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Corbett aide says District should count on cigarette tax; Gov coming to Philly

Photo: Kevin McCorry/WHYY

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

State Budget Secretary Charles Zogby says that Superintendent William Hite and the School Reform Commission should count on the eventual legislative authorization of a city cigarette tax to raise money for the city’s schools — meaning that they should not pull the trigger on layoffs and other school cuts on Aug. 15 that could delay the scheduled opening of school.

Sources also said that Gov. Corbett is planning to make an appearance in Philadelphia on Wednesday morning to discuss the schools’ crisis.

Zogby made this not-quite-commitment just one day after Corbett had no luck in persuading legislative leaders to come back on Sept. 8 instead of their scheduled date of Sept.15 to enact the tax. Sept. 8 is the scheduled first day of school in Philadelphia.

The authorization legislation for the cigarette tax has been hung up in Harrisburg, primarily because unrelated additions to the bill split House and Senate Republicans.

The District has been saying it needs a firm commitment of funds in order to narrow its budget gap and avert layoffs.

Facing a shortfall of $81 million for the 2014-15 school year, the District had been looking for $45 million to $60 million from a $2-a-pack cigarette tax to help close the gap.

By Aug. 15, absent the guarantee of new funds, the District will be forced to lay off 1,300 more employees and take other drastic actions — potentially deciding, for instance, that it does not have enough personnel to open schools safely.

This is a scenario that Corbett desperately wants to avoid, especially as he seeks re-election.

"I don’t want to get out in front of the General Assembly, but we believe it is ultimately going to happen," Zogby said of the cigarette tax passage.

The governor urged the legislative leaders on Monday to present a "clean bill" just on the cigarette tax and deal separately with the other divisive issues, he said. Those issues mostly involve economic development measures and hotel taxes in York County.

Spokesmen for legislative leaders have also tried to put forth the impression that the eventual passage of the cigarette tax is virtually guaranteed — once they work out their internal issues.

State Sen. Vincent Hughes, a Philadelphia Democrat, is holding a hearing on the impact of delaying the passage of a cigarette tax in City Hall Wednesday at 10 a.m. at which Hite, Nutter and others are scheduled to appear.

District spokesman Fernando Gallard said that Zogby’s statement doesn’t change much regarding the District’s calculus of its options right now.

He noted that last year the District budgeted $50 million from the city because they had it in writing from the mayor and Council that the money would be forthcoming.

"We have moved forward when we have an official guarantee," Gallard said. "At this point, we haven’t heard of or seen an official guarantee on the cigarette tax."

Both Hite and School Reform Commission Chair William Green have said for months that they will not budget for more spending than the funding they have available. Some advocates have urged them not to make further cuts and to operate the schools at current staffing levels until the funds run out.

In the meantime, the Corbett administration is moving on two fronts: getting an advance of the state aid that is due to the District, and gearing up the state Revenue Department to make the cigarette tax operational as soon as possible — even sooner than the 30 days called for in the current bill. That 30-day implementation time could be shortened to as little as 10 days, Zogby said.

Every day counts, he said — the tax is estimated to bring in about $90,000 a day. Cutting 20 days off effective implementation could mean nearly $2 million more for the District. There are a lot of logistical issues involving wholesalers, retailers and distributors to start collecting the tax that the Revenue Department has to put in place.

"We want to make sure the District doesn’t lose out and put it into effect as quickly as possible," Zogby said. "The governor has got his team working to do everything we can, short of the law actually being signed, to make sure it is ready to go."

Giving the District an advance of state funds that are already counted on in the 2014-15 budget does not close the budget shortfall. At best, it may save the District a few millon dollars in borrowing costs — nowhere near enough to prevent what Hite has said would force 1,300 additional layoffs, class sizes above 40 and more cuts in supplies to schools.

Last year, the state advanced about $400 million in state funds to Philadelphia, which saved about $10 million in borrowing costs. "They would have had to go to the markets but for the state’s advances," Zogby said.

Gallard reiterated Tuesday that an advance from the state doesn’t solve the District’s problems, and said he would have to check further to see if it would save any interest on debt.

"We do not know yet if it will save monies as it relates to borrowing," he said. "This is something we will take into consideration as we review options for the opening of schools this year. We are still a making a decision on that by Aug. 15. As the governor, superintendent, and mayor have stated, the advance does not solve the problem we are dealing with, which is funding an $81 million gap."

He said the District is in daily communication with legislative leaders and the governor’s office to find new sources of revenue. Even if the cigarette tax passes, it will not raise the full amount needed this fiscal year.

"Our priority is to have a budget that at least fills that gap, even go beyond that if possible," Gallard said.

He did not elaborate on other potential revenue sources from the city or the state, except to say that "the next thing we have to do is find savings with our labor partners."

The Philadelphia Federation of Teachers, the District’s largest union, has been working without a new contract for nearly a year. The District wants some $100 million in concessions, including benefit restructuring, salary cuts, and work-rule changes including a weakening of seniority as the major deciding factor in teacher assignment and layoffs.

"We’re hopeful that something will come through," Gallard said. If forced to impose layoffs on Aug. 15, principals will be required to redo their schedules and rosters.

Hite has said repeatedly that with further layoffs, he would consider it unsafe to open schools.

Zogby said that an on-time opening of city schools was crucial.

"Failure is not an option," he said. "Over 200,000 kids need to go to school for a full school year."

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