Guess who pays for the proposed Philly school funding deal?

     Efforts such as fasting to support more school funding are unlikely to have much long-term political impact, writes NewsWorks Blogger Dave Davies. (Nathaniel Hamilton/for NewsWorks)

    Efforts such as fasting to support more school funding are unlikely to have much long-term political impact, writes NewsWorks Blogger Dave Davies. (Nathaniel Hamilton/for NewsWorks)

    These are days of miracle and wonder. Suddenly, there’s hope that Philadelphia’s school system won’t crash and burn.

    Word emerged last week that Pennsylvania Gov. Tom Corbett – yes, Republican we-don’t-need-no-stinking-Medicaid-expansion Tom Corbett – is working to craft a funding solution for the Philadelphia School District, which is headed toward a September meltdown without one.I’m told Corbett said in committing to the effort that he doesn’t want a one-year fix. He wants a solution that will last. Philadelphia City Council members are crossing their fingers and looking to the heavens, hoping it happens.

    The deal is a long way from done and may fall apart, but there’s a point to be made about the funding package under consideration: This “solution” relies mostly on Philadelphia taxpayers and school district employees, and requires no serious funding commitment from the state – despite the legislature’s constitutional obligation to provide a “thorough and efficient system of public education” for the state’s children.

    Which isn’t to say Mayor Nutter shouldn’t go for the deal if he can get it. Political realities are what they are, and hunger strikes, marches to Harrisburg and holding our breath aren’t going to change them much. The alternative to this deal for Philadelphia school kids is pretty scary. I just want truth in packaging here.

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    What’s in the deal

    As told to me by sources and reported in Newsworks and other media, the financing plan under discussion would include:- a one time infusion of $100 million or more in federal funds – money withheld from the state and city due to problems cited in past audits, which might get released and steered to the school district.- A $2 a pack tax on cigarettes in Philadelphia, already approved by City Council and awaiting authorization from the legislature.- State legislation making permanent the additional one percent sales tax in Philadelphia that was due to expire next year. This would leave the city with an enduring two percent differential between its sales tax and other counties (Philly would be eight percent, other counties, except for Allegheny, six).- Enhanced collection of Philadelphia taxes, which should help both the city and the school district.- Contract concessions from the Philadelphia Federation of Teachers, which the PFT hasn’t and may never agree to. It’s not clear whether the deal under discussion with state officials might include legislation to give the school district new powers to impose terms on its employees.

    You see any new state funding in that menu?

    The legislature may come up with something this year for Philadelphia and other troubled districts, though it’s clear it will be a small fraction of the district’s $304 million deficit, and unlike the Philly tax hikes, not permanent.

    We’ve been here before

    The whole thing is eerily similar to the grand deal worked out 22 years ago to save the city from financial collapse.The city was on the verge of insolvency and couldn’t borrow money to finance its deficit without state help, so city and state officials worked long and hard to find a way out.There were a variety of causes for Philadelphia’s problems, the most important one being the disintegration of the city’s manufacturing economy. But there was a strong feeling among many here that the city was shortchanged by the state on funding for basic county functions, particularly child welfare services and schools. Many in Harrisburg saw the main cause as waste and corruption in the city.In any case, the only way out of the mess was to get cooperation from Gov. Bob Casey and the legislature, and a deal was eventually struckThe legislature created a new board to borrow money to retire the city’s accumulated deficit and oversee its finances in the future. The city would have to submit five year financial plans for the board’s approval (a very good idea, still in effect).And although the package was sometimes to referred to as the “Philadelphia bailout,” the state didn’t kick in a nickel to rescue the city.The tab for repaying the principal and interest on the deficit bonds was on city taxpayers, along with the operating expenses of the oversight authority and some lavish compensation for lawyers and underwriters recommended by state politicians for the bond issue.The real sacrifice came from city workers, who made concessions in their 1992 labor contracts, and city taxpayers, who began paying a one percent sales tax in addition to the six percent state levy (Credit is also due to Mayor Ed Rendell’s team, which made meaningful managment changes, and a roaring national economy which boosted tax revenues).

    Sound familiar?

    Both in the 1992 city crisis and the current schools mess, city officials had to beg Harrisburg politicians for cooperation, because so many pieces of the proposed solution required state action, even though they didn’t involve more state money.

    The city needs the state’s permission to extend the sales tax on its citizens and make its smokers pay another two bucks a pack. And in government and politics, nothing is free. So an enormous effort is now being extended to get the state to cooperate in a deal in which we pay again.

    This is for a school system governed by a board with a majority of state appointees.

    One of the things that came out of Philadelphia’s 1991 financial crisis was a realization that in order to rebuild its economy and restore its finances, the city needed to address its heavy tax burden. As things got better in the 1990’s, the mayor and City Council enacted gradual reductions in wage and business taxes, which over time amounted to real relief and offered some encouragement to businesses.

    But the national financial crisis pretty much ended that. The wage tax cuts were suspended and the city added another “temporary” one percent increase in the sales tax, with the legislature’s permission. And for each of the past two years, the city raised property taxes to help its struggling school system. These were all tough policy choices, made in good faith. But the fact is that a heavier tax burden in the city doesn’t help us attract people and businesseses.

    There were proposals in Harrisburg recently to come up with some state revenue to help the schools, like delaying cuts in the stock and franchise tax for businesses. That won’t happen.

    So if this is a fix for Philadelphia’s schools, it won’t be free.


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