This article was originally published in The Notebook. In August 2020, The Notebook became Chalkbeat Philadelphia.
In question-and-answer format, here is an explanation of the components of the School District’s funding package presented Sunday by Gov. Corbett.
What sources of new money does the governor’s plan include?
For this year, it includes $45 million in a one-time federal infusion. An additional $50 million comes from borrowing against money that will start flowing to the District next year from extending the 1 percent city sales-tax surcharge beyond 2014 and diverting proceeds to the schools. It also projects that $30 million more will come from more-aggressive city property tax collection (the city projects only $28 million). And it includes a nearly $16 million increase in state basic education funding for the city. But that is only $2 million more in the basic education subsidy than the District had already included in its austerity budget. The governor says it all adds up to $140 million, but the plan would only produce roughly $125 million in revenues not already factored into the District’s budget. Whichever numbers are used, the total is well below the $180 million that the District sought from state and city government.
How much of this is city money vs. state money?
The basic education increase is state money, and the $45 million is money that the state would otherwise have had to pay back to the federal government – it is forgiveness of a past overpayment. The rest of the money will come from people who live, own property, or shop in the city.
How much of the money is one-shot vs. recurring?
The one-time $45 million grant and the $50 million loan are to be replaced by the annual proceeds of the sales tax in 2014-15. The sales-tax surcharge should ultimately generate $120 million annually in recurring revenue. It is still unclear whether the $30 million from more-efficient city property tax collection will be recurring or a one-time recouping of delinquent taxes. Certainly the hope is that the city will be able to collect more of the money it is owed from taxpayers each year than it now does. Increases in basic education funding are recurring.
What will the sales-tax extension mean long-term?
It means that people who live and shop in Philadelphia will pay a higher sales tax (8 percent) and that “up to $120 million” from that 1 percent bump will be used to fund the schools. The $120 million matches the amount that the District had asked for from the state, but the money will come from local sources, and that full amount won’t be achieved until 2015-16.
What additional action is needed to guarantee the funds?
The plan makes the $45 million grant and the $50 million borrowed against the future sales tax revenue contingent on the new secretary of education, William Harner, “certifying” that the District has adopted certain operational, educational, and fiscal reforms. Increasing property tax revenues on a recurring basis may depend in part on whether the city gets three new bills from the state expanding its powers. Those bills are not on the immediate docket, but City Council members are confident that they will be approved.
Some are saying that Corbett’s plan provides $274 million out of $304 million needed. Has this plan closed nine-tenths of the gap?
To draw that conclusion assumes that the deal guarantees that the District will get the entire $133 million it is seeking in concessions from the unions. The provision requiring certification by the secretary of education strengthens the District’s hand in getting the concessions. But union president Jerry Jordan argues that the union is now being asked to contribute more than the combined efforts of the city and state.
Using the $274 million figure also counts the entire $16 million increase in the basic education subsidy as an increase over what the District had already budgeted, when only $2 million is above what the District had already factored in.
Does this plan mean that the District can avoid nearly 4,000 layoffs?
That is not yet known. The District will most likely offer a more-detailed response to the package later in the week after it is finalized and budget officials have had the chance to analyze its implications. Negotiations with the union are likely to continue at least up to the Aug. 31 deadline. State action, at best, gives the District about half the dollars needed to avert the layoffs in its gap-closing plan.
Are there any prospects for additional revenue for this year?
Slim. Council is still interested in approving the cigarette tax, which would require state legislative action. State Sen. Anthony Williams said he may introduce enabling legislation in the fall. It is not clear whether that would be in time to raise more money for fiscal 2014. Advocacy groups are still interested in changes in the Use and Occupancy tax on businesses that would have brought in about $30 million annually. Council President Darrell Clarke said that the window for that has passed; the City Charter doesn’t permit new taxes to be enacted after the fiscal year has begun. In any case, he said, Council does not want to jeopardize any future chance at getting the cigarette tax, which is estimated to bring in more revenue than U and O over the long term.