But none of this $45 61 BILL NOS. 000708 and 000709 million is going to go directly to educational programs?
Sure. I mean, for the city's Operating Budget, most of that Operating Budget is spent directly for educational programs. So in that sense it certainly does. And bonuses, one of the big costs of the educational program is teachers and other school-based personnel in classrooms and in schools. So in that sense, it fully funds School District programs, just not additional programs.
I will continue until the next one. I will save myself for the next round.
Thank you, Madam Chair. Just a couple of questions. I am curious to know, is this transaction, as you have outlined it, is it a first? Is there some other precedent that you looked to that guided you towards this type of transaction at this time? 62 BILL NOS. 000708 and 000709
I don't think that I am aware of any structured exactly like this. I do understand that the city -- and the finance director can speak to this -- has prepaid, I believe it is, some pension funds. But nothing structured exactly this way.
And in your view, what's the worst-case scenario, what's the fallout, what's the alternative should this not happen?
As I think I just stated, I think it is a significant problem for two reasons. One is that if the School District does not obtain this $45 million, as the chief financial officer testified, the district will run out of cash. And that has a whole series of repercussions which certainly she can speak to. It would increase the School District's deficit for this year by $45 million. And perhaps, you know, equally importantly, and most importantly, it would be an abrogation of the agreement that we had made and negotiated in the spring with the Governor in order to do the city's part to be able to keep schools open for all of our kids for the current school year. 63 BILL NOS. 000708 and 000709
Thank you, Madam President. In the event that this million and 20 9 million dollar transfer is passed, how will the 10 district cover the cost of operating the schools in 11 the evening and on Saturdays going forward? 12 From what the testimony has indicated to 13 me, the $25 million is going to pay for the bonuses 14 that you negotiated with the School District 15 teachers, PFT, without even having the money. So 16 you negotiated a contract that you knew you didn't 17 have the money for. 18 And then the other 20 million is going 19 to pay for, or it is going to try to plug a hole 20 that's already there. 21 So starting next month, when X school or 22 Y school or Z school is open to recreate kids in the 23 recreation department program or in come cultural 24 program or some approved use, how will the district 25 pay for the costs associated with the operation of 64 BILL NOS. 000708 and 000709 those schools going forward?
Just an answer to that really specific question is that, as we budget for next year and for the years beyond, we didn't anticipate that there would be an additional revenue stream to cover our expenses. What we budgeted is that marginal cost being uncovered in the future years because there's been a prepayment in this year.
But the prepayment is being used to pay for the bonuses and to plug the hole that's there. The hole that's a result of the operation of the School District facilities will obviously continue on, because we have already spent the money supposedly to cover part of that cost. So that 5.7 million -- and I want to get to the specifics of that in a little while -- the $5.7 million that the School District alleges this costs a year is still going to be an ever-gaping hole. So it is not as if we are taking the 20 million and we are earmarking it for use in overtime, engineers, security, and all the things 65 BILL NOS. 000708 and 000709 that relate to these after-school or after-hours programs. We are going to take that money that we're being asked to provide for that purpose and put it somewhere else. How are you paying for the 5.7, the 6 million dollars a year going forward over the next ten years that you are committing to do? Because my assumption is that, if we give you the 45 with the supposed purpose of paying for these programs, you are not going to cut those programs back, you are not going to limit the use of the schools. Because then you would be misleading people into believing they are paying for something now that may in three or four years from now say, well, we can't afford to do that anymore because we don't have the money to pay for it because we spent it in the first year we got it. How do I tell people in the community, running basketball programs, cultural programs, after-school programs that we can guarantee that you will have access to that school? Even though you are prepaying for ten 66 BILL NOS. 000708 and 000709 years of the use, I will have no way of guaranteeing as a Council member, no other Council member because it will be out of our hands by then, to go back and to ensure that the peanut league or some other babe group can use those facilities for the next decade, because I will have no ability to review. Or Mr. Trujillo says I can complain. I have been complaining about School District problems for the past decade, and to know avail. So where do we go to when the School District decides they are no longer going to give access to or reduce the amount of access of the school buildings to these programs? What happens then?
Councilman Kenney, your question is actually part of the broader question. That $5.7 million contributes to the gap that we projected for next year and the year after that.
And the School District's ability to provide all of its services is contingent upon plugging that gap.
I understand that. And I don't really disagree with it. 67 BILL NOS. 000708 and 000709 What I can't understand is, you are asking me to prepay for a service over the next ten years that I have no ability to ensure will continue beyond the time we agree and vote on this transfer ordinance. So this time next year, theoretically -- and you are all honorable people, and I am sure you are going to tell me don't worry about it, we are going to do that -- but next year or the year you may say, do you know what, one of the things we have to get rid of is the use of School District facilities after school and on weekends. And, you know what, Harrisburg didn't come up with the money. So, you know, we asked you for that prepayment for ten years, but tough. Now what?
And that's actually precisely why you have a licensing agreement. Because what the licensor here, the School District, has an affirmative obligation for which it will have been paid. And it has got a duty, an obligation, a contractual obligation, to make at its sole cost and 68 BILL NOS. 000708 and 000709 expense to provide the engineers, to provide the athletic fields, the parking lots, and the like.
