The following year, what they said was, You get same amount of money you've gotten in the prior year, plus these additional supplements to that. And one supplement was a poverty supplement, which was $100 times your AFDC, which is Aid to Families with Dependent Children, and that was 92,414. And a gross supplement, which compared the growth in your average daily membership from '01 -- from fiscal '91 to Fiscal '93. And you multiply that by your aid ratio, and that's how you came up with the second supplement. 61 6/7/00 - FISCAL STABILITY - RES. 000232 Those three items together produced a $560 million entitlement we had in '94.
What would have been the increase that year if the formula had not changed?
Exhibit C. We've done for you an analysis of what the subsidy would be.
Well, before you do that, do you have any historical information as to what brought about the change in the formula?
I believe -- it's just my own personal opinion -- that it just was a money crunch at the State, because I remember when this 62 6/7/00 - FISCAL STABILITY - RES. 000232 happened. Originally what happened in '92-3, they kept intact -- the Governor's proposal was to keep intact the ESBY (ph.) formula and then let everybody -- instead of receiving 100 percent of it, only receive. I believe, it was 96 or 95 percent of it. But then it finally was passed by the legislature, they came to the other process of just freezing it at exactly the same amount as the prior year. Because the total appropriation didn't really change much from one year to the next, in those two years.
Statewide appropriation. The total appropriation statewide did not grow much.
Okay, all right. Take us now from FY '94, at $560 million to FY '95.
Okay. That basically -- they went through a similar process as they did in the prior year. They said you get the $560 million that you received in prior year plus 63 6/7/00 - FISCAL STABILITY - RES. 000232 poverty supplement and a gross supplement, which, that was also equal to about 12, $13 million.
And it appeared that the growth supplement went down by 175?
But then they didn't multiply it by the aid ratio. It's just the way they passed the legislation. I don't know the logic behind it or. . .
So if they had multiplied it by the aid ratio, it would have been more.
Probably. But they decreased the rate but they used no aid ratio, so. . .
So your poverty number grew by about $2.3 million, but your growth figure went down by about 1.3.
Okay, all right. And so then there have just been a series of -- well, it looks like something -- 64 6/7/00 - FISCAL STABILITY - RES. 000232
Yes. That was the only year where something different happened. In '96, I believe, that was the present Governor's first budget, and his assumption was that you would take the prior year's basic ed. subsidy, divide it by your average daily membership of the prior year. You would come up with a number of 2728 and increase that by 3 percent, and it would produce a number of 2810, and you would multiply that by your prior year's average daily membership, and that produced an additional $21 million.
Right, I understand -- I see that. Now, is this the first time that the formula seems to go in the direction of a direct per-pupil figure?
Or direct per-pupil 65 6/7/00 - FISCAL STABILITY - RES. 000232 expenditure?
Again, just for historical purposes, do you have any idea where these formulas come from and how they are derived and what they are based on and what their relationship or relevance is to what's going on in a particular school district?
No. This came about -- I know this was the Governor's proposal, this was not the legislature after the Governor came out with his proposal. This was when his proposal came out when he introduced his budget. So it was done in the Governor's chambers, I guess, they decided.
There is actually a presentation that was made to the Commonwealth that speaks to the long history of funding. It goes back to the 1900s, it's not that long. We're 66 6/7/00 - FISCAL STABILITY - RES. 000232 trying to get it and we'll forward a copy. It goes to some of the thinking behind the original formula.
In '97, the same thing happened (Unintelligible, parties talking over each other.)
Yes. The same thing happened as what happened in '93. There was no 13 increase at all to any school district.
Correct. Except for this new supplement called "the base supplement." 67 6/7/00 - FISCAL STABILITY - RES. 000232
Which -- that's how they generating the monies out to the School District now in the past-- I guess it's -- it would be four years now.
And the base supplement seems to taken the place of the previous poverty supplement.
What they basically do is they say, you qualify for this base supplement if you have an aid ratio over 0.4.
An aid ratio -- what Miss Chatzkel described before, the market value personal income aid ratio.
And Philadelphia's -- our average daily membership was 214,000 times an aid ratio of 6548. And then that would go into the pool of all school districts that qualify, so that, therefore, I believe -- I don't have it 68 6/7/00 - FISCAL STABILITY - RES. 000232 right here in front of me -- that roughly we got our proportion of that $16 million, which I believe probably was around percent. Okay? 5
-- that's divided up among 17 all of the qualifying school districts, of which we are one.
