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SRC budget: 'Punting on difficult decisions'

By Bill Hangley Jr. on Jul 1, 2014 12:06 AM

A School Reform Commission meeting in February.

Rather than commit to yet another round of layoffs and yet another increase in average class sizes, the School Reform Commission approved a $2.5 billion “placeholder” budget Monday evening that banks on $93 million that it doesn’t yet have.

With budget negotiations still underway in Harrisburg, District officials say they’re hoping legislators will soon come to an agreement and fill the gap.

“Hopefully, within the next week or so, we’ll have revenue,” said SRC Chairman Bill Green. “We’re really punting on difficult decisions by passing this placeholder budget.”

Among the slender remaining hopes is that the state will authorize a $2-per-pack cigarette tax in the city. That tax is not included in the budget approved by both houses of the General Assembly in Harrisburg late Monday – a budget that is actually worse for education funding than early versions, but is also not yet a done deal.

Gov. Corbett is for now withholding his signature, seeking votes for his plan to cut state pension costs.

But if the extra millions aren’t found before the budget is complete, Green and Superintendent William Hite said they may choose not to open schools in September, rather than bring students into what Hite says could be unsafe conditions.

“The harm for children now is, in my opinion, irreversible, irresponsible, and it’s not something we can continue to do year after year,” Hite said. “I have no intention of putting children in those options.”

A budget based on current revenues would force the District to implement a wide range of cuts to all sorts of services, including special education, transportation, facilities and more, District finance chief Matthew Stanski told the SRC on Monday evening.

Most prominently, the District would be forced to lay off about 1,300 workers – including 800 teachers – and raise class sizes to 37 in elementary grades, and 40 or more in high school. Such cuts would save about $58 million.

“The impact now becomes harmful,” Hite said. “We’re talking status quo minus $93 million. There aren’t any more places to cut. … This will require additional revenue.”

The placeholder budget matches a request by Mayor Nutter, made in a letter sent earlier Monday to the School Reform Commission. Nutter’s top education aide, Lori Shorr, said she’s particularly concerned by the prospect of larger class sizes. Those increases would be inevitable if the District is forced to close the $93 million gap on its own, she said.

“That’s really all that’s left [to cut], and that’s not something any of us believes would be good for kids, particularly in the large comprehensive high schools,” she said. “They’ve lost so many staff, to take class sizes up to that level seems like a really bad idea for the city.”

Green called on legislators of both parties to compromise – Republicans on funding, and Democrats on the governor’s proposed cuts to state employees’ pensions.

“Typically the way things work in a legislative body is there is compromise, and nobody gets what they want, and everybody gets a piece of what they want. We can’t afford as a district for either side to stand on principle,” he said.

Green has said he would never “embarrass” the governor who appointed him, and although he and the SRC have called for increased funding, they have refrained from publicly criticizing the governor during this budget season.

However, Green said Monday that he would back Hite if Corbett’s final budget leads the superintendent to keep schools closed in September.

“If you tell me that children will not be safe,” Green said to Hite at one point during the meeting, “I will follow your advice.”

Hite said that even with the current $93 million gap, passing the “placeholder” budget was a better step than launching a series of painful and expensive layoffs that might later be reversed.

“Layoffs, in and of themselves, cost a lot of money, and that could be millions of dollars that we would be on the hook for,” Hite said. “There’s still a lot of things in play.”

Commissioners voted unanimously for the placeholder budget, with only a few questions and comments.

Only Commissioner Wendell Pritchett allowed himself to share a moment of frustration: “We have made tons of difficult decisions over the years. We’ve closed 31 schools, we’ve laid off 5,000 people,” he said. “It would be nice to be joined by some other adults in some other positions.”

That wasn’t enough for Lisa Haver, a retired teacher and activist. With many local education advocates lobbying in Harrisburg, she was one of the few present at Monday’s sparsely attended meeting. The lack of heat on Corbett himself from Green and his fellow commissioners left her frustrated and angry.

“I’m in a bad mood,” she said. “None of them said anything that puts their neck on the line, or their appointment.”

After the vote, Hite repeated his hope that someday, the District will be able to end these annual budget battles.

The process has always been known for insider horse-trading, but this year the politics are more nakedly exposed than usual, with Corbett publicly demanding Democratic support for his pension plans, in exchange for school funding.

The long-term solution to such politicized budgeting, Hite says, is not just a bigger budget but steady, recurring revenue streams.

Such sources, however, are far from becoming reality.

Although Hite cited two in Philadelphia – real-estate and sales taxes – in Harrisburg, the closest thing to a long-term funding solution lies in the hands of a newly created House commission on education funding.

Green said that commission plans to deliver a new funding formula next year. He’s optimistic that it could bring some rationality to the process, but the history of such formulas in Pennsylvania is unpredictable; one was created under former Gov. Ed Rendell, but legislators abandoned it as soon as Corbett took office. 

In the long run, Green said, Philadelphia’s best hope lies not in legislative solutions but economic growth.

“I would say the pie has to grow in order for funding to come into the places that are most needed,” Green said. If state revenues grow, he said, legislators might be able to find the $214 million needed to implement Hite’s “Action Plan” for districtwide improvements.