What if the money is not there? I have already paid, our constituents have paid for a service that because of a dire financial situation next year, the year after, they are got getting. That's why two things are problematic with this. Number one, I would rather you come in here and say what it is. Just come in here and say what it is. We signed a contract with the PFT that costs $25 million more than we have, and we have a $20 million hole. We need $45 million of money from you, the city treasury, for the Grants Revenue Fund. When you set up this scenario of a licensing agreement with ten year, nine, one-year and nine renewable options, and all this other stuff, it is as if we are not that bright. Like we don't really know what this money is being used for, and we are going to vote for something that's not only going to do this, but take ourselves out of the process altogether. And 69 BILL NOS. 000708 and 000709 that's, I guess, what's problematic. And let me tell you something about Act 46 in my opinion. I am not a lawyer, but I have been around the legislature long enough to know how they act. If in fact the School District is taken over by the state -- which I think is almost an impossibility. The State of Pennsylvania has the ability to take over the School District of Philadelphia, they have the authority. But, let me tell you something, they are never, ever taking over the school system. My opinion, I have been involved and around the legislature, working directly for it for 12 years and being involved in this government for the last 10. I am telling you, they are not taking over the system. And in the event that they did and there became some dispute vis-a-vis Act 46 and whether or not we had contributed a grant or economic contribution, and whether or not there was an argument, they are going to win that argument anyway. Because all they are going to do is just take it from somewhere else and reduce that amount. 70 BILL NOS. 000708 and 000709 So that they will come, they will win the argument. Because if the $45 million, for example, now is in dispute under an Act 46 problem, they are going to take the $45 million from somewhere else and their gain will be zero sum. So trying to hide it, cloak it, maneuver it, it just isn't going to work from an Act 46 perspective. And I tell you, the thing that concerns me about doing it this way in this Council, if we in this Council allow us to be Mack-trucked over again on this kind of issue, by giving nine years, ten years of prepayment, then forget the contract language. You might as well take that contract language in the Charter out of the Charter and let the Administration, whoever it is, do whatever they want. Because that's basically what they have been doing anyway. We look at Vet's Stadium recently, with a three-year contract renewal on a vendor for food services and beverage services that was supposed to be a three-year contract, done unilaterally, without bid. 71 BILL NOS. 000708 and 000709 When I complained about it, all of the sudden it became a one-year with two-year renewals. This renewal option stuff is just a way to get around Council. And it is not this Administration. It has been previous administrations that have done the previous thing. But if we continue to allow this precedent to be set and continue to do it and play into it, we might as well just mail our votes in, because there is really no sense in us being here. And I am telling you, if I can't guarantee in some way through our legislative powers that the service that we are prepaying for for the next ten years is in fact going to be there for the next ten years, why don't you just ask for the money to pay for the School District contract, which is what this is all about. Just be honest with us. We signed a contract, we didn't have the money. Now we are coming to you for the money.
So don't give me a ten-year license agreement on how to get the money, because Act 46 I don't even think applies in this particular situation.
Councilman, several things 72 BILL NOS. 000708 and 000709 in response. First of all, again, for the record, the portion of the money, only a portion of the money, is for the contract, and the other was announced back in May.
I don't mean to interrupt you. But when you signed the contract, you knew you didn't have the money, and you didn't know yet whether or not we were going to approve the money. So, I mean, maybe the public sector is different than the private sector. But if you own a company, and you are doing a negotiation with the Teamsters, and you sign a contract with money you don't have, how does that company, this company, get that money?
Councilman, actually, the public sector is different. And most public sector contracts, governments negotiate all the time, and in future years they don't really know whether they are going to have the revenue or not.
And make commitments that the legislative body needs to approve prior to even consulting with the legislative body. 73 BILL NOS. 000708 and 000709 Because I don't remember being asked about the 45. I remember reading it in the paper, but I don't remember being asked about it.
As far as the larger issue goes, I think that we have, and our testimony will show, that we have said exactly what this money is for. And that's what we have been discussing. Again, the structure that we are proposing here is in response to all of the legitimate concerns expressed by yourself and other members of Council and by the Administration about the ability to try to protect these funds and not have them be recurring, to the best of our ability. These are exceptional circumstances, extraordinary circumstances. And we structured this proposed agreement in a way that, to the best of our judgment, would enable us to do that. I also think that -- and, again, the City Solicitor can speak to this better than I -- but simply by virtue of having this agreement, there is more protection than there otherwise would be for, in fact, the school building to be open and accessible, as we all want them to be, to all of the children in Philadelphia for recreational purposes. 74 BILL NOS. 000708 and 000709 Because if in fact the district finds itself unable to perform that obligation, the city does have the right to be repaid.
Wait a minute. Let me go back to that. September comes around. God forbid, we don't get the money from Harrisburg, the Governor wasn't being as forthcoming as we'd like, the legislature tells us to take a hike, and we can't open the schools in September. Do you mean to tell me that the schools will be open at night for basketball leagues?
They may not be. But that's when I am saying the city may well be repaid.
Where do I go to get my money back? Where do I get the refund the from? You don't have any money. So just be honest with us.
No. We are trying to frame this and craft this in a way that's cute and novel. But, guess what, it is what it is. If it is quacking and walking like a duck, that's what 75 BILL NOS. 000708 and 000709 it is.
Councilman, this precise kind of arrangement has been requested by the city controller four years ago. The fact that it overlaps with a need that the School District has now does not illegitimize it. The city controller suggested in 1997 and 1998 that this precise kind of arrangement be --
But, Ken, in all fairness, you are a smart, intelligent lawyer, I think you are a decent person. You are telling me a ten-year prepayment is not an odd thing? It is the oddest thing I have ever seen here.
I don't think it is the oddest things you have ever seen here.
Well, it is one of the top three. There are a lot of ties.
Well, what I really would like, just on the practical side, I would like to know, out of the 115 schools that are involved, I would like to know how many employees are involved 76 BILL NOS. 000708 and 000709 in this after school, after-hours issue. I want to know the list of classes of employees and what their hourly rates, overtime pay, are. And I would also like to know whether or not there are in fact electric and water meters and gas meters in every 115 schools that are involved. Because I don't know what the age of those schools were, whether those are all metered or not. Maybe they are, maybe they aren't. I know we had a similar problem with our electrical use rates when it comes to alley lights. They are not metered, but we negotiated a number with PECO. So I need to know, of those 115 schools, how many actually have water, electric, and gas meter readings we could look at. And that's it for right now. Thank you.