It's similar to that. 69 6/7/00 - FISCAL STABILITY - RES. 000232
But that pot changes every year from -- you saw in that year, it was 66; the following year is 85; the following year, it's 70.5; and next year, it's 76. The total pot that's to be distributed for this base supplement.
Right, right, right. And then on Exhibit C, you've gone back and taken the original formula from '91-'92.
And what did you use? Did you maintain all of the figures that still existed?
No, I increased it for -- well, the only figure that I kept consistent was the factor for educational expense. In '91-2, the fee or factor for our instructional expense was $2,550. It was in the law that in the following year, in '92-3, that fee was supposed to go to 2655, I believe. So that's the number I used. It's the fee, and I've never increased that fee. And then 70 6/7/00 - FISCAL STABILITY - RES. 000232 I used the average daily membership, as we had, and our aid ratios and all the other --
Our aid ratio for every year. We get the aid ratio from the Commonwealth, every year our what ratio is.
All right. And so when you go to Exhibit C, your calculation is that in '91-'92, we were getting approximately $548 million, and based on that formula of 10 years ago, we would now receive $733 million.
Which is $73 million more than what we receive under the current formula.
And then you've done it cumulative over that 10-year period of time, and -- I mean, you're basically saying that we are short from the Commonwealth $656 million? 71 6/7/00 - FISCAL STABILITY - RES. 000232
Yes. All school districts, not just Philadelphia. It's all school districts.
I mean, this 656 is just Philadelphia, but it affected all school districts.
And would every school district have a shortage, based on the formulas? Did some school districts get increases rather than decreases.
Are you able to calculate -- not that you necessarily would want to, but is everyone subject to the same formulas?
Okay. Would you be able to calculate what the total cumulative effect 72 6/7/00 - FISCAL STABILITY - RES. 000232 of the funding formula changes over that 10-year-or-so period of time would have been for the Commonwealth? In other words --
I -- I -- I really couldn't do that without having every district's statistics. The Commonwealth obviously could, but I couldn't.
656 million. Let's roughly say we get percent or percent of the 13 statewide appropriation. Divided into that, I 14 guess it would be over $2 billion, correct? No? 15 We don't know. I'm just -- this is 16 just a very rough ballpark -- 17
Most people have not been carted away when they said they didn't know. But you're at least able to calculate it 73 6/7/00 - FISCAL STABILITY - RES. 000232 for us. Now, I mean, this is the next obvious question. I'm sure you're shared this with the Commonwealth, and the response has been. . . ?
I was never there for their response. I just gave my testimony, and they --
Isn't the heart of the lawsuit that was filed against the State, the lawsuit that's still alive but postponed for a year?
Councilman, the federal lawsuit goes to a discriminatory effect, so it's 74 6/7/00 - FISCAL STABILITY - RES. 000232 more focused on the racial and poverty composition of school districts and educational outcomes, and funding is the third leg of it.
But I think the -- a core portion of that lawsuit is the contention by the school districts like ours that the change in formula produced an effect that was discriminatory, and I think it's this formula, this change that we're alleged -- that that lawsuit is alleging brought about the discriminatory effect. No one's charging that there was an intention to discriminate or an intentionally racist action taken, but I think the core of the lawsuit is that that has been the impact. And that's the reason I raised the question. I think that this formula helps to fund at a much larger level non-urban areas, non-rural poverty areas. I think it's not just urban and rural 'cause rural districts in the poor areas seem to suffer as much as the urban poor areas. But we can get that. If nobody is competent or knowledgeable enough to answer that question, flatly we can get other witnesses to 75 6/7/00 - FISCAL STABILITY - RES. 000232 deal with that.
Mr. Masch or Miss Chatzkel, have you had any opportunity to look at either the funding formulas that are in place for other major cities across the country or in other states?
I have not. I know that we've talked about a long-term plan. As part of a long-term financial plan, we will look at other large urban school districts. We'll not only look at our expenses, which we will need to do, and look for efficiencies; we'll do benchmarking and expenses. But we'll also look at the revenue support that other large urban school districts do. We've just begun to do that. Hopefully, when we come back to Council next year, a lot of that work will be under our belt.
