Is there a way out of the District's budget hole?

(I'll be on Radio Times from 10-11 a.m. this morning talking about the District budget crisis. Calls are welcome!)

The School District's plan to close the huge budget gap undermines the very bedrock of what we know works in education: early childhood supports, full-day kindergarten, transportation, a manageable class size.

But when the District is faced with a deficit of more than $600 million, are there better solutions?

Much of the public’s attention has been rightly focused on Harrisburg. But no matter what comes out of the final state budget debate, both the city government and the District also need a multi-tiered, short- and long-term approach toward addressing finances. The District also needs some serious re-consideration of the type of leadership that will help us get there.

First, Philadelphia needs a grassroots coalition-building approach toward Harrisburg. District officials have been organizing a series of bus trips and rallies to the state capital to protest the governor’s budget. But local leaders ought to know that actions which include only Philadelphians and feature the controversy-laden District in a prominent role will have limited impact.

The stronger tactic is to build alliances with districts and education supporters across the state, all of whom have benefited from improved funding for schools. This type of alliance helped win the historic Rendell-era funding formula in the first place. In a political environment that is so jaded about Philadelphia's needs, a coalition approach is needed more than ever.

Second, the city needs to re-establish its financial responsibility to the school district. Several years ago a group I co-founded, Parents United for Public Education, worked with others to secure a higher share of city real estate revenue for the schools. City Councilman Wilson Goode, Jr. sponsored a bill that increased the District's share from 58 to 60 percent and brought in an additional $10 million to the schools at the time.

Under the Nutter administration, we have seen that share decline from 60 percent to 55 percent, a difference of almost $60 million, according to the District’s finance office. Although property taxes have increased, the City's contribution to schools has reverted back to 2007-8 levels. The City has also held onto sacred cows like uber-generous tax abatements. An

Inquirer analysis done in 2008 said that by 2012 the schools would have forfeited at least $109 million due to tax abatements. Our schools don’t see a dime of profit from the program until 2025.

The mayor needs to take a proactive approach about the local funding of schools in the deepest financial crisis to face our schools. The city must decide on an additional allocation to help the District address the immediate budget gap. The mayor should support re-establishing the 60 percent property tax share to schools and easing the financial impact of the tax abatement program.

Clearly, the District's spending priorities also need review. Last week, Chief Finanial Officer Michael Masch offered to open up the District’s books and invite any and all viable solutions. We need to take him up on that offer.

It’s alarming that the District has so prominently targeted for cuts programs that we know work while leaving in place questionable initiatives and pet projects. For instance, it still plans to spend $23 million on summer school and has budgeted $24 million for extra supports for 18 Promise Academies. At the same time it is cutting $40 million from transportation, eliminating all bus service and transpasses for regular education students attending District-run schools.

The District spends $400 million annually on contracting for services. It claims that about 75% is locked up in largely non-negotiable areas like utilities. That still leaves $100 million worth of discretionary contracts that include things like professional services that aren't even competitively bid; extraneous Benchmark testing; and more than $4 million paid to the City for the Bureau of Revision of Taxes.

As a start, the District should identify and publish all contracts that cost more than the mean salary of a teacher, say $50,000 or more. It should specify which of these contracts are competitively bid, whether they are essential services to schools, and whether there’s been a review of their effectiveness.

Finally, in any budget or fiscal crisis, integrity matters. The public needs to trust that the individuals making the decisions on potentially devastating proposals abide by a sense of stewardship and ethics. For example, the current budget forecast relies on the District’s ability to renegotiate the contract with the teachers’ union. But if District officials refuse to budge on their own exceptionally high salaries then it sure seems a stretch to expect others making far less money to do so.

There's no doubt this administration has made a lot of mistakes, polarized communities and elected officials, and created significant and unnecessary controversy on a seemingly regular basis. The frustration and anger evident at a budget meeting earlier this week shows how such actions can come back at the District in other ways.

But we can't link the responsibility for funding and governance to this administration alone, especially if leadership at City Hall and Harrisburg have not made a significant effort to exercise control. Punishing through purse strings is not responsible governance.

Public officials love to say "it's about the kids" when talking about the schools. In a time of fiscal crisis, that commitment must mean identifying the District's essential mission and setting aside pet projects. It's not about rhetoric but about hard choices, priorities, and a need to exercise real fiscal discipline.

This message so far is absent from leaders at the District, city and state. It's up to the public to set those priorities straight.

The logic of this is stunning

Under the Nutter administration, we have seen that share decline from 60 percent to 55 percent, a difference of almost $60 million, according to the District’s finance office. Although property taxes have increased, the City's contribution to schools has reverted back to 2007-8 levels. The City has also held onto sacred cows like uber-generous tax abatements. An Inquirer analysis done in 2008 said that by 2012 the schools would have forfeited at least $109 million due to tax abatements.

So - to attract homeowners and businesses we essentially trade off the salaries of teachers, school nurses, and school librarians, to offer tax abatements to people and businesses who won't locate here unless schools improve and there is an available well-educated workforce.

