In approving the School District of Philadelphia fiscal year 2012–2013 budget, the School Reform Commission may have closed a bumpy chapter in its history — and potentially created new dramas as well.
SRC members voted unanimously to approve the budget. The budget details operating revenues of $2.33 billion, operating expenditures of $2.55 billion and the use of $43 million in reserves.
In other words, the adopted school budget for next year confirms Chief Recovery Officer Thomas Knudsen’s findings that the school district will face a budget deficit of $218 million.
The budget also assumes it will receive $94.5 million from the city’s controversial Actual Value Initiative. City Council has held a series of debates in regard to the merits of AVI, and no decision has been made yet on if the district gets those funds.
“The greatest uncertainty is the $94.5 million. We have acknowledged that we have it in the budget at $94.5 million,” Knudsen said in a meeting preceding last Thursday’s public budget announcement. “And we hope that we receive that amount from City Council. So yes, there was a lot of uncertainty, but at this point in time, you put a pen in hand and stake in ground and say these are the conditions we know about, these are the factors we know about … so what we have had, I think, is a very complete, concise presentation of a complicated enterprise.”
According to the budget, school district revenues represent 81 percent of the budgeted revenues for the next fiscal year, and that the district actually expects revenue to increase by 3.8 percent; but AVI looms large over the entire budget, with numerous references made to the new tax structure.
“The most important single change in revenues in the $94.5 million increase in real estate tax revenues proposed by Mayor Nutter as a result of capturing the growth in property values through the Actual Value Initiative,” read the budgetary explanation. “Pursuant to Mayor Nutter’s proposed five-year financial plan, an additional $94.5 million in value will be captured based on new, more accurate assessments.”
School Reform Commission Chairman Pedro Ramos said that, politically, it would be a “catastrophe” if City Council couldn’t make the AVI funds a reality, but believes Council will do the right thing when it comes time.
“I believe ultimately, City Council will recognize, and I believe already recognizes, how critical it is for the school district to get the $94 million,” Ramos said, noting that SRC officials have taken transparency to a new level by posting each individual school’s budget online. “What the consequences are of the $94 million; our intention isn’t to make any threats or projections or get ahead of it, because we think each of these school budgets is a compelling case in itself that will resonate with council members, and I believe they will ultimately deliver on the mayor’s proposal.”
Ramos and Knudsen both said the district can finance the expected $218 million gap, but wouldn’t be able to do so without the AVI funds. The budget also highlights the shrink in grants and funding the city — and thus, the school district — has endured over the past several years, including lost revenue from a recent State Tax Equalization Board ruling and the slashing of public education funding in Governor Tom Corbett’s proposed budget.
“At this point, we have shown what we have in terms of revenues, and that means we will finance that amount of money,” Knudsen said, referring to the district’s plans on filling next year’s budget gap. “We will sell bonds to do that; this is not a course of action any one of us wants to take, but in this circumstance, we have little choice.
“We are effectively maxing out our credit cards,” Knudsen continued. “We have the capacity to raise around that amount of money, but we don’t have the capacity to go much beyond that, I believe.”
According the budget, the school district is also bracing for a huge reduction in Title I revenues. Title I is a federal grant given to school districts throughout the country, and although the amount Philadelphia’s school district will receive hasn’t been determined, SRC officials expect it to be drastically lower than what the district is accustomed to receiving.
And since the district has to decrease Title I spending (due to the anticipated funding reduction), the budget claims that certain areas will be targeted, including kindergarten and Head Start programs without Title I grants, the district will also be forced to eliminate supplementary counselors and eliminate almost the entire lineup for summer programs. As is, the district only funds summertime credit recovery classes for seniors only.
The district’s budget also dispelled long-held public notions that the SRC is attempting to isolate charter schools and decrease the funding they receive. While the district’s five-year reorganization plan calls for an overall reduction of $149 million to charter school funding, its budget for 2012–2013 calls for a $44.2 million increase in charter school funding. However, the school district, in utilizing a formula from the state, will actually decrease the per-pupil payments for children in both regular and special education classes.
“The charter school per student amount is calculated using the previous year’s budget data,” read the budgetary explanation. “Thus, because the district-operated schools made severe cuts in fiscal year 2011–2012, in fiscal year 2012–2013, charter schools’ per student payments will be significantly lower.”
The school district’s budget also examined and expanded on the rising cost of labor and the attached benefits. According to the district, while the overall number of school district employees has actually decreased over the past three years, benefit and pension pay-ins have steadily risen.
The contracts for the five unions that represent school district employees — including the Philadelphia Federation of Teachers, which is the largest with more than 10,000 members — is up in August of next year, and while the SRC plans on an open and honest negotiation with the PFT, it is also cognizant of the current bargaining environment.
“You can’t say you’re just about education or just about the kids, when adults refuse to do more or give something up,” Ramos said, noting that this approved budget contains no concessions for unions. “We all share the circumstances in which the district finds itself. At some point, labor will realize there is no silver bullet nor magic out there, and that we both have to work together to increase revenue over the long term, and provide more stable and predictable funding, like AVI, and manage expenses to what we can afford.
“Right now, we’re spending money we don’t have.”