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Short on funds, District looks to state budget

Tighter times ahead?

This article was originally published in The Notebook. In August 2020, The Notebook became Chalkbeat Philadelphia.

Local education advocates are encouraged by increases in school funding in Governor Ed Rendell’s proposed state budget. But a School District hiring freeze and an unexpected round of midyear school budget cuts have spurred anxiety that the School District may be depleting its reserves this year and be facing a period of budget austerity.

The districtwide hiring freeze, affecting central office and regional personnel but not school staff, was announced in November to address what District CEO Paul Vallas called a $19 million budget shortfall.

The freeze was followed by a surprise District announcement in January of a 30 percent cut in discretionary funds at schools and in administrative offices. These midyear cuts totaled $23 million – with more than $6 million of that amount at schools. Afterschool activities, professional development, and overtime were among the affected areas.

Vallas said he expects the hiring freeze to remain in place through the end of the school year.

But he stated in a March 3 interview that the upcoming 2006-07 School District budget “is not a bare-bones budget.”

“It will finance the continued implementation of our reforms, from expanded early childhood to the reorganization of the District [through K-8 schools and smaller high schools] to the expanded accelerated and gifted programs,” Vallas said.

He also highlighted some new initiatives planned for the coming year in conjunction with the city, including a program to modernize 6,000 more classrooms over the next four years and “a significant expansion of behavioral support services in the schools.” He promised that the District’s massive school construction program would be in high gear, with groundbreaking planned for over a dozen replacement buildings and additions.

Bond provided breathing room

The infusion of $300 million in deficit financing for the School District, negotiated in 2002 as part of the state takeover, has provided some financial breathing room for the District in recent years. Those funds were the biggest piece of a package that lifted the School District out of a chronic deficit. With this borrowing, the District had a $203 million fund balance – or reserve – when Vallas came on board as CEO in July 2002.

But by July 2004, the District’s fund balance had shrunk to only $54 million, and by last July 1, District officials say those reserves were down to $49 million. The School District’s fiscal year runs from July 1 to June 30.

A February press statement prepared by District officials noted the District’s commitment not to dip further into reserves this year: “The CEO has chosen to maintain the fund balance at this level going forward to maintain a healthy level of working capital and to ensure long-term fiscal stability,” the statement read. “The current year budget (FY06) is currently balanced.”

Vallas affirmed those words on March 3, saying, “I feel pretty good that we’re going to finish the year balanced.”

But concern among some District observers that the financial reserves will be depleted was fueled by Mayor John Street’s comment to that effect in his January budget address. He stated, “The deficit borrowing proceeds supported by the City and used to balance the School District’s budgets in recent years will run out at the end of Fiscal Year 2006.”

Why the crunch?

District officials say the midyear budget crunch and the resulting cuts and hiring freeze are due to a number of unexpected and costly developments, including the following items:

  • Charter school expenses were $8 million higher than expected, as charter enrollment soared by 3,000 students this year – to almost 27,000
  • Utility costs surged in the wake of hurricane season, with the unanticipated cost totaling $7 million
  • Charges formerly paid for by the Department of Human Services, for certain students in residential treatment, are now being paid by the District and total $5.2 million
  • Funds totaling $5 million were expected from the Parking Authority as part of a deal when the state took over the agency, but the money did not materialize
  • The state shifted charges to school districts for students placed in approved private schools, costing the District $4.6 million.

The role of rising charter school costs in the budget crunch brought a statement of concern from Philadelphia Federation of Teachers President Ted Kirsch, who pointed out that the District’s total charter costs have climbed to well over $200 million annually.

“The School District has to take a much closer look at this – there’s got to be some accountability for that money,” Kirsch said.

The midyear school-based budget cuts brought public statements of protest from some principals. But the principal whose school took the single biggest hit said he thought the school cuts were done “pretty fairly.”

Kelly Barton, principal at Northeast High School, which has the largest enrollment in the city, said, “We trimmed things back, and it’s not really affecting my programs that seriously.”

Barton acknowledged that although he had to cut almost $200,000, having a large budget gives him “more wiggle room” to make adjustments than principals at smaller schools. He also noted that the District had restored some funds for sports teams.

Barton added, “My greater concern is next year and what that budget will look like.”

Pat Raymond, president of the districtwide parent organization, Philadelphia Home and School Council, echoed that remark.

“We’re very concerned about what happens if the Governor’s budget is not okayed,” Raymond said. “The District is still not getting the money that it needs.”

Hopeful about Rendell plan

Local education activists are working to build support for Governor Rendell’s education budget proposals. Approval of the state budget may not take place until June.

The proposed state budget includes a 5 percent increase in the state’s core funding for school districts – the basic education subsidy – which state officials say would make this the largest increase since 1991. Special education funding would climb 4 percent.

Philadelphia would benefit from a proposed 25 percent increase in the state’s Accountability Block Grant program – which the District has used to support its kindergarten program – and it also stands to gain about $4.5 million in Head Start funding if the governor’s plan is approved.

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