Auditor calls the District’s funding model unsustainable
The Pennsylvania auditor general says the model for funding the Philadelphia School District is fundamentally flawed and could ultimately endanger its purpose and mission – adequately educating students – if it isn’t doing so already.
In an 86-page report, Auditor General Eugene DePasquale says the District’s total reliance on outside funding sources – from the federal government, the state, and the city – and its lack of control over escalating fixed costs have resulted in a “persistent structural deficit” and a “deteriorating financial position.”
“Anytime borrowing has to occur to meet operational needs, serious concerns are raised about the long-term viability of a district,” the report said. “The District’s current operations business model should be re-examined because the existing level of funding is insufficient to meet the District’s operational needs and ultimately may impact the District’s ability to achieve its essential mission of educating students.”
He recommends finding a better business model through heightened discussions and collaboration with the District’s funders. Such a model will need legislative support and “enable the development of a financial business model that aligns educational and business expenses with total available revenue.”
“Without a coordinated plan at the federal, state and local legislative levels, the District will continue to be in a structural deficit,” the report states.
The District’s response is that it basically agrees, but it adds that it has long sought “a fair funding formula [that] takes into account its demographics as a poor urban school district and no independent taxing authority or ability to raise its own revenues.” It added that any funding plan would also need “engagement of the community and parents as well as charter school and non-public schools.”
Rising charter school costs, along with pensions and debt service, are major fixed costs facing the District. The audit found that Philadelphia has relied periodically on borrowing to meet basic expenses – generally, a budgeting no-no. It was forced into doing that twice: after the state takeover and this year due to the state budget stalemate. Many other Pennsylvania districts found themselves in the same position.
The audit also found fault with several of the District’s operational practices. They include:
- Failure to properly account for textbooks and other educational materials after it closed 23 school buildings, which resulted in usable textbooks sitting idle in storage instead of being in classrooms. The District promised to strengthen its inventory system and internal controls, and it now has an online system for textbook storage.
- Failure to do timely performance evaluations of Superintendent William Hite or have a proper contract with former Deputy Superintendent Paul Kihn. The District responded that Kihn had the title but actually functioned as Hite’s chief of staff.
- Failure to properly vet the applications of bus drivers, including background checks and keeping child-abuse clearances up to date. Two bus drivers had prior convictions that should have barred them from employment under state law. The District said it was tightening its procedures and working more closely with the vendors who operate some of the buses.
- Failure to ensure that all school police met all requirements and fulfilled minimum training hours. A random check of 33 out of 337 files found 12, or more than a third, missing at least one of the required clearances. The District said that central office downsizing “has created a challenge to adequately monitor the implementation of … policies and procedures.” Plus, many officers did not complete a required education and training program. The auditor recommended hiring only people who have completed formal state or municipal officer training. But the District argued that its security officers, who are unarmed, do not undertake all those duties and that it receives no subsidies for this training, as do municipalities. The auditor disagreed that school police weren’t required to complete mandatory training, but agreed that the District could not afford this without subsidies.
- Failure to make hard copies and keep permanent records on its student data submitted to the state for the purpose of calculating state subsidies. Last summer, the District implemented a new student tracking system and will be training personnel on how to use it.