COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING BEFORE SELECT COMMITTEE ON FISCAL STABILITY AND INTERGOVERNMENTAL COOPERATION - - - Room 400, City Hall Philadelphia, Pennsylvania Monday, June 5, 2000 10:45 a.m. - - - RESOLUTION 000232 - Authorizing the Committee on Fiscal Stability and Intergovernmental Cooperation to hold hearings in order to fully examine and analyze the current and future financial conditions of the Philadelphia and to receive testimony from Mayor John F. Street and the Board of Education on proposed plans to stabilize the funding base of the School District to prevent fiscal insolvency, avoid a possible State takeover, and ensure a quality education for Philadelphia's public school children. PRESENT: COUNCIL PRESIDENT ANNA C. VERNA, Chair COUNCILMAN MICHAEL A. NUTTER, Vice Chair COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DAVID COHEN COUNCILMAN FRANK DICICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JAMES F. KENNEY COUNCILWOMAN DONNA REED MILLER COUNCILMAN ANGEL L. ORTIZ COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILWOMAN MARIAN B. TASCO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 6/5/00 - FISCAL STABILITY - RES. 000232 I N D E X Mayor John F. Street. . . . . . . . . . . . . 5 * Debra Kahn, Secretary of Education. . . . . 25 6 * Pedro Ramos, President, Board of Education 36 * Superintendent David Hornbeck . . . . . . . 51 * Rhonda Chatzkel, CFO, School District . . . 59 Richie Feder, Chief Deputy City Solicitor 157 Appeals and Legislation, Law Department Janice Davis, Secretary, Financial Oversight 187 * Joseph C. Vignola, Exec. Director, PICA 221 * Michael Churchill, Chief Counsel . . . . . 239 Public Interest Law Center of Philadelphia (* - Also provided attached written material.) 3 6/5/00 - FISCAL STABILITY - RES. 000232 P R O C E E D I N G S
Good morning. This is the public hearing on the Select Committee on Fiscal Stability and Intergovernmental Cooperation. Before we start, I have a very brief statement that I would like to make. As you all know, this is a hearing being held by City Council's Select Committee on Fiscal Stability and Intergovernmental Cooperation. This committee was initially formed at the request of then-Councilmember John F. Street, in the light 1980s, to bring focus upon the fiscal difficulties facing the City, which, at that time, was on the verge of bankruptcy. Since that time, this committee has become a standing committee of the Council, with the responsibility of monitoring the ongoing financial condition of the City and annually reviewing the Administration's proposed Five-Year Financial Plans, which approval is required by State law. Mayor Street and Governor Ridge have reached a tentative agreement to keep the schools open for the next school year, whereby the only additional bankable revenues from the State are 4 6/5/00 - FISCAL STABILITY - RES. 000232 $10 million and interest earnings on money advanced or obligations deferred by the State and $20 million in additional City contributions. It is totally appropriate for City Council, which has the sole local authority to authorize taxes for School District purposes, to hold this hearing in an attempt to ascertain the true financial condition of the School District and whatever measures are to be proposed to correct its difficulties. Although City Council does not have a right to approve, or disapprove, the School District's Operating Budget, since the Educational Supplement to the Philadelphia Home Rule Charter merely requires that the Board of Education submit to the Mayor and Council a lump-sum statement of anticipated receipts and expenditures and a request for authorization to levy taxes to balance its budget, Council has routinely held hearings regarding the School District's budget prior -- prior to the reenactment of the District's tax authorization. Because of the School District's inability to submit a budget to the City Council in a timely manner this year, Council was not able 5 6/5/00 - FISCAL STABILITY - RES. 000232 to conduct such hearings prior to the District's adoption of its operating budget, which inability was condoned and requested by Mayor Street. On May 31, 2000 the Board of Directors of the School District of Philadelphia adopted an operating budget that was not balanced and, therefore, in violation Section 12-303 of the Educational Supplement to the Philadelphia Home Rule Charter. That budget shows a cumulative deficit for the current fiscal year and a larger cumulative deficit for Fiscal Year 2001. Arguably, these deficits are understated since they rely upon the number of assumptions, which are very tentative, which assumptions we will discuss later in this hearing. While I am aware that the School District is at the beginning of a process to develop a long-term strategy for dealing with the educational needs of the children of this City and ways to fund these needs in a responsible manner, I believe that this is an appropriate time for City Council, which has the sole local authority to authorize taxes for School District purposes and which, in recent years, has also appropriated 6 6/5/00 - FISCAL STABILITY - RES. 000232 funds to assist School District, to begin upon what will undoubtedly be an extended process to understand and evaluate the educational opportunities of this city and what feasible means are at our disposal to provide for these means. At this time, I would ask Mr. McPherson to please read the title of Resolution No. 000232.
Resolution No. 000232, a resolution authorizing the Council Committee on Fiscal Stability and Intergovernmental Cooperation to hold hearings in order to fully examine and analyze the current and future financial condition of the School District of Philadelphia and to receive testimony from Mayor John F. Street and the Board of Education on proposed plans to stabilize the funding base of the School District to prevent fiscal insolvency, avoid a possible State takeover, and ensure a quality education for Philadelphia's public school children.
At this time, the Chair will recognize Mayor Street.
Good morning, 7 6/5/00 - FISCAL STABILITY - RES. 000232 Mayor Street.
Good morning, Council President Verna and members of City Council. Actually, this might be my first time here.
All right. Actually, we've been very, very busy. As most of you know, we just had a press conference where I announced the resignation of Superintendent David Hornbeck as the head of our School District. And, unfortunately, these things take time, and we got involved in some questions and answers, and we were a little bit late starting, and I want to apologize to the members of Council, this legislative body, for our tardiness in arriving to this hearing. This, of course, is a very significant development, but I want to assure the members of this Council several things: one -- and I appreciate the fact that most of you were unable to be at this announcement. I want to assure you that, one, Superintendent Hornbeck's leaving was a decision that he made and with which the Mayor and 8 6/5/00 - FISCAL STABILITY - RES. 000232 the Board concurred. There, apparently, is some concern that someone other than the Board or the Mayor somehow forced David Hornbeck's departure from the system. We believe that this was a decision that he made and with which we have agreed, and notwithstanding some of us had a very good working relationship with him, we respect his decision. We also want you to know that very shortly, we will be announcing a plan to replace the superintendent, and there will be a search committee, and we will be looking forward to representation from City Council, through the Council President, to be a part of the process to replace the superintendent. As most of you know, a lot of work went into creating an environment and a financial condition at the School District of Philadelphia where we would be able to operate the schools for the entire school year next year. During that period of time, we made a commitment that we would ask City Council to help us raise $20 million directly or indirectly to support the School District of Philadelphia. 9 6/5/00 - FISCAL STABILITY - RES. 000232 Now, much has been said and written about it, but I would like to make this administration's position very clear. The Mayor of the City has no capacity to bind the City Council of Philadelphia to do anything. It is soley and completely and exclusively within the prerogative of this legislative body either to make a part or all of $20 million in cash or in kind available to the School District of Philadelphia. And there are some people who have said to me, Oh, Councilmembers look like they don't want to do it, or they might not want to do the $20 million. Councilmembers are entitled to reserve their judgment on $20 million or on any other amount of money to the School District of Philadelphia, and they're entitled to make -- this legislative body is entitled to make an independent judgment on it after asking and getting any reasonable information that it wishes. So for those of you who have said, Well, we want to know this and we want to know that, those are entirely reasonable questions. You're entitled to know what other people are 10 6/5/00 - FISCAL STABILITY - RES. 000232 doing, how all this is going to impact the School District, why we think it's a good idea, and where and what recommendations will be made as to sources of money. We thought we made it clear that this is a one-time commitment because the longer term objective is to make sure that there is an education program reasonably funded at the Board that puts this system in a position to provide high-quality education for the 210,000 children that attend the system. So two points: One, we did not presume to tell the Governor or anyone else that absolutely Council was going to do this, you don't have to worry, we never said that. What we said is, we will make a request and then Council will exercise its own judgment as to what it thinks it wants to do and how. We have some reservations and we don't want to be put in an unfair position as a city, and we will work with City Council to create the mechanism whereby we can give whatever money we collectively decide should be available.
We think, however, in the main, getting a commitment from the Commonwealth of 11 6/5/00 - FISCAL STABILITY - RES. 000232 Pennsylvania, assuring the parents, the student and the teachers and administrators and advocates and other folks who are stakeholders, who are interested in the continued public education, we think it's good that they know that there will be a school year and that it will happen from the beginning to the end and that we're not talking, Well, maybe in February or March. People are tired of that, and I know you're tired of that, and especially the students and parents are tired of it. We didn't want to carry this all through a possible school shutdown or takeover in the middle of the year. We are appreciative of Council's support. We would like to make a commitment that City Council will be engaged in this whole process. We actually met with -- with actually the Pennsylvania Senate delegation this morning. We have met with the delegation to the Philadelphia delegation of the Philadelphia House of Representatives. We hope to establish a broad-based stakeholders group so that during the course of the next year, we can, as best as we can, agree on what is in the best interests -- 12 6/5/00 - FISCAL STABILITY - RES. 000232 programmatically, what's in the best interests of the School District of Philadelphia and then go about carrying that message to the variety of different places to which it must be carried. We appreciate very much the opportunity to come here. As you can see, I am surrounded by folks who probably can answer -- hopefully, they can answer in great detail any question that you have. I think that we have made some progress and that if we all work together, we can do good things for the children of this city.
Thank you, Mr. Mayor. I think that we all want to work together to make sure that we're not here next year to talk about a very, very huge deficit. And in all fairness to my colleagues, we were questioned about the $20 million after we passed the City budget. We have been waiting for recommendations from the Administration as to where the $20 million would be coming from. Further, we wanted a guarantee that next year we would not be asked for $20 million again because if, in fact, under Act 46, if that were to happen 13 6/5/00 - FISCAL STABILITY - RES. 000232 next year -- which we hope it wouldn't -- then we would have to pay $35 million in perpetuity. And that was the concern of many of my colleagues, and I think we made that very clear to members of the Board that attended the meeting, that it's certainly not that Council does not want to support School District; it is how we support them. And, as I said, we are waiting for a recommendation from the Administration as to where the $20 million would come from and a guarantee that it would not be reoccurring next year.
Well, I couldn't agree with you more. And one of the reasons why we did not -- we refused to commit where it was coming from, we refused to commit what time it was going to be there. We, in fact, are going to engage in this process. We will work with City Council to determine what is the best way to come up with whatever resources City Council concurs is necessary or reasonable. And we, too, agree that we shouldn't put ourselves in a position where -- where we become obligated on a recurring annual basis to make $20 million available under circumstances 14 6/5/00 - FISCAL STABILITY - RES. 000232 that don't warrant it. When that decision is made, then we should be making that decision; we shouldn't be making any other decision, and so we couldn't agree with you more.
It would be the $20 million plus the $15 million grant that we've been giving.
Well, the $15 million is in the Five-Year Plan. I mean, we are --
So we don't think that test the credibility of the Five-Year Plan, but the $20 million would create a $100 million difficulty in the Five-Year Plan, and we just haven't made that commitment. And we -- and not only do we agree with that assessment, but we appreciate very much Councilmembers' agreement that this is something that we should be really, really careful about.
Thank you. Are there any questions or comments from members of the committee or any other Councilmembers? Councilman Cohen. 15 6/5/00 - FISCAL STABILITY - RES. 000232
Mr. Mayor, there's just one thing about the agreement that puzzles me. Until the agreement was announced, I did not know that part of the deficit consisted of money allegedly due back to the State from the School District. Could you explain what that was and why there had been no reference to it before.
Well, Councilman, during course of the relationship between the Commonwealth of Pennsylvania and the School District, there are always audits. And, really, there are audits with the School District by the Commonwealth of Pennsylvania, there's audits by a number of different agencies. During the course of these audits, sometimes it is determined that -- in this case, that some of the school districts, there was a difference in agreement as to some of the population of the school district that the Commonwealth of Pennsylvania claims would then require a return of money that was based on certain population figures, and we disagreed with it, but sometimes we get caught up in it. And the Commonwealth of Pennsylvania has agreed to take some actions in deferring any 16 6/5/00 - FISCAL STABILITY - RES. 000232 collection of some of this money until we resolve to hold the School District funding problem in the next year, and this helps us adopt a balanced budget for the upcoming fiscal year and we will be able to have some further discussions about all of that. It's -- I mean, it is a fairly routine kind of practice, and we argue a lot about the application of funding formulas in a variety of different ways down at the Board. If you want a real specific -- that's a very general kind of explanation. If you want real specific information, I suggest you ask at the appropriate time Mike -- or Board member Masch, excuse me. I understand he's in Los Angeles. We'll get him on the phone. But we have folks here who can answer in detail all of those kinds of questions.
One other question, Madam President. It seems to me in this agreement that the State in this agreement is, in fact, is not giving any new money but that the State seems to be wanting the City of Philadelphia to grant new money. All the State has done in this agreement 17 6/5/00 - FISCAL STABILITY - RES. 000232 is to say, as to that $59 million, which allegedly the School District owes, and I don't know for what period of time it's supposed to be, we will just let you delay payment of that, and with respect -- and we'll advance the money which they had agreed to do and have done in the past at various times. It seems to me that there's an imbalance here in that the request is being made to the City of Philadelphia to add new money while the State, at least thus far, has not offered any new money.
I would like to have one of the members of our team here explain in detail, because we won't make money off of the advance. I think it's about $10 million. We do get money out of the Empowerment Act, which is about $16 million. I mean, there is some new money from the State. It would be incorrect to say that 18 6/5/00 - FISCAL STABILITY - RES. 000232 there's $69 million from the State, but there is new money from the State, and we'll get you a very clear and specific answer to that question.
Thank you. The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. Good morning, Mr. Mayor. Under the circumstances, I thought it important to give you the opportunity in a more public fashion and in, quite honestly, hopefully, a more friendly environment to share with us, without violating any confidentiality, the circumstances that you found yourself operating under with regard to the Commonwealth on the issue of the $20 million and what significance in the whole scheme of things that is to the State given their financial situation as compared to our financial situation and why there's this emphasis, and continued emphasis, about the City putting in an additional $20 million and the circumstance surrounding that.
I think that answer -- 19 6/5/00 - FISCAL STABILITY - RES. 000232 actually, I think that's a very good question. The Commonwealth of Pennsylvania is always concerned about the relative contribution that the City makes versus the contribution that the Commonwealth makes. And whenever we go to the Harrisburg and start asking for additional revenues from Harrisburg, a number of questions are always coming up, and they go something like this: Well, you're cutting taxes and you need to be -- you need to be putting more money into the School District. And you have X-millions of dollars of surplus, and you need to go putting more money into the District. And they're always questioning what has become known as the so-called "local effort." And we get criticized -- and we disagree with the criticism, but we get criticized on the local effort made by the City of Philadelphia in funding public education. We have our own story to tell on what the local effort is, and if you want some detail on that, then you can, but this is -- this is a regular -- this is as a result of a regular and routine effort on the part of the Commonwealth of 20 6/5/00 - FISCAL STABILITY - RES. 000232 Pennsylvania to get the City of Philadelphia to put in more money to fund School District activities. We were also requested not only to make money available -- and we, of course, refused to make any commitment that would result automatically in a recurring obligation to fund, but we were also pressured to make additional cuts. Now, you know, I sent a letter to the Board suggesting that we should be looking for ways to reduce the cost of managing the District by $100 million, 'cause I think that we need to be looking for ways to reduce the cost of administering public education in this city. What the Commonwealth of Pennsylvania did was say, We would like to see some of that now. And, you know, it wasn't our first inclination. It was my inclination to say we need to engage in a process that will allow us to save serious money. And we talked about, you know, getting rid of -- selling the building down there and putting, you know, the Administration in reasonable facilities but not in that particular 21 6/5/00 - FISCAL STABILITY - RES. 000232 facility, and a number of other things. As is always the case, the Commonwealth wanted to see us show some kind of commitment, some kind of, you know, act of good faith, and that's how some of these things are characterized. And we during the course of the negotiations resisted many of the things that were suggested, but in the end, we understood that we were going to have to do something, and we wanted to do something. And we didn't want a takeover, we don't -- we think that public education and its administration is a local matter, and we want to remain in charge locally, but we knew that we were going to have to do some things that were different. And this was in the end to balance that.
Lastly, Mr. Mayor, under the circumstances -- and this is not a new concern -- would you support any effort to have greater financial oversight of the budgetary process at the School District by the City in general and City Council specifically?
Thank you. 22 6/5/00 - FISCAL STABILITY - RES. 000232 Thank you, Madam Chair.
You're welcome. The Chair recognizes Councilwoman Tasco.
Could you please explain the negotiations around the lawsuit and what impact it may have on the School District. And if we had to -- if you had to use that as a part of the negotiations, could you might have gotten a higher per capita based on their request to delay the lawsuit?
Actually, I don't think we could have. As most people know, in the truest spirit of candor, there are certain officials in the Commonwealth of Pennsylvania who do not like the lawsuit, and we steadfastly resisted any effort or anyone suggesting that we dismiss the lawsuit. But we did agree with the Governor and 23 6/5/00 - FISCAL STABILITY - RES. 000232 others that if we're going to try to work cooperatively to work out a long-term funding solution for the children of this city, that we ought to do it in a more friendly venue at the moment. And so we agreed to put it off, to put it on hold, to stay a lawsuit for one year, while we're all trying to come together and work. If we don't work out a long-range funding -- because what we have done, with Council's cooperation and approval, is work out a situation where the schools will be able to be open for an entire school year, which we thought was very important. During that one-year period, we wish to engage the Commonwealth, both the Governor and the General Assembly, in discussions around where we're going with public education in this city and, you know, what's our future, you know, where -- you know, how many children are we going to have in these classes? what kind of after-schools programs are we going to have? how are we going to deal with the problem of compensation and technology and a lot of things that are important in the system? And during -- that while we negotiate 24 6/5/00 - FISCAL STABILITY - RES. 000232 and try to work out a program, the lawsuit will be stayed. If we don't work it out, then we'll pursue with the lawsuit. I mean, it's as simple as that. And we thought it made sense to give us all an opportunity to work on a long-range solution to the problem.
Thank you, Councilwoman. Are there any other questions or comments from any of the Councilmembers? (No further questions or comments.)
I know that Mr. Vignola has been sitting here since 9:30. Are you in a hurry?
All right, good. Is someone going to make an opening statement, or do you want us to simply go into questioning? 25 6/5/00 - FISCAL STABILITY - RES. 000232 SECRETARY KAHN: If you would like, I do have brief prepared remarks.
