State looks for Philly funding solution with other people’s money

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

Weeks of frantic lobbying have moved Gov. Corbett and some key legislators to recognize that the Philadelphia School District has a real problem and that they have some responsibility to be part of the solution.

But in seeking to craft a deal that would allow the District to avoid implementing its “doomsday” budget, Harrisburg doesn’t want to contribute any revenue of its own.

None of the proposals currently on the table, either to solve this year’s immediate crisis or provide sustainable levels of aid to Philadelphia in the future, involve an increase in dedicated state money to the city schools, Harrisburg watchers say.

“The state doesn’t want to come up with any money. They think giving [City Council] authorization [to enact more city taxes] is a big step,” said one person with knowledge of the negotiations.

Nor have Republican legislative leaders and the governor shown any desire to grapple with bigger issues of what is fair, adequate and equitable when it comes to education funding around the state, not just for Philadelphia.

“A critical issue has to be getting back to the conversation of what a funding formula [for education] looks like,” said Susan Gobreski of EdVoters PA, an advocacy group. “We have to divorce school funding from who is governor and develop a system that does not depend on the whim or propensities of particular leaders.”

Philadelphia and many other districts are still reeling from the loss of about a billion dollars in state and federal education aid soon after Corbett took office. The brunt of those cuts was absorbed by Philadelphia – resulting in an unprecedented $304 million budget gap this year.

To close the gap, the District has asked for $120 million from the state, $60 million from the city, and $133 million in concessions from unions, primarily the Philadelphia Federation of Teachers. Lacking any commitments, it has adopted a "doomsday" budget that lays off more than 3,800 employees and strips schools of nearly everything but a principal and a minimal number of teachers.

In Harrisburg, the issue must be resolved by June 30.

“We’re down to the last 10 days of the fiscal year, and there is no clear indication coming out of the General Assembly of what it might do, let alone a commitment to do anything,” said Ron Cowell, a former legislator who now runs the Education Policy and Leadership Center in the capital.

Where things stand

On Thursday, Philadelphia City Council passed a budget that would raise nearly $75 million for the schools through a $2-a-pack cigarette tax and more aggressive property tax collection — more than the city’s share of the requested bailout package. But Council still needs state enabling legislation to enforce the cigarette tax and would like more power from the state so it can go after delinquent taxpayers by putting liens on properties they own outside Philadelphia.

The day before Council’s action, Gov. Corbett issued his first formal statement about the District’s funding dilemma, saying that “over the past several weeks, many viable ideas and solutions have been suggested” to close the gap. These include, he said “a combination of student-centered contributions from the state, the city, the School District and the union.”

Number one for Corbett was getting the teachers’ union to agree to concessions in benefits, pay, and what he called “the ability to staff schools around the needs of students,” meaning changes in seniority provisions. The PFT contract doesn’t expire until the end of August.

After that, Corbett said he was amenable to backing legislation that would allow the city to step up its efforts to collect delinquent taxes and raise more taxes on its own. That fits in with what Council did.

In fact, Council declined to pursue, to the dismay of the activists in attendance, an option for raising funds that doesn’t depend on state action — a provision to raise the Use and Occupancy tax on businesses that would have yielded $30 million for the schools. Council members said they feared passing the Use and Occupancy tax would scuttle any chance of getting state approval for the cigarette tax, which is projected to bring in more money.

"I guarantee you that if we pass the U-and-O bill, we don’t get smoking," City Council President Darrell Clarke told the Inquirer. "What I’m asking people is, let it play out, let us continue to have that dialogue."

Even the bill’s sponsor, Maria Quinones-Sanchez, turned against it.

According to the Inquirer, she said that Harrisburg was "very close to what would be a historic, one-time, serious allocation of resources" to the city schools. Passing her bill, she said, would "give anyone an excuse who is not looking out for the best interests of Philadelphia" to not provide state help.

Historic?

But what is that “historic, one-time, serious allocation"?

Corbett, in his statement, mentioned nothing concrete. Except for this: “Other potential solutions include … redirecting 1 percent of the existing city sales tax toward the School District.”