I think you might be coming back to Council before next year.
In the letter from Majority Leader Perzel to Mr. Ramos, the issue was raised, and I know, at least from reading in the press, either Governor Ridge himself or Mr. Reeves, his spokesperson, they have often raised the tax effort issue, and the tax effort issue is mentioned in this particular letter. We raised this the other day, and just for the record, at least according to Representative Perzel, the statewide average back in '96-'97 for equalized millage was 20.6. The average for the other urban districts in the 14 State, like Pittsburgh, Allentown, Harrisburg, and 15 Chester Upland, was 26.2. And Philadelphia's was 16 only 19.4. 17 Your Exhibit D, I'm assuming, is in 18 response to that particular issue. Could you walk 19 us through that and explain what that means. 20
All right. You asked us 21 to look at this issue, and what we have here is 22 equalized mills, which I believe is what that 23 letter addresses, which is the total local taxes available for the schools -- this does not include the City Grant, by definition, it does not -- 77 6/7/00 - FISCAL STABILITY - RES. 000232 divided by the market value of our real estate.
I understand it doesn't include the City Grant. Why don't you just put on the record specifically what it is. Is this the portion of the real estate property taxes?
This is all local taxes which we've received. This is the liquor-by-the- drink tax, it's all local taxes.
But specifically, I wanted to mention the piece that IT does not exclude, that we count as significant funding. We have three years here, and the reason we do is because Fiscal Year '96-'97, which is what the letter addresses, is an extraordinary year for us. We did a tax lien sale, so we took in $41 million in additional revenue, which was counted as local tax. But, again, it's an aberration. So we took you to the year before that and the year after that.
Just take us through the numbers from the top. The $529 78 6/7/00 - FISCAL STABILITY - RES. 000232 million, that represents --
Total local taxes received by the District in that year. The market value of real estate in Philadelphia, which is about three times assessed value, is determined by the State, and that was $31,417,499,500. The mills on market value then is 16.9; whereas, the State median for that year was 21. You had asked us what level of additional taxes would be needed to reach the State median, and we have that figure: 130 million.
The 16.9 percent figure, assuming I don't have the benefit of the Hewlitt Packard, is 529 million divided by the 31 billion figure, and that results in 16.9?
Okay. And so your calculation here is that the City in that year, to meet the State median, would have had to give an 79 6/7/00 - FISCAL STABILITY - RES. 000232 additional $130 million to the School District in order to meet the State median figure?
Okay. And in the '96-'97 year, which you have the asterisk and talk about the $41 million tax lien, we were at a -- what is this -- for us, what is the figure called, what's the correct name of the figure?
The equalized mill rate that year was 19.4, and the State was at 20.6, and so we would have only had an increase of $35 million.
That's correct. Although, again, we had the tax lien sale. For that year, we have information that we don't have for other years, which is why we include in it taxes needed to reach the surrounding district average.
All right. And then you come back in the following, year and it's basically back up over $100 million. How did the $41 million additional revenue on the tax lien sale have what appears to 80 6/7/00 - FISCAL STABILITY - RES. 000232 be such a dramatic difference between the '95-'96 rate and the '97-'98 rate? How could $41 million plummet that figure down to 35?
The $41 million, as a percent of all of the taxes that we received, is a very high number, relatively speaking. And that's why it skewed the results.
And just for the record, $104 million, if we went by the '97-'98 figure, is it my understanding that each 1 percent in millage represents about $10 million; is that correct?
This is not a real-estate tax. These are total taxes. So a mill of real-estate tax roughly generates around $8 million.
A mill of real-estate taxes is based on the assessed value rather than on the market value.
So what would the City -- if the City -- if we were to attempt to meet that challenge of $104 million, what would the City have to do from either a millage standpoint or I guess -- I mean, this would really get into the realm of very large grants.
It would be just over 12 mills, or close to 13 mills, or a large grant, yes.
And we would have to take that figure to somewhere into the neighborhood of 65, 66, 67?
Higher than that. I 82 6/7/00 - FISCAL STABILITY - RES. 000232 think over 80.