It is interesting to think back to the long debates at YPP about the wisdom of Nutter's perspective on tax cuts; I wonder if over time Nutter supporters have re-assessed their position.

Respectfully disagree about reallocating property taxes

Reallocating the property tax would mean starving other essential city programs. We would be right back to a library crisis, a recreation center crisis, a health center crisis, and/or a public safety crisis. We have been brainwashed to believe that the world as we know it will end if we roll back the gross receipts tax cuts of the last 20 years. But that's how we should raise money for the schools, for two reasons.

First, we can structure a business tax increase so that it mainly hits large and out of city companies. We would do this by exempting the first $500,000 of receipts from the gross receipts tax, and increasing auditing activity against outside companies selling goods and services into the City. According to undisputed facts developed by the Coalition for Essential Services, rolling back the GRT to its 1996 level and exempting $500,000 in receipts from the tax, would raise about $75 million a year, while leaving more than 80% of all business taxpayers with no GRT liability whatever. So this would be tax increase that falls mainly on big and out of city businesses, a move toward that would make the tax progressive.

There would be a slight technical problem in getting this tax revenue to the School District. GRT revenues go to the City, not the School District in the first instance. All that would be needed to get the money to the School District, though, would be for Council to make an appropriation to the School District in the same amount as the expected GRT revenue.

The second reason for increasing taxes on big Philly businesses in this way is because the Chamber of Commerce wouldn't like it. That's right the Chamber wouldn't like it. And that would be a great thing because the Chamber, and the elites that it represents, is the main force behind the crisis. That's because the Chamber and its friends financed the election of the right wing government we now have in Harrisburg, and is doing nothing to fight its horrible priorities. The local Chamber is headed by Rob Wonderling, former Republican State Senator from parts of Montgomery, Berks, Lehigh and Northampton counties. He knows how to contact the Governor he helped so mightily to elect. He know how to contact the leaders of the House and Senate. And he should know how disastrous it would be for business if the School District is allowed to go bust.

The Chamber argues that business tax increases will bring on Armageddon. If it truly believes that, it has the power to stop them. We should remind them of that, and of the fact that what business really can't tolerate is an uneducated workforce. Getting ready to actually increase the gross receipts tax on large Philly businesses is the best reminder that we can send.

Property Tax

The property tax allocation is done through millage rates with specific millage allocated to the City and specific millage allocated to the District. The District is specifically prohibited by state law from raising taxes. That means only the city can do it.

It's my feeling that something needs to exist where the City is obligated to raise the District millage if the City millage goes up. My feeling is that it should be proportional and representative of a 60-40 split.

Your other idea is fine but it relies solely on the good will of an administration coming into office and that's no place to make your bets. It is both appropriate and necessary to focus on the property tax split because that's what the schools are entitled to.

All I'm saying is that the revenue has to be made up

and school advocates shouldn't be on the other side of the fence from library advocates. We're always doing that on the left, and ultimately that's why we keep running harder and harder and yet falling further and further behind in developing the political power that would enable us to have BOTH great City services and great schools. We need to advance global goals which would have the public understand that, of course, we can have both, and they can be paid for, fairly.

In this particular situation, we can change the scenario I posed earlier just slightly and get the same result. Instead of transferring increased business tax revenue to the School District we can simply use it to replace the revenue that the City loses through reallocation.

But we don't just have a technical or rhetorical problem here. School funding advocates should make keeping the City government whole a central part of their proposal, not just an afterthought. We've just got to get out of our tendency to look at the world as a collection of interest issue silos, i.e., one for the environment, one for civil rights, one for gay rights, one for libraries, one for peace, one for schools, one for labor rights, etc., etc. Ultimately that means we all lose. The Republicans have developed one silo into which all their interest concerns can fit, i.e., "government is the problem." We need to think wholistically too, even more than the Republicans actually, because they've got so much more money than we do and can influence public opinion so much easier.

But aside from the overarching strategic point I'm trying to make, there is one reason I think in this case the strategy I posed above is really best in this particular struggle. Big business should directly be asked to pay to fund public schools. We should make that demand first because big business is working so hard to kill them and we need to bring that fact out of the shadows. And secondly because big business is subsidized by the educational system insofar as it supplies them with an educated workforce. And thirdly, because ordinary working people are tapped out. They should not have to fork over more money that they don't have to keep schools and other services flourishing.

Take our schools back

It seems even sillier to pay outside contractors millions of dollars to do what the SRC is supposed to do: manage our schools. How much would be saved by eliminating outside contractors to run schools?
Ten years ago the state came in due to what they considered financial negligence. Under the state watch we saw Edison, the state's solution, fail. We've seen several Charter Schools, the state's solution, commit fraud. And now we see a state approved board engage in questionable ethics and financial malpractice. It is time for the city to take our schools back.
Republicans believe in small and local government. Time to practice what they preach.

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