This article was originally published in The Notebook. In August 2020, The Notebook became Chalkbeat Philadelphia.
School District officials are still hopeful that City Council will borrow more money on their behalf than was approved by a Council committee on Wednesday, and they have Mayor Nutter on their side.
But these debates are still mainly about how to close a lingering gap in this year’s budget, not the larger revenue shortfall the District is facing in the new fiscal year that is less than three weeks away.
In an interview with radio reporters, according to his spokesman Mark McDonald, Nutter called Council’s decision to support a $27 million loan instead of the $55 million that District leaders requested "an unfortunate turn of events."
Nutter said, according to McDonald, that "we need to do everything we can to get all the resources we can to the District. The need is clear."
McDonald said that there was time for an amended bill to be introduced next Thursday and for a final vote to be taken June 26.
On Wednesday, District officials pleaded with Council to approve $55 million in borrowing against future revenue from a 1 percent extension of the sales tax, a move that was authorized by the state legislature to raise money for the schools this year. McDonald said that supporting a loan this size "basically holds the city’s general fund harmless."
Council, however, approved just a $27 million loan because it wants the District to use money from sales of school properties to fill part of its budget hole this year. The difference in the carrying costs for a $27 million loan and a $55 million loan would be modest.
Last year, the General Assembly authorized City Council to extend the 1 percent sales tax and use up to $120 million for the schools, an idea that did not sit well with Council President Darrell Clarke, who was eyeing that money for the city’s ailing pension fund. Nor did he like the idea of borrowing against future years of that revenue stream. The legislature said that the city could set aside $15 million a year for four years of the future sales tax revenue as debt service — which officials said could actually support more than $50 million in immediate revenue for the schools.
When Superintendent William Hite said last August that he may not be able to open schools without a guarantee of the $50 million, both Nutter and Clarke sent him a letter providing a means to obtain it.
Nutter promised the money through the borrowing — but said that if Council didn’t approve that, money would come out of the city’s general fund, a solution he didn’t like.
Clarke offered to give the District $50 million in return for title to its surplus properties, with the city keeping the first $50 million in sales proceeds. But the District did not go along with that.
What Council passed on Wednesday was a loan for $27 million and the assumption that the District would get $34 million before the end of the month from property sales, chiefly the University City High complex and William Penn High School. That adds up to $61 million instead of $50 million because the District had already budgeted $11 million in revenue from the sale of surplus property.
Clarke spokesperson Jane Roh issued a statement saying that "the District could have had the $50 million up front" by leaving the city on the hook for unsold properties, but declined the offer.
But District spokeman Fernando Gallard reiterated that the District’s position is that it needs both the loan money authorized by the state and the full amount from selling its vacant properties. Otherwise, he said, the District may be forced to make further layoffs and program cuts.
What Council approved, Gallard said, was "whatever you cannot get from the sale of property, they said we will cover the rest. We are saying that’s not enough."
Gallard said that officials were working hard to get Council to amend the bill to increase the loan amount and were asking for public support. A Council member could have tried to amend it as it was formally introduced Thursday, but no one offered any amendment.
"What we need for our students and for our schools is access to the full loan and the money from selling the properties," said Gallard. "We are in a position where we don’t know if we are going to have functioning schools next year."
For next year, the District says that it needs $216 million in additional funds — the $120 million plus $96 more — just to reach this year’s depleted service levels in schools.
City Council wants to raise money for the District through a $2-a-pack cigarette tax. Harrisburg has so far declined to authorize that tax. And in her testimony to Council’s Finance Committee on Wednesday, School Reform Commission chief of staff Sophie Bryan told Council that even if the cigarette tax were approved, next year it would not provide the full $80 million that is expected, but only about half that amount. She argued that was another reason to provide the District with a larger loan.