And I think there are two things that are true. The difference between -- I think there are two simple things that define the difference between where we are today and where we would be in what you have defined as a hostile take-over.
Well, I have not defined a hostile take-over. 526 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY
Or in response to your question what a hostile take-over would look like.
That language from yesterday was from Chairman Nevels.
Number one, Edison Schools would be in charge of the Philadelphia School District. There would be 55 different employees or 55 potentially changed employees at the top of the district. Edison would be in charge of all of the decision-making apparatus of the public schools of the City of Philadelphia. And from a financing perspective, because we would not be in those discussions or part of a partnership, we would be subject to the whim of the General Assembly and the State to take resources away from the City of Philadelphia to help fund public education. We're not going to circumvent the need to put money into that process. We simply decided we were better off to be in a position where we were a part of those discussions and a part of the decision about how the City participated as part of the schools going forward.
At least part of the result of which is we're here today trying to make a 527 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY decision about something that if we don't do it, the General Assembly will still take action against us in a potentially onerous fashion or take the money in some other fashion. And that is with this partnership. I mean, we don't need to go back to the $300 million discussion. But you know as well as I do in that in any other circumstance, I mean, that's a whacked transaction. And we have no ability to say no. 12
We couldn't change the entire structure of government with this agreement. And the State is, as the Mayor likes to say, the sovereign. However, in this agreement the treasury is protected because the City's contribution is capped as part of this agreement.
We don't know yet. But what we do know is that part of the decision-making body -- and as I explained earlier this morning, we prevented a situation where in 30 days the interim chair, and not to say that he would have, but could have done that. 528 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY And I would also like to add that we have representing the City of Philadelphia two quality School Reform Commission members in the form of Sandra Glenn and Mike Mash, who I think give a lot of comfort to many of the constituents of the public schools, knowing that they are really representing the City's absolute best interests in a variety of ways.
That's fine. I don't have any issue with them. They were good on the school board. They'll be good on the SRC. I mean, they are not the issue in this debate. We've gone from -- yes, Edison does not have all the power and jurisdiction that the Governor's office initially wanted, although they continue to complain about. They've now moved into an unknown status, which for the moment leaves things even murkier than they were before. And while they won't have 100 percent control, it sounds like, looks like, feels like it'll be somewhere in the 50 to 75 percent. I mean, I can appreciate the effort. But I'm not sure how much has changed.
Councilman, the 529 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY administration has some questions about Edison Schools. We've said that consistently.
We've been on the record. But the one thing that we have a greater degree of comfort with is that the SRC -- and this is to Jim Nevel's credit, and I want to publicly commend him and the members of the commission -- have taken the time -- what our issue with the Governor in the beginning of these discussions was really wasn't Edison. It was the way in which Edison was getting in, that they weren't subject to public scrutiny, they weren't subject to an evaluation of their capability, they weren't subject to any competitive process.
That started with the deal with Governor Ridge. I mean, you sign a deal with somebody, their next step is to hire somebody to tell them what to do.
Councilman, you have never 530 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY heard us object to Governor Ridge hiring Edison to do the consulting study. That was a decision that Governor Ridge was completely --
I understand that. But then you can't be surprised if they want to get the business. I mean, come on. Everybody knew what the deal was.
Councilman, we're not surprised that they wanted to get the business. And we think one of the results of the negotiations that we went through with the Governor was to slow that process down. Everyone believed that Edison would be here in January running the Philadelphia School District even after what we did and negotiated. And I think the SRC has gone through a responsible process. It is our expectation that out of that process -- and I think Mr. Nevels and members of the commission have said that Edison is going to participate in some way. And the Mayor said from the very beginning, when he stood in a press conference with Governor Schweiker, that he was prepared to have Edison in some responsible fashion in the school district. What he was not prepared 531 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY was to have them running the district as the CEO and the top administrators.
I understand. But you know as well as I do that you can't really complain too much if you participate in the process that allows the fox in the henhouse and now you're upset that they decide to have a meal.
Councilman, with all due respect, we are not upset. Politics and public service is a contact sport.
So we are in no way upset that the Governor would support Edison, that Governor Ridge supported them nor that Governor Schweiker would support them. We don't support them. We think we've created a process by which their participation is different than it would have been originally. We think that the participation is going to be broader than Edison in the consulting services and in the managing of school services. And I believe, and I think this administration believes, that the School Reform Commission deserves a great 532 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY deal of credit for acting independently as a body to do that review.
We might agree about that. What is the City's expectation when all of this is said and done, the consultants, the SRC, diminished role for Edison, competition, other groups in, what's the City's expectation out of all this over the next five or ten years? What can parents and citizens and taxpayers and the children of this City expect to see based on the deal that's been negotiated?
I believe that the Mayor has I think regularly and routinely articulated his vision for public education. And it is to create a quality opportunity both with preschool programs and after school programs and smaller class sizes and core curriculums that give young people an opportunity to learn, creating safe environments, having trained teachers. They're the things that make Philadelphia a first-rate public school system, whether it's an urban center, rural center or suburban center. We believe that for the first time, for the first time all of the relevant players 533 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY are in a discussion about that end. Now, can we commit or promise that we're going to get to the end that we would like to see? I don't think we can. But I think for the first time the Mayor has created an environment where all of the relevant players are talking about how do you fix the public school problem in the City of Philadelphia, not pointing fingers and saying it's the Democrats down there in Philadelphia and they don't know what to do or how to handle it, it's the Republicans in Harrisburg that don't care about it and are not responsive to it. People are sitting and have responsible discussions about how we get at the crisis of education in the City of Philadelphia, not just the money, but the product of the school system also.