Thank you. Is Councilwoman Tasco in the chamber? No questions. Ms. Chatzkel, you state on your testimony that, quote, Based on our current 77 BILL NOS. 000708 and 000709 forecast, the School District would be unable to meet its cash obligation after June 21, end of quote. I am somewhat confused by your statement, since on one page of your testimony you state, Based on the projected cumulative deficit of $44 million, the School District is currently forecasting an end-of-year cash position of $60 million. I would think that if the $45 million was not forthcoming, then $60 million less $45 million would leave you with a $15 million cash balance. Am I missing something?
No. You are absolutely correct, Council President. What happens with our payments -- and we did provide daily cash flows. I don't know if you all have them. We get a payment from the state at the very end of the month. It is a special education payment. And for the end of June, it is projected at $38 million. It comes the same time every year. We 78 BILL NOS. 000708 and 000709 can't move that. The date that it is anticipated to be received is June the 28th. Between June the 22nd and June the 28th, we reach a negative cash position. We are not able to cover our bills during that time period. The other point to note is that --
Are you able to come back with a positive cash by the end of the year?
We get $38 million at the very end of the month. And that's what rebounds, that's what brings us back to only $15 million. But just to clarify -- because it is an important point for us as we manage our cash -- this is all based on an estimate. You noted in your earlier question that there is some projected improvement in the district's fund balance. Some of that we know for sure because it happened last year and was clarified in our audit. But $15 million of improvement is based on an estimate. There could be some variance. And we have to account for that, too, as we look for the required level of cash.
You know, as it stands 79 BILL NOS. 000708 and 000709 now, I don't think anybody at the table can tell us that the schools will open in September. Is that true? Are we getting that impression?
We can tell you that we are making every possible effort to have that happen.
See, I think that several Council Members feel that if this fact we approve these two ordinances and risk the city to a payment of $45 million a year, if in fact the state takes over the district, we are really committing ourselves to $60 million a year? It would be the 45, plus the 15? I somewhat agree with Councilman Kenney. The state certainly doesn't want to take over the School District. But if the City Solicitor can't tell me or any of us what a court would do, I don't think I could sit here and tell you that I'm a hundred percent certain that the state would not take over. What happens to our General Fund if that happens? I think we sat through budget hearings. It was indicated that cuts were going to be made. I think last year this time we also heard that the 80 BILL NOS. 000708 and 000709 School Board was going to be making, or the Mayor had asked the School District to make, what was it, a hundred --
I don't know that we have heard of any of the cuts that have been made. We don't know what you are doing. And apparently we come in here, ask questions. And all we are told is, we are working on it. Well, I think we are going to have to be given more information.
Actually, last year, as part of the budget process, the Board did approve nearly $30 million in proposed reductions in expenditures. And we do have --
But you were here this year for the budget, and we were told that cuts were going to be made. Can you give us some indication as to what cuts have been made or will be made or can be made?
We can answer for you the cuts that were made last year, as part of our -- 81 BILL NOS. 000708 and 000709 for this year --
For this year, the lump-sum budget, which is the preliminary budget that we shared with you, is due to be approved by the Board. It is just a start of a process that ends on May 31, when we adopt the final budget. What we are looking at, in general terms -- and I think that Mr. Goldsmith addressed some of these -- we want to look at, number one, ways to generate revenues other than tax revenues. That's the easiest thing for us to do, because it is not painful. There are Medicaid reimbursements that we hope to increase. The dollar amount for that could be anywhere between 5 and 10 million dollars. Then what we would look at as a district, and are looking at, are the expenses that are furthest away from children in the schools, which obviously starts with administrative expenses. And I think that there have been several meetings, internal meetings, to discuss how the 82 BILL NOS. 000708 and 000709 Administration can be reorganized, which should effect some savings. We don't know a dollar amount to those savings for two reasons. We don't know finally what the administrative structure will look like. There is a lot of detail to that. But the other question is, if this administrative restructure can free up some educators, whether the best thing to do might be to take educators who have a higher salary than we are used to paying for teachers in the classroom, but in theory -- and I hope in actuality -- earn that salary by experience, are redeployed back into the classroom. Which is why we can't give you a dollar on that. But I can say, of all the things that are being looked at, that's being looked at the most heavily. And then in terms of other cuts, we are looking department by department, but again our emphasis right now is on administrative areas.
And it is over the next four to six weeks that the intensive work of the School District's budget is always done. I mean, these are 83 BILL NOS. 000708 and 000709 the months. So, again, we have a problem of being a little bit out of sync with otherwise what is the city's timetable.
Right. Well, again, May 31 is the date by which the Board is required by the Charter to adopt its budget. So certainly, again, over the next four, six, seven weeks, up until and including May 31, a lot of that work will be done, but certainly the bulk of it over the next four to six weeks.
Is there anything to preclude the Board from taking action earlier?
Well, you know, because part of the issue is the state budget process. Which, again, their budget is often, I mean, sometimes not approved until June, but usually in May. And since the bulk of, 60 percent of, the School District's budget is state funded, it is 84 BILL NOS. 000708 and 000709 very difficult for the district to do a budget without knowing what its state resources will be.
Yes. I just have a question for the law department. How does this position us in terms of possible lawsuit in case the state does take over the School District, in terms of this money going to traveling this route, based on intent and this record that we are building today?
Would it still leave us open to a takeover, to being responsible for the continued funding of the 45 million?
I think that the licensing agreement that was entered into is -- or the proposed licensing agreement is not only defensible, but I think it is very appropriate. I believe that it is the most defensible kind of arrangement that can be entered into legally. And I am unaware of any other type of arrangement that would give us the kind of ability 85 BILL NOS. 000708 and 000709 to protect the city than this agreement does.