Kindly identify yourself for the record. SECRETARY KAHN: My name is Debra Kahn, and I am the Secretary of Education in the administration of Mayor John Street. I do believe that my remarks are being distributed at the moment. Good morning, President Verna.
Just a moment, please. We don't have copies of your remarks. Who are they being distributed to? Councilman Cohen?
Before the questioning, I wanted to state that I was at the press conference this morning in connection with the resignation of Superintendent Hornbeck, and I wanted to state, at least speaking for myself but I think I speak for many other members of City Council at the same time, that I not only thought that he and the Mayor both conducted themselves in an outstanding fashion. And I wanted to congratulate 6/5/00 - FISCAL STABILITY - RES. 000232 Superintendent Hornbeck for what I regard as a tremendous job that he's done over the last six years. He would not have thought that from the responses he's gotten from City Council over the years, but that's our job, to raise all kinds of question. But in my judgment, certainly there's no question that he's moved the School District along, that the education of children is much more advanced, much better than it was when he entered and that I, for one, in fact regret his leaving and hope that whoever replaces him has the same general kind of vision that Superintendent Hornbeck has. And I want to thank him for that. I hope he will be available in the future when the new superintendent comes in, as well as during the next two months to be available. And before the fireworks begin again today, when it will seem as if everyone here is opposed to him, probably if it runs like other hearings involving in the School District, I wanted him to know that services have been appreciated. SUPERINTENDENT HORNBECK: Thank you very much. I appreciate those comments. 27 6/5/00 - FISCAL STABILITY - RES. 000232
Thank you. Do all members have copies of Miss Kahn's testimony? Okay, Miss Kahn, please proceed. SECRETARY KAHN: Thank you. Good morning President Verna, Vice Chairman Nutter, members of the committee, and other members of City Council. My name again is Debra Kahn, and I am the Secretary of Education in the administration of John Street. Seated with at the table this morning are the President of the Board of Education, Pedro Ramos; our Vice President, Dorothy Sumners Rush; and Superintendent David Hornbeck. Also here are several members of the Board of Education and the School District's new Chief Financial Officer, Rhonda Chatzkel. Other members of the Street Administration are also here and available to answer your questions in their areas of expertise. They are: our Secretary of Financial Oversight, Janice Davis; and the Deputy City Solicitor, Richie Feder. We do appreciate this opportunity to 28 6/5/00 - FISCAL STABILITY - RES. 000232 discuss with the current and financial condition of the School District of Philadelphia as part of our ongoing efforts to work cooperatively towards the goal of achieving fiscal stability and quality education for all Philadelphia public school students. It has been three months since we last appeared in this chamber to launch the School District's Fiscal Year 2001 budget process. At that time, the brand-new School Board had not yet adopted even its preliminary budget for the next year. But we said then that the District faced a deficit of as high as $300 million and the prospect of running out of cash in July. We faced the equally real prospect of the School District being taken over by the Commonwealth of Pennsylvania, under Act 46 for failure to adopt a valid budget. Today, thanks to unprecedented cooperation between the Ridge and Street administrations, Philadelphia students can look forward to summer vacation, starting next week, with the assurance that they can return in September and look ahead to an uninterrupted year 29 6/5/00 - FISCAL STABILITY - RES. 000232 of study. We also have the assurance that the management of our schools will be where it belongs -- under local authority. This resolution to an exceedingly difficult problem may not have come about exactly when and how we would have liked, but it is a solution that should provide a great deal of relief to parents, teachers, principals and pupils, and to all of the citizens of Philadelphia whom we serve. And perhaps, most importantly, it is a temporary solution that provides the foundation for us to work towards a long-term solution with the Commonwealth as our partner. Let me just outline for the record the components of the agreement with the Ridge Administration which Mayor Street accepted last Wednesday. In early spring, the School District determined that $115 million in cash would be needed to enable the schools to open and operate for a full school year. The City Administration and the Board of Education proposed a cost-sharing arrangement among the State, City, and School District that we believed would be feasible to 30 6/5/00 - FISCAL STABILITY - RES. 000232 obtain the $150 million. The State share was identified as 69 percent, which is equivalent to the current state aid ratio, or about $80 million. The School District was already to receive an additional million in State funds 7 through the new Education Empowerment Act. So the 8 balance needed was $64 million. 9 The City's share was proposed as 10 $20 million in new funds. The School District's 11 contribution would be in the form of 15 million in 12 budget reductions, which were to be added to the 13 $15 million already assumed in the preliminary 14 budget, for a total of $30 million. 15 After the Commonwealth budget was 16 passed without the necessary additional funds, Governor Ridge and his staff set forth to work with the Street Administration and the School Board to identify other sources of funds that could be made available to the School District.
The resulting package consists of: First, an advance of $363 million for the Fiscal Year 2001 subsidies, which will yield the District an estimated $10 million in interest earnings; and 31 6/5/00 - FISCAL STABILITY - RES. 7 million in intermediate unit reimbursement payments. 3 million, which the School District was able to incorporate into the revenue estimates in its adopted budget. On the strength of the Mayor's pledge to seek one-time nonrecurring funding from the City, the School District also included the City's recommended share in its revenue calculations. The combined impact enabled the School District to reduce its projected Fiscal Year 2001 cumulative fund balance deficit to $80 million, down from the nearly $205 million forecast in its March preliminary budget. This aid enables the schools to be open for a full year and precludes the State from assuming control of the schools during that time. In exchange, the City and School District agreed to join with the Commonwealth in requesting a stay for that same one-year time period of the discrimination lawsuit that had been filed previously. 32 6/5/00 - FISCAL STABILITY - RES. 000232 This is the resolution of our immediate problem. It was achieved through months of relationship-building with the Governor and his administration. We are grateful for the cooperation and initial trust that enabled this agreement to go forward. But we also know that much work remains to be done so that its value is fully realized. All along, as Mayor Street sought this short-term solution, he asked for that most precious of commodities -- time, time for his new administration and the new School Board to work together and with City Council and with the State to develop the long-term solutions that will restore financial stability to the School District while supporting an effective educational program. One year can pass quickly, and the challenges are enormous. But the fact that much has already been accomplished should be cause for more hope and confidence. In just a few months, this dedicated and talented volunteer Board of Education has demonstrated a tremendous capacity for hard work and tough decisions. It hit the ground running by 33 6/5/00 - FISCAL STABILITY - RES. 000232 approving new charter school applications, adopting a policy for mandatory school uniforms, and appointing a chief financial officer for the District. It also undertook that most painful and arduous task of significantly cutting its budget. Following a series of four detailed public budget meetings and numerous working sessions with School District managers, the Board last week proposed a very difficult $30 million in spending reductions to fulfill its commitment to the short-term funding solution. This Board now faces many other challenges, including the need to negotiate a new teachers' contract in an atmosphere of very high expectations and financial constraints. The Board has shown the ability and the will to get the hard jobs done. The announcement made just this morning that Superintendent Hornbeck will leave his post sometime this summer adds to the complexity of our situation and, in my view, strengthens the necessity for all of us -- City, State, and School District -- to pull together for the good of the kids. I will quote Mayor Street in noting 34 6/5/00 - FISCAL STABILITY - RES. 000232 that the superintendent, like all of us, is not perfect, but David Hornbeck will leave the School District much improved, with a long, tangible list of improvements that include full-day kindergarten, early leveling of classes, and steadily rising test scores. His conviction that all, all kids can learn, and his passion for doing what it takes to help them are qualities that few can match and still fewer will soon forget.
No 11 matter what else we do in seeking new executive and educational leadership for the School District and in righting its finances, we must continue that momentum and retain that focus, which is the real bottom line of children achieving. In reaching our short-term funding agreement with the Ridge Administration, we have set the stage for the City and the School District to work in partnership with the State towards a long-term solution through least two vehicles: One is the development of a five-year plan to be prepared in concert with stakeholders and City and State government and the private sector. We want this participation to ensure that the process and resulting plan engender the 35 6/5/00 - FISCAL STABILITY - RES. 000232 confidence, commitment, and financial support needed to implement an effective educational program and achieve as we work towards achieving a balanced budget. The second vehicle for cooperation will be the Education Empowerment Act. This legislation establishes a process through which the School District and the State identify needs and develop an educational improvement plan aimed at increasing student performance. 4 million through this act. In future years, as the District and State reach agreement and work towards goals and means, we have in place now programmed State legislation to which Philadelphia can expect to receive about 80 percent of all State funding that is appropriated annually. Both of these vehicles and others that we can also develop also provide opportunities for collaboration among the City Administration, the School District, and the City Council. We remain committed to working with you towards the short- and long-term solutions that will produce financial stability and educational quality in 36 6/5/00 - FISCAL STABILITY - RES. 000232 Philadelphia's public schools. Again, I thank you for the opportunity to make these opening remarks. And with your permission, I would like to ask Pedro Ramos, President of the Board, to present his remarks and then introduce the other School District presenters.
They have not been, to the best of my knowledge.
Yes. Thank 37 6/5/00 - FISCAL STABILITY - RES. 000232 you.
Have all Councilmembers received a copy of the testimony? I believe Councilwoman Miller does not have a copy. Mr. Ramos, please proceed.
Good morning, Madam President, Mr. Vice Chairman, and others. My name is Pedro Ramos, and I am the President of the Board of Education. On behalf of my colleagues on the Board, I want to express our appreciation for the opportunity you've created this morning for us to review the budget adopted by the Board last Wednesday evening. We especially appreciate the opportunity to continue the discussion we last had here on March 6th regarding the harsh fiscal realities that confront the School District and the more than 213,000 Philadelphia children we serve and which we have discussed informally in a couple of briefings since then. I am joined today by the School Board Vice President, Dorothy Sumners Rush, Superintendent David Hornbeck, and Chief Financial 38 6/5/00 - FISCAL STABILITY - RES. 000232 Officer Rhonda Chatzkel. Also with us are Board members Martin Bednarek, Helen Cunningham, Sandra, and Dr. Emilio Mattioli. Other Board members had work commitments that could not be rescheduled following the announcement of this hearing. Michael Masch, our Budget and Finance Committee Chair, who led the budget process, is in California on a scheduled work trip for his employer. In fact, I think we're all lucky to still have jobs and families after the time that our volunteer Board members have been putting in in the recent weeks, Madam President. I should you also note that the last time I introduced the Board, I did not know a majority of the members very well. Boy, have we gotten to know each other. The Board is strong, hard-working, focused, and determined to not be deterred or distracted in moving this district forward. We've also had the benefit of a dedicated and effective superintendent, who has been a passionate advocate for my children, your children, and the children of this city. Although we are sad that the Hornbeck era is coming to an 39 6/5/00 - FISCAL STABILITY - RES. " This Board has a lot to do. In addition to all the telephone calls we had to make today in the wake of this morning's announcement, our work also includes: Working with the managers this week about the implementation of the departmental budget cuts adopted by the Board on Thursday; Identifying an interim superintendent by mid-August; Starting a superintendent search; creating and working with the Educational Empowerment Team under the Educational Empowerment Act; Running summer school programs; Negotiating a teachers' contract that is pivotal to the future academic and financial health of the District; Expanding our reduced class size initiatives; Monitoring the implementation of a new school uniform policy in the fall; 40 6/5/00 - FISCAL STABILITY - RES. 000232 Opening a new alternative school for disruptive students in January; Working with the City and other public agencies to find savings and combining purchasing power and possibly certain operations; All while managing this year's cash flow. With your indulgence, I will provide you with an overview of our budget, Superintendent Hornbeck will set the educational context, and Miss Chatzkel will provide a similar presentation on where we were, where we are, and how we got here financially. Approximately three weeks after we met -- after we last met in these chambers, on March 31, 2000, the Board of Education adopted a lump-sum statement of revenues and expenditures. 7 million for the fiscal year ending June 30, 2001. As a result of the extraordinary efforts of many people who worked up to and through Wednesday, May 31st, we adopted a budget that projects a fund balance deficit of 41 6/5/00 - FISCAL STABILITY - RES. 000232 $80 million for Fiscal Year 2001. This budget incorporates a number of new and significant revenues, expense reductions of $30 million, and a Board commitment for $15 million in new reform initiatives relating to expanded summer school programs, and an initiative to further reduce class sizes for kindergarten and 1st grade.
This budget also incorporates $18 million in possible additional educational reform initiatives, which are wholly subject to identifying additional sources of revenue and/or cuts, beyond the level already identified by the School Board and the District's administration. The projected deficit for the fiscal year ending June 30, 2001 has been reduced by $125 million, compared to the lump-sum payment. 7 million in Intermediate Unit reimbursement payments to Fiscal Year 2000 and beyond. 42 6/5/00 - FISCAL STABILITY - RES. 000232 The State has also agreed to advance the District $363 million of Fiscal Year 2001 subsidies. Interest earnings on this advance should yield the District $10 million in additional revenue. The cumulative budgetary benefit to the District of these deferrals is close to $70 million. The Mayor has recommend $20 million in additional City revenues in Fiscal Year 20001, in addition to the currently budgeted grant of $15 million. 4 million as a result of the Education Empowerment Act passed by the State legislature and signed by the Governor with the past three weeks. These revenues will be recorded as categorical revenues but will be used to pay for expenses in the operating budget. Finally, the Board and Administration have worked to identify $30 million in expense reductions. In recommending these reductions, the Board has upheld the principle of not making 43 6/5/00 - FISCAL STABILITY - RES. 000232 reductions in school-based programs for children. It has also needed to consider the numerous Federal, State, and contractual mandates which govern School District operations. It should be clear that the process of identifying $30 million went to the wire. Each departmental reduction was based on a rationale that we can discuss and which Mr. Masch can discuss in greater detail at a future time. He literally met with each senior manager to discuss his or her proposed budget. What we are not in a position to say is what specific changes managers will actually make to effect budget cuts for their departments. Budget and Finance Committee Chair Michael Masch and our CFO, Rhonda Chatzkel, will be meeting with the Superintendent and senior management throughout the week to discuss the implementation of these reductions. 2 million were cut from the operating budget. Programs related to GED will continue to 44 6/5/00 - FISCAL STABILITY - RES. 000232 be funded through our categorical budget. Additionally, the District will look for ways to continue offering adult education programs through a dialogue that we will generate with the private sector and other adult education providers. We are also exploring providing the classes, keeping them in place, but charging fees to cover the cost. " Secondly, professional development programs in the amount of $5 million will be cut from the operating budget. This represents 14 percent of the School District's total 15 professional development expenditures. 35 million of these cuts will occur within the 17 22 cluster budgets. This short-term hit should be 18 viewed as a short-term budget necessity. We can't 19 execute a long-term educational strategy without 20 significant investment in the continuous training of teachers. 36 million identified above. I know that there is some political sentiment for reducing the number of clusters; 45 6/5/00 - FISCAL STABILITY - RES. 000232 however, Madam President, I do believe that cluster offices are better than regional offices, and that any potential savings from reducing clusters is not worth the havoc it would create at this time. 44 million in aggregate cuts will made from the proposed 2001 budgets of several administrative offices. $950,000 in savings was achieved by budgeting comprehensive day care according to a small increase over actual enrollment.
According to the financial analysis done, the initial budget proposed by staff did not reflect the historical enrollment trends, which are low, and demographic projections, which are going down. We did not expect the number of children served to decline, although we felt the number of sites might have to consolidated some. I am going to ask staff to brief you further on this later this week because there is some apparently conflicting information out there, and I need to get to the bottom of it. 46 6/5/00 - FISCAL STABILITY - RES. 000232 We will achieve savings because -- we will also achieve savings because the alternative school for disruptive students operated by CED will not be ready in September. We have a budgeted January opening. 7 million in savings. The budget also included a $500,000 savings based on the consolidation of the enrollment of three of our remedial disciplinary schools into two schools. Again, staff may have an alternative way of generating that amount without taking the Board's specific recommendations. 6 million, that portion of the District's summer programs for June and July '99, which were to have been carried in the operating budget, will be absorbed through the categorical funding and will not be paid from the operating budget. 2 million have also been identified. 6 million of this comes from the requested increase in the school security office. This reflects a 40 percent increase from Fiscal Year 1999, or 100 additional full-time 47 6/5/00 - FISCAL STABILITY - RES. 000232 positions. While this area continues to grow quickly, we also have to be able to manage our people and our resources. We need to develop a sensible way of deploying this ever-increasing force. We welcome Commissioner Timoney's input and coordination in his new capacity as the City's Secretary for Public Safety. The Board of Education has also made a couple of changes in the structure of senior management of the School District. A new position of Chief Financial Officer was created, reporting to both the Superintendent and directly to the Board. Rhonda Chatzkel was appointed as CFO. Tom McGlinchey was appointed Chief Operating Officer, reporting to the Superintendent. Since our last meeting in City Council, I have appointed new Board member Michael Masch to chair the Budget and Finance Committee of the Board and asked him to take a hands-on role in this capacity, using his particular expertise, and he has done that. The net result of all of the above is twofold. We have projected -- we have a projected fund balance deficit of approximately $80 million for the upcoming school year and a cash position 48 6/5/00 - FISCAL STABILITY - RES. 000232 which enables the District to keep schools open and operating for the full year. Secondly, the Board of Education has been able to remain consistent to the five objectives that I outlined when we met here on March 6th. We said we would not cut school-based programs for children. The amounts going directly K-12 education in school budgets were not tapped in the budget process. Full-day kindergarten, instituted by the Superintendent, supported by you, required by Judge Smith, and not funded by the Commonwealth, continues, along with other school-based reform initiatives. We said we would continue to make every effort to further maximize the efficiency and productivity of the School District's management and operations. We have created the positions of CFO and COO. We are participating in an effort with the City and other public agencies to examine opportunities for savings through greater collaboration and possible consolidation of non-core functions of the District, similar to the suggestions made several years ago by City 49 6/5/00 - FISCAL STABILITY - RES. 000232 Controller Saidel. Some of the savings in the budget also recognize the room for efficiencies and increased productivity. We said we wanted to keep schools open and operating.