I'm wondering if the Secretary of External Affairs could list those relevant players. I'd be interested in knowing who the administration believes are relevant players in this process.
For this purpose, it is the leadership of the General Assembly, the Governor, the Mayor -- 534 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY
I don't want to get into specific names. We have spoken to the leadership of the General Assembly.
Well, if you've spoken to them, can you tell us who they are? It's simple names.
We have talked to the leadership of the General Assembly, we've talked to the Governor, and I believe that they are all in responsible discussion about this issue. 535 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY
So either you won't given them to me for you don't know who they are?
Councilman, we have talked to the leadership of the Republicans and we've talked to the leadership of the Democrats about the issue of education. And we will continue to talk them and we will continue to try to resolve --
How often do those conversations take place? How often have they taken place in the past?
I'm not going to try to recall how many times that we have gone to Harrisburg or that the people that represent us have been in Harrisburg talking with leaders on these issues. It's impossible for me to recall all of that. I'll simply say for the record that we are in recurring discussions with leadership on these issues.
On the issues of class size and the issues of curriculum, all those issues?
On the issues of articulating the Mayor's vision. The Mayor has articulated his vision -- 536 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY
He hasn't articulated that vision to us. I don't know how he's articulating to anybody else. Who is it that you've talked to?
If you want to think about it and give it to me in writing, I'll wait until later.
That's all right. I withdraw the point of information. Apparently, it's not going to be answered. So I withdraw it.
Let's not shout at each other. Ask to be recognized.
I do believe that it is relevant, Mr. Secretary, that while we're considering all of these millions of dollars of debt that we're going to be incurring, that we, as a legislative body and I think the public, should know what conversations are taking place, what are the levels and what commitments are going on because 537 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY everything we hear from the leadership that you're talking about in Harrisburg is about the lack of communication that is presently happening, that there is no conversations. And if there are conversations, I think it would be relevant for this body to know what they are and I think it's relevant for the public to know. I mean, government by secrecy, especially when you're talking about 214,0000 kids and you're talking about the most monumental change in public education in the history of this country, I don't think that should be acceptable. I think there should be a public discourse and a public debate that has to take place in the public. If we're going to win in Harrisburg, the only way we're going to win is if you engage the people and you engage the parents. And if you don't engage those individuals, those stakeholders, we're not going to win. And you're not going to engage them by not being forthright about who we're talking to in the leadership and what conversations and what is their response. Thank you, Madam Chair.
You're welcome. Councilman Nutter. 538 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY
Thank you, Madam Chair. Secretary Burrell, the start of your response was that the Mayor had articulated his views on education and you ticked off some of those items. I did also need to ask, from your perspective, where have those articulations taken place? In what forum has the Mayor laid out to the general public or to City Council what his views are on education, what his concerns are, what his commitments are -- I'm not questioning his commitment; I know he's committed -- and what his goals are as it relates to not only the current situation, whether it's the funding problem in general or the short to medium term, as you would indicate, funding solution in front of us? But I'm actually talking about more of a view and a vision of what public education can be, what it should be, and what the goal is over the next four, five, eight, ten years that this City should be trying to attain from its standards and an educational excellence standpoint.
And that is because she spends a lot more time with it than I do that 539 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY Secretary Kahn can answer more in greater detail. But going back to from the time that the Mayor has appointed under -- when we came into office and within the first three and a half months of this administration, appointed a new school board. I think at the time that he appointed the new school board, made a public statement about the direction and the encouragement and the objectives that that school board was trying to achieve. I think simply in the fact of appointing Debra Kahn as Secretary of Public Education, a job that had not previously existed in government, signaled his commitment to trying to address those issues. In his inaugural address when he said that that was the year of the child and we've made it the year of the child in every year since then, spoke to what his goals and objectives were for education. From the beginning of putting together a plan for how we thought that you could resolve the fiscal crisis, a part of that plan is not just the financial objectives of the administration in terms of how to solve that plan. It put together how to change the business practices at the school district to make it run more efficiently and set forth what 540 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY the objectives were with respect to school size and other educational issues that were there. It has been the subject of probably four or five of the weekly radio messages that the Mayor gives on KYW every week. I think it's been the subject of -- I know it's been the subject of at least of briefings that we've held with council members in which we've used the briefing document of our plan of how to solve that crisis. And so I think that it is an issue that the Mayor has spoken about repeatedly, publicly privately since he has been in office, and has said that among the highest priorities of this administration is dealing with the issues of children and their future and I think tried to lay out what he would like to see that be.