“It’s not unrealistic to think that in a couple of years, we can actually put the best team in public education on the field and let them execute their plan,” said Green.

But in the meantime, District officials are faced with a much less pleasant reality. Finding the missing $93 million would only bring them back to the current status quo, which advocates and officials alike have called inadequate.

With that in mind, veteran advocate and retired teacher Karel Kilimnik urged the commissioners to take the fight directly to Corbett. 

“Depriving students of education is a basic human rights abuse,” she said. “Evidently the governor and his allies disagree. I’m hoping that can overcome your association with him. … None of you would send your children to a school with an ‘empty shell’ budget. Don’t expect other parents to do the same.”

About the Author

Bill Hangley Jr. is a freelance contributor to the Notebook. 

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Comments (9)

Submitted by gloriaendres (not verified) on July 1, 2014 4:35 am
November cannot come soon enough. Corbett has to be the most heartless state leader in the country, He lets frackers have access to more Pennsylvania woodlands to pollute without expecting an extraction tax, which would be a valuable source of income. All he wants to do is "reform" the pension system after the state raided it for a decade. Shame on Green and Hite for not standing up to him. Shame on all the legislators who put politics above the education of children.
Submitted by Ken (not verified) on July 1, 2014 6:27 am
"Yeah, we will give you the votes on pension reform (which most of our constituency is against) and in return you will let us tax only Philadelphians 2.00 a pack on cigarettes". that is a fair deal!! And yes of course why funding education should be a part of any horse reading is just ludicrous!
Submitted by Lisa Haver on July 1, 2014 7:53 am
Bill, Four APPS members including me had come to the SRC directly from Harrisburg. (I probably didn't make that clear when I was talking (OK, ranting) to you last night. But I'll say it again: Submitted by Lisa Haver on Mon, 06/30/2014 - 22:05. In his remarks at the SRC meeting, Chairman Green castigated the Philadelphia delegation in Harrisburg for "putting the pensions of state employees ahead of our children". Apparently, that is the only choice. Did Green call on the Governor to expand Medicaid? Did he tell him to tax the frackers? No. Green spent the past weeks blaming City Council for not coming up with more ways to tax Philadelphians, even telling one Councilperson in a public meeting that he didn’t care about funding schools. There has not been one action taken by Green which has not served the political interests of the Governor, from holding City Council responsible for funding schools to bashing teachers and their union. What has Mr. Green put ahead of our children? Governor Corbett's reelection. Has Green taken any political risks in this whole process? No. He has not called on the Governor to restore the funding cuts. He did not call on him to restore the fair funding formula. Now he pretends to believe what we all know is a sham: that the Governor and the General Assembly would fund schools if only the Philadelphia Democrats would cave on pension “reform”—knowing full well that this was a last minute ploy to put the blame on someone else. There were never going to be enough votes to pass pension reform, no matter what. Green and the SRC should be ashamed of themselves. They played it safe and protected the Mayor and the Governor. They protected the politicians who appointed them, and they abandoned the children. Did one member of the SRC stand up in public and demand that the Governor restore school funding? Did one member of the SRC refuse to pass a meaningless budget based on non-existent funding? Mr. Green told us in May that what the SRC was being asked to do was “immoral”. What is immoral is his selling out the children of Philadelphia to advance the political interests of the Governor.
Submitted by Anonymous (not verified) on July 1, 2014 8:11 am
Wow! Talk about hitting the nail in the head!
Submitted by Seth Kulick on July 1, 2014 3:50 pm
that's a great statement, Lisa.
Submitted by gloriaendres (not verified) on July 1, 2014 6:22 pm
Give it to 'em, Lisa!!!
Submitted by INTHETRENCHES (not verified) on July 1, 2014 8:04 am
Read study on implications of Corbett's pension "reform:" Keystone Research Center HARRISBURG, PA (June 2, 2014) —Public pension proposals championed by Gov. Tom Corbett and Rep. Mike Tobash would make little progress reducing the state’s pension debt, while forcing draconian benefit cuts on future teachers, cafeteria workers, nurses, and state employees, according to a new report from the Keystone Research Center. “What the Tobash proposal does is force new, mostly young employees to pay for the past mistakes of their employers,” said Stephen Herzenberg, economist and executive director of the Keystone Research Center. “What it doesn’t do is save the Commonwealth substantial money, now or in the future.” The Keystone brief synthesizes the findings of four different pension consultants and actuaries – working, respectively, for Pennsylvania’s two pension systems, for the Corbett Administration, and for the Public Employee Retirement Commission (PERC) – released by PERC last week when it transmitted the four reports to Commission members and lawmakers. Information in the report by PERC consulting actuary Cheiron indicates that Rep. Tobash’s proposal would make only minimal changes in what the commonwealth and local school districts contribute to the retirement systems. At the same time, many new employees enrolled in this new pension system would see their benefits cut by 40 percent or more compared to Act 120 of 2010. It’s important to remember, Herzenberg noted, that Act 120 already cut benefits for new employees by 20 percent. Cheiron summarized its overall findings: “For new employees the loss of retirement security is greater than the value of the cost savings for the Commonwealth.” Rep. Tobash’s proposal would replace Pennsylvania’s existing pensions with a hybrid pension plan. The first $50,000 of an employee’s