The state allowed the city to enact a temporary 1 percent sales tax increase in 2009 during the recession, and that levy is due to expire at the end of 2014. Someone suggested extending it and giving the money to the schools — and suddenly that has become the “state share.”

“His solution is to [extend] the sales tax,” said one frustrated Philadelphia education advocate. “That is not a state contribution. That is using Philly’s money to solve Philly’s problem.”

In any case, it wouldn’t help with this year, because that money is counted on as part of the city budget — which is why U.S. Rep. Bob Brady has been enlisted to ask the U.S. Department of Health and Human Services to waive $108 million it says it is owed by the state due to past overpayments. That effort has been described as the “Hail Mary” plan to satisfy the state’s $120 million request for 2013-14.

Other possibilities floated at various times to fill the immediate gap include reinstating the charter school reimbursement line item, which, before it was zeroed out, sent $110 million to the city. Then there has been discussion of increased aid to distressed school districts that would include Philadelphia. Most recently, State Sen. Vincent Hughes touted Medicaid expansion under the Affordable Care Act, which would free up $165 million in the state budget that could be used for education.

But most state solutions for Philadelphia would involve coming up with many more dollars so that other districts would get something as well. The charter reimbursement idea would restore a funding stream that Corbett took out to begin with.

The governor is firm on his no-new-taxes pledge. His administration consistently maintains that there is no money available and that the state is facing its own shortfall due to lagging revenue collections.

“To deliver $120 million to Philadelphia means a half-a-billion package,” said one Harrisburg insider. “There is no way the General Assembly is going to send $120 million to Philadelphia and not want something for their own school districts.”

Corbett also said in his statement that the "solution" to the District’s dilemma will come “with an expectation that we will not be at the drawing board again next year with another fiscal crisis.” Sources say that Philadelphia’s negotiators have told the governor that if it gets the desired $300 million in recurring dollars, this will solve the District’s “structural deficit” and they won’t pester Harrisburg for a fairer, more stable school funding system.

There are two problems with that, say Philadelphia education advocates. One is that the additional $300 million only preserves the status quo, and does not restore two prior years of cuts under Corbett. The other is that the state does need a better way to fund schools.

Pennsylvania is one of only three states that does not have a formula for funding education that is based on the needs, wealth, taxing power, poverty levels, and size of individual districts. Partly as a result, the state-vs.-local share of total education spending is one of the lowest in the country — 32 percent compared to a national average of 48 percent.

Gov. Ed Rendell made increasing allocations to school districts and the state share of education spending a priority. But Corbett has different priorities, including corporate tax breaks, and his first budgets slashed the amount of money that the state sent to school districts.

The solutions being proposed now “ignore that the state government has been cheap about supporting K-12 education,” said Cowell of the Education Policy and Leadership Center. “It ignores that nearly $900 million was taken from districts two years ago and little has been done to restore those dollars. And it ignores that the biggest cuts affected the Philadelphia School District.”

The way that the state funds education “is bad for schools and no way to run a budget,” said Gobreski of EdVoters. “It is too dependent on backroom deals and somebody coming up with a bright idea at the last minute.”

With all the energy about education in the state sucked up by the funding issue, she said, there is no room for serious discussions about “improving learning incomes, how to get kids more exposure to arts, how to upgrade science and technology, and improve leadership and development for teachers and principals,” among other issues.

Corbett is seeking re-election next year and his approval ratings are low, a fact confirmed this week by a poll commissioned by the education reform group PennCAN and shared with the governor.

Corbett’s approval ratings on education policy — and not just in Philadelphia, but around the state — are in the tank. And education has become a much more potent issue in the public consciousness as districts of all stripes have felt some effect of the cuts under Corbett’s watch.

The PennCAN poll showed Corbett trailing U.S. Rep. Allyson Schwartz in a matchup, and the national GOP has declared him the country’s most vulnerable Republican governor.

So Gobreski thinks there is no mystery why Corbett is seeking a way to prevent the Philadelphia schools from falling apart without making a serious dent in his own budgetary and political priorities.

“This is not an education reform agenda,” Gobreski said. “It is a Corbett salvation agenda.”