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Competing stories on size of impending deficit

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

Mayor Michael Nutter and Superintendent Arlene Ackerman held a telephone press conference Tuesday evening to acknowledge a $234 million hole in next year’s District budget resulting from the loss of federal stimulus dollars, while rebutting reports of a much larger expected deficit as – in Ackerman’s words – "purely speculative."

"There are any number of unknowns; there’s a variety of scenarios," the mayor added, emphasizing that the District has just begun work on its budget for next school year. "We’re literally at the start of a process," Nutter said.

The gap faced by the District due to the end of the federal stimulus program has been widely reported for months.

But an Inquirer report Tuesday evening said that "district officials are staring down a hole of at least $430 million in next year’s budget, and the gap could surpass the half-billion mark under the worst-case scenarios, according to government officials briefed on the district’s finances." A more detailed story appeared in Wednesday’s Inquirer.

Nutter and Ackerman insisted that sounded more like a "worst-case scenario."

But there are some obvious holes in next year’s budget besides the loss of $234 million in federal stimulus funds.

In October, Chief Financial Officer Michael Masch clearly warned the School Reform Commission that the scope of the anticipated budget shortfall next year extends beyond "a quarter billion dollars in discontinued federal stimulus funds." Several other factors will be at play, Masch told the SRC at that time, including:

  • the District won’t have a $40 million fund balance to start the year, as it does this year – the current District spending plan assumes that reserve will be used up by June.
  • pension costs are projected to rise by $28 million.
  • a 3 percent wage increase for teachers and others, effective January 2011 2012, will drive up wage costs by $30 million in 2011-12.

Add on a likely increase in benefit and charter school costs, and it’s easy to see the budget gap for 2011-12 rising to $350 million or more.

The mayor and superintendent said repeatedly that there are a variety of scenarios on how next year can play out but were not ready yet to offer any specifics on what would narrow that gap. The District plans to release its budget in February, earlier than usual.

Ackerman did say that one of the scenarios under consideration involved making cuts in the last six months of this year’s budget, but no decisions have been made. "We want to take what we want to do to the SRC," she said.

Nutter and Ackerman both highlighted signs of improved student achievement in the District, with the mayor saying, "Look at what has happened over the last few years – the gains that have been made."