Against enormous odds, including skepticism as well some citizens in some parts of our community, our staff, the Finance Committee, the Board-City Harrisburg Team, our mayor and our governor have been able to make this possible. We said we wanted to make a down payment on educational reform initiatives. This budget does make a down payment, although not as large a payment as we had hoped. And we said we would work with the leadership of the City and the State to develop additional short-term and long-term solutions to the fiscal challenges that face the District. Almost every moment since our last visit here has been devoted to creating the short-term solution that would give us the space and time to work with all our partners on a longer-term solution. The longer-term solution must be a joint solution of local and State government. I am pleased that we have made significant progress 50 6/5/00 - FISCAL STABILITY - RES. 000232 in building relations with the Governor's Office, not just institutionally among offices, but between and among individual people as well. We are working towards the same with the legislative leadership. With respect to City Council, I am not yet pleased with the flow of information and the level of interaction between City Council and the District and want to work together with City Council leadership on that as a two-way effort. I know that we have some way to go on that effort. I assure you, the Members of Council, that the members of the Board of Education and the School District administration remain committed to these objectives for the long term. We are eager to move forward to use this intervening time to develop a long-term financial plan, to address the fiscal years 2002 and beyond, which enables us to build on the foundation of the last six years. I know that I speak for the other volunteer Board members who have been putting in extraordinary hours since March to collectively address the myriad of challenges when I say that we will remain focused and that we will keep moving forward. We hope that through your 51 6/5/00 - FISCAL STABILITY - RES. 000232 financial and political support and other actions, you enable us to move forward. I now have the pleasure of introducing Superintendent David Hornbeck, who is going to provide a brief educational context for the presentation by Miss Chatzkel.
Thank you. Good morning, Mr. Hornbeck. Please identify yourself for the record and proceed with your testimony. SUPERINTENDENT HORNBECK: Good morning, Madam President and members of the committee. My name is David Hornbeck, and I'm the Superintendent of Schools. We appreciate the opportunity to appear before you to discuss the single most important issue in the City, public education. Our success in public education will determine whether we take off economically with high-wage jobs, the quality-of-life issues, with which we wrestle constantly, the safety of our neighborhoods, the characteristics of the citizenry, even the strength of our families. There is no single other arena which will drive every single other 52 6/5/00 - FISCAL STABILITY - RES. 000232 component of our life together. As we all know by now, a little while ago, the Mayor and the Board President and I announced that I will be stepping down as superintendent in a couple of months. This has been a very difficult decision for me. I love Philadelphia, I love the children of this city. However, due to the fiscal constraint imposed on the City by the State's school funding formula that exists by virtue of the bipartisan historic actions in Harrisburg, the era of school change I symbolize, and for which I have had the honor to provide leadership, is coming to a close. My sadness in making this decision is tempered by the fact that the next era of school change has already begun with the smart, energetic, and able leadership of the new mayor and the new Board of Education with leadership from Pedro Ramos and Dorothy Sumners Rush. I want to spend a few minutes framing the discussion of the financial challenges we face. If we miss the context, I believe that we will fail to take school change to the next level. 53 6/5/00 - FISCAL STABILITY - RES. 000232 Too many have failed to grasp, or in some instances accept, that our children, as a result of the hard and smart work of our teachers and administrators have made more academic progress than virtually any other city in the United States. To take that one step further, our children have outperformed the voucher kids in Milwaukee, the longest running voucher experiment in the nation. Our kids have even done as well a as the kids in the first Edison School 12 projects, even though those schools didn't open 13 until they were ready to open; children in those 14 schools were handpicked, and they started with 15 extra money. 16 Last week, we had the pleasure of 17 announcing another year of dramatic academic increases by our 15,000-plus 4th-graders. They went up another 8 percent in reading, math, and science. They've now gone up 48 percent since we since established the baseline in 1996. Fifty-nine percent of them are now at basic and above in reading, 51 percent are at basic and above in math; and with a 17 percent increase in science this year, 63 percent of the 4th-graders 54 6/5/00 - FISCAL STABILITY - RES. 000232 are at basic and above. Since the beginning, I would also point out that the proportion of students now scoring at world-class levels, either proficient or advanced, has doubled from percent to percent, which is 7 about 2500 kids. 8 I won't go through all of the numbers 9 other than to observe that as of a year ago, 10 including 3rd, 7th, 8th, 10th, and 11th-graders 11 whose scores we will not get until later in the 12 summer, we had already seen the scores increase by 13 40 percent. 14 Anyone who still does not get it either 15 has not done his homework, or he has an agenda 16 that is different from an agenda in student 17 learning. I illustrate the point with three 18 examples. Speaking of the 4th-graders, one prominent person observed that he was not impressed since 42 percent of the kids still are not at basic or above. In what other industry or enterprise does coming out in the top two or three in the nation result in criticism instead of celebration.
It's an insult to both the kids and 55 6/5/00 - FISCAL STABILITY - RES. 000232 to the teachers. Some still are in a time warp of saying that the progress results from including untested kids in the equation. Unfortunately for those naysayers, our national percentiles rankings relying only on tested kids have gone up so much that the untested student argument is utterly without foundation. I might also add that with 4th-graders, more than 95 percent of the kids are now tested. So if we ever got an achievement bump from including untested children, it's even statistically impossible now. Finally, I heard a talk show caller the other day make the observation that the games are rooted on our artificially deflating the score in the first year five years ago. Because such critics have not done their homework or they have another agenda, they simply don't know what to do with the children's continuing success, like the 8 percent increase in 4th-grade achievement in the last year alone. As you embark on this new era of school change, I urge you to believe in our children. They deserve it. All of this didn't happen by 56 6/5/00 - FISCAL STABILITY - RES. 000232 accident. We have full-day kindergarten; We have tripled the number of computers; We have doubled the books and other instructional materials; We have quadrupled the amount of staff development for teachers and leaders and improved the quality; We have 15,000 more school volunteers; We have raised over $150 million to improve academic outcomes; We've implemented reduced class size in kindergarten and the 1st grade in more than 100 of our schools; And last year, for the first time in a decade, we restored summer programs; We raised standards and developed sophisticated accountability systems for educators, students, and citizens; We have world-class standards; We have adopted an accountability system built on student performance; We have stronger graduation and 57 6/5/00 - FISCAL STABILITY - RES. 000232 promotion requirements for students We have the best school-to-career system, preparing students for productive careers of any school district in the nation; We created human being friendlier organizations in smaller communities and clusters; We enrolled 5,000 more children in health insurance, and there are dozens more nurses in schools; Every school has a breakfast program; We provided an average of more than $120 million per year in capital initiatives, building a number of new schools, several little schoolhouses; we have bought and put parochial schools into services; and there are countless new roofs, bathroom replacements, window replacements, and other substantial projects; 25,000 students this year are engaged in service learning projects; Since money belongs in classrooms, and not administration, we've reduced the number of administrators by several hundred; We spend more on instruction and less on other things than is spent on average in the 58 6/5/00 - FISCAL STABILITY - RES. 000232 other 500 Pennsylvania school districts; The GPF Management and Productivity Committee helped us save millions and avoid the expenditure of millions more so that those dollars could go into education. The City and the District have unbelievably strong assets. The stage is set for this next era of school change. While the financial challenges we face are unprecedented, if we solve those and build on the program changes already initiated, Philadelphia will succeed. I don't mean the District will succeed; I mean that Philadelphia will succeed. It's my fervent hope that the Mayor, Council, the Board of Education, and whoever your new superintendent is, will come together in an unprecedented way to pursue a common vision of even deeper change as you push toward having all of our children achieve at high levels. If you do, nothing will stop you.
It's my pleasure now to introduce to you the new CFO of the School District, Rhonda Chatzkel, who brings a lifetime of financial acumen and wisdom, and has done quite a remarkable 59 6/5/00 - FISCAL STABILITY - RES. 000232 job, even in the months leading up to right now, and the District is blessed to have her talent at its disposal. Miss Chatzkel.
Thank you. Good morning, Council President Verna and committee members.
My name is Rhonda Chatzkel. I'm the Chief Financial Officer of the School District. Board President Ramos has talked about our current fiscal situation and the tough choices that the Board has had to make in effecting cuts. The Superintendent has talked about the educational achievements that have occurred during his superintendency, and Councilman Nutter has asked me to talk about the fiscal story that brought us to the situation that we're at today. I have prepared a presentation, not testimony, which I hope you all have. I won't begin until you've got it.
I don't believe we have it. 60 6/5/00 - FISCAL STABILITY - RES. 000232 Do all Councilmembers have a copy? They do not. Please proceed.
What I hope to detail for you -- and please interrupt me with questions. I will focus on a couple of key slides, but I wanted to give an overview of our funding sources over the past ten years, which are primarily from the State and from the City, to talk about how we've spent the fund that we've got, and to talk about how we came to this situation where we have an emerging deficit. If you will turn to the second page, you'll see the components of our funding. As of the date of the lump-sum budget and before the recent adjustments made by the State, our total revenue was just under a $1.5 billion and about 60 percent of that revenue comes from State, about 40 percent comes from local tax sources. With regard to State funding, if you'll turn to the next page, and again, I want to flip quickly through some of these but explain to you the components of our funding. State funding has many components, the 61 6/5/00 - FISCAL STABILITY - RES. 000232 biggest of which is our basic education subsidy, but there are a number of other pieces that are important to talk to because they tie directly to programs that we offer. However, the biggest piece, again, is the basic education subsidy, which is projected to be $635.6 million. It should be mentioned that the Governor's budget increases with, the exception of the Empowerment Act money, are reflected in these monies. There was a $36 million increase in the Governor's budget, and that is in these numbers. Subsequent to these numbers, the Empowerment Act dollars were approved. They will not be shown as revenue in the operating budget. They will pick up operating expenses, but they will come in to us as a grant. But in total, before the package that was talked about last week, there was $64 million -- rather $52 million in new State funding. With regard to the basic education subsidy, I'd like to turn your attention to 4.
Does the figure of 867 at the bottom of still stand? 62 6/5/00 - FISCAL STABILITY - RES. 000232
It does stand, with the exception of the adjustments that were announced last week.
Actually, I'm going to flip forward to , and I think that's probably the most important page to be talking about. Overall, our State funding has tracked with inflation if you look across the District as a whole. Our State funding has gone up since 1995 about 2.5 percent, inflation has been about 2.5 percent. What's happened, though, not just in the past five years, but going back a decade, is that our enrollment has jumped. In the past decade, we've gone up about 23,000 students. And for that reason, it's important not just to look 63 6/5/00 - FISCAL STABILITY - RES. 000232 at State funding as a gross number, but to look at the State dollars we get per student, because that drives how we spend our money. And if you'll look on , the basic education subsidy per pupil, which, again, is important to note, starting in 1991, we took a bit of a dive. At that point, the basic education formula that was in place at the State level changed, and the key driver up until that point had been enrollment. It's not right to say that the basic education subsidy was capped at that point, but it was not as responsive to enrollment growth, and that's why, if you look between 1991 and you see a dip, what's happened effectively is that the basic education subsidy has fallen relative to our enrollment.
Our enrollment actually over the past decade has gone up. It's gone up by 23,000 kids. Our basic education subsidy, at this point, has a very small growth supplement. It's about $400 a child. But in 1991, the old formula was heavily driven by enrollment, was very 64 6/5/00 - FISCAL STABILITY - RES. 000232 responsive to enrollment increases. And, in fact, if that old formula were still in place for the next fiscal year, we would have about $75 million more in basic education subsidy. I mean, that's what was. Just dealing with what is, there is a change in formula, but I thought this chart would be helpful in that it shows you what our basic education subsidy per child is relative to inflation, just the CPI.
The formula used to have a large component. About 60 percent was a fee per child. And then there was a poverty supplement and then there was a tax (unintelligible) supplement. What happened subsequent to that point is that the largest piece of our basic education funding was fixed at 1991-'92 levels. So even though our enrollment continued to increase, at this point, the predominant force -- in fact, 97 percent of what we get in basic education subsidy is driven off of our 1991-'92 levels. So it doesn't fully capture the enrollment growth that 65 6/5/00 - FISCAL STABILITY - RES. 000232 we've had. Just looking at the basic education subsidy --
I know you may not know this, but could you tell us why they -- I mean, you say that that's not a cap, but it is a cap. I mean, why did they -- I know you have to be nice, but it's a cap. So why did they cap it? Do you know? Was it legislatively, was it administratively?
Councilwoman, there was State legislation that changed the formula. And in terms of context, in 1991, 1992, we're talking about the middle of the recession in the country as well as in the State, at a time when it -- when Philadelphia continued to get a large chunk of the State's money and the State was spending a greater proportion of the total education dollars across the State. I believe that that is also true.
The State used to pay the bigger share of the education dollars for 66 6/5/00 - FISCAL STABILITY - RES. 000232 everybody; that share has gone down. And in 1991-1992, I guess -- and I don't know, as a budgetary matter, the formula was in essence, as you say, capped so that the additional benefit to Philadelphia for the 23,000 kids that have been added since that time was limited; whereas if it weren't, if it had just been kept the same, we'd have significant dollars that would have come with all of those additional children. And, you know, as you probably know this, it's a time when the City's population was going down significantly by, you know, probably over 100,000 residents, and the School District population was going up by over 20,000, and generally, a poorer population as well.
Also, I did want to point out as well that that was a different formula. The formula has changed, but just dealing with the formula that we are right now dealing with, I thought that this bar chart was helpful, because it shows what our basic education subsidy per child would be if it had merely kept pace with inflation, forgetting about the 67 6/5/00 - FISCAL STABILITY - RES. 000232 components of the formula.
The present formula -- I'll get back to you with a specific written version, but about 97 percent of it is driven off of that '91-'92 number. That '91-'92 figure has had base supplements. Those base supplements build a base, but they're not driven off of changes within our enrollment or our poverty level. There are for the other small percentage of what we're getting for basic education. There is a piece that is a gross supplement. That's $400 per addition and enrollment. There's also a poverty supplement. But, again, about 97 percent is not responsive to what's going on just within the City with the School District population.
Was the lawsuit -- was the basis of the lawsuit this formula, the change in the formula? SUPERINTENDENT HORNBECK: There have been two particular lawsuits. The issue of both equity and adequacy was in the State lawsuit that the State Supreme Court declined to act on and 68 6/5/00 - FISCAL STABILITY - RES. 000232 sent back to the legislature as a so-called political matter, and that was clearly rooted directly in that formula. The basis for the federal lawsuit arises out of the fact that the way the overall formula works, it ends up having a significant negative impact on school districts that are poor and that are majority minority kids. So that it is the particular result of all of the formulae. The thing to which Miss Chatzkel has been referring is just the basic education subsidy. And in addition to that, there's transportation there's special ed, and there are all these other things. And those other things, for example, have no equalization for the most part in them at all. And so they become disequalizing in places where they're rural or urban, that have lots of poor children. But it was a fact like the fact that in a majority minority school district holding poverty constant, for every percent increase in the proportion of minority kids, we lose $52.88 per kid from the State. And that was the -- that is the basis of the federal lawsuit. 69 6/5/00 - FISCAL STABILITY - RES. 000232
Yes, thank you. Miss Chatzkel, you made reference earlier to the prospect of getting us additional information with regard to the formula. Were you anticipating the written documents that lay out what the formula is, or is there a way to show us in more of a chart form by way of explanation of how the different dollar components come to us by way of the State, and what formula they come from? I mean, I have never -- I've really not been able to understand what the formula is, the significance of '91, and how this formula affects the other 500 school districts across the Commonwealth. I mean, we're all subject to the same formula; is that correct?
Okay. And do some people do better in that than others? Superintendent? SUPERINTENDENT HORNBECK: Mr. Nutter, I 70 6/5/00 - FISCAL STABILITY - RES. 000232 can give you a piece of that answer. The formula is extremely complicated, and I frankly don't understand all of it. But what happened in 1991 is that basically they said that if you spend X-number of dollars -- and that was 4800, I think, was what the number was -- up above that, the State was not going to continue to equalize the dollars.
What does that mean? SUPERINTENDENT HORNBECK: Well, it means basically that up to 4800 -- or whatever that number is, I don't remember what it is -- that the State takes into account how poor you are. And so if you're poor, like we are, you get more money; and if you are wealthier, you get less money.
Right. SUPERINTENDENT HORNBECK: But once you spend above whatever that money is, 4800 or 5,000 or whatever, then basically, that difference is on you, on the district. And since we're in Southeastern Pennsylvania and our costs are much greater, we, of course, are spending above the 71 6/5/00 - FISCAL STABILITY - RES. 000232 $4800. Again, I say whatever that number is, 'cause I don't remember. And, therefore, that piece is not equalized; and thus, you begin to see at that point this disequalization taking place.
Well, would someone be able to lay out for us at a subsequent hearing -- I guess I would like to get better understanding of why we are where we are. I mean, putting some of the politics and some of the personalities and all of that aside, to the extent that you can ever put all of that aside, but I would like to have a better understanding of where things were at a certain point, based on whatever that particular formula was, and then whatever happened in 1991 and what that formula was, and then I need you to show me on either one sheet of paper or a series of documents on a year-by-year basis what the formula has meant to Philadelphia in its calculation, at the same time you have an increasing school age population, and what the bottom line of that financially ends up being as it relates to us. And then I would ask you, if someone has the capacity to do this, show me what that 72 6/5/00 - FISCAL STABILITY - RES. 000232 same formula has done under the same circumstances with a couple other places that are either somewhat like us or not like us at all. SUPERINTENDENT HORNBECK: I have no 6 doubt but that we can do the former, and we'll work hard on producing the latter as well. There are features outside of the formula which need to be a piece of this discussion, like not only the transportation features, but things like the charter school rise in expenses, which has been has been one of our big, big increases, and the increase in payments to approved private schools, and the fact that the Commonwealth doesn't reimburse all of that, and so on. So I think that the Council would be well served to have exactly the answer to your question, and we'll be glad to do that.
We've looked at actually what the change in our funds balance would be if the basic education formula still had been in place. It's about $700 million. Would have an impact of about -- 73 6/5/00 - FISCAL STABILITY - RES. 000232
Cumulative right. And it's about $75 million for next year alone. So we have looked at that. What we haven't looked at is kind of defining the changes in the formula, and I think that's what you're asking for.
Thank you. The Chair recognizes Councilman Kenney.
Thank you, Madam Chair. President Ramos, I think we may all agree that our efforts in lobbying Harrisburg for additional dollars or for dollars that people in the School District believe we deserve, as a result of poverty issues and increased enrollment, has not been a successful effort, I guess, up until some of the breakthrough that we've had 74 6/5/00 - FISCAL STABILITY - RES. 000232 recently. My understanding of the agreement, or the breakthrough, we've had recently is to give us a year to fix that situation, while not having the schools having any interrupted service and having a continuous academic year for the year 2000-2001. What, if anything, is planned, and what are the component parts of dealing with the Governor's Office, the members of the legislature on both sides of the aisle different? What's going to be different in the next year that has not happened in the last five or six years?