Let me mention a couple things. My recollection of the start of our time together is that we were sworn in on a Monday in January of 2000. You may also recall that it was this City Council in 1999 that changed the City Charter that allowed the Mayor for the first time in the history of the City to appoint a school board almost immediately upon the Mayor being sworn in. 541 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY That power had not existed before. And this City Council took that action so that the Mayor would have that authority. We were sworn in on a Monday. My recollection is, is that the Mayor had a press availability the next day on Tuesday and did announce that he was going to be the education Mayor. The parties I remember being around were at least the Mayor, Mr. Ramos, Ms. Rush and possibly Ms. Kahn. There was press availability. The next day on Wednesday, I believe the Mayor announced that he was in support of new stadiums. And for the rest of the year 2000, we pretty much spent all of our time working on the practice facility transaction and the two new stadiums. I don't recall much discussion about education during the course of that year. Second, with regard to the informational briefings -- and I have attended many of them -- to be honest with you, generally, the informational briefings are neither. They are generally not informational. They are usually a recap of stories that have been in the newspaper for the past week or so, and often unfortunately they are not brief. 542 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY I guess what I'm asking is should there be a forum in which the Mayor does lay out -- and I don't know how many people listen to the KYW weekly addresses. I think they're about five minutes in nature, which for any topic or certainly for any Mayor they're good to do. I mean, it's hard to communicate a whole lot in five minutes. And I think you don't necessarily know which week there's going to be a discussion about education. But my recollection is that the Mayor did come and testify in these council chambers back on Thursday, November 30th about the stadium transactions. Came to this chamber, sat at the table, made an opening statement, I think answered some questions and talked about stadiums. I do not have a recollection that the Mayor has ever, in City Council, talked about his views and his vision for education. And I guess under the circumstance, given where we are with all of the matters in front of us, it would probably be helpful at this point in time to hear from him directly about these kinds of issue, given all that happened last summer, what happened back in December, where we are now and what we are 543 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY continuing to go through in terms of the SRC, the future of Edison, not Edison, other players, EMO's, providers, lead providers, charters, community partnership schools and the like. I mean, I think that that might be under the circumstances a great forum for the Mayor to have a full-blown, no time limit talk about public education. When you say that we took advantage of the charter change to appoint the school board, there was another component to that charter change which has never been adhered to, which is that the Mayor, the Board of Education, who we now know whose powers have been suspended, and this City Council, according to that charter change, are required to meet twice a year in public to talk about public education. That has never happened. There has never been a meeting even before the SRC became an entity. There has never been a meeting of the Mayor, the school board and the City Council to talk about public education in all of my time here.
Let me go back to the first year of the administration. Number one, I was not a part of the administration in January. I 544 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY didn't join the administration until February.
Much of the discussions in the first year of that administration were around the finances and trying to work out relationships in Harrisburg, and they came up a little bit in I guess April of that year in the budget discussions. In terms of the Mayor's public interaction on the issue of education, I would say two things. Number one, let's not forget that he went to every one of the clusters in the very first several weeks of the administration, and each cluster district, held a public meeting with the cluster leaders, with the school board, with the community, open to all comers, anybody for unlimited time, with no time limit.
I would encourage the Mayor to have a meeting with this council, to have discussions about where we are with respect to education. I would, though, remind you that if you 545 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY would go back to the Mayor's budget address in this council, that you will find a considerable discussion about the issue of public education, what our priorities are and what the funding mechanism is for this deal that is currently before all of us as we consider it. And that's not to say that there's not opportunity and room for more discussion and more involvement. But I would say that in that budget message the Mayor did spend a considerable amount of time talking about the issue of public education.
In the pages of 14 the speech, yes, there was a lot of discussion about 15 public education. But let's try to keep all of that 16 in context. 17 I think the speech was on January 29th, 18 January 28th, somewhere in that neighborhood. The 19 SRC became a realty on December 21st. And within 20 month, or slightly more than a month actually, the 21 Mayor has got to deliver a budget message about an 22 incredible event that has taken place in the City. 23 I know that the Mayor cares about public education. Again, I am not in any way, shape or form questioning that. That is not the issue. 546 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY I would expect in a budget speech that there would be a lot of discussion about the school situation. It is new. It is live. There was a lot of consternation, if not protest, and people being upset about that particular issue. But you know as well as I do from all of your government experience, a budget address is just that. It is a budget address. It's not an interactive discussion. It is an address. You sit, you listen to it, the speech is made. The applause is given, end of discussion. That is not an engagement with the public, from my perspective, solely about public education. It's a budget speech. And the schools were a discussion as a part of that. But let me mention this to you, and one of the reasons I raise this. Now, different city, different mayor, different circumstance. On March 1, 2002, in New York City, Mayor Michael Bloomberg gave testimony before the City Council Education Committee. And he had it seems like a relatively long speech and he took questions. But one of the things that he talked about which struck me in his speech, after thanking everyone and pleased to be there to come and testify 547 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY at a public hearing that the committee was holding -- but these are some excerpts from his speech talking about governance and structure. "The root of the problem is in the system, the way it is structured, organized and managed. The ultimate goal, enhanced student learning, can be achieved only when each of these factors are in alignment. The best way to achieve this goal is to abolish the Board of Education and give the Mayor control of the school system. "Retaining the board and adding additional appointees will not accomplish the designed change. It would serve only to bring more cooks into an already overcrowded kitchen, increasing expenditures and advocating so many different alternatives that nothing would get changed. The resulting pretense of progress without substantive reform would be too cruel a hoax to play on our children and parents in their time of need. "We need a direct line of accountability and a single empowered voice to give meaningful improvements. And the Mayor must have sole control over the appointment of the school's chancellor, with the chancellor reporting directly to the Mayor 548 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY the way all current city commissioners charged with delivering services to the public do. "While some have proposed various systems of nomination and/or approval, none of these systems would serve to provide the direct authority and responsibility so necessary to fix a system universally agreed to be broken. " We see the case evolving in New York. The mayor is seeking more responsibility, more accountability. We know about the Chicago story where the mayor went in partnership with the state legislature, which was also Republican -- it may still be at that time -- and crafted a deal where the mayor took responsibility for the schools in the City of Chicago. Most other systems are moving in that particular direction.
