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Mayor Nutter sticks with his plan to borrow $50 million, rejects property transfer idea

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

Mayor Nutter and key staff members came to meet Friday with the editorial team at WHYY and the Notebook to explain and defend his strategy for securing additional funding for the School District.

Both the mayor and City Council have assured the District that it will get an additional $50 million from the city, but they still disagree about how to raise that money. Counting the $50 million, efforts this summer to bring additional revenues to the District have so far generated only $80 million of the $180 million requested by Superintendent William Hite, so most of the cuts made to balance the budget are still in place.

While saying he had no hand whatsoever in developing Gov. Corbett’s rescue plan, Nutter continued to argue that extending the city sales tax surcharge and borrowing $50 million against it is a better plan for raising money than the one put forward by City Council President Darrell Clarke. The mayor questioned whether enough money could be generated this year by selling off District properties. He acknowledged that he needs City Council approval for any borrowing plan.

Here’s what the mayor had to say about the governor’s plan to fund the schools through sales tax revenue, how it came about — and his own strategy:

While I put forward a path, this is really not my idea or plan. This is using power and authority granted to the city of Philadelphia by the General Assembly in a piece of legislation that was signed by the governor. There’s not a person sitting at this table who was in negotiation on what came out of the legislative process. None of us were in a room anywhere with anyone. I know there have been these thoughts that I somehow signed on to something. This was the ultimate in “This is what you’re getting, put it on the table, you can take it or leave it, but that’s what you’re getting.” …

It happened at the end of the process and I believe we ultimately learned its components literally by reading it on a blog site. … There were rumors, conversations, discussions that things might be going in this particular direction, but at the end we were not a party to anything. We were the recipient of certain authorities granted by the General Assembly. … It is much like if you asked someone for $25, and they say “All I have is $15” — you can decide to either take the $15 or take nothing. I chose to take $15 on behalf of the children of Philadelphia. I am going back for the other $10.

We went to Harrisburg with this plan. … I announced a $95 million proposal out of the city of Philadelphia: $28 million in enhanced delinquent tax collection on behalf of the School District, $45 million in funding in a half-year to come from the new cigarette tax, $22 million to come from increasing the liquor-by-the-drink tax from 10 percent to 15 percent. That was my plan.

The General Assembly chose not to take up either of those two measures, even though City Council had passed the cigarette tax by 16-0. The General Assembly and governor said, “That’s very interesting, we’re not doing that, we’re doing this. Take it or leave it.”

In the late, late hours of this budget discussion, the governor’s office came up with the idea: We may not have any “state” dollars to put on the table, but we can extend the sales tax that we know is going to expire next year and we’ll devote those resources to the School District. The sales tax generates about $135 million, maybe upwards of $140 million a year. They gave us $2 million of additional state money; they incorporated our $28 million in enhanced tax collections into their “plan.”

And the excess revenues from the disputed fine with the federal government, the Department of Health and Human Services — the state essentially put aside more money than ultimately they were required to pay by the federal government. It was not the feds’ money, it was the state’s money. They put aside about $140 million … and through a negotiation [involving U.S. Rep. Bob Brady], they ended up with a $93 million settlement. … It was always the state’s money … in the state treasury and now that they don’t have to pay to the federal government, they can do whatever they want to do. And so they decided, "We’re going to give you a one-time infusion for this upcoming year of $45 million" — solely in their discretion.

They attached requirements to it in terms of the state education secretary’s certification, that’s their interpretation. They can do whatever they want. Until the education secretary determines that those conditions have been met, that’s that. … That’s solely in their jurisdiction, and there’s not a soul around here who can do anything about that.

My focus is to work on an area where I do think I can do something about. … The city of Philadelphia was given the authority to do something right now to access $50 million.

Is it the best piece of legislation ever written? No. Does it have problems? Yes. … But this is what we have at the moment. I’m not going to sit around and leave money on the table, let the perfect interfere with the good, and not have children go back to school on time or safely. … It’s not a perfect plan, but it is what it is, and we should access those dollars. It’s not debt to the city, it’s not debt to the School District, but it allows us to move forward.

The extension of the sales tax will result in $600 million in additional funding in the School District of Philadelphia over the next five years, and $400 million in additional funding to the city’s pension fund over the next 10 years. That’s what you get from what’s on the table, as imperfect as it may be. And there is no other proposal, plan, or idea that comes anywhere near that level of sustained, recurring, stable funding for schools or the pension system right now.

More from this interview to come.

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