I want to go back for a second. There was at the tax authorization hearings, and it has kind of continued as an item of discussion, with regard to what the state may or may not do as it relates to the current fiscal situation. Now, I don't remember what the announcement was, but the Governor put out his budget maybe shortly after, I think, the Mayor announced the city budget. Now, were there dollar figures announced in that budget from the Governor that indicated increased support for Philadelphia?
Yes. There was approximately $67 million in additional revenues, new revenues, contained in the Governor's budget.
And what does that do in terms of the anticipated $235 million deficit?
Those figures are included, already assumed, what's ever in the Governor's 86 BILL NOS. 000708 and 000709 budget, within our forecast. So in that sense it made the problem $67 million smaller.
So when the President just asked the question a couple of different ways, I get the impression the response has pretty much been the same, you are working on it, you are looking at it, you are talking to people, a wide variety of things going on. What is the expectation out of all these meetings and discussions and the like?
What we would like to see is to get agreement among the parties over a series of years, which again we discussed at the tax authorization hearings, that we can put the School District on the road towards long-term financial stability and also towards improvements in education.
Well, okay. I mean, 87 BILL NOS. 000708 and 000709 that's a good answer. But are you expecting the 235 problem to be solved in the course of this year, between the additional state effort and city effort?
What does the path to nirvana look like? And what will we have to see over anybody's reasonable period of time? What kind of numbers are we talking about?
Because of the fact that the budget problems have really been a long time in the making, we are realistic enough to say that there is no way that they will be resolved within one budget year. So as we have already discussed, we are looking at a series of actions which may well have to include some deficit financing. But that can only be done in the context of knowing that there is a plan over the course of, again, maybe five years or more, where the district would come into balance.
And so we find ourselves now in a situation where we are just waiting to see what the result of the discussions and the meetings and the conversation in Harrisburg 88 BILL NOS. 000708 and 000709 is to then know what the game plan is going forward; is that --
Yes. I mean, every week there has been more activity and more parts of putting together this puzzle. We have had legislators into Philadelphia over weeks, you know, several important groups trying to gain common ground and increase their understanding. As you know, the House Appropriations Committee will be in Philadelphia on Wednesday and Thursday of this week, where several of us will be testifying. And they have come to look specifically at the School District's financial situation and consider those needs. And they preface that visit with open-mindedness and a willingness to look and to hear and to see what it is that -- to understand the problem and to see what contributions they can make towards helping to solve it.
And, I mean, just, you know, always hoping for the best, but, I mean, we do have to plan for the worst. Suppose out of all that they say, you 89 BILL NOS. 000708 and 000709 know, it is a really nice city, love coming here, you have some serious situations and challenges, and we are going to keep talking to you, but that for this year, nothing changes? What does that mean?
Well, I think that all of us in the City of Philadelphia have a huge problem in that event.
Tell me about the magnitude of the problem and the realities. Tell me about real-life situations that could result from such a scenario.
Real-life situations would be the question that's always asked, will you be able to open school and will you be able to keep open. I think the answer to that would have to be no, we couldn't. So we would have to see what the ramifications are. We would have great difficulties -- and again the CFO can speak to this -- in the bond market, certainly.
I guess what's the line or what's the dollar amount, what's the breaking point between open, no open? Because I have asked you about zero, and 90 BILL NOS. 000708 and 000709 I assume zero means no open. On the other hand, I am sure that if after all this process you go through with Harrisburg, and they said, oh, well, yes, you made a really good case, and I think we will send, we could throw another million in the 7 pot, I assume that there is a line somewhere that, 8 until you cross that line, you are not really doing 9 anything. Not that $10 million isn't a lot of 10 money, but it doesn't necessarily open the schools. So tell me what the line is.
The gap is -- and I would like to answer your question, Councilman Nutter, by talking about the four ways that we can close this gap, and also how much of the gap we have to close to operate, which I think was your first question. We start the year, as estimated -- and, again, this is an estimate -- of a little bit of a cash cushion. That little bit of a cash cushion means that for next year, we don't need to close fully $235 million. We have to close close to it. There are four ways to do it. And I don't want to make light of the fourth way. 91 BILL NOS. 000708 and 000709 Although it is not my favorite, I think it is going to have to be part of it.
How close is close? I just trying to keep track. How close is close?
I think that what we would like to have is $235 million. I think we ought to, for everybody's sake, we ought to wipe out the fund balance deficit. That's the way to operate.
Given the magnitude and given that this has been several years in the making, we should look at each of our four options for closing that gap, because all of them come into play.
The first is to have the School District effect cuts. What we looked at during the budget briefings with you was that we are already spending 7 percent less than the national norm on a per-student basis and percent than other school 24 districts in the Commonwealth. 25 That doesn't mean we can't effect cuts. 92 BILL NOS. 000708 and 000709 It means that we have to do so responsibly and make sure that we don't cut the spending on children between K and particularly, which is our core 5 mission. We will look at cuts. 6 To do those cuts responsibly, and to 7 generate new revenues responsibly, will probably 8 have to happen over many years, which is why Ms. 9 Kahn said we are looking at a five-year plan at this 10 point. 11 We look at two sources of revenues. We 12 look at local revenues. You have contributed, locally we have had 40 percent of our revenues come from local sources and 60 percent from the state. Those are obviously ways to close the gap. If those first things, three things, don't materialize to a full $235 million, which -- I mean, I would love to see that happen; I don't think we expect to see that happen -- the fourth means is deficit funding.
Wait a minute. I'm sorry. I must have been going slow. I thought number one was school district cuts?
Number two is local 93 BILL NOS. 000708 and 000709 revenues. Number three is state revenues. Ms. Kahn actually mentioned number four, which is federal revenues. And since we don't know yet what's going to be passed, I can't rely on that. But what we have heard is that there may be some additional special education funding, which would help as well. So, actually, reasonably we should add that to the mix.