All I'm trying to encourage you to do is as you are developing these partnerships with the State and enhancing your relationship with the state legislature, it would be helpful, if not appropriate, to hear from the Mayor directly as to 549 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY what his view is, what his vision is and what his goals are for public education in this City, with this body and with the public here who will ultimately either pay for it or have their children subject to it.
Councilman, I will take your request back to the Mayor. But I would, just so we're clear on the record, be very clear that I think that even though it was a part of the budget process and it's been a part of the other processes where the Mayor is making a public statement, the Mayor has very clearly articulated his vision of public education, what his goals are, what his objectives are and what the ends are that he would like to achieve. Now, to the extent that we can create different forums or different environments for that discussion, I will raise that with the Mayor and get back to you. But I don't want it suggested that I agree that the Mayor has not publicly stated what his priorities are with respect to public education. I don't know and I haven't looked at the New York situation. I don't know anything about the New York situation. I don't know that it is our 550 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY objective to try to unilaterally bring the authority for public education into the Mayor's office.
I only mention that as something else that's going on somewhere else. I'm not asking you to do a research project on the New York situation. I'm sure it's very different than ours. The larger issue -- and I don't want this to get lost -- is that in different places, in big cities, mayors are trying to get a better handle and a better control on what's going on in their situation and take that line of accountability upon themselves. With regard to the other forums, again, the Mayor does take advantage of many opportunities to have discussion in a variety of places about education. The only issue I would raise with you is at times it is driven more by either the crisis of the moment, a deal that's on the table or kind of general positions that all of us would agree on. Of course, we want kids to learn. Sure, we'd love smaller class size. We'd like them all to have all the books and tools and resources that they need. We can all agree on that. Those generalities 551 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY don't get down to the specific of how you make it happen and what you're going to do to make those things happen. And I guess all I'm suggesting to you is -- I mean, I read the newspapers and watch TV and listen to the radio as much as the next person. It is not crystal clear, not just to myself -- I don't need to have it crystal clear for me. But I'm left with the impression from my constituents it is not crystal clear what the goal and the game plan here is because in many instances the goal and the game plan is being done in a more private setting in circumstances and situations. You may have the greatest plan and objectives known to mankind. The problem is very few people know what they are.
And with all due respect, we will respectfully disagree with respect to that, Councilman. We have begun this process and we've spent an extraordinary amount of time with people in this process and we have worked day in and day out. Secretary Kahn, the Board of Education have worked day in and day out in Harrisburg, in Philadelphia, trying to craft what they thought was a responsible 552 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY solution. We proffered that solution in Harrisburg last year. Governor Ridge didn't embrace it, didn't support it. We worked through --
Mr. Secretary, I'm not talking about political people.
I'm not talking about political people, Mr. Secretary. You're not going to find a Philadelphian in Harrisburg.
I think that we have briefed public constituencies repeatedly on this issue, with all due respect, Councilman. We've had numbers of public constituencies in the Mayor's office over and over on this issue over the last two and a half years. We did not reach the point of saying to Governor Ridge that either you give us the money that is necessary to run the school system or you take it over or let's do a partnership lightly. What became clear to us -- and we are open to any discussion or ideas or thoughts that people have. But what became clear to us, that the state was not going to provide the resources to the City without 553 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY greater participation in the decision-making on public education in the City of Philadelphia.
Mr. Secretary, I am not debating with you the actions in this part of the conversation. I'm not debating with you the actions that you took. I'm not asking you to justify what you did or what you didn't do. We are obviously talking right past each other. I am talking about people who live in Philadelphia, have kids in school or pay taxes for this system, many of whom have no idea what your game plan is and what you're trying to accomplish. That's all I'm talking about.
We're not talking past one another. We disagree on that subject.
Have you been to a home school association meeting recently?
Well, I have. I 554 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY have. And I can tell you that many of the parents at that particular home school association have no 4 idea what the game plan is. And I think they actually read, pay attention to what's going on, have been participants in the process. They do not understand what the goal is. I'm not questioning motivation. I'm not asking you to refute actions that were taken. If you believe that those actions were necessary to forestall whatever cataclysmic events may have taken place, I understand that. We can disagree about some of the details. I am now talking about communication with the public and people who have children in schools trying to understand, as it all filters down, what does it mean to me or my child for the school that they are presently attending, what is this all about, what are those people trying to do. Now, your position is you have communicated at a level that everyone should know what the story is. Is that your position?
My position, Councilman, is that we have communicated routinely and regularly and continue to do that. This is a changing 555 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY situation that no one can today, not I and no one else can say precisely what's going to happen. But I think we've tried to communicate our objectives clearly. We are sensitive to the needs of parents and people who rely upon the public school system. It has been the foundation of every decision that we've tried to make in the last two and a half years. We have made no decision that we did not think -- and I've heard this repeatedly here today. We've never made a decision in this case that we thought was in the Mayor's political interest. We have made decisions on this issue, on the issue of public education day in and day out. It is an issue we have lived with from the very first day of the administration. And every single decision has been made trying to improve the opportunity for people who rely upon that district in this City. And we will continue to do that. We will continue to reach out to people. We will continue to involve people in that discussion. And if we're not getting our message out broadly enough, as you describe it, we will try to get that message out more broadly to the people 556 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY who rely upon public education in the City of Philadelphia because there is no higher priority for this administration.
You're welcome. The Chair recognizes Councilman Kenney.
