SRC approves $3 billion FY19 budget with fund balance, counting on more money from city

With new city money, officials now forecast fund balances, instead of deficits, through 2023.

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

In what was likely its penultimate meeting, the School Reform Commission (SRC) approved the Philadelphia School District’s $3 billion budget for fiscal year 2019 on Thursday and debated, in candid terms, whether Mayor Kenney could deliver a promised tax increase that would firm up District finances.

Three of the four remaining commissioners approved the budget, noting that it was only for next year and that the District is on solid financial footing for at least that long, regardless of the city’s actions.

Commissioner Bill Green voted no, arguing that it was irresponsible to approve a financial plan while City Council continues to debate raising property tax rates. He noted that many of the investments in the 2018-19 budget are attached to a five-year plan that assumes that City Council will approve Kenney’s proposed tax hike.

“I believe this budget is an illusion built on shifting sands,” said Green, a former City Council member.

Kenney has vowed to raise property tax rates as part of a revenue package that would nearly eliminate the District’s structural deficit and leave it with at least five consecutive years of positive fund balances. The mayor pledged more money to the city’s financially beleaguered school system as part of a return to local control. The state-controlled SRC will likely meet just one more time before it dissolves on June 30, turning over District governance to a nine-member Board of Education that Kenney appointed.

Council members, however, have expressed skepticism about a 4.1 percent property tax rate increase requested by Kenney, which would raise about $193 million over five years.

On Wednesday, sitting as Committee of the Whole, council members advanced tax bills on other parts of the revenue package: a $20 million additional direct contribution to the District in each of the next five years, an increase in the local part of the real estate transfer tax to raise $136 million, and the move that would raise the biggest chunk of the new money – a slowdown of scheduled wage-tax reductions that would raise $340 million for the District. With the property tax rate increase, the package would total $770 million over five years.

Green doesn’t think that money will come through, and he laid out the political calculus that he believes will leave Philadelphia’s school system in the lurch. City Council will reject the plan, he said, which will allow Kenney to blame the failure on Council members and allow Council members to tell their constituents that they stonewalled a proposed tax hike.

SRC Chair Estelle Richman, herself a veteran of city and state politics, blanched at Green’s prediction.

“Don’t undersell the voters in Philadelphia,” she said.

As City Council deliberates, there’s a lot at stake for the schools.

Uri Monson, the district’s chief financial officer, told the SRC that revised projections show that the District will end the 2018 fiscal year with a $148 million fund balance and that he is projecting a $194 million fund balance in fiscal 2019.

And he presented a vastly changed five-year budget picture to the SRC than he did last year, when he said the District would end fiscal 2022 with a shortfall of $701 million without additional revenue and assuming no new investments.

Under his new projections, which include the new city revenues proposed by Kenney but not yet approved by Council, he is forecasting a fund balance that year of $112 million.

Though the financial conversation has the longest-term implications, the SRC still had some lingering charter business to tie up as it prepares to disband.

The commission approved one charter, rejected another, renewed a charter once threatened with closure, and approved the relocation of a fourth charter.

The approval went to Philadelphia Hebrew Public Charter, though it wasn’t an enthusiastic yes. The SRC imposed conditions on the school that will limit its enrollment, and two commissioners said they were only approving the school because they were afraid that the state appeals board would overrule them if they issued a denial.

“To preserve our control, I will vote to approve this charter,” said Richman.

The chairwoman added that she didn’t think Philadelphia Hebrew was the type of charter that the District should be prioritizing and argued that its addition would hurt the school system’s already precarious financial position.

Philadelphia Hebrew is based on a model out of New York City and includes Hebrew language instruction for all students. The school, to be located in East Falls, will open in the fall of 2019 and serve a maximum of 468 students in grades K-5.

“We have a national model of success that we are excited to bring to Philadelphia,” said president and CEO Jon Rosenberg in a statement.

The SRC voted to renew Laboratory Charter School of Communication & Languages one year after it began a process that could have eventually closed the school. In its initial evaluation, the SRC’s charter office highlighted organizational and financial concerns that overshadowed the school’s academic strength. In an updated memo, the charter office noted several areas where school leaders had addressed deficiencies.

And in a move that helped two other charter schools, the SRC permitted Kensington’s Ad Prima Charter School to move to the Cedarbrook section of Northwest Philadelphia. Ad Prima says the move will allow it to expand enrollment. Deep Roots Charter School, which was approved a year ago to open this fall, plans to occupy the Kensington building vacated by Ad Prima.

The only charter applicant left disappointed was APM Community Charter School, which would have been run by the nonprofit Asociacion Puertorriquenos en Marcha Inc. (APM) and located in the Olney section of North Philadelphia. Former mayoral candidate Nelson Diaz testified on the applicant’s behalf, to no avail.

During the public comment portion of the meeting, several community activists continued pressuring the District over its plan to phase out Strawberry Mansion High School and use the building for what it has been calling a “complex” of alternative secondary school options.

Strawberry Mansion has a dwindling student body, but protesters say District leaders stripped the long-troubled high school of money and programs. They vowed to fight on, even as the SRC’s candle burns low. And they scoffed at the District’s announced intentions to install options in the building starting in 2019, such as a project-based high school, that District officials said are more suited to the neighborhood’s students.

Several speakers said there was no real consultation with the community over what the students need.

“There is no plan,” said former Strawberry Mansion principal Linda Cliatt-Wayman in an impassioned statement. “Let your final act be on the side of the children.”

The school has accepted no new 9th graders for September as part of the phase-out, but neighborhood residents and their supporters are demanding that a 9th-grade class be enrolled so those students don’t have to travel outside the neighborhood.

“This is the last time you will hear words from me,” said Melvin Sharpe. “But you will see action from me.”