June 30 — 6:50 pm, 2013

Corbett plan for Philly schools falls short of $180 million, relies mostly on city dollars

by Dale Mezzacappa and Holly Otterbein for the Notebook and NewsWorks

Hours before the deadline for passing the state budget, Gov. Corbett announced a plan to help the Philadelphia School District out of its fiscal crisis that relies mostly on dollars from the city, will require more borrowing, and contributes an additional $45 million of one-time state money.

The budget passed the Pennsylvania House and Senate, and Corbett signed it Sunday night. A portion of the funds also come with strings attached.

With the fiscal year ending and more than 3,800 District layoffs scheduled to take effect Monday, Corbett outlined a plan Sunday afternoon that he said would raise an additional $140 million for the city schools, short of the $180 million the District asked for from the city and the state. And one chunk of Corbett’s $140 million package was money that was in his original spending plan and already factored into the District’s budget.

It was unclear Sunday how many layoffs or other cuts would be averted under the plan.

Sales tax to hang around

Corbett proposed to let Philadelphia extend its 1 percent sales tax past its scheduled expiration in 2014 and dedicate that revenue for schools. Because that money is used by the city for this fiscal year, the governor’s plan would let the School District borrow $50 million against the expected increase to close its 2013 budget gap. The sales tax extension was approved by the Senate on Sunday night, and a GOP House spokesman said members were on board and would approve it Monday.

The governor’s plan also would give Philadelphia $45 million from a pot of money that the federal government had wanted, but has now apparently forgiven, from the state for past Health and Human Services overpayments. The Senate authorized this one-shot infusion of dollars Sunday night, and the House will vote on it Monday. House GOP members also support that, according to a spokesman.

The Senate attached conditions to the $45 million and the sales tax extension, requiring that the state secretary of education determine that the District has enacted "reforms that will provide for the district’s fiscal stability, education improvement and operational control." The Senate approved that language, but some Philadelphia House Democrats are against it, concerned that it is anti-union.

Philadelphia Senate Democrats, though, did not oppose it.

“Right now, we feel comfortable with it,” said Sen. Vincent Hughes (D-Philadelphia). “Everything we have in place allows for free and fair bargaining.”

Hunt for back taxes stressed

Corbett’s plan counts on Philadelphia doing a better job of collecting its taxes to raise $30 million more. The legislature is considering several bills to help do that, including one that would allow Philadelphia to put liens on properties in other counties owned by delinquent city taxpayers. Those bills were not voted on and do not appear to be on the immediate agenda. Mayor Nutter and City Council were projecting the slightly lower figure of $28 million in new revenue from cracking down on tax delinquency.

The final chunk of Corbett’s package comes from a $122.5 million increase in state basic education funding, which for Philadelphia will rise 1.6 percent to $984 million. While Corbett said the increase amounted to $15 million in new dollars, it is only a $2 million increase over his February budget proposal, on which the District’s budget is based. Local officials confirmed that the increase was mostly money already counted on by the District.

The total increase for Philadelphia in state education aid is about $30 million, but that includes appropriations for special education, transportation, accountability block grants and other funds the District was counting on.

The bitter taste of half a loaf

Philadelphia officials and some education advocates were clearly disappointed after their months of lobbying and following the playbook of adopting an austerity budget, closing schools, and declaring they had to "live within our means."

"The plan puts only $45 million of one-time state money into the schools," said one person close to the talks. "That’s it. The other money is our sales tax and our delinquent tax collection."

School District officials did not return messages seeking a reaction.

The package would add up to $127 million in additional revenue — $53 million short of what the District said it needed from the city and state to avert a "doomsday" budget that would see schools open in September with little beyond a minimal number of teachers and a principal.

As District and city officials lobbied frantically over the last several weeks for a deal, Harrisburg was decidedly cool to most ideas. A plan that would have allowed Philadelphia to raise some $45 million this year through a $2-a-pack-cigarette tax — already passed by City Council — fell off the table at the last minute due to opposition from anti-tax Republicans in the House.

"I think it’s terrible," said Susan Gobreski of EdVotersPA, which advocates for stable, recurring education funding. "What the state should be doing is enacting a fair funding formula instead of hamstringing districts. They’re going out of their way to avoid providing adequate funding. It’s blatant."

Democratic lawmakers also said the budget did not include enough state funding for Philly’s schools.

“These are not new dollars in any significant fashion, new recurring dollars, that are coming from the state,” Hughes said. “That is the big problem in this whole conversation.”

Pennsylvania is one of only a handful of states that does not drive out new school aid each year according to a predictable formula based on the needs of districts, measuring such factors as tax base, tax effort, poverty rate, enrollment and student needs.

Gobreski pointed out that requiring the District to borrow against the sales tax to plug this year’s $304 million shortfall will incur additional debt service payments. The District borrowed $300 million to make ends meet last year and now spends more than 10 percent of its operating budget, some $280 million, on debt service. Members of the School Reform Commission said they could not afford any more borrowing.

"That’s money that should go into classrooms," she said. 

Impact on teachers vague

The contingencies on the money do not specify any changes in the teachers’ contract, particularly in seniority rules, that some education groups had urged as conditions for more funding. On the other hand, the language is vague enough to give the secretary of education power to judge what is reform and what isn’t, putting pressure on the negotiations.

The District is seeking $133 million in labor concessions, most of it from the Philadelphia Federation of Teachers, to plug the balance of the $304 million shortfall. The PFT contract expires in August.

"This budget once again places education as our highest priority, accounting for 41 cents of every state dollar," Corbett said.

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