Thank you, Madam President. I'm glad to see that this is such an apolitical administration. I feel much better. Council awhile ago appropriated $342 million for stadiums in Philadelphia, both for the construction of two new facilities and renovation of the Vet. And through that process, which was a grueling process -- I'm sure everybody who remembers it or wants to forget it will recall what a grueling process it was. And it was a relatively lengthy process. And through that process there were term sheets available, subleases. There was information for us to read, albeit it wasn't all the information we would have wanted, but there was still a substantial amount of information. What we're being asked here today to do 557 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY is to approve or authorize a $300 million borrowing or to set up the mechanism to allow that borrowing to happen without one sheet of paper explaining what the plan is going forward. How does the administration expect us, based on just past experiences with such investments like stadiums, to do this today, which is what they're asking us to do, without one sheet of paper other than the testimony that has been provided by the witnesses?
Councilman, we have tried to be responsive on every issue that this council has to consider. It is one that we continue to work on. It is one that everyone agrees, the Governor, the Mayor, results in a drive towards solving in the short run and then to work on a longer term solution to the funding crisis of public education. This deal has been presented we think as clearly as it can be presented in terms of its urgency and importance to the children of this City and to the ability to borrow the $300 million in a timely manner for the school district, and as incentive for the General Assembly to move the 558 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY legislation next week and thereafter the $75 million bill.
You've sat in maybe not this chair but one of these chairs.
Would you have accepted the same level of information or lack of information from any preceding mayor and would have voted readily for such an investment of $300 million other 30 years? I recall that you were, I know, a very serious legislator at the time and are still a serious person. Would you expect to have sat here and to cast a vote in favor of encumbering us with that kind of debt without one sheet of paper?
Councilman, I will try to answer this as cautiously as I can and as accurately as I can. It is the responsibility of every legislator to try to have as much information as they can possibly have on the issues that are before them. But at some point in time we reach a point where we have to exercise a judgment. And then quite candidly, you have to decide whether you have 559 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY enough information to exercise that judgment or not. It is one that, as a member of this body, a body that I have a tremendous amount of respect for, that I tried to exercise seriously in instances when I was in the majority and equally seriously when I was in the minority. Unfortunately, much of the time I was here I was in the minority.
The $75 million that we're requesting from or we anticipate coming from the Commonwealth, is that a recurring $75 million? Is that in perpetuity?
Well, it is in the structure of the agreement that we have reached with the Governor, and what we hope that the General Assembly will agree with, that the $75 million is a recurring $75 million. But it is a recurring $75 million that the General Assembly will have to appropriate every year in the same way that we'll have to appropriate the $45 million here.
Not exactly the same way because our $45 million -- 560 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY
So it's 20. From what my reading of this is, is that if we get the amendment relief on the 2002 45 million, we're still going to have a $20 million grant plus a $45 million millage adjustment.
You're making a $45 million in perpetuity commitment that the legislature isn't necessarily making. Even if they give us the first year, there's no guarantee on the second, as opposed to ours where we're required under Act 46 to do so.
That is correct. The $75 million relies upon the General Assembly appropriating it annually.
Let me walk you through one worst case scenario, or maybe there's a number of them. We pass the 2002 45 million --
I'm sorry. I would 561 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY like to walk you through one of the potential worst case scenarios. Maybe there's a number of them, but this is the one that I'd like you to comment on. We pass the 2002 $45 million appropriation that the Mayor committed to that we had passed last year and was vetoed. We also pass the $20 million grant and millage adjustment, for another 45 million, and the State does not come up with their 75 million for whatever political reasons exist. What happens?
In terms of reaching an agreement with the State to put up $75 million, it is this appropriation cycle that will be the first time that they are asked to do that.
There is a certain level of commitment. And this is not said to encourage any action in any other quarters. There is a certain level of commitment that the administration believes that the City is responsible to support the school district at. And that conceivably is the $45 million that we're prepared to put forward. Some have argued that we should be 562 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY prepared to give even more. But we think that that potentially -- that $45 million is a risk that we are willing to assume, not on the assumption that the General Assembly and the State will not act. But we think it is a risk that if they didn't, that we would be supportive of continuing to give.
Perhaps Mr. Doosey could give me the ramifications of what happens if the $75 million from the Commonwealth requested for next fiscal year doesn't arrive.
While he comes up to clarify that, for the 2002 appropriation, again, if the exemption is provided -- and the City would like to be in the position to be able to provide those dollars to the school district as soon as possible -- nothing would happen and that really is not tied to the 75 million.
What's the effect of the loss or the lack of acquiring the 75 million?
The nonreceipt of the 75 -- I'm sorry. Jim Doosey, CFO, School District of Philadelphia. The nonreceipt of the $75 million would merely increase the deficit and shorten the time 563 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY frame to less than two years, assuming you get the $300 million in deficit financing. It just increases the deficit.
Well, the school district budget overall for the operating budget is 1.5 billion a year. So it would probably shorten it up by about three weeks.
Lack of receipt of $75 million -- I testified yesterday that even with the receipt of $300 million, we would be in a deficit position again sometime at the end of the '04 fiscal year or beginning of '05 fiscal year. And nonreceipt of $75 million would just bring that time frame into the '04 fiscal year.
So if we borrow the 300 million and put up the 45 and the State does nothing, when would we be in a position not to be able to open the schools?
We would be in a position not to open -- 564 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY
You would have to close the schools sometime during the '04 fiscal year.