salary (increasing 1% annually) and first 25 years of service would be covered by a defined benefit (DB) plan, while a 401(k)-style defined contribution (DC) plan would cover the other portions of employees’ salary and service. Employees would make small contributions to the 401(k) plan below the $50,000 and 25-year thresholds. Gov. Corbett seeks to couple savings from benefit cuts with lower state and school district payments to the pension plans over the next four years. “Deliberately underfunding the pension plan now would repeat the mistakes of the past,” Herzenberg said. “We have already seen what happens when the state and school employers use a credit card to avoid making required pension payments.” While advanced in the name of taxpayers, the actuaries found that, best case, the Tobash Plan would not lower future pension payments substantially and, worst case, it could dig a deeper pension hole. Little savings: Measured in present value terms, equivalent to dollars in hand today, the plan would save only $3.1 billion. A spending spree that uses up much of any savings: Using those savings like a new credit card, to lower near-term pension contributions, would eliminate over a third of them. A potential transition cost: Down the road, the PSERS actuary (Buck Consulting) notes, the Tobash Plan could lower investment returns of the SERS and PSERS defined benefit pension plans because it shrinks contributions from new workers, and shifts pension systems’ obligations toward retirees. A “transition cost” equal to even a small fraction of the $40 billion price tag on Governor Corbett’s immediate shift to 401(k)-style defined contribution accounts would more than wipe out any Tobash savings. A hidden cost for future wage increases. The benefit cuts in Tobash would make public-sector jobs wages plus benefits uncompetitive with private compensation, particularly among more educated employees. The state will likely have to raise future salaries to attract and retain high-quality teachers and other public servants. Two pension consultants estimated the impact of the Tobash Plan on retirement benefits: Many new employees would see large benefit cuts. Of nearly 100 SERS and PSERS career trajectories examined by the Governor’s consulting actuary, roughly half would receive benefit cuts of 40 percent or higher, and all but a handful would experience cuts of about 20 percent or higher. Buck Consulting found similar but smaller cuts in PSERS benefits using a method that it explicitly noted is conservative. Benefit cuts for new employees would increase each year. Since the $50,000 salary cap on the defined benefit plan rises by only 1 percent each year, well below expected inflation and salary growth, the value of the defined benefit plan would decrease over time. In two generations, the defined benefit pension would deliver retirement income equal to one-sixth or less of most employees’ final average salary. Very long term, under Tobash, the defined benefit plan vanishes. There will be an erosion in the quality of public schools and services. Long-tenured employees would have less incentive to remain in public service once they reach 25 years of service, at which time they stop accruing benefits in the defined benefit plan. This will likely lead to higher rates of staff turnover among those able to command higher compensation in the private sector, eroding the quality of public schools and services. “Now that we have these actuarial reports,” Herzenberg said, “We know that the Corbett-Tobash plan is a non-starter. We need to build on Act 120 by addressing the root cause of Pennsylvania’s pension debt, low employer contributions.” The end of the KRC brief outlines a six-point framework for reform that would build on Act 120, including by incorporating elements of the pension proposals advanced by Representative Glen Grell and Senate Democrats. A starting point could be recapturing to shore up state pensions a portion of the $3 to $4 billion revenue lost annually because of corporate tax cuts since 2003.
Submitted by Fed Up Schoolmarm (not verified) on July 1, 2014 10:14 am
It's a Perfect Storm. Now that colleges of Education are only able to attract one-third the number of student teachers they attracted only 10 years ago - now that the media has so savaged the teaching profession that young people would rather pick up cans along the highway than stand in front of a classroom - now that government mandates/state testing/et al have made teaching something akin to standing in a straitjacket for seven-and-a-half hours each day while people scream at you from all sides for not achieving impossible feats on an hourly basis - now that charter schools and their horrific teacher turnover rates are becoming the new norm - now that the public school system has transmogrified into one colossal dumping ground for pupils with outrageous behavioral problems and appalling learning deficits - now LET'S SLASH PENSIONS AND WAGES!!! Sure! That'll certainly bring in the fresh recruits! How pathetic! Any young person contemplating coming into this profession today is in need of serious career counseling. Not only are they taking a flying leap onto the back of a dying profession (better to run a video rental store or become a blacksmith) - they are letting themselves in for years of disrespect and intimidation from administrators, threats and violence from students, and a peculiar sort of self-contempt that sets in when one ceaselessly attempts to do one's very best at work that no one else values any longer.
Submitted by gloriaendres (not verified) on July 1, 2014 6:38 pm
Too true and too depressing. Of course they want to discourage career teachers who will be expecting higher wages and retirement benefits. The relentless put down of teachers sometimes done by paid trolls is determined to demoralize and demean the profession so that amateur replacements can come in, teach to the test and stay only a few years. Future students who are exposed to nothing but regimented curriculum devoid of critical thinking will not be able to handle higher education. Only the elite will be able to claim an authentic education minus high stakes testing.

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