I think part of is the information we're getting out of the Governor's Office last week is that there is a shift. I mean, at one point, Councilman, they said that we have -- that Philadelphia has a year to figure this out. I think the context that we've set is that the City and the State leadership are going to work together to figure this out. It's not just you have a year and come back a year later. And I think that you're right, we have made significant progress in the last few months in building relationships. And as you often have said and others, a large part of this is first 75 6/5/00 - FISCAL STABILITY - RES. 000232 about having the relationships, having some sphere of trust where people can work together. I think that some of the sphere of trust that was built up in the last few weeks came at a very -- were critical at the end of last -- in the middle of last week as we were talking to the Governor's Office. There were several points at which trust was required. And it would have been a lot harder if Debra Kahn and I and other members of the Board and the Street Administration hadn't already established not only just official relationships, but we've now been working with representatives in the Governor's Office enough that, you know, you do start getting to know each other a lot better and know kind of what, you know, how much room you have to work with. So I think that part of it we have the new type of relationship with the Governor's Office that still has to be strengthened and built on. And I think there's -- I think of we've built some credibility with the Governor's Office, and now I think we can begin to transfer that to the legislature which, as you said, there's a whole 76 6/5/00 - FISCAL STABILITY - RES. 000232 lot of work to do there. But, you know, I think that we have accomplished establishing some credibility. We have been speaking to staffs of the legislative leadership. Everybody does know and understand the School District's financial crunch. Everybody understands, as you said, that this is really a year to work on a longer-term solution -- and, in fact, probably not even a full year, because what we really are talking about is, you know, probably February and March, when the whole budget process starts all over again. So, I mean, we don't want to relax and think we have a year to do it; it's actually several months. And, you know, we announced this on Wednesday night. Since then, you know, we've probably talked to the Secretary of Education twice and one of the Governor's senior staff people once or twice, so this has been an ongoing process.
Could you elaborate on what has been done, similar to what you've been doing at the Governor's Office and with the Secretary of Education as it relates to the 77 6/5/00 - FISCAL STABILITY - RES. 000232 legislature. Because it's been reported, and perhaps privately discussed, that various elements of the legislature, both Houses, both parties, probably don't feel as connected to the new administration as perhaps the Governor's Office by virtue of your working together in a time of crises.
Well, I think that you would agree that several months ago, the same would have been said about the Governor's Office. And we are -- we have, through a number of initiatives, started working in terms of just getting information out to senior staff, providing them the opportunity to check the numbers themselves to know that we're providing them with credible information. The Mayor has, in recent weeks, I know, spoken to legislators and the legislative leadership on both sides, and we understand that he will continue to do that. And I would defer to George Burrell to share, you know, the greater details with you on what communication exists between the Administration here and the legislative offices. But that, I do believe, is our next 78 6/5/00 - FISCAL STABILITY - RES. 000232 great task, is continuing to build with the Governor's Office while extending that credibility as well as relationships with the legislative leadership. I think that's right.
You had testified this morning that there's planned $30 million in non-instructional cuts that are part and parcel of this recent budget passed by the School Board. And I think you made it clear that none of those cuts, in your opinion, would be affecting children in the classroom in a negative way, or to the best of your ability.
Not directly. I would say that, you know, professional development does affect children in the classroom in a negative way, and that if this were, you know, a permanent approach, I would probably not be able to answer this way. We are, you know, making some very tough decisions about this year.
I guess part of the problem and part of the frustration that I've had over the last number of years in this body as far as our questioning and our relationship with the District over school budget and budgeting is that 79 6/5/00 - FISCAL STABILITY - RES. 000232 we've been told repeatedly that there were no more cuts being made, and that, in fact, I think terms like "The sound you hear is the sawing of bone. We are so close to the bone that there is nothing else left to cut." And then today, we learn that there's 30 million more to cut, even though it may not be the level of funding we would like. But I think you've made it clear that it's not a level of funding that's going to hurt children in any way. And I guess the frustration and the question is, is that if we had done this over the past three, four, five years, would we have not have accumulated not only enough savings to keep our fiscal distress at a minimum, but more credibility and ability to talk to the legislature and the Governor about the things that we've done. And I know that the Governor and the legislature are clear: they don't think we do enough in the way of providing resources for education. But if we were able to continue to make these cuts over the last number of years, would we not be in a better fiscal situation and also be able to point to Harrisburg and say, you know, we 80 6/5/00 - FISCAL STABILITY - RES. 000232 have done things to clean our house and to fix our system. It just seems to be two different stories: on one hand, we can't cut anything; and on the other hands, here's another 30 million, by the way.
Well, Councilman, I think -- you know, would disagree to some extent. I mean, first of all, over the last six years, a number of reductions have been made in administrative expenses being pushed into the classroom, as well as some progress and management and productivity. We just concluded a contract with Local 1201, which represents bus drivers, engineers and others, where the number of crafts went from something like 28 to 4, where we added a third shift so that you don't have automatic overtime for certain times. So a lot has been done in the savings, in the productivity area, and a lot has been cut in the administrative area. I can't really say, Councilman, that there are cuts here that I feel are, you know, that in any way should make any of us feel good. These are cuts made under extraordinary circumstance, you know, as you said, for the 81 6/5/00 - FISCAL STABILITY - RES. 000232 purpose of creating the space in the year to start working on longer-term solution. We are trying to do a number of things here. We are -- we are -- you know, we are -- in the long term, the amount of revenue that's going to be needed to continue making academic progress is going to have to increase, and it's going to have to increase significantly. One of the things we're doing, however, is trying to redefine what money -- what we have to do as a system. We've focused this year on school-based services for children. Some of things you see in here like free adult education, I'd love to be able to provide adults, you know, who are in their 30s, 40s, and 50s who have never completed their high school education a free high school diploma. That's a real substantive educational cut that we cut because it wasn't for children.
Right, we're all paying for 82 6/5/00 - FISCAL STABILITY - RES. 000232 it as taxpayers, but it's coming from somewhere.
Yeah. I can only give you a corollary to my own personal experience. I mean, when I graduated from high school, St. Joe's Prep, which my parents struggled to send me to, at a very expensive rate of tuition, I wanted to go away to school and I wanted to stay in a dorm and go away and have that college experience. And we sat at the kitchen table, and my parents told me, much to their chagrin and disappointment, that they couldn't afford to send me to an away-school at a higher rate of tuition. So I went to LaSalle and I commuted, and I think I got a pretty good education. I guess the question is that there are certain things we would like to do for everyone if it cost nothing or it didn't affect anyone's ability to pay for it, but our own individual personal experiences show that even though we'd like to send our kids to Georgetown or Harvard, and although I would have liked to have gone away to a private, overnight dormitory school, we couldn't afford, and we did the best with what we 83 6/5/00 - FISCAL STABILITY - RES. 000232 had, and I think that I was happy. I went to LaSalle and got a good education, 'cause that's what my parents could afford to give me and would have loved to have given me more.
And, Councilman, I agree 100 percent. You had the opportunity to go to a university that was a fine university, with a lot of strength, a lot of prestige, a lot of history, a lot of community, and you didn't have to pick an accredited college that you never heard of that's struggling and holding together with, you know, tape and rubber bands. And I think we all would be pretty content if this school district, relative to our neighbors, could be as strong as LaSalle is in this college community. That would be a relatively -- you know that would be a very strong position for us to be in, but we're pretty far from saying, you know, that we're the equivalent of LaSalle, among our neighboring school districts. Another metaphor that's often used is, you know, about people in their households having to make ends meet. And this isn't about cutting premium cable; this is about macaroni and cheese 84 6/5/00 - FISCAL STABILITY - RES. 000232 every day, about, you know --
But your testimony on these cuts made it very clear that it would not have a negative effect on the backs of the children in the system.
Either it's going to have a negative effect on them, or it isn't. If it is, then we have to discuss it.
Then let me say this. What we said in March and the commitment we made and we kept was that we would not make cuts in school- based programs for children. That's not the same as saying this doesn't in the end have a negative effect on kids. If we sustain this type of approach and don't find a new way of doing it and you approach the balancing of the budget as slicing and slicing, and you do away with professional development, and teachers don't get, you know, periodic retraining, that will have a negative effect on children.
What effects do you think that the upcoming -- when does the teachers' contract expire? 85 6/5/00 - FISCAL STABILITY - RES. 000232
What role or dynamic do you think -- without getting into the specifics of negotiations, what dynamic and effect do you think it's going to happen on this one-year temporary plan and how it's going to affect what our needs our in Harrisburg? 'Cause I will argue that the last teachers' contract, I think, perhaps wouldn't negotiated as hardly -- as tight and as tough as it could have been, and it's one of reasons why we're in the situation that we're in. And I know -- in my own personal opinion, there were political considerations at the time doling with presidential elections and national politics that put in us a situation not only from a financial standpoint but from a workable standpoint, that gave us no opportunity to really make gains in the area of labor relations and employees. And I know you guys weren't here and it was the last mayor, it wasn't this mayor, but, I mean, what are we going to do 86 6/5/00 - FISCAL STABILITY - RES. 000232 this time differently?
Well, there are a couple of things. I'll let Debbie also respond to part of that. First of all, this -- you know, we have said a number of times that we think, you know, that the teachers' contract should look different. I don't want to get into the negotiating the contract in public.
The -- I -- we also know that, you know, the financial circumstances are what they are, and that we are going to need the leadership in the Commonwealth to be a part of any long-term solution. And we're not going to do something that jeopardizes that. The final observation that I'll make, just in just terms of the context, the fiscal year context, is that the represented teachers just received a 4 percent increase at the end of April through at least the next April 30th, which, I think you know, is something to keep in mind.
One of the greatest advantages that the City had in its dealings with 87 6/5/00 - FISCAL STABILITY - RES. 000232 its labor unions back in 1992 was the existence of the PICA statute which allowed for the neutral arbitrators to determine the City's ability to pay that contract. It really took, I think, some of the political pressure off of members of Council and others to allow the Administration, despite the fact that the unions were upset about it, to get some of the breathing room it need to get the City back on its fiscal feet. Is there some scenario that would allow for a similar PICA arrangement for the School District that would give the protection to the District as it relates to its ability to pay for a negotiated contract? SECRETARY KAHN: Well, let me just say a couple of things. First of all, in answer to your first earlier question, I did speak with Ted Kirschner actually probably first thing Thursday morning, and he did express his relief and his pleasure that, in fact, we could be looking forward to a full-year school, you know, during the next school year, which really does help us, in negotiations at least, to have that certainty. I think the Mayor said earlier, in 88 6/5/00 - FISCAL STABILITY - RES. 000232 responding to that question about additional oversight for the School District, that he would certainly be open to that discussion, he did talk about it previously. There is nothing formal right now that is in the works, but that's something that we would talk about. We know -- I believe that the Federation knows that there are very high expectations for the result of this contract now, and we have a lot of discussions ahead of us between now and August 31st.
Thank you. The Chair recognizes Councilman DiCicco.
Thank you, Madam Chair. Maybe, Mr. Ramos, you might be able to answer this; if not, or someone else could. Does anyone know what the cost of the cluster program is, the cumulative cost?
The total cost is just $14 million, and included in there are some of the 89 6/5/00 - FISCAL STABILITY - RES. 000232 professional development, which is scheduled to cut. After the cuts that are contemplated, the cost will be brought down to about $11 million.
I'm a little confused. In your testimony, Mr. Ramos, unless I'm reading wrong, on , you begin to talk about cuts in the cluster program. I believe you talked about $1.35 million, which will occur within --
All right. And then on the next page, it goes on to 1.2 and then 1.36. I think that's probably a --
A typo. But if I'd adding correctly from through , in those items where you speak about cuts in the cluster offices or professional services, it's approximately about $9 million in cumulative cuts; 90 6/5/00 - FISCAL STABILITY - RES. 000232 is that correct?
You're saying 6.4 million in aggregate cuts will be made from the proposed 2001 budget?
Right. That's not limited in the cluster offices. The other administrative cuts is 6.44.
It's not limited to the clusters, right. It's in places other than in the clusters.
All of the administrative cuts in the aggregate were about $8 million and --
What is the total number of cuts in the cluster system?
22. I mean, depending on who you speak to, and I'm not going to get into the particulars. But since this Council will be mulling over the possibility of granting another $20 million, if the cluster system were done away with completed, that would be $14 million, right?
And I understand your testimony. You believe that it would create some havoc to go back to the original superintendents and whatever.
Right, right. That's right, Councilman. But the other thing to keep in mind is part of that structure is probably a constant anyway. Regardless of whether you call them "regions" or how you do it, there is going to be 92 6/5/00 - FISCAL STABILITY - RES. 000232 a certain level of support you're going to need. You're still going to have, you know, an apparatus for special education at the cluster level, you're still going to have a lot of those same type functions. You might end up having, you know, having one boss instead of two bosses and maybe, you know, one secretary for the boss instead of two secretaries for two bosses. But once you get into the level of service needed to provide -- to service the field, you know, you get some additional savings. But you also are, you know, putting it in a -- you're creating mini 21st Streets throughout the City instead of the opposite of what we're trying to do, which is to create smaller, more manageable --
But I'm hearing that you may have one boss instead of two bosses and one secretary instead of two. And, again, this may be too much for us to talk about now, but if there is a way in which we can, you know, compare some of those numbers, I mean, that's how cuts are made. I mean, I'm assuming that's how you got to some of the cuts that you've already 93 6/5/00 - FISCAL STABILITY - RES. 000232 proposed, because you're eliminating a certain number of personnel from certain various departments. SUPERINTENDENT HORNBECK: We can give you some comparisons. For example, when we had regions, we had in the system as a whole more than 200 more administrators. So if we restored what we used to have, we would have to add administrators to the rolls. The cost of administration then and now is almost the same. And, finally, the achievement children is about 40 percent greater. So there are several things one takes into account. And from a numbers' point of view, we're better off today; from a cost point of view, we're about the same; and from an achievement point of view, we're significantly better.
Okay, I have no 20 further questions at this time. Again, I think that breakout would be helpful.
I don't want to belabor this, but if we have 22 clusters and you say that there are going to be cuts of $2.6 million, is that from the current or proposed 94 6/5/00 - FISCAL STABILITY - RES. 000232 budget?
The proposed budget was actually level with what we estimate for this year, so these are real cuts. It's not just --
So that would be approximately 118,000 per cluster?
And what kind of positions are we talking about?
Again, I think there will be discussions with the cluster leaders and with the Administration over the course of a week, but the intent was to have management within the District and each cluster leader propose an area that he or she felt could best absorb the cut. So I don't believe the District's intent is to make a uniform statement as to what type of position might be cut but allow the manager to work with those dollars.
It would certainly be more than one position if we're talking about cutting $118,000.
Some of it's also 95 6/5/00 - FISCAL STABILITY - RES. 000232 professional development; not just positions, but professional development all through the clusters.
And how much would the professional development be? I mean, I thought you were cutting that throughout, so wouldn't that be included with the cluster? Is that part of the 2.6?
There's a cut in professional development, generally. And that cut is $5 million. Part of the professional development is -- that budget right now is divided up among clusters and downtown, and I don't know whether this includes the (inaudible). And so what when we talk about a $5 million cut in professional development total, the 1.36 million of that 5 is coming out of the budgets that clusters had for professional development.
In addition to their professional development budgets being cut by $1.36 million, the cluster offices were also cut by $1.2 million. 96 6/5/00 - FISCAL STABILITY - RES. 000232
Mr. Ramos, I'm sorry. Where are you getting the 1.3 number from?
Is that different from the numbers that we received the other day on Exhibit G out of the Board Document F-1?
The Exhibit G in the resolution spoke to professional development cuts, I believe, as being separate from cuts just directed at the clusters.
Well, on that document, tell me what the professional development cuts were.
Okay. On Exhibit G, about halfway down the page, "Professional Development," the line reads: "Reductions in professional development to be identified." The total was $5 million.
That was as of Tuesday night. And, again, we went to the management of the District to talk about how to best effect 97 6/5/00 - FISCAL STABILITY - RES. 000232 those cuts. What they came back to us with was that about 1.3 of those cuts would be at a cluster level.
All right. So this has been a discussion that's within a realm of $5 million, and now you're trying to parse out for --
To make distinctions within the $5 million of where these cuts are being made around the system.
So now the calculation that we have is that the cuts for the clusters would be in the vicinity, then, of 54,000, once you have taken away the development, the professional development.
It's -- actually, it's 1.2 million directly from the clusters that may 98 6/5/00 - FISCAL STABILITY - RES. 000232 have been to be effected through staffing changes. And it's $1.36 million that are professional development. We'll have to deal with those cuts in the aggregate. Those cuts are 2.6 million, which means each cluster will have to pick up from their budget more than $100,000 of cuts.
I'm sorry. At this time, the Chair recognizes Councilwoman Tasco. I'm sorry, I know everybody wants to be recognized.
Thank you. I'm just going to temporarily deviate from the cluster. On of your testimony, you talk about the $950,000 in savings that was achieved by budgeting comprehensive day care according to a small increase over actual enrollment. What I am puzzled by is the low enrollment. And if that is so, why, when we had testimony here when we had hearings on the welfare-to-work program and most of the women were complaining that there was not adequate day care. 99 6/5/00 - FISCAL STABILITY - RES. 000232 And am I missing something? Do we not market your capability to provide comprehensive day care and these parents don't know about it? Because we're constantly getting requests for home day care and variance changes at the Zoning Board. So that was on the other day when we had the briefing and I couldn't stay is the question that I'd like to have answered. SUPERINTENDENT HORNBECK: At least one of the reasons that we have that challenge is that there was an amendment put into State law back in 1991? When? Anyhow, ten years ago or so. At a moment when there was an attempt to cut out a bunch of centers that said you always have to have the centers that you have right now for eternity, and some of those centers are in places where the people to whom you refer don't live. And so despite the fact that that may not be the place that would be the best place for those centers if you placed them, where the need was greatest, the law requires that we keep those centers there. Now, what all of the reasons are is probably a lot more complex than that, but that's 100 6/5/00 - FISCAL STABILITY - RES. 000232 one of the reasons.
Well, has there been any attempt by the District to change the law to demonstrate that where -- since they are the ones who enacted the law for women to go to work, they instituted the welfare to work, has there been any collaboration and coordination to say, Well, where the centers are, the people who need the centers are not there, and so we need to change the law so that the centers can accommodate the mothers who need the service. SUPERINTENDENT HORNBECK: I think that discussion would make a lot of sense, and I suspect that that will be part of the conversation that will take place over the course of the next year. There's actually a number of ways in which, in my judgment, the welfare law has been implemented in Pennsylvania over this last couple of three years that could use our intention, and that's just one of them.