So the City is willing at this point to still proceed down that path of $45 million approval, $20 million grant, $25 million millage adjustment, $300 million borrowing even though we don't though whether the 75 million is coming, and if doesn't come, we're still going to proceed?
Yes. We are prepared to and are asking council to approve the legislation before it to begin us in that process. We believe we'll get a relatively early indication of where the General Assembly is by the legislation that would empower the district to do the deficit borrowing and provide some of the exemptions that would have to be offered in the General Assembly probably next week to be able to get done.
I would disagree that that is any indicator of any commitment, and I'll tell you why. If you're asking me, as a legislator, to give you approval to go into $300 million in debt, 565 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY that really is of no issue to me because I'm not paying the freight. So any amendment allowing for a 30-year borrowing is no, to me, any indication that the State or the legislature has committed the 75 million because they'll say borrow away, kill yourself. They don't really care because it doesn't affect them.
I would disagree. And I do believe -- and as I said, at some point in time you have to exercise a judgment about where you think you have the potential to succeed and where you have the potential to come out. I believe that the Governor and the General Assembly understand that this issue is squarely before them now, and if you don't solve it, whether we take this bridge, whether you believe this bridge gets us three years or five years, if you don't take this bridge, it will be squarely before them next year and it will be before them the year after that. I think there is a realization and a reckoning in the General Assembly that this is an issue that we have to confront, and I think that the leadership is preparing to confront it now. And 566 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY that's a judgment that we're exercising and one that we're relying upon in asking us to move forward on the $45 million.
But the potential exists for us to move ahead on the 45 plus what amounts to 45 without any commitment or any definitive answer that we're definitely going to get the 75. So we're still going to proceed in spending and indebting the taxpayer of Philadelphia while at the same time not knowing for sure or having any ability to control the process on the State coming up with their end initially and in solving the long-term problem moving forward. What is the motivating factor -- what I'm trying to get at, what is the motivating factor for the state legislature of Pennsylvania to fix Philadelphia's problem?
Because at some point in time there is a constitutional requirement on the State to provide a thorough and efficient education in the Commonwealth of Pennsylvania. And I believe that the Governor has stepped forward, Governor Ridge before Governor Schweiker. Governor Schweiker has stepped forward and said that we must do 567 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY something about education in Philadelphia. We have a Republican Governor, albeit it one who's going to go out of office at the end of the year, a Republican Governor who has asked the legislature to provide the $75 million necessary for the City of Philadelphia to get this bridge to the future for public education. We believe that there is going to be a genuine and serious effort and a successful effort to get that done.
The cynic would argue that this bridge is a bridge for the Governor to get out of office prior to it falling apart on his lap and having a new governor, whether that be a Republican or a Democrat, having to deal with that going forward, with basically the same set of players in leadership in the House and Senate that are there now.
I don't want to speak for the Governor. But I've spent a fair amount of time with him and with the members of his administration. And I believe that although we disagree with some of his conclusions in the study that he completed and the plan that he put forward, I think that the Governor legitimately, as the current Governor and 568 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY from a historical perspective, believes that this is an important piece of work. And I think that he's dedicated to it, he's committed to it. And I don't think it's just because there would have been easier things for him to do, Councilman, to just get out of office. He could have advanced us a little bit of money, kind of skated through it and gotten out of office without having to go through this whole process and do a study and present to the public his plan for how to do you fix the public school crisis in the City of Philadelphia. I think there are a lot easier and better ways for him if he simply wanted to skate out of office than the process we're currently going through.
He could have stepped right in and taken over and not negotiated anything with the City and come in and did that. It would be even a more direct way to begin the process of reform as opposed to this extrapolated process of negotiation and this so-called partnership, which some people believe exists, some people believe doesn't. 569 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY
I do not believe that they believe that is accurate, Councilman. I do not think that they believe -- there is no question that they have the power to take over. But I don't think that they believe that they have the power to create an environment in which they could effectively govern the school district of the City of Philadelphia, given the organized constituencies that are concerned about and involved in public education. And I do believe that the Governor acted in good faith and is acting in good faith in wanting to try to solve this problem.
The second 45, the $25 million millage adjustment, the $20 million grant. The $25 million millage adjustment is going to this deficit financing of 300 million. Is there anything that prohibits or precludes the additional million in perpetuity 20 from being used for additional deficit financing? For example, we borrow $300 million. We get the 45. The State, say, they give us the 75. We take the millage adjustment and borrow 300 24 million. Is there anything to keep that other $20 25 million from being used to incur additional debt? 570 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY
It becomes a commingled part of the general revenue of the school district so that it would be -- again, I don't want to speak for the School Reform Commission. But that $20 million, once granted to the school district, becomes an undivided part of the whole. So it could be used for any number of things, one of which could be some sort of debt service.
So it potentially represents another 250 or 260 million dollars or so in additional debt?
You could look at it that way. But as I say, it becomes an undivided part of the whole and becomes the School Reform Commission's responsibility to fashion that budget and to bring that budget to the council each year and take a look at it and talk about it.
But, I mean, it also provides a $20 million -- a perpetual debt service for additional debt.
Again, that's a question about the intentions with respect to debt service, additional debt and future debt, that should go to the School Reform Commission. There is not 571 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY currently, to my knowledge, any intent to do any deficit financing beyond the $300 million that's on the table.
I'm not suggesting there's any current intent to do it. But the potential is there. And would this not potentially be, as we go down the road, another ability to delay true reform? I mean, we're looking to use the $300 million for the $25 million debt service to get the bridge to reform. Perhaps the bridge gets a little longer with the additional $20 million in debt service in perpetuity.