Right. If in the aggregate we don't have enough to close that $235 million gap, we are going to have to look to deficit funding for the rest.
Deficit funding, it is not the end all and be all, obviously. It is debt. And in order to make it real, we would have to show a plan where, over a period of years, probably five years in our case, there is an ability through perhaps a right sizing or a rethinking district activities and through other revenue measures to close the gap. So that with deficit funding, the 94 BILL NOS. 000708 and 000709 largest piece of whatever is borrowed is used in the first year. And then the amount that's needed in the out years continues to diminish, until you finally reach a budget balance.
I mean, I know that the government is a lot different than our own personal financial circumstances. But, I mean, in less financial terms and kind of more street-type nomenclature, what we are really talking about is borrowing our way out of debt? We were going to borrow some money it pay our debt, and end up with more when all is said and done; is that what we are talking about?
We are talking about borrowing to fill our cash needs over the next couple of years. The idea being, though, that we balance. And, yes, there is absolutely, there is debt service on that, which is why it is not --
But in a current financial crisis, how do you pay that additional debt?
Whatever the debt 95 BILL NOS. 000708 and 000709 service is has to be added to the gap that you see in the years ahead. And as you look at ways to close the gap, the gap has grown by the amount of debt service. You are absolutely right.
Okay. All right. You mentioned about some cuts. I did have one item that I needed to ask about. It has to do with the Philadelphia High School Academies Program. And the district has funded that program, it is my understanding, for the past, I think at least, three years? Are you familiar with that particular program?
Now, it is my understanding that there has been funding provided to the organization for the past three years in the amount of $250,000, but that recently it was apparently revealed that this year, in the current '01 budget, the district is not going to make those 96 BILL NOS. 000708 and 000709 funds available, and we are now nine months into the Fiscal Year. Can you tell me what's going on with that, and why we would do that, and what happens to all these programs in our local high schools?
Well, several things. I learned about this arrangement that had existed under the prior Administration some months ago. And I have been in ongoing discussions with the executive director, who I admire greatly. And I am a former Board member of the Academies and a great fan of what they do for our kids and our schools. And we have been in those discussions. And, frankly, because of some other business, she and I have been staying in touch. But it was not something that I needed to resolve right away, in her judgment. So we have had those ongoing discussions. When I learned of how that arrangement had been done, I was frankly somewhat surprised by how that payment --
I don't know anything about the arrangement. What's the 97 BILL NOS. 000708 and 000709 arrangement?
Apparently, over the past several years, the money had come from the city to the Academies, and the money had been allocated as part of the $15 million grant.
We don't allocate the $15 million in any specific fashion. We never have. We have talked about that.
Are you saying to me that in the city's budget for the 15, which until, I believe, the current year, had always been a separate appropriation, a separate bill, for the $15 million, I believe that either in this current year's budget, or the one that we have just approved last week, the 15 was already in the budget? We didn't do it separately? Now, Madam President, if I can, I'm sure Mr. McPherson would know the details on our recent 98 BILL NOS. 000708 and 000709 situations with the $15 million. Is it in the current Fiscal Year that the money was already in the budget for the 15, and we didn't do -- MR. McPHERSON: 2001 it was in the budget, and 2002, also.
So in the past years we had a separate bill for the $15 million that the Council had to approve. MR. McPHERSON: Yes.
In the current fiscal year budget, it is already in the budget. Now, is it detailed in the budget what the $15 million is for?
Yes. In the current fiscal year budget, there is a $15 million item covering this, what had been a one-time grant, for the past five years to the district. In the previous four years, we had a separate bill, just for the 15. We voted for it separately. There was no specificity as to what the 99 BILL NOS. 000708 and 000709 $15 million was for. You can check all the notes of testimony over the past years, there was never an earmarking of what those dollars were for, other than going in the big pot to be used for whatever the district wanted. Now you are saying that that's part of what the money was for, this 250 out of the was 9 specifically for this particular program? 10
Again, the preliminary look 11 that I have had into it, okay, I am just saying that 12 I have heard something to the effect that maybe the 13 School District simply in some way looked at that -- 14 because they don't budget for particular 15 organizations to support. So that maybe to some extent those dollars were used in that way. But it was an arrangement that pre-existed this Administration.
I am just trying to understand why anyone would say or believe that some particular program was being funded from a $15 million grant, which was not specific in its designation for anything? And in the past when we asked about having certain items covered by a portion of the $15 100 BILL NOS. 000708 and 000709 million, we were specifically told that the money is for general operating purposes of the district, and is not specific to any program, project, activity, or anything else. So I don't know where someone would get the notion from that this particular program or any other specifically came out of the $15 million. It was $15 million that was going in a bank account somewhere and being used however it was being used in the School District's general budget.
Can someone tell me, over the past five years, give me an accounting for that $15 million on a program or project basis, and show how the money was spent? Then where does that answer come from?
Point of order, Councilman. Thank you, Madam President. Councilman, I have asked this almost every year we have done this $15 million, specifically for a breakdown of where and when, and I am still waiting. So, I mean, one of the problems that we have always faced with this is that, on one hand, if 101 BILL NOS. 000708 and 000709 we don't give them the money, we are being insensitive and unrealistic. On the other hand, we have no control or ability to talk about books or programs or certain academic subjects or parent co-op nursery or whatever it is, it is out of our hands once we give them the money. And I don't know, I think you have been here as long as I have, I don't remember anything we have ever done one time that's not been in perpetuity so far. So this 45, I put it in the same category. We may be asked to make this a regular number. But I have asked for it consistently and have received nothing in return.
I was just going to add that we transmit to the district $14.75 million, which is net of that 250,000. The 250,000 has been transmitted directly to the Academies by the city in the past.