Probably to the new 101 6/5/00 - FISCAL STABILITY - RES. 000232 financial officer. How many budgets does the School Board have? You have a capital budget and then you have an operating budget, and then in the testimony, I hear about a categorical budget.
What is that categorical budget, and how much does it involve?
It's just over $200 million. Categorical funding is comprised of federal funds Title I money, Title IV, Title VI, Title 20. And it also consists of grant funding that we get from a variety of sources -- the federal government, the State, and other sources.
Well, not to do it here, but at the time we had the discussion that Councilman Nutter talked about with respect to the formula that changed in 1991, I think it would be awfully good if we could have information on all of the sources of funding, because I wonder whether sometimes there may be judgmental decisions that can be made to take funding from one source to help another source. Somewhere in one of the two statements, you mention that a cost in the operating budget is going to be paid for by 102 6/5/00 - FISCAL STABILITY - RES. 000232 categorical funds, which immediately raises the question, what other costs could be? So if we could add that to the budget. Secondly, I wanted to say I agree strongly with Superintendent Hornbeck that public education is the most important question. Although by newspaper coverage, you might think the stadium was the most important issue that Philadelphia was confronted with. Somehow, I imagine Philadelphia might survive much better if we forgot all about stadiums and did nothing. In contrast, if we took the same approach to schools, it would be a disaster. So I think, obviously, the number-one question facing Philadelphia is the School District. Third, I have to give a dissenting opinion to all of the plaudits that are being voiced about this great compromise arrangement between the Governor and the City and the School District. I happen to think it's not a good arrangement at all. I think that what should have happened was that the Governor should have acted much more quickly in delaying the payments that -- you know, the portion of the 59 million that he's 103 6/5/00 - FISCAL STABILITY - RES. 000232 talking about, and instead of asking for the School District -- instead of asking that the City put up the money, I think the Governor should have advanced money. I think the cuts that are being made are bad cuts because they're affecting adversely, I think, the performance by the school system. I don't know, but I expect that maybe that was one of the factors that caused Superintendent Hornbeck to make his decision about leaving. I don't think you advance a school program or school programs in general by compelling cuts. I view all of the cuts that you're making as harmful to the school system. I've never seen all of the waste that some of my colleagues believe exist; maybe it does, but I haven't seen evidence of it. And I thought with the studies being made by the School District, together with Greater Philadelphia First, I thought that if there were waste, that those kind of audits would have ferreted out those wastes. And so I think that the Governor, by not giving any additional money, by compelling 104 6/5/00 - FISCAL STABILITY - RES. 000232 cuts, has not served the City well. And I'm deeply concerned about that. The buying-time argument I don't go for at all. We've been buying time for so many years, just managing to survive each year. And I think the Governor should have taken steps to have really given support to the school system. But I think what we really need on the budget is the kind of full -- kind of not so much -- Madam Chair, I'm suggesting instead of maybe a formal hearing, I think this is a discussion about funding that might be best done in the Council caucus room. I mean, it doesn't have been to be a closed affair, but where we can have informal discussion. We ought to know and we don't know, and when we ask you some questions, it seems to us that you don't know some of these real terrible complexities, because, you know, it's human to try to just take the conclusion rather than to get to the fundamentals. And I think we've got to get to the fundamentals if we're going to play a larger role, as I understood we are, in the discussion between Mayor Street and Councilman Nutter with respect to Council supervision over the school 105 6/5/00 - FISCAL STABILITY - RES. 000232 budget. I think the Council has got to know much better than we know now all of these complexities.
But I did want to make clear that as to the whole agreement, I look at it negatively, if it has the result of so-called buying time, whatever that means, if it means the State is going to be more responsive after the Republican Convention. I'm not concerned about Governor Ridge's positions. Now I don't know whether they're genuine. I read in the paper that with respect to the views on abortion choice or compulsory non-abortion procedures, he's ready to switch his position one way or the other. And during the time, you know, leading up to the Convention and the decision as to who the vice president will be, we've got to know where he's going to be standing after the Convention, whether he does or does not become the vice presidential nominee. So let me say that I think the adult -- as the senior member of City Council, maybe not in years served -- I think President Verna may have served more years than I. 106 6/5/00 - FISCAL STABILITY - RES. 000232
But in age, I'm very concerned about the cut in adult education 'cause the educational system, sure it's for the kids, but it's also for the adults. And when we're talking about the need for preparing more adults for jobs that are not being filled, I think the adult education program is extremely important, and I'm hoping that in one way or the other, the proposals in -- I think it's in your statement, President Ramos, I'm hoping that that program will continue to exist in at least its current form. I think it ought to be enlarged, I think there ought to be more than two high schools throughout the City of Philadelphia that make adult education available. Thank you, Madam President.
You're welcome. The Chair recognizes Councilman Ortiz.
Thank you, Madam Chair. Those of us that were here around 107 6/5/00 - FISCAL STABILITY - RES. 000232 1988-'89, some of this budgetary processing is eerily reminiscent of the hearings we were having here in this chamber about the City budget. We were talking about one-shot fixes, which is what we have here, a one-shot type of fix that really does not, I believe, take us to the next step. We don't know where we're going to replace the $20 million, if this Council says we're that we're going to give this one-shot deal, how is the Board going to replace that $20 million next year. We have to begin thinking -- and I'm -- I'm also of the thinking that we have made incredible cuts in the budgets of education, specifically in the teaching part. My kid still goes to a classroom that has too, too many kids in one class. My son -- by the way, who likes macaroni and cheese, it seems to be his only food that he eats -- is going to a classroom that is going to be too many kids in that classroom. And it's a good school, the teachers are excellent. They don't have music really; they don't have art, as they should. I think over the years we've comprehensively have become so used to cutting 108 6/5/00 - FISCAL STABILITY - RES. 000232 back on the actual programmatic teaching that now -- that now we don't believe that public school systems should offer a comprehensive really educational experience. So we have cut on the basic aspect of what I -- what I had as a kid growing up in a ghetto, growing up in a poor community, growing up with a lot of kids in the classroom, but still, the programmatic aspects were still there. My child, for the first time in four years, just had a book that she could take home this year, and that to me was a great improvement. But when I went to public schools, I had many books that I took home and that I had to cover and that I had to take care of and so on down the line. So we have made -- we have made cuts. What I'm concerned about is that it is eerily, eerily reminiscent of 1988-'89 in the City of Philadelphia in terms of one-shot deals and cuts. And I'd like to find out, you know, what it is really. I mean, you have said that you're going to construct a five-year plan, and within that five-year plan, I would like to see 109 6/5/00 - FISCAL STABILITY - RES. 000232 how it is that we are going to finance the aspects of education. And that means bringing classrooms down from 30 to to 20. 5 That means -- I was -- Saturday 6 morning, I was with some kids at William Penn, and 7 we spoke about, how many computers do you have? 8 And they said they really didn't have computers. 9 They had a computer room that they would go to and 10 that it would be a computer class. And we talked 11 about some of the other aspects in terms of what 12 their experience in school was and what was the 13 prevalent nature. 14 I also asked them if they thought that 15 uniforms were going to increase their learning 16 experience and asking why they have passively 17 accepted the position over the uniform question, 18 especially in high schools. I would have expected 19 a little bit more of a questioning attitude from 20 high school other than Masterman as to the added 21 imposition of uniforms. I believe in a public 22 school system, freedom is part of the questioning aspect, and it was going to be, why they were not consulted. I asked them that, and there was a lot of passivity, and I didn't like that passivity. 110 6/5/00 - FISCAL STABILITY - RES. 000232 They should have been a little bit more questioning. But in terms of some of the aspects of Councilwoman Verna, she went down in terms of the cluster and the cuts. Have you any vision right now as to where these cuts in the cluster area are going to be?
As I said in my testimony, Councilman Ortiz, what the Board has done is gone through the proposed budgets of the departments. The Finance Committee made recommendations, the Board adopted them, and throughout this week, the Chair of the Finance Committee, Mike Masch, and our CFO, Rhonda Chatzkel, will meeting with the Superintendent and other managers to start addressing that with respect to the clusters and other areas that were cut.
What is an equity coordinator? An equity coordinator in the cluster, what is that? SUPERINTENDENT HORNBECK: It's an individual that examines the content, for example, of professional development, the formulae and the way money ends up in different schools, the test 111 6/5/00 - FISCAL STABILITY - RES. 000232 data results, all with an eye toward how equitable the distribution is.
How many of those do we have? SUPERINTENDENT HORNBECK: 22.
of them? 8 SUPERINTENDENT HORNBECK: As you may 9 know from years past, I think, for example, when I 10 first came here, that we discovered that about 11 $3.2 million of Title I money had been allocated 12 to the northwestern part of the City when, in 13 fact, the children that had generated that money 14 lived in North Philadelphia, east of Broad Street. 15 If equity coordinators had been in place, it would 16 have been a lot less likely that that was true. 17 The notion is that each kid ought to have a fair 18 chance and that person examines through that lens 19 those kinds of issues. 20
What's a 21 post-secondary readiness coordinator? 22 SUPERINTENDENT HORNBECK: An individual who has two primary responsibilities. One is to help create thousands and thousands of worksite learning opportunities, apprenticeship placements 112 6/5/00 - FISCAL STABILITY - RES. 000232 with employers throughout the City for the kids in each one of the primarily high schools. And the other is to help develop, this year, 25,000; by the year 2002, 70,000 surface learning placements throughout the City.
And is that like a job office, and there are of them? 9 SUPERINTENDENT HORNBECK: There are 22 10 of them. 11
One in each 12 cluster? 13 SUPERINTENDENT HORNBECK: One in each 14 cluster. 15
So the 16 secondary-readiness becomes sort of like an 17 employment office of sorts? 18 SUPERINTENDENT HORNBECK: Well, 19 actually, in Philadelphia, on the job front, the 20 worksite learning front, it's sort like the system 21 that exits in Denmark and Germany and England and 22 in other Scandinavian countries where there's an apprenticeship system. It's not so much to get a job; it's to place kids in places where it's another learning setting, where they equip 113 6/5/00 - FISCAL STABILITY - RES. 000232 themselves for college or for a job later.
So the job office with an educational framework in which there -- if a kid or a woman, a young woman is interested in banking, they would go to First Union and say, how many slots can you give us here? or something like that? SUPERINTENDENT HORNBECK: That's very much the way it is. And then on the surface learning side, similarly, there is the development both inside the schools and outside, with health agencies and nursing homes and all kinds of other places, places where kids are also linked back to the curriculum linking --
Do we have any data on that office, for example, in terms of the success per office? If there was a secondary- readiness coordinator at the Edison cluster or the Kensington cluster, how many kids and where they were placed and -- SUPERINTENDENT HORNBECK: Sure.
And what is the impact and effect on their educational processes and so on? 114 6/5/00 - FISCAL STABILITY - RES. 000232 SUPERINTENDENT HORNBECK: Well, we can certainly identify where kids have been placed, their record, that kind of thing.
Per cluster? SUPERINTENDENT HORNBECK: With each cluster. The degree to which we were able to say that it was that worksite learning situation or that service learning project that produced the gains in graduation rates, for example, that have occurred over the last several years are the big increases in being able to read and do math and do science. In my judgment, that can't be done in --
But you can say how many they have placed. SUPERINTENDENT HORNBECK: Oh, yeah.
Are they classified as teaching people or administrative individuals? SUPERINTENDENT HORNBECK: I have no 23 idea from an accounting point of view, but I consider them instructional people.
You consider them 115 6/5/00 - FISCAL STABILITY - RES. 000232 instructional, okay. Are they classified as instructional or as administrative? SUPERINTENDENT HORNBECK: I have no 5 idea where --
I think there's some dispute here. SUPERINTENDENT HORNBECK: -- where the accountants put them.
They are classified, but they are -- and how much do they earn? SUPERINTENDENT HORNBECK: They earn, I think, a teacher's salary. We can get back to you on that. But going back to the administrative classification, when I say that over these last several years, as I did a moment ago then, that we've reduced the administrators by 2 to 300 people, that already counts people like that as administrators, so that they're not over on the 116 6/5/00 - FISCAL STABILITY - RES. 000232 instructional side. There have been those in the past who've suggested that we have mislabeled --
But are they in the instructional side in terms of the budget that you submit, or are they on the administrative side? SUPERINTENDENT HORNBECK: I understand that they --
Because if you're trying to look at what is the size of the administration of the system and they're included in the teaching side, then that is confusing if they are actually administrators. SUPERINTENDENT HORNBECK: Well, that's the reason, I think, that Miss Chatzkel said they are classified as administrators.
There are two points to make, Councilman. One is that, as Miss Chatzkel said, for budgeting purposes, they're labeled as administrative, even though educators might see the role as instructional. The other is, and it goes to Councilman Cohen's earlier question, that some positions that are out in clusters are categorical. They're not -- you know, the operating budget doesn't show them as -- 117 6/5/00 - FISCAL STABILITY - RES. 000232
I don't know if it's some or all. SUPERINTENDENT HORNBECK: Some of them are.
The equity and the readiness are categorical? They're paid by federal funds? SUPERINTENDENT HORNBECK: Well, not all categorical monies are federal funds, but some of them are categorical, yes.
Thank you. The Chair recognizes Councilwoman Brown.
Thank you, Madam Chair. Let me first say that in the short time that I've been here, I've heard President Verna plead on a number of occasions on the value of having members of this body and the Harrisburg delegation sit down to make sure we're all on the same page as it relates to Philadelphia, and I 118 6/5/00 - FISCAL STABILITY - RES. 000232 think the recent agreement speaks loudly on the overdue need for that. So as we look at this coming year, typically, we hear it takes two, but it's really going to take three to make it work: this body, the Harrisburg delegation, and you, those who have the awesome responsibility to turn this around over the years in front of us. I want to go on the record first to say I see the need in that is overdue, and let us be mindful to use those 12 months in a way that gives us the yield that we're looking for. One of my colleagues mentioned that one of the fundamentals in terms of looking to where the fundamental problem lies with the formula, and for my first time, again, in the six months that I've been here, I clearly got it on why there is this severe, glaring, obvious inequity when it comes to the funding of Philadelphia public school students. Now, since the formula, the new legislation happened at the State level in 1991, has there been discussions and pending strategy that the formula will again be looked at to see if 119 6/5/00 - FISCAL STABILITY - RES. 000232 it can be recrafted -- and "it" means legislation -- recrafted so that the new formula adequately captures what has us where we are now? Please respond to that.
There are probably two levels of responses. One is that, frankly, I think if we were just to go back to '91-'92 and just undo the changes made to the formula there, that would probably still not reflect a system of funding public schools in this state that makes sense. The -- you know, the -- one of the big problems that we have is that over that same period of time, you know, the local governments have been increased and expected to pick up a bigger share of the cost of public education. And if you're going to look at changing how public schools in Philadelphia and other public schools are funded and make sure that they're funded adequately, you'd probably have to change and do more than just uncap the formula. You'd probably need to change the formula. There are two bills right now in the State legislature -- the Califano and the Rhoades 120 6/5/00 - FISCAL STABILITY - RES. 000232 bills -- that seek to change the funding formula altogether. And there are other types of initiatives out there that are seeking to shift some of the burden from real estate tax to other forms of tax at the State level. I mean, you have some people that have been talking about this for a long time, such as (unintelligible), I guess, has been talked about tax reform for some period of time, and there are more people listening.
Let's say the 1999 formula was never changed; would we be able to say today that there would be equity of funding per-pupil expenditures between Philadelphia students and those students that are living in the other counties?
No, it's pretty clear that there would not be equity. And I think we're even at a point where, you know, where we're still struggling for adequacy; and, you know, we're not even approaching equity. SUPERINTENDENT HORNBECK: I think, as an arithmetic matter, that if the 1991 formula were still in effect, it would remedy between about 25 and 33 percent of the problem. 121 6/5/00 - FISCAL STABILITY - RES. 000232
25 or 33 percent -- SUPERINTENDENT HORNBECK: Of the problem.
Oh, okay. SUPERINTENDENT HORNBECK: I mean, that would be a good beginning and it would get us a significant way down the pike to the structural deficit that we find ourselves in, but it would not close the gap between Philadelphia's children and the children in the surrounding 61 school districts.
Which again points to the need for this body and at least those who represent us in Harrisburg from Philadelphia to all be on the same page. SUPERINTENDENT HORNBECK: There are fundamental flaws in that system. They are flaws that are, for example, reflected in the fact that 20 years ago, the State picked up about 52 or 53 percent of all education costs, and today, it's somewhere in the mid-30s. So there's just been a quantum shift in the character of responsibility for public education during this period of time, 122 6/5/00 - FISCAL STABILITY - RES. 000232 and it is not an easy fix. But your question goes to the heart of the matter, and that is to the kind of fundamental changes that are reflected in those two pieces of legislation that Mr. Ramos mentioned and other approaches that could be taken as well.
Okay, let me move to a second point, around this notion of the deficit. New school reform initiatives like full-day kindergarten honoring the mandate around charter schools have contributed somewhat to our existing debt; is that not correct? SUPERINTENDENT HORNBECK: That's --
What other things would you add to that that would have happened had we had all the dollars to begin with? SUPERINTENDENT HORNBECK: Well, the things that have contributed to the big dollar amounts are full-day kindergarten and charter schools and payments to approved private schools, or as the budget says, to "alternative educational institutions" or something like that. And there are -- Rhonda, what are the -- there are a couple of more. 123 6/5/00 - FISCAL STABILITY - RES. 000232
Actually, if you turn to of the presentation that I handed out, it talks about some of those mandates that have increased our expenses, and the payments to charter schools -- actually, what's listed on here is $68 million we now expect. Because of the additional charter school approvals made by the Board recently and the expectation for enrollment that, our payments to charter schools will approach $80 million next year. In just our payments to charter schools, in 1997, our payments to charter schools were 0. The tuition payments to other schools, which are $45 million, are an area of significant growth, and we present in another slide the degree of growth there. We have to honor the terms of an IEP, of an evaluation that's done for special education students and who are poor and place students, and we have to bear the cost of tuition. Comprehensive day care is a mandate, it's a service which we have wanted to offer, but we talked a little bit about the amendment that requires us to keep open locations that we had in 1988. And services to non-public students is 124 6/5/00 - FISCAL STABILITY - RES. 000232 another mandate expense for which we receive reimbursement but, again, these are mandates that contribute to the deficit overall.