I think that we would need to ask the School Reform Commission to speak to its concerns and any constraints that it has about its ability to borrow. I don't think that it's an unlimited ability.
Well, as long as you have the debt service that's guaranteed, you can borrow up to whatever it will bring.
But that's also to say they could look at any of their existing revenues anyway -- it doesn't need to be this 20 million -- 572 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY and fashion any kind of borrowing.
Well, it's 4 million in new money that they weren't getting. And 5 at issue relative to the ability to continue to 6 delay the process of true reform, there's another 7 $250 million which gets you another three years, 8 three and a half years you can continue down that 9 road, I guess, without any true resolution because 10 we are, as the city taxpayer, providing that 11 additional opportunity for debt service to continue 12 to expand or extrapolate this process of reform. 13 See, let me go back to the original. I 14 honestly believe that without everyone involved who 15 is elected facing the potential of being defeated 16 unless they fix the problem, it won't get fixed. 17 All intentions, all good intentions, all wonderful 18 vision, all that kind of stuff. If it comes between 19 you, your reelection and fixing the problem, you'll 20 fix the problem. If it comes down to you, your reelection and delaying that problem, whether you're a House member, a Mayor, a Governor, or at council member, the propensity for that process to be delayed is there because you have breathing room. And as long 573 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY as you continue to have breathing room, whether it's a $300 million breathing or it's an additional 250 based on more money we can borrow breathing room, they'll continue to breathe as best they can. When the air gets cut off, that's when they actually move to get something done.
Councilman, let me say that I, for the record, genuinely believe that what you are saying is what are legitimate questions to be considered in the process of making this decision. At some point in time, as I've said, and I've repeated myself a little bit today, we have tried to take the measure of the people in this process, and we believe that people are operating in good faith and that they want to get this done. And I hope I don't sound too naive in saying it. I understand that we're functioning in a political environment. I understand that there are issues that are going to come into those discussions that are unforeseen today that will complicate getting to the end of the road. But I believe, as we discovered working through this with the Governor's people, that if you are, in fact, trying to get to the same end, you can find a way to get 574 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY there. I believe that's the case here, if everybody is working toward the same end. And today I believe that everybody is. Could that change next week? Could that change? Absolutely, in a political environment it's capable of change. But we have to exercise the best judgment we can at the moment about what's the best thing to do. We believe at this moment, with all of the information, all of the understanding of the political environment that we're functioning in, that the best options are the ones that we're putting forward with respect to what we're asking this council to do and what we're looking to the General Assembly and the Governor to do.
And from my perspective, if the bridge could be built with a one-time $75 million contribution from each side, I'd vote on it yesterday. The problem is that this bridge gets built with $750 million in 30-year debt. When you come to a decision to trust people or to believe that they're going to work in the best interest of kids, I have a lot of poor faith if I'm only spending $75 million one time and 575 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY $750 million over 30 years. And that's where the rub comes. I would vote for the 2002 $45 million appropriation that the Mayor committed to. I'd vote to make that $75 million if necessary. Where I get really queasy and really concerned is that I'm asked to commitment to 30 years of debt, a $750 million price tag with no real clear understanding that this problem is going to get solved. And that's I guess where my fiduciary responsibility, my elected responsibility comes down, and I'll make that decision accordingly. And I appreciate your position and I don't deny that you're working in good faith. I don't think that you're sitting here lying to us.
I just get worried that when certain statements are made about what we anticipate the legislature to do that I've seen in the face of years in this business not happen. 22 And when $750 million is on the line, I've got real 23 serious concerns. 24
And just for the record -- 25 and I appreciate your hypothetical. I mean, if we 576 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY thought there were a way to do this where the City could afford to put up $75 million and the General Assembly put up $75 million, it would be something that I think we would consider. (Unintelligible. Parties talking over one another.)
With all due respect, Councilman, there is a genuine view that I have listened to the finance director in this administration and the budget director over and over tell us that the ability to do the kind of numbers that we are doing now put us at serious risk that, as you grow those numbers, it just compounds that problem. That's what we legitimately believe.
But the 70 or 75 million dollar potential is still there. I mean, if we don't get the amendment relief on the one-time contribution and you add the 45 to the that we're 20 being asked to do in the millage, I mean, we're in 21 the $75 million perpetuity range as it is. 22
I think we've consistently 23 said we will not do the 45 without the protection. 24
Thank you, Madam 25 President. 577 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY
You're welcome. Are there any other questions or comments from members of the committee? Thank you both very much.
Madam President, thank you very much. Could I just leave with -- since we may or may not get a chance to come back again, we do believe, and we appreciate all the time, but that it is very important that the legislation that is before the council be considered. We would hope that it could get reported out. It is the thing that starts this train down the road so that the legislature can vote next week to give us the protections that we need on the one-time $45 million and to authorize the deficit borrowing. There are some time lines that the SRC is bound by -- and they can speak to those -- about how much time they need to actually be able to do the deficit borrowing, collect the proceeds, and be able to avoid running out of cash over at the school 578 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY district. So that I appreciate all of the questions that council members have asked today. And in the somewhat not uncertain but not totally known future that we're going to function in, that we believe that if we take these steps here in the City that we will send a signal to Harrisburg that the legislation we need next week will be approved and we do believe that we'll get the $75 million. So we appreciate your time.