So what's the situation now going forward? Are we transmitting 102 BILL NOS. 000708 and 000709 14.75 or are we transmitting 15? The money was, I thought, to the 4 district. Now we have got a slicing off of a 5 portion for -- I mean, I am supporting the 6 Academies. There is no issue about that. 7 But no one could ever say where the 15 8 was going, who it was for, a breakdown of the 9 programs. 10 And now we are finding that, I mean, 11 some net amount -- so was the check coming from the 12 City of Philadelphia off of the 15? 13
Councilman, all I can tell 14 you is that it is an arrangement that I learned 15 about some months ago. I had -- you know, was not a party to it, nor were any of the people sitting at this table. And it is just something that I need to look at. I had asked the School District -- and I believe I am getting the information -- just for some information on how the Academies are supported and how they in turn support the School District, in order to make a judgment as to whether or not, you know, additional funding would be appropriate. 103 BILL NOS. 000708 and 000709 But, again, that is not an arrangement that any of us had anything to do with.
I appreciate you looking into it and getting all of the analysis. But, I mean, a decision apparently has been made that no money will be forthcoming, before your analysis and before your --
Okay. Then maybe you can explain this to me. This is a letter from Mr. Goldsmith, to the Chair of the Board of the organization. The letter says, "I am also writing to follow up a recent conversation," this is to the Board Chair, "you had with Dr. Cassandra Jones of my staff regarding the Academies' requests for funds through the district's Operating Budget. The district enjoys productive relationships with a good number and variety of partner organizations. The Academies is one such valued partner. However, given the district's budget situation, in which we currently face a sizable deficit, our ability to identify $250,000 from our operating budget to provide one of our partners for its core operating 104 BILL NOS. 000708 and 000709 and/or unrestricted expenses is terribly difficult at this time. I hope you will understand that I wish the budget circumstances were different and that we could assist the Academies in this way. If the situation should change or if other solutions become available, I would be delighted to revisit this decision." Now, if you got this letter in the mail, does it sound like you are getting 250 or not?
No, it doesn't. And I will tell you, Councilman, we have a lot of things going on. And I will tell you personally I did not know that letter had been sent. And I had considered it as one of my to-do's on my pile. That's the most honest answer I can give you.
It sounds like you might want to check it off. It sounds like it is to-done.
I might be able to. I don't know. But I will certainly talk to Mr. Goldsmith and find out what the status is. I just don't know.
Let me ask this question: Let's say that you were in a situation with us and you had made some financial projections 105 BILL NOS. 000708 and 000709 based on what had happened in the past. I know nothing lasts forever. But let's say that you were in a little situation or relationship with us, and we had been doing certain things for a certain amount of time. And maybe you didn't have a full-blown contract like the $15 million a year that the district would budget every year and would expect to get, and then you find out in March that the is not 11 forthcoming. 12 Now, would you think that was fair? Is 13 that a way to do business with someone who is 14 actually doing things in the district? 15 We have 12 career areas, 19 high schools, 29 academy sites. I think they are kind of doing something with us. And you find out three-quarters of the way into the Fiscal Year that someone has pulled the plug on $250,000?
As I said to you earlier, that's why I had been in touch with Ms. Allen all along. And she and I -- and as someone who used to run a nonprofit organization, I think I appreciate it. 106 BILL NOS. 000708 and 000709 And she had and I had had the discussion about how much were they depending on this and what was the status. And I am just telling you that I personally, I think, spoke to her as recently as a week or so ago. And I did not know that letter had been sent. And, as I said to you, I had asked the School District to provide me with some information. And I will now follow up on it and see where we get.
Is this a valued program? You have got, it is called the Philadelphia Academies, Inc. You have got a couple of people who serve on the Board here, the officers. Now, this would be a guy named Paul, it looks like, Brideman. He would be the Chairman and CEO of Mellon Bank. The Vice-Chair is a guy Robert Fox, Manko, Gold & Katcher, law firm. Mary Gavigan, from Sunoco, and John Lucca from KPMG, LLP. Isn't this like a business-oriented entity that has some of the leading stars in the city from the business community on its Board?
Do they provide a 107 BILL NOS. 000708 and 000709 valued service to the district?
They provide a terrific service. But there are a number of nonprofit organization that also provide terrific services to the School District which the city does not fund directly. In some cases there are contracts --
To say whether or not they would be funded now on an operating basis is not to devalue the work that they provide for the School District. They have not always been --
What was the basis of the decision then, if not on a value basis? I understand you have a financial issue. But apparently that money was being covered out of the 15 that we were sending. Now, someone has now made a different decision about something. No discussion with us. I mean, you know, I understand that. But it is three-quarters of the way into the Fiscal Year.
That's correct. And we will look into it. 108 BILL NOS. 000708 and 000709
Are we going to get back? What are we going to do? I mean, is the district just dismantling programs and relationships, some of which are actually working? I mean, we can --
We can go back into PCN, if you'd like, and have some more of that discussion. We have that situation, now we are doing Philadelphia Academies. I mean, are there other people who we should anticipate being on the chopping block? Are we just getting out of certain core activities, or are we only doing certain activities? Why would we do something like this? What's the graduation rate in the School District?
Let me just say, there is no 24 core list right now of activities that we are necessarily getting out of. But I think as we work 109 BILL NOS. 000708 and 000709 our way through --
And I take particular note at your term "right now." I heard that.
And what I was going to say is, I think as we work our way through this budget process, and this workout, I think we can all expect that there will have to be changes. There is no way, there is just simply no 11 way that we will work ourselves out as a city, as a School District, of this financial problem that we all face in the School District unless we anticipate some major changes being made. It is just simply not practical and reasonable.
