going in this particular direction, but at the end we were not a party to anything. We were the recipient of certain authorities granted by the General Assembly. … It is much like if you asked someone for $25, and they say “All I have is $15” -- you can decide to either take the $15 or take nothing. I chose to take $15 on behalf of the children of Philadelphia. I am going back for the other $10.

We went to Harrisburg with this plan. … I announced a $95 million proposal out of the city of Philadelphia: $28 million in enhanced delinquent tax collection on behalf of the School District, $45 million in funding in a half-year to come from the new cigarette tax, $22 million to come from increasing the liquor-by-the-drink tax from 10 percent to 15 percent. That was my plan.

The General Assembly chose not to take up either of those two measures, even though City Council had passed the cigarette tax by 16-0. The General Assembly and governor said, “That’s very  interesting, we’re not doing that, we’re doing this. Take it or leave it.”

In the late, late hours of this budget discussion, the governor's office came up with the idea: We may not have any “state” dollars to put on the table, but we can extend the sales tax that we know is going to expire next year and we’ll devote those resources to the School District. The sales tax generates about $135 million, maybe upwards of $140 million a year. They gave us $2 million of additional state money; they  incorporated our $28 million in enhanced tax collections into their “plan.”

And the excess revenues from the disputed fine with the federal government, the Department of Health and Human Services -- the state essentially put aside more money than ultimately they were required to pay by the federal government. It was not the feds’ money, it was the state’s money. They put aside about $140 million … and through a negotiation [involving U.S. Rep. Bob Brady], they ended up with a $93 million settlement. … It was always the state’s money … in the state treasury and now that they don’t have to pay to the federal government, they can do whatever they want to do. And so they decided, "We’re going to give you a one-time infusion for this upcoming year of $45 million" -- solely in their discretion.

They attached requirements to it in terms of the state education secretary’s certification, that’s their interpretation. They can do whatever they want. Until the education secretary determines that those conditions have been met, that’s that. … That’s solely in their jurisdiction, and there’s not a soul around here who can do anything about that.

My focus is to work on an area where I do think I can do something about. ... The city of Philadelphia was given the authority to do something right now to access $50 million.

Is it the best piece of legislation ever written? No. Does it have problems? Yes. … But this is what we have at the moment. I’m not going to sit around and leave money on the table, let the perfect interfere with the good, and not have children go back to school on time or safely. …  It’s not a perfect plan, but it is what it is, and we should access those dollars. It’s not debt to the city, it’s not debt to the School District, but it allows us to move forward.

The extension of the sales tax will result in $600 million in additional funding in the School District of Philadelphia over the next five years, and $400 million in additional funding to the city’s pension fund over the next 10 years. That’s what you get from what’s on the table, as imperfect as it may be. And there is no other proposal, plan, or idea that comes anywhere near that level of sustained, recurring, stable funding for schools or the pension system right now.


More from this interview to come.

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Comments (16)