My final question is again related to clusters and the makeup and the dollars spent. I want to echo comments made by Councilman Cohen with regards to concerns that exist currently around waste, particularly when we bring in a highly respected outfit like Philadelphia First, and they come back to you and deliver the message that there is none. And I believe that some legitimate questions have been raised around dollars spent on the admin. side, but on the class side, in clusters, where instructions are needed specifically within those clusters, is there not research to support that where you have small learning environments, which is what led us to the clusters, is that not correct? SUPERINTENDENT HORNBECK: That's correct.
Children do better academically. SUPERINTENDENT HORNBECK: What we found 125 6/5/00 - FISCAL STABILITY - RES. 000232 is that -- in two different ways. The small learning communities, which are inside of schools, there's a lot of research that tells us that kids do better in those settings, rather than in great big, you know, 3,000-kid high schools and 2,000-kid middle schools, and so on. And then in the framework of the clusters, when some of these concerns were raised about clusters some time ago, one of the things we did was to see how the kids, even within our own clusters, performed. And what we discovered is, which I hadn't looked at before, is that the kids in the smaller clusters did significantly better than even the kids in the somewhat larger clusters. And it's really not sort of rocket science to figure out why. Most human beings relate to one another better if you're relating to each other as human beings, as persons, as not big abstract, anonymous groups. And the clusters give a kind of an access between schools and administrators and parents and schools and community agencies, health agencies. I mean, everybody comes to know each other in a different 126 6/5/00 - FISCAL STABILITY - RES. 000232 way, and they will tend to accept responsibility from one another. And that's the whole point of the notion that smaller is better.
One final question. I know that in schools like McCall and Meredith, you have enrollments of somewhere between 550 and 610. The children are doing very, very good there. Give me the name of other elementary schools where you have larger enrollment and the academic performance of those children, generally speaking. SUPERINTENDENT HORNBECK: Well, I can't just pull off the top of my head big ones and little ones. I can give you a lot of schools where performance is very good and where the climb in achievement is really dramatic; I just can't associate it with size off the top of my head. And one of the things that we begin to see happening is even in the bigger schools, where the total enrollment is, say, 1,000, that school with 1,000 kids would generally have 3 small learning communities in it. So that instead of having school with 1,000 anymore, you've got 1 25 physical structure with 1 principal, but inside of 127 6/5/00 - FISCAL STABILITY - RES. 000232 that school, there are schools within schools, with only 3 or 400 kids in them, and those 3 or 400 kids stay together, and the teachers that teach them stay together. And so what we're trying to do by doing that, in fact, is in a sense, to replicate the experience out of Meredith or out of McCall by not building a new school over here for 3 or 400 kids, but to create schools inside of schools that exist and have the benefit that comes from being small happening that way.
Thank you. The Chair recognizes Councilwoman Miller.
Thank you, Madam Chair. Good afternoon, everyone. I have a couple questions. Superintendent Hornbeck, in your testimony on , the bullet points at the bottom, right before the last one or two, it says 128 6/5/00 - FISCAL STABILITY - RES. 000232 "Money belongs in the classrooms and not in administration. We have reduced the number of administrators by several hundred. We've spent more on instruction and less on other things than is spent in the average 500 Pennsylvania school districts." What are those things, such as? What are the things that other school districts are spending? 'Cause this is my real question, and I've been thinking about this over the weekend. $1.6 billion to me is a lot of money, and I just can't figure out why we can't run a school district on 1.6 billion. And then maybe I'm not thinking about the fact that maybe this includes facilities. I know it does. I was pretty shocked when the principal at Gratz told me they needed 10 million just to bring Gratz up to where it needs to be in terms of the facility. And I agree with Councilman Cohen when he commented earlier that this is not the setting for us to truly understand what is going on in the School District budget. Maybe there needs to be some other type of session and setting so that we can really understand. 129 6/5/00 - FISCAL STABILITY - RES. 000232 Because a friend of mine, State Representative John Myers, whom I know you know, was meeting with a group of other people from out of town, and they were astounded to learn that our school district budget was 1.6 million (sic), so I said to say to John, Listen, you know, we have like a little mini city here. We have more than 200,000 children, but that is the initial reaction. And it's my reaction when I say we have 1.6 billion. Well, how much do we really need? SUPERINTENDENT HORNBECK: Well, I think you've posed one of the problems we face, 'cause in any of our worlds, $1.6 billion is a lot of money.
It's a lot of money, right. SUPERINTENDENT HORNBECK: And that's the reason, in my view, it is useful to think about it not in terms of the total but how much is it per child.
Right. SUPERINTENDENT HORNBECK: And in Philadelphia last year, the per-child amount was 130 6/5/00 - FISCAL STABILITY - RES. 000232 $6,969. And if you run across our respective political borders here, you would discover that it is about $1900 more than that, or about like $8900 per child. And when I was talking about spending more on instruction and less on administration and these other things, I was talking about, to some extent, the same categories -- that is transportation and what it takes for the buildings and the custodians and the central office and all of that stuff. And so what it's saying is that on those kind of things, we spend less in Philadelphia than is spent on average in those other 61 school districts in Southeastern Pennsylvania. And if you want them to look across the State, we spend more on instruction and less on those other things than is spent on average in the other 500 school districts. And that doesn't even acknowledge the fact that we have administrative expenses here that they don't have. For example, the 440 security officers that are budgeted next year. We have far more security officers per kid than anybody else does, but those are part of 131 6/5/00 - FISCAL STABILITY - RES. 000232 administration, and they get counted in our administration, where we already spend less than the other people spend. And, similarly, with other challenges that we face in that process that just don't exist out in -- because the nature of the needs of our kids are different. So if you could actually strip out of our budget the stuff that is unique to us, like security officers, and then look again at the administration, we would be even lower. But even with them in, we're still lower than the other guys, because we do believe that out of the dollars we have, good stewardship requires that we put it into instruction first. And so, I mean, people say to me, if you haven't gotten any more money, then how the heck did you have full-day kindergarten and how did you double the amount of money on books and triple the amount of money on computers and do all these other things? Well, the way we did it -- it's not magic. There were two ways. We went out and raised money from private sources and that kind of thing and we shifted money from where it 132 6/5/00 - FISCAL STABILITY - RES. 000232 used to be spent on administration to where it's spent now, and that's on instruction.
Okay. I have a couple more questions too, Madam Chair, but I still believe that we need some other type of session. If Council and the Administration and the School Board are really going to work together, then we need to be more knowledgeable about this whole financial picture as it relates to the School District. SECRETARY KAHN: Well, let me just say, Councilwoman, that we absolutely agree with that, and I think that also ties in to Councilwoman Reynolds Brown's point, which is, when you ask about $1.6 billion, it's hard enough for those of us in Philadelphia who know the City, who know the system so well, and have some appreciation for its size, you know, its enormity, its complexity. Take that, you know, some miles west to Harrisburg and it becomes extraordinarily difficult for people. And I've have that said, you know, to us from staff and members and people on the Administration and been on all sides of the aisle, and people just can't get their arms around that 133 6/5/00 - FISCAL STABILITY - RES. 000232 and appreciate. So, you know, all of these points are dovetailing very, very well.
And we've started a process, led by Mike Masch, where we're breaking down the budget and rebuilding it in a way that we think is more understandable to people, more as a communication piece. And I'll just give the first step of how we're conceptualizing this in this is terms of communicating how the budget is built. And Mike Masch takes credit for this concept, but I like it so I'm going to repeat it. If you take 1 teacher with 33 kids standing on a street corner, without any books, pencils, buildings, electricity, buses, police principals, that's $400 million?
Mike does it better than I do. So $689 million is the teacher standing on the street corner with 33 kids. And then we have to, from there, layer on the other costs of running the school system.
Actually, one of the 134 6/5/00 - FISCAL STABILITY - RES. 000232 things that was interesting when we looked at how the dollars were spent, and we do have lots of charts, which we don't need to go through today, but I'm happy to come back and talk to you about them. It was interesting when we looked at just teachers, principals, counselors, and books, that accounts for more than $800 million. That's out of every $2 that we spend just on those items. And the other thing that we did, and we need to do a better job of doing, particularly in Harrisburg, you're right, when we talk about $1.6 billion, it's huge. It's really $41 per day per child. And out of that, what we spend on administration is cents out of every dollar. So if you start to parse it out and just, you know, get it into real numbers, it becomes more meaningful.
Okay. Yeah, we need that, 'cause these were just a couple examples you gave and are, you know, really very helpful.
Right, okay. 135 6/5/00 - FISCAL STABILITY - RES. 000232
I'm giving Mike a couple days off. And then, you know, the next phase for us is really the communication piece. It's going to be critical to not only work in Harrisburg but even more critical, you know, here locally. We really do have to get this story out and told better, and the format that we've used for our budget book and all of that, you know, has not historically been designed, in my opinion, to be as helpful as possible.
That's true. And even though they've talk about the formula, I'm glad people raised that question earlier. That's something I've always been pretty confused on. And I asked someone this morning again to sit down with me and show it to me on paper because if we're going to say that the formula needs to be changed, then we have to know what we're changing from to, you know, that's going to help us. And it's really very, very, very confusing. But I have a couple other questions. I have a school in my district, and the principal has been here a couple times during School Board hearings, and the Reading Recovery Program is a 136 6/5/00 - FISCAL STABILITY - RES. 000232 program that's being used, that people say really works. It's hailed as one of the best programs here. And if that's so, then why are they calling me to tell that they, I think, lack $9,000 to have Reading Recovery in the upcoming school year? Does that cut take place at the school level or at the cluster office level?
Well, on the programmatic piece, I'll -- you know, I think we should wait for Superintendent Hornbeck, because I don't know that any of us are qualified to answer. But there are -- what we did was, when you look at the elementary, middle, and high school budgets, left that alone. Now within that, there may have been some schools that got more, some that got less, depending on their enrollment in the operating budget. If they were getting Title I dollars poverty funding, they may have had that changed because of changes in their poverty rates. I believe -- and I'll ask Rhonda to confirm -- that we did lose some Title I money this year because our poverty rate went down. Or, 137 6/5/00 - FISCAL STABILITY - RES. 000232 in other words, you know, our population is not as poor as it was last time. So that has had an impact, you know, in some individual school budgets.
Do you think the poverty rate increased due to welfare reform, more people working now?
I think it's probably a function, and this is just speculation. It's a function of a strong economy and that income in other places has gone up by a lot more than income has gone up here.
It's also because some the population is charter school population, and the charter schools are eligible to apply for Title I. That comes out of a pool that would otherwise come to the District.
Okay, good. And there are a couple of items that you talked about in terms of the budget cuts. I have a few questions on those. What would be the rationale for consolidating the disciplinary schools from 4 to 3? I think when we went to Houston, someone made 138 6/5/00 - FISCAL STABILITY - RES. 000232 a statement that there are 5,000 children in Philadelphia that would be in the category of those needing a disciplinary school. So if you're going to consolidate one of those schools into the other, what does that do in terms of the need? 'Cause I know with CEP coming in, it's not really going to be able to serve the total amount of children that they're going to be contracted to serve in the very beginning. At least that was the original plan. I don't know whether it's changed with them now coming in January.
We should let the Superintendent talk about the programmatic impact, but I can tell that you when we looked at the budget cut, it did not assume that we would eliminate any teachers. And, in fact, it's believed that there is extra space in the existing two schools that would remain. It's a matter of moving the staff there and having some consolidation at an administrative level, and that's really all that is contemplated.
Excuse me. Do we know at this point in time which school will 139 6/5/00 - FISCAL STABILITY - RES. 000232 be closed?
Council President Verna, what we did was, we looked at -- the Finance Committee looked at the budget and saw that in terms of capacity, you could fit the same number of students that are currently in three schools into two and that -- so budgeted according to that potential savings, budgeted the savings of CEP opening in January instead of September, as you've been briefed, it's -- that program is running behind. Now, we've asked staff to do it because that was the basis on which the Finance Committee made the recommendation and the Board adopted the budget. Now, this week, the Finance Committee Chair and the CFO are meeting with the Superintendent and the various department heads, including people in charge of remedial disciplinary schools and looking at, you know how they propose to effect the savings. What you have is the basis on which we made that budgetary decision. They may think that they can do something differently. They may think that, you 140 6/5/00 - FISCAL STABILITY - RES. 000232 know, able academies that I know the President has spoken of before, they may think that maybe there should be a change there instead of a consolidation. We want to give the programmatic people, the educators, a chance to come back and tell us if they have another way of doing it and what that way would be.
I want to get this clear in my own mind. I don't know how we can say we have a savings of $475,000 with the closing of one discipline school. How do we arrive at that figure? What do we then do with the building? It's going to be a vacant building. Where will the children go? You say there are two other schools. How can you say you're saving $475,000 when you can't tell us what school you're closing?
The administrative costs, actually, for all three schools and the 141 6/5/00 - FISCAL STABILITY - RES. 000232 cost for -- we're talking basic building support -- a maintenance engineer, utilities -- they're all fairly comparable. You know, the difference might be $20,000 up or down, but they actually have similar budgets for administration.
But where are the students going, and wouldn't that cost us more money? Wouldn't we have to have personnel to --
The teaching staff would move with the kids. We're not eliminating any teachers in this analysis, and there would have to be --
Do you have more teachers in one of the disciplinary schools than you have in another? I mean, you're really not giving us any information at all on this. And in March, we were told that the Community Education Partners Program would commence, I believe, in November. Now, today, we're hearing it will not commence until January. We still don't know where that's going to be located, how many pupils will participate in that program, and where will the students come from. 142 6/5/00 - FISCAL STABILITY - RES. 000232 I think I'm talking to somebody. SECRETARY KAHN: Let us just try on the projected savings again. I think that what was taken into account to reach the $475,000 figure is the cost of the administrator in the building, the principal, the building engineer, other positions, other --
Other support positions -- the secretary and the utilities and the running of the plant.
I'm sorry. Now I'm stepping over the President's question, which, I think, was over Councilwoman Miller's. I think what we're having difficulty understanding, or at least I am, when you say that you save that money from not having those people at School X, but you are not laying anyone off and all of those people are going to go now to Schools Y and Z, how do you save money?
It's actually what we've kept intact is the teaching staff. The savings that we've talked about are just the administration and the maintenance of the building. 143 6/5/00 - FISCAL STABILITY - RES. 000232
I can't speak to that yet. SECRETARY KAHN: You know, depending upon the other needs within the system, it's possible that employees will be transferred to vacancies, building engineer positions that would be vacant in other buildings through attrition, you know, or any other needs. And we won't know that until --
These are positions that are already budgeted for but not filled? SUPERINTENDENT HORNBECK: That's the way it would happen. I mean, one of the -- I mean, take the administrator. We've got, you know, of course, hundreds of places and vacancies all the time, including people who are leaving us to go get paid decently in the suburbs. And so we can absorb that level into the rest of the system without a layoff and still -- into vacant positions, just like you just said, and still save the money from not paying them, because we'd hire somebody else to go into the other positions. 144 6/5/00 - FISCAL STABILITY - RES. 000232
But you have budgeted apparently for that position, albeit unfilled, right? SUPERINTENDENT HORNBECK: Well, there's a revolving -- I mean, like today -- on August 15th, there will be another position unfilled for a while, the superintendent. Yesterday, nobody knew that. There are going to be principals that will announce that they're going to be leaving tomorrow. There are -- in any large institution, there are going to be vacancies at any given moment. What we would do with, for example, the administrator and a position like this would be, instead of having the person there and instead of hiring another person into one of these vacancies, we'd take that person and put them in there and cut that position out altogether and save the money.
All right. I'll come back on that issue on my own time. I apologize.
May I follow up on that for one moment? 145 6/5/00 - FISCAL STABILITY - RES. 000232
If I may. Is this a City-owned building that we're closing, or is it leased space that the school may be -- SUPERINTENDENT HORNBECK: No. If I remember correctly, each of them are School District-owned buildings.
So even if the building were closed, wouldn't we still have to pay for some type of maintenance? SUPERINTENDENT HORNBECK: It would be --
We would have to weatherize it, I'm sure, and do all of the things that would have to be done so that the building would not be so badly deteriorating after two years that we'd have to demolish it. SUPERINTENDENT HORNBECK: Yes. Some of those kinds of things would be necessary, yes.
And with all of that being said, we're still going to be saving $475,000? SUPERINTENDENT HORNBECK: It's my understanding that that's the estimate.
Councilwoman 146 6/5/00 - FISCAL STABILITY - RES. 000232 Miller, I really apologize. I didn't mean to --
I may make you unhappier 'cause I would compute it at a higher savings. These people, the maintenance people that you would be transferring elsewhere, represent a savings, because if you didn't transfer them elsewhere, "the elsewhere" would require additional appointments, wouldn't they?
No, no. They already are in operation, Councilman. That would already be in operation.
No, but they say they have vacancies, they're going to transfer these people to vacancies that exist.
Are the vacancies in the budget as vacancies, or are they already calculated for? We don't know that. SUPERINTENDENT HORNBECK: Generally 147 6/5/00 - FISCAL STABILITY - RES. 000232 speaking, there are X-number of positions in the budget, and they have dollars behind them. And at any given moment, those positions with dollars behind them are filled or not filled, and that will change from day to day, just like in a small city with as many employees as we have. And then there is, as you know, a salary savings that is taken in the preparation of the budget, and those things together constitute how much money there is in salaries over a year.
Okay. Superintendent Hornbeck, how many School District employees are there? What's the number of School District employees? SUPERINTENDENT HORNBECK: About 28,000 full-time.
So you have an average daily vacancy rate of -- 'cause I think 148 6/5/00 - FISCAL STABILITY - RES. 000232 for myself, you know, we're trying to get people jobs all the time, and lots of places don't have a lot of vacancies. So we're not -- I'm not in the -- my mind is not in the mindset of vacancies 'cause so many people just aren't hiring at all. So you have a average daily vacancy rate of -- SUPERINTENDENT HORNBECK: I can tell you what it is for teachers; I can't tell you what it is as a whole. For teachers, we have a vacancy rate of between 1 and 1.5 percent on a daily basis.
I think you're going to have more too, because the article that was in the Inquirer a few weeks ago -- I've had two people say they were going to go to Pennsauken to apply, and another young woman, who's in college right at the moment, is going to change her major to accounting because of the low salary that Philadelphia offers. She was, you know, going to -- wanted to be a teacher, but she's changed her mind because of that article. SUPERINTENDENT HORNBECK: Well, the average starting salary in Philadelphia is $3300 149 6/5/00 - FISCAL STABILITY - RES. 000232 below what is paid on average in our marketplace in the surrounding suburbs. And within years, 4 it's $10,000 less. So we lose lots of people as a 5 consequence of that inequity. 6
Okay, I have two 7 other quick questions. 8 In the budget list that you're talking 9 about that you propose, what cuts are being made 10 in transportation? And also, what does the elimination of professional-growth funds for non-represented employees mean? What is that exactly? What is the fund, actually?