Thank you. The committee will stand in recess for five minutes before we hear testimony from the public. (Brief recess.)
Can I have everybody's attention, please. The Committee is now back in session. It is my understanding that we have two groups of students that are present that would like to testify and I understand their tokens run out at 7 o'clock. So at this point in time we will recognize Councilman Nutter, who I believe still has some questions. Is Mr. Doosey here? 579 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY (Mr. Doosey came forward.)
Councilman Nutter, do you want to be recognized?
Yes. Thank you, Madam Chair. Mr. Doosey, I need to ask you a couple technical questions with regard to why don't we call it the schedule. Today is -- what is today? March 20th?
It was my understanding that there's been some discussion back and forth earlier about action to be taken with regard to any number of these bills. I think it's fairly clear that the normal tax reauthorization bills are not under any dispute or question. I don't even know that they've had any discussion over the course of the past couple of days, the regular school tax reauthorization bills. The primary matters before us today and that have been of the most intense discussion are Bill 020040, 020033 and 020032, 32 and 33 being the millage transfer shift bills, if you will. I need you to walk me through your 580 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY proposed schedule with regard to the current plan to borrow $300 million in deficit financing for 30 years and tell me if these bills were to come out of committee, get a first reading on tomorrow -- there is no council session on the 28th and I believe our next session is then on April 4th. So under this hypothetical situation, the bills get on the calendar, they're voted in the affirmative on April 4th, the bills are done, the Mayor signs them. Tell me what actions you would then take from that point.
From April the 4th -- to start off with, for me, my hurdle is to have funds in hand by mid May.
My hurdle is to have funds in hand by mid May. Assuming that there is no 19 supplemental receipt of funds -- that would be no 20 proceeds from the $300 million proposed financing and no receipt of funds for the $45 million one-time grant that is proposed -- the school district will run out of cash May the 15th.
I understand that. I didn't ask you that question. 581 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY Now, you said you needed to have funds in hand by mid May; is that correct?
"Funds in hand" would be closing on the bond -- your question was a time line question. If the bill is approved by City Council on April the 4th, that leaves me just enough time, but literally just enough time to complete the bond financing in time for the 15th.
What would have to happen is first there would have to be a bond team developed, a financial advisor hired. You would go out to Wall Street and actually solicit proposals for interest in the bonds to see who frankly is going to buy the bonds at a discount and then place them with retail customers. And then there is a 15-day window that cannot be shortened that gives the Pennsylvania Department of Education and Mr. Biddenbender's office in Harrisburg the right to review the 582 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY transaction to ensure that it comes under the aegis of the state intercept, which acts as a de facto guaranty. In the event that the school district does not pay the bondholders, that the State will step in and redirect funds.
Now, by your earlier testimony -- I just want to make sure I have this correct -- you said that for FY '02 you basically have a $70 million cash flow problem?
A $70 million cash flow problem. That is correct. That would be from May the 15th through the end of June 30th.
That's from May 15th to June 30th. And your earlier testimony also was that if you received the $45 million, that is, the subject of Bill 020040, which is an FY '02 proposal, that would carry you through June 10th.
And that you needed an additional $25 million to get you through to the end of the fiscal year; is that correct?
Now, action is taken by this body. You do all your paper work. You go 583 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY to the market. You talk to the legal team, the underwriters. You go to Harrisburg, the Secretary of Education. And at what point in time are the bonds floated?
The actual close and transfer of funds would be immediately prior to May the 15th. The bonds would be priced and the underwriter's spread locked in approximately days 10 before that. So it would be April 25th. 11
April 25th. Okay. 15 Now, the security -- you're going to 16 have to sign some kind of agreement or document that 17 says to the bondholders and anyone else that cares 18 what the security is for these bonds. You're going 19 to have to create a reserve or a debt service fund; 20 is that correct?
The debt service fund is actually funded on a daily basis once the bonds close, yes.
Don't you need to indicate that you have a direct revenue stream for 584 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY these bonds?
I need to have the revenue stream, yes. I don't need to create the debt service fund. I need to have the revenue stream looked in on that or prior to that April 25th date.
Well, one would hope that at least at the moment it would be the transfer ordinance for $25 million worth of millage going forward, starting with the fiscal year '03.
So in the official statement, or in the OS, or even in a preliminary initial statement, I'm assuming that you're going to put in that document that the funding source for this is this millage transfer?
That's correct. That's what's been preliminary -- that frankly is the only additional source of cash flow that I would have coming into the district.
So you'll go to the 585 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY market. In the OS you've identified your funding source. You've locked that in --
-- because we have these millage transfer bills. Then tell me what the impact will be if the provisions of Bill 020033 and Section 2, small letter I or small letter double I, if those provisions do not go forward and the City Solicitor does not certify to the chief clerk by June 28, 2002, which is two months after you've gone to market, that the necessary relief related to Act 46 has not taken place?
It's my understanding that the City Solicitor will be able to provide that certification much earlier than June 28th.
Based on an action of the House of Representatives and the Senate in Harrisburg long prior to June 28th.
Again, as per my prior testimony, my understanding is that that bill will 586 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY be present next Tuesday.
And you believe that next Tuesday that action is going to take place?
I believe that next Tuesday it's my understanding that the bill will come out of the Rules Committee for presentation to the Senate. But that's a layman's understanding.
I base that on discussions that I've had with counsel for the school district. I'm an accountant, not an attorney nor a legislator.
Could I ask you to speak directly into the microphone so that this side of the room can also hear.