Yeah. Your portion would have to go between 75 and 80, and the City's would go down to 25. 8
Again, we are not 9 necessarily proposing this; you've asked for this 10 information. 11
No, I understand 13 that. The record should be clear that I asked you 14 to get us this information. You know, somebody 15 says you're at one rate and the State's at another 16 rate -- I mean, it doesn't mean anything until we 17 have some dollar signs in front of it to better 18 understand what they're talking about. And 19 sometimes once you get the answer, maybe you're 20 not interested in pursuing that particular proposal anymore. Councilman?
Well, there's nothing in that report that compares our contribution to the School District, taking into 83 6/7/00 - FISCAL STABILITY - RES. 000232 account the fact that we have certain county expenditures that other school districts don't have. Those that contribute a higher percentage of real-estate tax to the schools don't pay for police, often don't pay for fire or at a reduced level, don't pay for the court system, which -- and have a larger geographic area beyond that of the school district. For example, Pittsburgh is only a part of Allegheny County. Yet, Allegheny County -- the rest of Allegheny County outside of Pittsburgh bears a heavy burden of the cost, say, of courts, police, and so forth. Is there any way of arriving at what we could think would be a fair comparison? 'Cause this just compares the taxes that Philadelphia imposes for the schools compared to what others impose for the schools, but it doesn't take into account all of the other expenses that Philadelphia has because it's a city county rather than a city in a county.
Councilman Cohen, we would defer to our colleagues at the City here, but I believe that the Pennsylvania Economy League has completed a study, or is about to complete a 84 6/7/00 - FISCAL STABILITY - RES. 000232 study, that speaks to the overall tax burden to the City, which is also contained in your five-year plan, which addresses that issue.
And what would be the result of that, say, if such a pair comparison were made? You're indicating that there may be a basis of such a comparison in this Pennsylvania Economy League report?
That's correct. I don't have it in front of me, but it speaks to the tax burden on a family of 4, I think with median income of $25,000. And it also compares us to other cities in terms of, again, overall tax burden.
And what in general is your impression of what it shows?
It shows that the tax burden on the corporate and private citizens of Philadelphia is high.
Would you say that again? I missed that. It shows. . . ?
It shows that the tax burden on the corporate and private citizens of Philadelphia is high compared to other cities. 85 6/7/00 - FISCAL STABILITY - RES. 000232
And I think that's very important for us to be able to put through. Mr. Chairman, I'm wondering whether -- there's at least one person from the community here, where at a school, an announcement was made, I think, at the beginning of the week or last Friday, with respect to reductions, and it's the kind of reductions that I indicated I was very concerned about. And if we could interrupt and give our brains a little rest from all of the cerebral additions and just hear what's happened and see whether that is as a result of the impact of the additional cuts, 'cause I'd like the comments from the people at the Board or anybody else from the Board to explain that.
Could we just recess and they'll get a little rest as they listen instead of being directly on the spot.
Mr. Donato, yes. 86 6/7/00 - FISCAL STABILITY - RES. 000232
All right. I see his name here. Mr. Donato, why don't you come up and give us a brief explanation of either what you heard or --
He can talk about what's happened at Forest Elementary School.
My name is Mark DiDonato (ph.). I live in the Wissanoming section of the City. The reason that I was able to come down is because I have availability in my schedule. I was speaking to my --
This is my first time down here. Okay. I had spoken to my girlfriend 87 6/7/00 - FISCAL STABILITY - RES. 000232 earlier in the week. Her daughter attends Forest Elementary day care. She needs full-time care. She is a single parent, and she was told at a meeting last night that the service would be -- the full-time day care would be transferred to Lincoln High School. The after-school and before-school care would be totally eliminated. That's a concern because there are a lot of single parents who have children that go to that facility. I don't know what their status is in reference to availability at Lincoln High School and so forth, but it puts a burden on these people because, to put small children in a high school setting, it's kind of a -- you're asking for a problem there.
I understand. If you could, I'm sorry, repeat to me the two elements that you're are told being affected. You're told it would be the after-school program?
The two components of the day-care program are the before- and after- school care program for school-aged students, and the full-time care for preschool children.
Would that be the 88 6/7/00 - FISCAL STABILITY - RES. 000232 comprehensive day care program?
Well, it's a full-time care -- a full-time day care program for children who are potty-trained, up until about kindergarten age.