The professional-growth trust fund that's being reduced was established under a CASA contract of many years ago, and it required that it we maintain a training fund for CASA employees, which we will continue to do. This is administrative training, and as we looked at the administrative training dollars available across the budget, we feel that there was enough cushion at least going into the next year.
Okay. And what about the transportation up here, up at the top?
As President Ramos said, 150 6/5/00 - FISCAL STABILITY - RES. 000232 and we don't take this lightly, we come out to staff with recommendations based on meetings we've had with them as to cuts, but we need them to come back to us and talk about how those cuts could be effected.
Okay, okay. So this is really something that's been proposed, looked at, but it still has to be more defined?
We need to go through various cuts before we can implement the cuts, yes.
Mr. Ramos, how many people will participate in the Community Education Partners Program? And where will the students come from? SUPERINTENDENT HORNBECK: Our expectation is that there will be about 800 in the beginning and it will grow to a maximum of 1500 under this contract, and they will come from all over the City.
And that will 151 6/5/00 - FISCAL STABILITY - RES. 000232 be in one facility? SUPERINTENDENT HORNBECK: That has not been finally, finally determined.
Wherever that facility is going to be located, I strongly, strongly urge that the District Councilperson be notified. I mean, since it's such a secret, I don't think it should be a surprise to the District Councilperson. SUPERINTENDENT HORNBECK: Well taken. And I honestly cannot tell you at this moment for sure myself where it's going to be located, but as this unfolds, we will include notifying the District Councilperson.
And we've been told repeatedly, President Verna, that they're not going to be able to have a site up unless they consult with the District Councilperson, so they understand and they have been told.
Are they going to have to build a facility? Or are they looking for -- you don't know? SUPERINTENDENT HORNBECK: The practice 152 6/5/00 - FISCAL STABILITY - RES. 000232 in all the other places is to take an existing facility and redo it to their specifications.
Well, I guess the school that you would be closing wouldn't fit their requirements? SUPERINTENDENT HORNBECK: It doesn't. One of the requirements is that it all be on one floor.
Mm-hmm. SUPERINTENDENT HORNBECK: For line-of-sight security reasons. And so that was one of our first questions, too. Why don't you just take this? but it doesn't work in the same way.
Thank you. The Chair recognizes Councilman Cohen.
Does the fact that the School District covers a city and a county have any impact on the funding by the State? SUPERINTENDENT HORNBECK: It has a huge impact. About two years ago now, Greater Philadelphia First actually did a careful study of the relative position of Pittsburgh inside of Allegheny county and Philadelphia inside of 153 6/5/00 - FISCAL STABILITY - RES. 000232 Philadelphia County. And as your question implies, there are county costs that are picked up by non-Pittsburgh municipalities for Allegheny County. And they determined in the study that if we were able to enjoy the same situation proportionately, that it would permit Philadelphia to spend $22.50 more per child in education. And examples include things like the courts, other health and welfare functions, things that in Philadelphia County, Philadelphia taxpayers have to pick up entirely; whereas in Allegheny County, non-Pittsburgh but Allegheny County residents pick up a share of those county costs.
But how does that affect State's funding of the schools in Philadelphia? SUPERINTENDENT HORNBECK: Not at all. It makes the State's funding, in my judgment, of schools in Philadelphia more unequal. It's one of the reasons that Pittsburgh City is able to spend almost $10,000 per child. SECRETARY KAHN: Yeah, and I think that's the point. In the sense that because the 154 6/5/00 - FISCAL STABILITY - RES. 000232 City bears those additional county burdens, it then limits the City's ability to fund the schools and, therefore, the State can look at the effort, you know, that goes into funding schools by the municipality and really, in effect, not -- you know, sort of ignore what it is that the City needs to assume because of its county burdens as well.
All right. Second, legal expenses. Could you at the next time be prepared to discuss what the budget is for your law department? I don't know what you call it, "the legal staff" or the law department"? And what you spend on outside counsel.
And, lastly, I think the Superintendent spoke of the State's share of educational costs having gone down. I'd like to ask you about that because my understanding has been that Governor Ridge always proclaims that he is an education governor, and during the approximate six years of his term, that the State has increased its funding. If you have any information on that, I'd like to hear it. 155 6/5/00 - FISCAL STABILITY - RES. 000232 I gathered you say the State has cut its share from what used to be close to 50 percent down into the 30s. SUPERINTENDENT HORNBECK: Well, it's more than 50, down into the 30s. That has not occurred simply during Governor Ridge's tenure in office. It's occurred over the past or 9 years. 10 But it is true, and we can get you 11 these numbers too, that if you look at the past 12 five administrations two Casey, two Thornburg, and 13 one Ridge, the Ridge increases in education have 14 been by far the least. 15
Could we have that 16 information also at the next session? 17 SUPERINTENDENT HORNBECK: Be glad to. 18
Thank you very much. I'd like to go to the Act 46 and this new Education Empowerment Act. I'd like for someone to explain what they are. What do they 156 6/5/00 - FISCAL STABILITY - RES. 000232 do, how do they impact on us and --
Richie Feder was here from the City Law Department, and we will track him down. In the meantime, on behalf of Councilwoman Tasco, if we can ask the School District or any of its representatives to give us a brief overview of both Act 46 and the empowerment bill to which Councilwoman Tasco made reference, and give us your explanation of those two acts and how they affect the School District and the City.
First, at a general level, I understand that there is a handout that summarizes the Educational Empowerment Act.
And you have a memo from Bill Epstein that summarizes the Education Empowerment Act? It's a memo format. 157 6/5/00 - FISCAL STABILITY - RES. 000232
I don't have that, I don't believe. It's not in my folder.
Our Office of Government Relations has a summary of the Education Empowerment Act that's very, very tight, and we'll make sure that you get a copy of that.
Okay, all right. And Mr. Feder has returned to the room, and he will approach the witness table. (Witness comes forward.)
Good afternoon. I asked for an explanation of Act 46 and this new empowerment -- Education Empowerment Act. What is the difference between the two, what are the similarities between the two, and how do they impact on the Philadelphia School District?
Okay. Councilwoman Tasco, my name is Richie Feder, and I'm Chief Deputy City Solicitor for Appeals and Legislation, and I apologize. I stepped out for 30 seconds.
We caught you. How 158 6/5/00 - FISCAL STABILITY - RES. 000232 dare you leave here after sitting there for four hours, waiting to come to that witness table.
I can certainly tell you about Act 46. I could just give you very brief comments on the Empowerment Act, which I think the School District people really understand better than I do. But Act 46 essentially authorizes, as you know, the Governor to take over the School District by appointing a School Reform Commissioner, I believe they call it, in the event of certain triggering events. The most notable one is that if the School District passes what's called "an invalid budget," i.e., a budget which does not balance. And if, in fact, that happens, the Governor has the right to immediately step in, suspend the Superintendent, appoint a new CEO and a School Reform Commission composed of one appointee by the Mayor, three by the Governor, and Secretary of Education himself. And it would essentially allow them to run the schools free of many mandates that the School District is currently subject to. 159 6/5/00 - FISCAL STABILITY - RES. 000232 The Empowerment Act, which --
This is just, I understand, for the cities of the first class, and that would impact only on Philadelphia and Pittsburgh?
Only on Philadelphia, Councilwoman Tasco. This was passed especially for us.
And the Empowerment Act, however, is a statewide act, which essentially allows the Governor to declare certain districts academically distressed -- that's my words, I'm not sure if that's the words that the Act uses. And if certain district don't meet certain performance standards after a certain number of years, the Governor will give the local district significant funding, which the School District people talked about before. But if they don't achieve certain levels after a couple of years, the schools again can be taken over by the State.
Okay. Thank you. Now, on Act -- on the empowerment -- Education Empowerment Act. 160 6/5/00 - FISCAL STABILITY - RES. 000232
I apologize. That second one -- the academic one is the academic -- SECRETARY KAHN: Yeah, I can speak to aspects of that of if you have particular questions, however you want.
Well, let me look at what I have. I have, I guess, a summary of the bill before me, and it states that -- a lot of things. I guess the question is, could -- one of the questions would be, we wouldn't like a takeover, but would it help us or harm us? Do you get more out of it if you're taken over? SECRETARY KAHN: I don't think so, necessarily, although one of the problems with the bill is that there is -- because of the way it's written right now, on the funding aspect of the bill, you receive an annual allocation as long as you continue to be on this eligible list as an education empowerment district. The fact is, once you improve to the level at which you are no 23 longer eligible to be on the that list, then the funding ceases. The powers and flexibility that are granted to the District under the Act 161 6/5/00 - FISCAL STABILITY - RES. 000232 continue, but the funding right now ceases.
And going back to this formula, I guess, under the basic education funding, it says that the bill provides Commonwealth funding for the '99-2000 school year for basic education, which shall consist both of an amount equal to the allocations for the '98-'99 school year and a base supplement payment to qualifying school districts. The bill provides a formula for the base supplement to be calculated for the 2000-2001 school year and adds a growth in poverty supplement. What does that mean. SECRETARY KAHN: Well, there was -- I think this is right, I haven't looked at it for a while. There is a per capita or a per-student allocation based on average enrollment of $75 per student. And what they did in the course of the legislative discussions with the bill, there was added into it a sort of a floor so that each qualifying school district was promised -- I think it was $450,000 was the floor. And so that was added in addition to the formula. But that was based on, I think, the poverty supplement as well. 162 6/5/00 - FISCAL STABILITY - RES. 000232 But the way the funding is set up, there's a per-student in effect based on enrollment allocation, and that's one of the reasons, or course, or the reason, that Philadelphia receives the lion's share of the funding through this legislation.
Councilwoman Tasco, are you reading from the summary or the bill itself?
Because if I recall correctly, my copy of the bill has the amendment to the School Code, and the first several pages of it are not the Education Empowerment Act. The Education Empowerment Act starts at some point into that bill. So I just want to make sure we're all talking about the same thing.
Well, I don't know what this is, but it says "Summary," and it has an analysis.
This document that the Councilwoman is reading from, I believe, is a document provided to us by the Mayor's Office out of the legislative group. It reads, "Senate Bill 25 No. 652, Printers No. 1922." It's dated May 5, 163 6/5/00 - FISCAL STABILITY - RES. 000232 2000, and it's just entitled "Summary." It apparently came out of the Harrisburg Legislative Research Bureau. SECRETARY KAHN: Again, because the bill was put in as part of the Education Empowerment Act, which built into a larger bill, I mean, part of the School Code, that there's language in Senate Bill 62 that doesn't relate directly to the Educational Empowerment Act. The funding -- and I believe I'm right about this, but we will certainly double-check it -- is, again, a per capita amount, which would need to be -- or a per-student amount, which would need to be allocated and appropriated every year. And, again, for the coming school year, it's $75 per student.
In addition to what you already get from the -- SECRETARY KAHN: Oh, yeah. It has nothing to do with it and does not affect the basic education subsidy or any other funding that Philadelphia or any other school district receives from the State.
In here is 164 6/5/00 - FISCAL STABILITY - RES. 000232 something about serving non-independent schools. Does that relate to you? What does that mean? SECRETARY KAHN: Well, part of the legislation -- and, again, what people in the Governor's Office and the Administration actually refer as to "the toolbox" or "the tool kit" portion of the legislation, which are the kinds of powers and flexibilities that are granted to qualifying school districts. Among other things it, for example, permits a school district to convert a current public school into a charter school, for example, without having to satisfy the current requirements right now under the existing charter legislation. Another action that it permits a school district to take is to establish what is really a very new phase right now, what are called "independent schools" in that legislation, and that was the topic of a lot of discussion, because it was a new phrase and there wasn't really an existing definition of what that was. And the bill does make some attempts to sort of define by describing the characteristic of what an independent school would be. 165 6/5/00 - FISCAL STABILITY - RES. 000232 But I do think that as the legislation gets implemented, again, both here and in Philadelphia and in the other districts, that we and the other school districts will need to be working with the Department of Education to really clarify exactly what structure that would be.
The independent schools? SECRETARY KAHN: Yeah, but as it was described to us in the course of our discussion, it was kind of --
It's kind of like charter schools. SECRETARY KAHN: It's somewhere between a traditional public school right now and a charter school that we all know what that is again through the existing charter legislation. But what we don't have in Philadelphia are any conversions of existing public schools to charter schools.
In a portion of the bill, of the summary that I have, it talks about a School District Improvement Plan, and it lays out a number of things that you would have to 166 6/5/00 - FISCAL STABILITY - RES. 000232 include in that plan. How would you the, School District, presently stack up to what this plan calls for? SECRETARY KAHN: Well, there's a structure, first of all, that's outlined in the legislation, wherein the School District would have to appoint and convene the Educational Empowerment Team.
Wait a minute before you go on. SECRETARY KAHN: Okay.
I'm just talking about the improvement plan and what they ask you to do in terms of establishing academic standards, performance goals, benchmarks and timetables to improve academic performance, revision to curriculum, instructional practices. Aren't you all doing that now? SECRETARY KAHN: We think the Philadelphia School District is way ahead of this (unintelligible) and will be ready to hit the ground running when it comes to the empowerment -- implementing the empowerment legislation. We will need to, as I said, conform to this structure of 167 6/5/00 - FISCAL STABILITY - RES. 000232 appointing this Empowerment Team and doing those things.
Do you have to -- just you're on the list. Do you still have to provide all of the requirements in this Empowerment Plan legislation? Do you have to adhere to this, even though you haven't been declared a district? SECRETARY KAHN: We will be, and I believe the trigger date is July 1, when the Department of Education will publish the names of the school districts that qualify as education empowerment districts that qualify as Education Empowerment Districts, and we will be there. And so, yes, I am sure that we will need to again establish that Empowerment Team. The State will convene its Academic Advisory Team, and we will need to go through the process of developing a plan specifically in response to this legislation and holding the required public hearing on it and all of the steps that are outlined in there. Yes, we will need to that.
Thank you very 168 6/5/00 - FISCAL STABILITY - RES. 000232 much.
I have a follow-up to that question and one other, and then Councilwoman Brown. Is that the mechanism under which you get the $16 million? SECRETARY KAHN: Correct.
You get the $16 million because you have been so far put on the list and you're expecting July 1, that this certification, quote/unquote, process then happens, and then you are subject to all of requirements here? SECRETARY KAHN: Credibility.
Okay. Mr. Feder, let's go back to Act 46 for a second. In the Act, at least as I have it, if this is the correct document, which appears to be 6-696. In small letter h, it talks about the 21 Chief Executive Officer and the School Reform 22 Commission shall direct financial matters related 23 to the distressed school district of the first 24 class and -- and then there are a list of five items. 169 6/5/00 - FISCAL STABILITY - RES. 000232 This has to do with the question around the continued support to the District, should that declaration be made. And I believe the Mayor's testimony and at previous briefings around the $20 million question has been the issue of, is it a one-time grant, or is it something that is in perpetuity subsequent to distressed district status being designated for the School District? Is there any language in the Act that you can discern that if the City of Philadelphia gave an additional $20 million grant somewhere between now and the end of this year, either the fiscal year or calendar year or somewhere into the next fiscal year of the City and the School District, and subsequent to that grant of an additional $20 million, if the State did step in for some reason, by whatever the regulations are in this Act and took over, is there anything in this language that leads you to believe that that $20 million would not have to be given in subsequent fiscal years?
Councilman, the Act certainly contemplates that certain types of payments would become automatically recurring in 170 6/5/00 - FISCAL STABILITY - RES. 000232 future years should a takeover occurs. And that's only if a takeover occurs.
But depending on how the payments are structured or if it's -- depending on how it's structured, there may be ways to arrange it so that is not automatically recurring.
Can you suggest some of those ways based on this language and the way it is structured?
I -- I think that's really a financial budget kind of question rather than a legal kind of question. I mean, if, for instance, payments or charges to the School District are deferred rather than payments to the School District, those would probably not be covered by this. There are ways which can be explored.
Right, I understand that and I plan to go into the issue of what the District owes the City and what the City may possibly defer, but this language --
You are correct, Councilman, that depending on how it's structured, it could become automatically, assuming that 171 6/5/00 - FISCAL STABILITY - RES. 000232 language is enforceable and assuming that language is lawful. But there are also ways to structure it to get it -- I mean, we are going to look into ways to structure it to get around that.
Well, let me not leave that just hanging out there. Is there something about this particular act that you think, either in total or in parts, is not legal?
It is certainly an open question whether the Commonwealth has the power to tell this Council how and when and whether it must appropriate money. In the final analysis, the Commonwealth does hold the purse strings and they do have that wonderful language that they will basically take it out of somewhere else if we don't give it to them here.
So it may be a futile effort, but it is not clear to me that it is Constitutional for them to take your taxing power away from you.
Well, are you questioning whether the Commonwealth has the 172 6/5/00 - FISCAL STABILITY - RES. 000232 authority to, quote/unquote, take over the School District?
No, I'm not, Councilman, but I'm talking about the taxing and spending power of this Council.
And whether or not they can, for instance -- I think the language talks about all taxes authorized to be levied by a school district of the first class or for a school district of the first class by a city or county of the first class on that date of the declaration of distress shall continue to be authorized and levied in accordance with Act and shall be transmitted to the school district. For the first fiscal year apart thereof and every fiscal year thereafter in which the school district is declared to be distressed, the amount appropriated paid by the county or county to the school district shall be in an amount not less than the highest amount paid by the city or county to the school district during any of the three full preceding fiscal years. In addition, the city of a first class shall provide to the school district of the first class all other available local 173 6/5/00 - FISCAL STABILITY - RES. 000232 non-tax revenues, including grants, subsidies, or payments made during the prior year.
What I'm saying is, there are Pennsylvania Supreme Court cases which certainly hold that this body is the only body that has the power to make taxing decisions and that they can't be made by unelected school reform commissions. I am not prepared to tell you that it is illegal, I am not telling you that.
Well, is that decision being made by the unelected School Reform Commission, or is that decision being made by the elected legislature that passed this act?
Well, that would certainly be one response, that the elected legislature has that power.
