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A huge hole: State funding is far less than expected

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

When the School District drew up a budget last spring with an increase in spending of 11 percent – more than $300 million – it looked like a once-in-a-lifetime opportunity for Philadelphia to close the gap with surrounding districts in areas like class size and student-counselor ratios.

The unprecedented infusion of federal stimulus money and state aid seemed too good to be true.

And it was.

Just months into a new fiscal year launched with extraordinary spending on new staff and summer programs, the District found itself in a big hole. As the dust settled in Harrisburg, barely half the new money had materialized.

In mid-September, District officials were publicly saying they were temporarily holding back on some spending till state budget details were finalized and projections firmed up. But privately, they were weighing drastic measures like 3 to 5 percent across-the-board cuts to District departments.

Activists were saying schools should be off-limits. Gerald Wright of Parents United for Public Education said he and his group “firmly believe that the classroom, teaching, and school-based resources should not be cut.”

The District had based its hopes for $300 million in new funds on the education allocations in Gov. Rendell’s state budget proposal – hopes that Chief Budget Officer Michael Masch justified based on past experience.

Masch, a former state budget director under Rendell, told the School Reform Commission in May that “the legislature has never allocated less for education than what the governor has proposed.… We hope that they will act in a way that is consistent with history.”

But Republican legislators resisted the governor’s spending plan, and Rendell was unable to overcome opposition to a temporary income tax increase to pay for his proposed boost in school funding.

After a summer-long impasse, legislators coalesced around a compromise plan with substantially less funding than was in the governor’s original plan.

The resulting District shortfall is expected to be more than $150 million. A lack of recurring revenue in the state budget means the District’s multi-year financial plans will see more red ink.

The biggest blow to the District was the decision to use federal stimulus funds to pay for the basic education funding increase, rather than allocating them directly to school districts. In addition, the legislature and governor agreed to scale back the statewide increase in basic education funding from $418 million to $300 million, modifying last year’s commitment to a plan for achieving funding adequacy targets for school districts by 2014.

Despite uncertainty about state revenues, Superintendent Arlene Ackerman went ahead with the new big-ticket items in the District’s 2009-10 budget, moving forward on $126 million for all the first-year initiatives from her Imagine 2014 plan.

Prior to the September SRC meetings, commissioners said they had not been briefed about the likelihood that there wouldn’t be enough money for these items. Masch said that the SRC would be briefed in September, but a revised plan for dealing with shortages would take longer.

“We will provide a full accounting … on where we think we stand financially and how we intend to maintain budget balance once we have all the facts in front of us, and are able to determine what our financial condition is and what our options are,” Masch said.

When the budget was adopted in May, Masch told the SRC that if revenue estimates prove to be wrong, “then we will present revisions in the spending plan for you.”

Some initiatives were halted to save money, including plans for more than 600 alternative placements for dropouts – 100 of those in a media technology school designed by Youth Empowerment Services. A re-engagement center for dropouts in North Philadelphia was also shelved.

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