Submitted by Anonymous (not verified) on August 16, 2013 8:37 pm
He doesn't have the 50 Million. It's time to stop playing games. It's time for the PSD to live within its means. The PSD budget is twice what it was 10 years ago despite having fewer students. Ridiculous.
Submitted by Headstart teacher (not verified) on August 16, 2013 9:15 pm
Thanks to charter expansion NOT the neighborhood schools. Thank you very much.
Submitted by Anonymous (not verified) on August 16, 2013 10:51 pm
Yes it is very sad that only few employees are hired back! Hite has come here to destroy the lives of families of Philadelphians. Hite demanded that once he gets the money he will hire 95 assistant principals, 212 secretaries and 290 counselors but only few are hired back.Employees have put in more than 10 yrs of service are standing with no jobs with their families. Hite why do you bring people from Virginia to be hired when SDP employees are standing here with no jobs. You are answerable to their families.
Submitted by Anonymous (not verified) on August 16, 2013 10:18 pm
Yes, large high schools with 3000 students are getting only 2 assistant principals and few noon time aides. All principals are upset because Hite promised the principals that schools with more than 400 students will get an assistant principal and so after getting the money he didn't keep his word. Large high schools like Franklin Learning Center, Ben Franklin are not getting assistant principals especially when high schools are getting students from other different schools, they need adult supervision to ease tensions and keep students safe. Imagine the first day at these large high schools and elementary schools with more than 400 students with only principals. This is ridiculous! Parents please make sure that schools are well equipped before you send your children. Principals are scared to death to voice their opinion because they are scared to loose their jobs.
Submitted by Poogie (not verified) on August 16, 2013 8:41 pm
You are right the City does not have $50 million and if it did Darell Clarke would spent it on DROP payments. Not Schoolchildren.
Submitted by Ms.Cheng (not verified) on August 16, 2013 11:07 pm
The City should borrow the $50 million from the General Fund, because Mr. Clarke was going to anyway at no interest, in order to purchase the District's surplus real estate. According to Mr. Clarke, there is no timeframe as well, to pay that back.
Submitted by tom-104 on August 17, 2013 9:40 am
Nutter's plan is more money for the banks. $15 million in interest payments over four years. Debt service is already 12% of the School District budget. In the SRC's "FY 2014 Proposed Budget in Brief" it says: " In FY09, these catagoires (debt service, charter school payments, and out-of-district expenses) constituted approximately 29% of the overall District operating budget, in Fy14 they are projected to be approximately 48% of the District's operating budget. As a result, a smaller share of the District's operating budget can be spent on District operating schools." For documentation see page 3 here:
Submitted by Ms.Cheng (not verified) on August 17, 2013 10:36 am
tom-104 how about you help me push to get the charter funding formula fixed so that home districts only pay to charters what they spend on instruction in schools that are fully utilized? Should be fair, because most, if not all, charters operate at full utilization. It may not be important to other school districts in the State, but Philadelphia is uniquely suffering from a huge loss in enrollment. This for various reasons: top among them, the flight of families from the City, and the unprecedented number of charters that exist. Both the District and ultimately the taxpayer is being penalized for a situation not of their making. I've already written to my State Rep., but perhaps others could write to theirs as well.
Submitted by Go-Eagles (not verified) on August 17, 2013 10:43 pm
Ms. Cheng - With all due respect, the funding of charters is a problem, but the real problem is the operations of SDP. SDP has budgeted $741 million for 55,000 students in charters. Revising the funding formula will provide savings, maybe $100 million or whatever that number will be. We can argue it all day. Charter schools are not going away. It will not solve the funding problems of the district. In other words, we're talking hundreds of millions of dollars here, maybe a billion. What do you do next year? Year after? Will Philly be the next Detroit?
Submitted by Ms.Cheng (not verified) on August 18, 2013 12:23 am
I think some of the charters will be going away. Even the BCG report recommends using equal standards and closing the underperforming ones. The emergency measures the SRC passed draw a tougher line against their expansion till the District is on better financial ground. If we can get this funding formula amended, then not only will the District cease to be the charter schools' "pot of gold", but they will be on more fair footing with resources in comparison with the traditional schools. Painful and sad as they are, eventually the school closures will bring the District's expenditures down. If the District also invested more in IT and HR, increasing the quality and efficiency of its administration, then costs might finally be under control. (I'm not holding my breath for that:) Then of course there is the hope that the natural gas, and (eventual) expansion of Medicare wealth will finally spill over into the schools. Perhaps sadder than the current necessary downsizing, and more ominous a foreshadowing of Detroit, is our City government's refusal to acknowledge the importance of schools in the City's future. Middle class families who start here, young and optimistic end up finding better options in the suburbs once their children reach school age. Even if they still work in the City, they take with them interactions their children might have made in the community, and community investment they might have made that would have lifted the poorer families and communities left there. Things that would have helped upward mobility for these, and help break the persistent cycle of poverty, while building stronger safer communities. Unlike Detroit however, Philly has its growing higher education, health care, and tourism industries to help fill the hole left by the loss of manufacturing. I doubt it will end up as badly off as Detroit, despite Council's best efforts towards that end.
Submitted by Joe K. (not verified) on August 17, 2013 10:51 pm
Tom 104--It all reminds me of what Thomas Paine said 230 years ago, "Democracy isn't free; You need to fight to keep it from those who feel entitled to take it from you."
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