SRC to city, state leaders: Show us the money

Philadelphia’s School Reform Commission adopted a lump sum budget Thursday, but not before a surprisingly frisky conversation that forecasted a potential showdown with city and state officials.

The adopted lump sum budget would leave Philadelphia schools with a small fund balance after fiscal year 2018, but does not include any substantial new investments in city schools. By fiscal year 2019, those reserves would evaporate and the city’s public school system would be left $138 million in the red.

The commissioners voted 3-1 to approve the budget, with commissioner Bill Green casting the lone “no” vote.

Green dissented because he believes the budget presented Thursday doesn’t include the money needed to sufficiently fund Philadelphia’s schools and produce needed academic gains. In essence, Green was asking the district to adopt a more aggressive budget that would force its main funders — the city and state governments — to think hard about what the city’s schools truly need.

Green argued that by rejecting the budget, commissioners would send a message that simply maintaining the status quo wasn’t acceptable.

“Why should I approve a budget that doesn’t spend what he need to spend?” Green asked. “Why wouldn’t I just vote ‘no’ and tell the state and city…to step up? Why should I acquiesce to this?”

Though Green’s push to reject the lump sum budget fell short, his argument did find a warm reception among fellow commissioners and members of the public.

Superintendent William Hite conceded that the district’s current investments — which total $526 million over the next five years and help restore much of what was slashed during past periods of austerity — still are not large enough to, as Green put it, “educate the children of Philadelphia.”

“I agree with commissioner Green that it is disappointing we have insufficient support from our local and state legislators,” commissioner Farah Jimenez said. “I do think the pressure needs to remain.”

The state and city are projected to send $1.5 billion and $1.2 billion to the district respectively in the current fiscal year. But the district’s costs are rising at about double the rate of its revenues are.

In a subsequent resolution, the SRC asked district officials to draw up a new budget that, in SRC chair Joyce Wilkerson’s terms, “reflects the real needs of the children of Philadelphia.” The SRC approved this second resolution unanimously, meaning the district will now have to craft a more ambitious budget for the SRC’s review.

“We are not receiving adequate funding, but I think it makes sense to spend time to develop what a real budget would look like for the district,” said SRC chair Joyce Wilkerson.

All of this activity and agita came with little warning during a hearing many expected to proceed without incident.

The back and forth underscored the fragility of the school district’s budget even in times of relative stability. It also sets a potential collision course between school officials and the lawmakers that fund Philadelphia’s schools.

District officials say right now they don’t have the money needed to offer more than the $150-million deal they’ve already submitted to the teacher’s union for a new contract. Nor, they say, do they have the dollars necessary to properly educate children in a city where more than one quarter of residents live in poverty. Even to simply maintain current spending levels will eventually require more money than the district currently receives.

“It sounds like the only decisions we have available to us are either to secure more from the state and the city in terms of revenue or to cut in painful ways,” said Jimenez.

But the district’s funders face their own challenges.

The state is up against a large budget shortfall. City officials, meanwhile, are worried about reductions in state and federal aid in a time when politically hostile Republicans control nearly every level of government.

Mayor Jim Kenney has already pushed through a controversial new sweetened beverage tax and is in no mood to raise additional levies this year. In a statement, however, one of his spokespeople did acknowledge the grim situation facing Philadelphia’s schools over the next five years.

“This is a significant deficit and it’s not something the City can address on our own,” said Deana Gamble, spokesperson for the Mayor’s Office of Education. “We need all the stakeholders to come to the table to work out a plan to finally make the District financially stable.”

City Councilwoman Helen Gym called on state lawmakers to contribute more money while also acknowledging that Council may have to play a bigger role.

“Over the past several years, city taxpayers have taken on significant responsibility for funding our public schools in the face of budget cuts and increased costs,” she said in a statement. “We have been fortunate to avoid new tax increases over the past two years. But given current budget predictions, we must be prepared to consider further increasing city revenues to our schools as we see the federal and state governments continue their retreat from our public schools.”

In the past, the city has imposed new levies such as the liquor-by-the-drink tax and the cigarette tax to help

City Council president Darrell Clarke and state House Speaker Mike Turzai both declined to comment on the district’s new budget until they had time to review it themselves.

Beyond the rhetoric, the clash here is pretty simple: Philadelphia’s school leaders say they need more money to create a stable and successful system (and solve the lingering stalemate between the district and its teachers’ union). The district’s funders, meanwhile, feel they have little money to spare.

Even in a year when that conflict wasn’t expected to spill out into the open, it has.

Thursday’s budget hearing before the SRC also went deeper into why the district’s monetary needs have grown so great.

Though it will surprise no close observers, the district has escalating obligations that will cause its expenditures to rise more than four percent over the next five years. The largest among them are charter expenses and labor costs.

The steady flow of students from district schools to charters creates added costs for a district that must decide how to maintain efficiency while contracting. The state’s charter formula also means that every time the district spends more money on its students it must reciprocate by increasing the per-pupil amount it sends to charters.

On the labor side of the coin, rising medical and pension payments will cost the district an estimated $97.4 million by fiscal year 2022.

The district must participate in the state’s teacher pension system, though chief financial officer Uri Monson said he’d prefer if the district could construct its own system the way charter schools can.

He characterized the current set-up as unsustainable and implied it would eventually result in younger teachers paying into a system that will not be able to reward them once they retire.

“For me it’s a moral issue,” said Monson. “I actually think it’s immoral to force people to be the last investors into a Ponzi scheme.”