Closure savings are labor savings

The District says shuttering 37 schools will lower expenses by $28 million annually. But in the short run there are “substantial” transition costs.

by Bill Hangley, Jr.
Photo: School District of Philadelphia
Matthew Stanski is the District's new chief financial officer

Philadelphia School District officials say that closing buildings will save them millions of dollars a year.

But a closer look at the numbers shows that the lion’s share of savings will come from eliminating jobs.

Officials have been adamant that their Facilities Master Plan, which would close 37 schools and relocate seven more, is a financial necessity that will ultimately save the District $28 million annually – but less in the first year.

Superintendent William Hite has been telling audiences, “We have to take some action – or we’ll have to close the District.” 

And while closing the buildings themselves will eliminate some annual maintenance and utility costs, a detailed analysis provided by District officials shows that almost 80 percent of the plan’s projected savings depends on reductions to the District’s unionized workforce. The closure plan anticipates lower numbers of teachers, administrators, aides, nurses and safety officers – over $22 million in annual labor costs.

Officials say most staffing levels are determined by the number of students in a building, and thus most jobs in closed schools will follow students to their new schools. 

But they say that consolidating schools is more efficient because it allows for a net decrease in the number of District employees, particularly in administration and maintenance. 

“When you operate a small school … you still need that administrative staff,” said Matthew Stanski, the District’s chief financial officer. “That becomes more efficient the larger the school becomes.”

Deputy Superintendent Paul Kihn says the District’s savings estimates are based on data collected from last year’s closures and factor in an increase in overall transportation costs.

Kihn also believes that closings won’t trigger a larger-than-usual migration of students to more-costly charter schools, and that the District can stick to its relatively lean budget for post-closure improvements in the so-called “receiving schools.” 

Next year, Kihn said, a total of $19 million is dedicated to investing in “high-quality seats” across the District; that figure will support everything from three new Renaissance charters to academic upgrades at low-performing schools and schools affected by closures.

“We’re not planning on spending money that we don’t have,” Kihn said. 

But District officials also acknowledge “substantial” one-time transition costs in the first year that will eat into some portion of the $28 million in savings – exactly how much they are not prepared to say.

Since the plan was announced, critics have been making the argument that transition costs will offset the promised savings. They point to reports from Chicago and Washington, D.C., where school officials once promised windfalls from large-scale closures. In Chicago, leaked internal school district documents suggest that it underreported its closure-related transition costs by anywhere from $150 million to $400 million. In D.C. a 2012 auditor’s report found that the capital costs for closing 23 schools were $40 million, four times higher than original estimates.

The surprise expenses in these two cities reportedly came in such areas as building maintenance and severance pay. 

Mary Filardo, who as head of the Washington, D.C.-based 21st Century School Fund has done extensive work around closures, said many of the unexpected costs there were the result of poor planning. 

“There were a lot of amateurs,” she said. “They underestimated what was going to be involved. They didn’t properly mothball [closed schools] – and then, when they went to negotiate with charters about them, the buildings were a wreck.”

School districts can also see savings quickly eaten up by increased demand for transportation and charter-school slots, she said.

Kihn acknowledged that not every transition cost has been fully determined. It’s not clear, for example, what it will cost to hire contractors to help empty decommissioned facilities and move equipment. 

In addition, the District assumes that it will face anywhere from $2 million to $3 million in ongoing “carrying costs” associated with maintaining and marketing the shuttered buildings – costs that must be deducted from the projected $28 million in savings until the properties are sold. 

But Kihn said the majority of costs have been factored into the overall savings calculations, including $1.5 million for additional school bus service and public transit subsidies for students traveling to new schools.

Of the $28 million in projected savings, officials project that about $22.5 million will come from workforce reduction, including:

The remaining savings come from things like reduced utility costs and the end of a pricey lease. 

Officials project that despite the displacement of 17,000 students, their charter costs won’t jump dramatically, but will continue to rise at the same rate they have been planning for. Each new charter student increases District costs by $7,000. 

Kihn said he doesn’t know how many students displaced by last year’s closures ended up in charter schools and that the District is still analyzing its data. But he said that at this point, it doesn’t look like last year’s closures had an outsized impact on charter enrollment – no more than “5 to 10 percent” of displaced students opted out of the system, he said.

”It could be charters, it could be they moved out of town, could be they’ve gone to Catholic schools.

“That’s actually perfectly consistent with the enrollment decline that we’ve been experiencing,” Kihn said. “So that might suggest that in fact closures have no effect on enrollment decline.” 

Officials do not have an estimate of anticipated revenue from building sales. But the five-year budget plan, developed before the final list of 37 recommended closures was complete, counts on building sales generating about $14 million over the next two years. 

Likewise, they have no estimate for the number of items that will be removed from the District’s long list of

needed capital improvements, saying they won’t know for sure until the final SRC vote.

But Filardo warned that no district should count on a windfall from selling shuttered buildings. “I don’t know that anybody’s really made any money,” she said. “If you’re in a high-density, wealthy commercial area, you’ll get something for it – but not much. You’ve got to have some really valuable land for it to generate squat.”

And while Filardo says that closing buildings can result in real savings for school districts, her biggest concern is that they can also create new costs for cities and communities. 

“I talk about it as cost-shifting,” she said, citing a California study showing that property values increased by $1.50 for every dollar spent on capital improvements in schools. “Part of what you’re not looking at is that disinvesting in education in neighborhoods will depress the property values in those neighborhoods.” 

Anne Gemmell, whose organization Fight for Philly is part of a coalition pressing for a moratorium on closures, said the surging home values around the popular Penn Alexander School in West Philadelphia – which is subsidized in part by the University of Pennsylvania – tell the same story: “When [a] school is adequately resourced, it succeeds – and the surrounding homeowners and renters have a richer community.”

This point has often been among the first made by parents and community members at the District’s public hearings: Closing schools, they’ve said countless times, carries costs for communities, and not just in terms of dollars and cents. 

“Think about the cost of children’s emotions as they come through this,” said Joan Foley, a teacher at George Washington Elementary, a school slated for closure. “You’ve made friends, you’ve come across the city, and now you’re going to be ripped apart from those friends for the sake of money? There’s an emotional cost there too that plays a part in their whole educational experience,” she said.

Kihn, however, insists that the benefits of the closures will offset any costs borne by the city’s communities. “Our goal is to improve the quality of schools, which will have a positive effect on property values,” he said. “One way that we do that is stopping wasting money on seats that are empty.”

 

About the Author

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