I understand we need some changes, as well. But it sounds like a decision had already been made before you even had an opportunity to investigate whether this is a change that we want to make. That's the part that I am not understanding. PEDRO RAMOS: President Verna, Pedro Ramos, President of the School Board. I have been listening in on part of this discussion. And I had an opportunity to call over 110 BILL NOS. 000708 and 000709 to the School District to talk to our CEO, Phil Goldsmith. And there are two issues we have been dealing with through the Academies. And one of them is resolved, and there is a resolution today on the Board's agenda. The second issue is this amount of the $250,000 in the city's million that I guess not a 10 lot of people knew about, and we have discovered as 11 the new team that was in there. 12 And Phil's intention in sending that 13 letter was, basically, $250,000, he is not -- you 14 know, just wasn't prepared to make that commitment 15 at that time. But I don't think that you can read into that any intention to dismantle anything, other than just trying to deal with, you know, the situation he has before him. From a Board perspective, the Academies' relationship --
I understand that. I guess I am just in a position where I would like to be maybe a little bit ahead of the curve, as opposed to every week, every month finding out, 111 BILL NOS. 000708 and 000709 start with the PCN situation, that was the last few weeks and the last couple of months, which is still unresolved, now we are talking about the Academies program. I would like to know, just give me the whole list at one time and tell me what business are we going to be in and what relationships are we going to have, especially with the groups and organizations that are actually doing something that seems to make a difference. Now, can somebody tell me what the graduation rate is overall throughout the School District?
I believe that on-time graduation in the School District is at the highest it's been in a long time, and it is still dismally low. I don't know if it is the high 50-something percent or low 60-something percent of graduation on time in four years.
If I can just answer your previous question. I ask your indulgence. The district and the Board, despite 112 BILL NOS. 000708 and 000709 whatever, you know, past bumps there may have been in the relationship with the Academies, my best sense of the Board is that the Board very much values the relationship with the Academies. So that this, you know, whatever communication has been had or hasn't been had, it should not be seen as -- it would be probably inaccurate to perceive that relationship as being where it was headed several years ago.
I don't know where it was. I don't know where it is today. I don't know where it is going. I hope it is going in the right direction.
And the other thing is, Councilman, that there is no list. But this school system, I mean, there is a surreal quality here. I mean, there is a lot that we are trying to get through in the district. And the Board and district Administration are doing their best to do that responsibly. And, you know, we are getting our budget process formally launched today with the adoption of a lump-sum statement. And we invite you to 113 BILL NOS. 000708 and 000709 participate, as you have in the past, in that process and bring it your concerns of your district and Council there. And we welcome the opportunity to continue to discuss with you. Because no matter what, the next several months, there's going to be a lot of pain and a lot of disruption until we get through that process.
I understand that. If it was easy, everybody would be doing it. And I would be glad to participate in that particular process. At the same time, I think I do have an obligation to participate in the one process where I actually get to vote on something. I don't get to vote on your budget. We are here today about the 45. I participate in that process. Last week we voted on 600-some million dollars in total taxes going to the district. I participated in that process. And now we have this particular issue. To go my to my earlier question, if the overall graduation rate, as you indicate, is maybe in the mid 50s or so, the graduation rate out of this program is in the 90 percent range. 114 BILL NOS. 000708 and 000709 90 percent of the students who participate in these programs graduate from school. And then they are tracked. And some 50-some-odd percent, close to 60, go to college or some post-secondary educational activity. I am trying to understand, what else do we have going on that either matches that or surpasses that, that gives an indication to not only these students and not only the participants, but the Board of this organization, made up of some of the leading citizens of this city, who could probably be somewhat helpful in our other situations and efforts, what is the message to them ?
The message to them is that the leadership of the Board and the School District feel that the children of the City of Philadelphia and the district has benefited from the relationship with the Academies. And as we move forward, that's the mindset with which we are looking at this specific request, which has been generated by a relationship that pre-existed some of us and that many of us didn't know about. It caught me by surprise when I heard 115 BILL NOS. 000708 and 000709 that in the past money had been earmarked in the $15 million for the School District, that there was some money earmarked formally or informally for --
Are you telling me that the person who gets the check in the mail didn't notice that it says $14,750,000, and they figured that the 250 got lost in the transaction, or we just took a slice off the top and kept it for ourselves? Didn't they wonder why they didn't get a check for $15 million? That's what we voted for. Did they not notice?
Councilman, I was referring to the Board and the new district leadership. And I can tell you that while putting in around 60 hours as a volunteer to this job, I am not yet at a point where I am opening envelopes to check numbers.
Mr. Ramos, I don't expect you to open envelopes. You shouldn't have to open envelopes. You have a Budget Office. And one day, a few times, the city sent a check. And the amount was supposed to be $15 million. And when the check came and when the 116 BILL NOS. 000708 and 000709 envelope was opened, someone should have noticed that it was $14,750,000. I don't think you, Ms. Rush, or anybody else over at the Board has to start opening envelopes to figure out is the money right.
There is an office of the treasurer who receives grants. I wasn't on board last year when that check came in. There may have been knowledge, but that knowledge wasn't transmitted to me.
You know, this is how PGW got started. So all I want to know is, open envelopes, not opening envelopes, 14.750, $15 million, the question of the day is, what's going on with the 250 and the nature of the relationship with this particular organization, and how much other stuff is coming down the pike in terms of groups and organizations?
A couple of things, Councilman. First, to just restate what I said earlier, I am not saying that School District management didn't know. What I am telling you is that, at least at the Board level, we didn't know 117 BILL NOS. 000708 and 000709 that this arrangement was there and that information wasn't transmitted. We are certainly aware of it now. And I would think that -- and you can probably confirm it with the Academies -- that there is a more positive relationship than there has been at some points in the past, and you have gotten as much as you know right now. I pulled Phil out of the Board meeting that I should be Chairing. And I take him at his word that that was the whole of it. Which was, this came on the radar screen, he said, 250, I can't make that decision right now. A lot of us didn't know anything of the political history here. And we will deal with it. We are not looking to burn bridges with the Philadelphia High School Academies.
What's the Board going to do about the situation with the parent cooperative nursery? And are you taking any action at the Board meeting today regarding that situation?
Council, I shared with the Board this morning the unanimous resolution by City Council asking that nothing happen. And nothing is scheduled to happen at today's meeting, although there are a number of speakers.
And are the items that we discussed in that resolution and the issues to still be discussed, and a report made to the Council President, is the Board and/or staff going to follow through on those items so that we can get a reasonable and complete and final resolution to this particular issue?
We certainly want to bring closure to this issue. And we will be communicating through the President.
Thank you, Madam Chair. I don't want to go back, but I would really would prefer to really to give you the $45 119 BILL NOS. 000708 and 000709 million, rather than go through this process that we are doing. I think it enters into a very dangerous delegation of authority of this Council. I think setting the trend and the precedent that you can prepay contracts, it is not about and the Board, but it is about our relationship with the executive. That giving that authority and delegating that authority, I think, is unwise, and really is an abdication of where we should be going in terms of that. If we need to have money, I rather would have a discussion, really, as to how much real funding we need to be giving the schools. I am sure it is not $45 million. But we are spending a hell of a lot more money on other issues and other programs and developments that do not lead to the quality-of-life improvement in the city and that do not really begin to entice other people to come in and move into the city. I don't think stadiums are going to do that; I think schools would. But be that as it may, Ms. Kahn, I would like you, we never got a full flow chart of the 120 BILL NOS. 000708 and 000709 School Board. And I would really like to begin looking at that. And I would like to look at three areas of the school structure. One is the Family Resource Network offices. I would like to find out how that is structured, how it is staffed, what contracts does it have, who is employed, what are the directions, what are the responsibility, and who do you respond to in that. Why don't you find out about the Equity Office. There is an equity officer at every cluster; right? Is that correct?
That office, the equity, and the contracts and grants that come under that, under that office. I want to see what the lines of reporting go to, who reports to whom, who staffs it. I would like to see a breakdown of the people and names of that. I would like to see the aspect of Teaching Learning Network; how that is structured, who reports to whom, who goes where, what are the contracts that go down. 121 BILL NOS. 000708 and 000709
Councilman Ortiz, is that the Office of Leadership and Learning?
The Office of Assessment, I think that's under the equity. I would like to see how that office is structured. I would like to see the structure of the Education for Employment Office; in terms of grants, monies, contracts, house staff, procedures, and protocols. And if you can give that information to the President, I would really appreciate it.
I think we will be able to see a lot more about where money goes, and how it is spent, and so on. And I would like an explanation of how do these offices relate to individual schools and to actual learning.
Councilman, we will be happy to that. And these are exactly the kind of reviews that we are undergoing in order to do our budget.
I would like for us 122 BILL NOS. 000708 and 000709 to be able to see where money is going and see how the money is flowing to the individual schools as much as possible. Because I would really like to begin a discussion as to really how much money this school system needs from the city. I don't think it is $45 million; I think it is probably much more than that. So if you can get that before we vote on this, this issue.
You are welcome. The Chair recognizes Councilman Kenney.
Thank you, Madam President. Could someone there tell me this cost associated with opening the schools after school time and at night? Is the most expensive element of that opening personnel or overhead as it relates to utilities?
The cost is broken down for last year, for 2000. I don't have this 123 BILL NOS. 000708 and 000709 breakdown yet for 2001. $3.4 million is personnel. That's on an hourly basis. It is for the hours that a building engineer is required at a rate of $30 an hour, since it is overtime. And there is an hour allocated between opening and closing. Somebody has to get there before the activity and be there to clean up and lock up, be sure things are secure afterwards. The utilities for Fiscal Year 2000 were $2.4 million, just under $2.4 million. And there is an assumption behind that. There was an analysis that was done by our energy manager. Looked at each type of school, and then looked at utility costs on a square-foot basis, assuming that percent of the school would 18 be open to support a given activity. 19
In the discussions 20 on the much touted and recently approved historic 21 reform contract, were there any discussions with the 22 unions involved relative to staffing of these 23 facilities as it relates to the potential for the 24 use of volunteers, people who were involved in 25 running the program? 124 BILL NOS. 000708 and 000709 Perhaps, for example, if a building engineer is required, could not the individual responsible for the athletic group be responsible for cleaning and/or opening up the building? And I tell you why I ask this. I have been at a number of schools as a result of my son's participation in athletics in the evening and on Saturdays. If you could find the door that's open, you are lucky. I don't really see a lot of personnel around. Now, granted, the building engineer may be in the engineering room in the basement. But I don't really see much else going on. The people who are in the building, involved with the recreation department or the private athletic association, are usually directing people, cleaning up, and the like. Have we looked at contract reforms in the last contract that would allow more volunteerism, and someone being more of a turnkey as relates -- especially if the person is running the organization that lives in the neighborhood where the school is located?
These employees, Councilman, 125 BILL NOS. 000708 and 000709 would not be members of the PFT bargaining units, so that wasn't a topic in the discussion of this last negotiation.
It was a four year -- I believe, I think it was a four-year contract.
I would have to -- I mean, I just don't know personally. I mean, I think a building engineer, I would think that if the building is going to be opened, because of the requirements with boilers and heaters and all of that, there is probably some need to have someone who is trained on site as long as the building is open. As far as the other duties that you talk about, the cleanup and other things, I would need to defer to -- I know our chief operating officer, Mr. McGlinchey, was here, but I believe he needed to go back because of the Board meeting. 126 BILL NOS. 000708 and 000709 But we would be happy to fill you in on what any of those discussions have been.