I mean, I'm not trying to argue their case. What I'm trying to understand is, we have been told that there may be things that can be done, or you could shelter the money or protect it from this particular provision or, you know, give it to 'em in the middle of the night and they not know about it. You know, 174 6/5/00 - FISCAL STABILITY - RES. 000232 whatever various scenarios are, I would just like to understand what they are, what is subject to this, and what is not. I understand on deferral of obligations, you might be able to slip on that one, but, I mean, for that paragraph and three or four others after it, it seems to be pretty clear that anything that's in the realm of taxes, levies, grants, loans, everything pretty much short of a nod and a wink, if they can count it and they know it's there and it happened in the prior year, it's in the pot. I mean is that -- do I have a different understanding than what is here or that any of the district people understand about this?
I mean, that's certainly what the language says. We have not figured out -- the Administration has not figured out how they're going to structure these payments or charges, and working with Council, will hope to come up with a way that it will not trigger that. I'm not saying that it can be done or can't be done. I'm saying that we're not prepared to say that it's definitely going to be covered. 175 6/5/00 - FISCAL STABILITY - RES. 000232
Well, lastly in this area, and then I'll go to the Councilwoman. I mean, is it a fair assessment of our current situation that, I mean, we're pretty much in, for instance, on the million, which started out as 7 a one-time grant, I think, four years ago. I 8 think coming up on fifth year of a one-time grant. 9 I mean, isn't that pretty much now subject to Act 10 46 provisions? 11
Assuming Act 47 is lawful, 12 which is always the better assumption, yes, it is 13 subject to it, Councilman. 14
And is there any 15 reason to believe that if did the 15 million, as we always have done, and now, because of the conversation between the Mayor and the Governor, that an additional $20 million request is being made, which, based on the Mayor's testimony, sounds like a request that will come to this body, that may require action of this body, which means that it will be a public action, which is different than any forgiveness of obligations, which the Mayor may be able to make on his own, without asking anything from us. If it is an 176 6/5/00 - FISCAL STABILITY - RES. 000232 action that comes to this body, more than likely through a transfer ordinance that we will hold public hearings on and vote on, why wouldn't that be subject to the same Act 46 provisions that the current $15 million one-time-over-four-year grant, you believe, is subject to the same provisions? What is the difference?
I'm not familiar with how that $20 million is going to be structure, Councilman. If it's going to be structured the same as the $15 million, I think you are probably correct, that it will be subject to the Act 46 automatic recurrence if there is a takeover. But I don't know that it's going to be structured that same way, Councilman.
I understand. Let me ask this last question, then, either for the District or I see our Finance Director is here. What are the current obligations from the School District to the City of Philadelphia for any and all services? Is there anything that the District has to either transfer funds, write a check, or have any other financial relationship with the City for services 177 6/5/00 - FISCAL STABILITY - RES. 000232 rendered or due. Whether it's picking up debris, utilities, anything, what does the District pay to the City on an annual basis?
For water, for gas, if we add that in. For trash collection, for basic services like that, City services, we're still south of $5 million.
We're south of $5 million I can get back to you with a precise number, but it's not even 5 million.
Interesting. Councilwoman Brown? Councilman Cohen, were you trying to --
I was going to raise specifically one question following Councilman Nutter. Mr. Feder, wouldn't it be true that whatever the City structured, if it did structure some way to try to shelter the funds, wouldn't that mean that the State -- it would be valid only if the State accepted that, or would we have to go 178 6/5/00 - FISCAL STABILITY - RES. 000232 to court and we'd never know what the answer is until the court finally decided it? We have no self-executing method of guaranteeing that anything we would structure would actually safeguard that money from being required to be paid to the State under the Act 46.
Act 46 has never been invoked. I can't tell you with any certainty how it's going to be interpreted. I mean, depending on how that payment is structured, there might be some pretty good level of certainty, and there might also be some ways where we would be uncertain, you are correct. It depends on how it's structured, Councilman.
Well, could you give me some idea of how it could be structured in a way that would create a certainty that we would know that that money is, in fact, sheltered and not subject to attack by the State?
I don't think there's an answer to that question. I mean, there's -- SECRETARY KAHN: I'm just going to ask 179 6/5/00 - FISCAL STABILITY - RES. 000232 the City Finance Director to come up, please.
And while she's coming up, if my question was too narrow, which may have generated a more narrow response, I would remove the restriction on the question and rephrase it such that what I was trying to get at was, all of the School District's cost that it pays for service or has to expend dollars either to the City or any other governmental agency or body related to the City. For instance, you may have taken a more narrow view that you don't pay for your gas expenditures to the City. Maybe someone took that to mean, well, no, we pay PGW. So I'd like to broaden that particular question to gas, water, or any other service provided by any other local agency or authority for which the District has a financial obligation. SECRETARY KAHN: I think that's fine. Let me just say before turning over the microphone, you know, we will respond as best that we can, but I think that the Mayor made it clear when he was here this morning also that we don't have the proposal yet or the recommendation. We are truly just beginning now to explore the 180 6/5/00 - FISCAL STABILITY - RES. 000232 possibilities. So, you know, it's not a matter of not trying to be responsive. It's really a matter of not having done the --
Just to make sure we understand what the question and what you think you're responding to. SECRETARY KAHN: Sure.
I was not asking, for instance, where the $20 million was coming from or what the structure of the was. What I 13 was asking on -- specifically on the point of Act 14 46, what does it say, what does it mean, and what 15 if anything the City could do? You will recall 16 from the briefing the other day, the phrase was 17 used "shelter." 18 Now, I don't see any shelter in this. 19 But as you know, I am not an attorney, but I did 20 learn how to read at a fairly early age. So, I mean, if someone tells me that there is language in here that allows for this, quote/unquote, shelter, I'd like to understand it. I understand the component of forgiveness of debts and obligations, and maybe 181 6/5/00 - FISCAL STABILITY - RES. 000232 that's completely in, maybe that's a question mark, and I'd be willing to make that argument. But in the way that we normally fund the District, either through property taxes, use and occupancy or now the recent $15 million, and if we're talking about more, based on this 8 language, I do not understand how you get around 9 that particular provision and say that it is only 10 one time and it is not subject to this. 11 And if there is a way to do that, I'd 12 like to know what it is. 13 SECRETARY KAHN: I understand, and 14 that's the focus of the discussion now. All I'm 15 saying is it may well be that we haven't -- the 16 team sort of hasn't come up with the suggestions 17 yet or the proposals that would enable the lawyers 18 to look at it and say, Oh, now that's one that 19 maybe we could protect. 20 And so that's the process we're in now, and I just don't know the answer to that yet.
Right. And you would certainly understand and appreciate that pretty much whatever you come up with that may potentially violate the intention and spirit of 182 6/5/00 - FISCAL STABILITY - RES. 000232 the passing of this Act 46, you know that it would take about a heartbeat to have it changed. SECRETARY KAHN: Correct. Although I will say that we have in the course of --
Act 46 will be amended in less than a minute. If we found some -- first of all, I can't see how you could read this and think that there's any leeway to shelter anything. But even if the best lawyers in the country come up with a way to craft this, they're going to amend it in less time than it takes to blink an eye. Or better yet, they'll take the $20 million out of our hide somewhere else. I mean, I don't know what we believe we're dealing with here, but you're dealing with a body that can move swiftly when wants to, and if it feels that is been gone around, will change this legislation to cover every possibility, including the one we crafted to so-called shelter the 20 or 15. I mean, I think it's very naive to think we're going to be able to find a vehicle or a shelter that's going to blind-side these people 183 6/5/00 - FISCAL STABILITY - RES. 000232 who -- the people who crafted this and passed it did it with a specific intent. I mean, you can read it, it's pretty clear what they were intending to do, and that was send a message to play around and you'll have this problem. And my point is that if you're going to try to, quote/unquote, shelter it, they will change the law. We're not in a position of strength here. I just find it frustrating or surprising that that's the approach we're taking, that somehow, we're going to outfox these guys who are now going to just simply change the law. I mean, we passed -- Angel Ortiz, we passed the assault weapons ban. How long did it take to change that?
Gone. I mean, you may be to negotiate this with them, where the Governor's Office and the legislative leadership will agree to allow you to shelter it, but if you think you're going to fund some crafty legal maneuver, don't hold your breath.
Right. And I 184 6/5/00 - FISCAL STABILITY - RES. 000232 appreciate the Councilman's statement. I mean, part of the reason I was trying to get to any of that is -- I mean, I think ultimately, it becomes fairly self-evident that, one, there may not be anything to do; and, two, even if there were, why would we take ourselves through that exercise? Because at least in our process, the time it would take from the introduction of the transfer of any dollars, before the Council session was over on that Thursday, the change would be made, we'd be done. So, I mean, I just don't -- I don't want anybody to spend any unnecessary time trying to look for something that either, one, doesn't exist; or, two, will, you know be blown out before we finish this discussion.
Well, Councilman, there are a couple of things. First of all, I think we would -- the environment in which all of this would be done would be the environment that we described earlier. We're in communication with the Governor's Office and you would have some communication with the Administration about what 185 6/5/00 - FISCAL STABILITY - RES. 000232 its intentions would be with respect to any outcome. The other thing is that, I'm not -- I guess I don't want to venture down the road of defending lawyers up here, but I do think that when the time is right, you would probably see confidential advice from your counsel about what the consequence of any proposed action would be and that that's something that you would, you know, rely on and make a decision accordingly. I'm a little nervous to the extent of which we're in a public forum talking about -- and maybe this is just kind of the lawyer concern -- I'm not up here as a lawyer -- about getting into that discussion in this public forum.
I appreciate your concern. It is a discussion that we cannot avoid, because if we weren't here today on a resolution 24 but we were in a public hearing on a bill to make such a transfer -- 186 6/5/00 - FISCAL STABILITY - RES. 000232
I mean, it would appear to be, unless Mr. Feder can convince us otherwise, that if we are being asked to do something at some point in time, the way that we ultimately conduct our affairs and take an action is by a vote. We take all our votes in public, we have a public hearing. We would ask the same questions at that public hearing, 'cause we're going to have the same documents and information, and someone will still have to answer the question of, would this appropriation, however much it is, be subject to Act 46? Now, maybe we won't have all the answers to that before we come into that public hearing, and we'll have all the confidential memos and we'll have a few private briefings and all of that. But you know as well as I do, that we're still going to have that discussion right here in this room, under these same circumstances, asking the same questions. Now, maybe there will be better answers on that day, but --
Right. And then you will 187 6/5/00 - FISCAL STABILITY - RES. 000232 be dealing with something tangible that's already structured.
Right. Okay. Now, we're going back to what does the District owe the City or any other local governmental agency under any circumstances or condition that you have to expend dollars for.
Janice Davis. Rhonda Chatzkel was correct. It's approximately $5 million in the utilities and gas, water and trash.
All right. It is what it is, I guess. I mean, I think some of us are actually somewhat surprised at the size of that number, as compared to a much higher number. But you said gas, water and trash?
We will go back. We asked staff last week to come up with expenses, and the analysts that are in our treasury office gave me a list. Obviously, it's a significant issue, and we will be meeting to talk about uncovering --
For instance, 188 6/5/00 - FISCAL STABILITY - RES. 000232 what's the School District's electric bill, total?
Right. That wasn't even a part of the question, just an add-on to the question. I mean, I just wanted to --
Our total utility bill 10 is about $40 million. I can't break it down off the top of my head between electric, gas, and oil.
I mean, we obviously have a direct relationship with gas and water. Obviously, electric is with a private utility. But, I mean, one, it would be interesting to know what that issue is; and, two, as we try to get around to what we think are our friends and partners in all of this, it would be helpful to know.
There's another footnote, Councilman, which is probably many of our 189 6/5/00 - FISCAL STABILITY - RES. 000232 buildings have dual capacity gas and oil. And at least my understanding is that we were doing pretty well under our spot oil purchase contracts. We were probably not buying a lot of gas. And, you know, the direction from you is flip the switch and burn the gas instead of the oil. I mean, that would not be the cost-effective way of doing it, but it would be one way of shifting costs.
Given PGW's situation, they'd probably be glad if you were using gas, right? And you're a good-paying customer. All right thank you. (Laughter.)
Getting away from that, Blondell Reynolds left, and she had one question that she wanted to ask. In terms of professional development and the problems that we have had historically in terms of math and science, and in that sort of instance, we have had in our classroom and in our 190 6/5/00 - FISCAL STABILITY - RES. 000232 schools individuals really that in many times have not been as developed and as professional in those areas as they should have been. And what, if anything, is going to be the impact on those areas of these cuts in terms of professional development and so on? SUPERINTENDENT HORNBECK: Well, my hope is that we're going to get, for example, a new renewal very large national science foundation grant that will minimize the impact on math and science. If we don't get that, then math and science, along with other areas, will be impacted, my guess is, to the tune of percent, 'cause 15 that's the amount of impact of professional 16 development generally. 17 We are at -- there are three stages to 18 successfully secure that grant; we have success- 19 fully passed two of them at this point. It's my 20 hope that we'll get it. We've got a $15 million one from 5 years ago, that 5 years is up now, and so I hope that that will come back in. It's been, in fact, in these 4th-grade scores that you've just seen, we enjoyed just in this last year a 17 percent improvement in 4th-grade science 191 6/5/00 - FISCAL STABILITY - RES. 000232 achievement. It takes us overall to 63 percent of our 4th-graders now being at the basic level and above in science. And one of the reasons that is so is because of the improvement in professional development for our teachers, for all of the reasons that you just suggested that that helps. And we were able to do that because of the National Science Foundation grant that we got when we submitted the Children Achieving grant proposal five years ago.
Thank you. And going back to the $20 million -- and, again, I repeat myself. It is real eerily reminiscent of 1988 and 1989 in the City, because these very same discussions we were having as Councilpersons here in terms of the City budget. And I was wondering, and I was just discussing it with Joe Vignola, 'cause we're going to have to go over the discussion of where and how we're going to get $20 million from a budget that we just approved, and that's going to be quite an intensive discussion. Or, if there's going to be a -- as I Joe and I discussed here, a -- an accounting aspect to this of raising the revenue 192 6/5/00 - FISCAL STABILITY - RES. 000232 projections, that would have an impact in terms of the Five-Year Plan. And going into January and March of next year, us sitting here, wondering whether we will include the $20 million that we have transferred to the Board as of this period, do we include that $20 million in next year's operating budget? And if we do include that $20 million in next year's operating budget, we still don't know, as the discussion that has been held here, what is the reaction of the State and what is it that we have done in terms of the Act that was just passed by the State legislature and signed by the Governor. And what does the Board do then to get that $20 million, and where's it going to come from? And so these are all questions because we have a very short window opening here in order to begin resolving this and maybe might it not be better at this point in time for us to confront the whole issue of school funding once and for all and maybe let the State take it over. Because to be back here in March -- and I believe that we will be back here in March, because we will not 193 6/5/00 - FISCAL STABILITY - RES. 000232 resolve this in seven months. We have huge issues of the union contract, both at the school level and at the City levels. We have the issues of PGW that are mounting upon us and coming that we are going to have to confront. We have billion-dollar stadiums that we plan to build, and we have a very reasonable question to ask: where is that $20 million going to come from, how are we going to replace it, what is the impact on our budget, and how are we going to protect that over the next five years? Those are just questions I have, Madam President.
And, Mr. Ramos, if in fact this $20 million were forthcoming, when would that be part of the so-called "deal"? Would we have to pass something before we recessed in June or just wait until next year?
Well, I will defer to Rhonda Chatzkel on any of the cash-flow issues school tax flow issues. I believe it's simply a cash flow matter we would budget if we know it's 194 6/5/00 - FISCAL STABILITY - RES. 000232 coming. With respect to next year, I would posit that you're talking about Fiscal Year 2002. It's not a -- you know, the issues are much bigger than the or another, you know -- or carrying 7 over the other revenue enhancements and reductions 8 from this year. This budget will again grow. I 9 mean, just the same amount of services carried 10 forward will grow beyond our capacity to deal with 11 it, which is why -- 12
So are you 13 saying that we may not need the 20 million 14 additional dollars, or are -- 15
No, I thought you were 16 talking about the next following year. 17
No, I'm 18 talking about from now until June, next June. 19
And this is just a cash-flow answer, but we would want that $20 million to be received by the spring or before, by April or before.
Thank you. 195 6/5/00 - FISCAL STABILITY - RES. 000232 I just have another question. It's my understanding that the Administration's strategy of keeping the schools open is to manage the District's cash flow, as you say, till classes are over in June of 2001, and that the State and City will try to work out a permanent solution. Is that correct, am I correct thus far?
What happens if the solution is not agreed to by then? and will you be able to pay the teachers and your various vendors what they are owed?
We have a cash issue that happens in June. And in order to continue in operations, we need to fill some of the gap that we've identified. That's absolutely true. Our expectation, though, although we will have conversations with Council next March, is to do a long-term plan, to begin a long-term plan to involve whoever wants to be involved in that plan, which we expect to take four to five months. To let you know the status of our examination, we're going to look at our 196 6/5/00 - FISCAL STABILITY - RES. 000232 expenditures, we're going to look at benchmarking -- Councilman Nutter brought in information about Chicago -- we will do that for every class of expenditures. We'll look at State funding and we'll look at local funding. We need to do all of that.
I remember last year at this time we were all very concerned about the teacher shortage. What is the shortage as of today? SUPERINTENDENT HORNBECK: During the course of the '99-2000 year, once we got past about October, we carried an average of roughly 150 vacancies a day, which is down from the previous year, but it's --
I believe last year at this time, it was 250. What is it today? SUPERINTENDENT HORNBECK: Today, I can't tell you what it is this morning. My guess is that it's somewhere again in that 150 range. 197 6/5/00 - FISCAL STABILITY - RES. 000232
Yes. And that was after we relaxed the residency requirement? SUPERINTENDENT HORNBECK: I'm sorry?
That was after we relaxed the residency requirement? SUPERINTENDENT HORNBECK: There are two major -- well, really three, three important things that have taken place. One is the extension of the residency to a three-year period rather than a one-year. Secondly, we offered the $4500 bonus -- $1500 in the first year and the other $3,000 in the 37th month after somebody was -- continued to teach and was a resident. And thirdly, we have strengthened significantly the human resources capacity for recruitment. And the reduction in the number of vacancies has occurred at the same time that there's been at least a 50 percent increase in the number of people we needed to recruit, so that it's -- the success of those three principal initiatives has been pretty substantial.
And I assume that we're continuing our recruitment policy? 198 6/5/00 - FISCAL STABILITY - RES. 000232 SUPERINTENDENT HORNBECK: We are, indeed. We expect to again this next year need --
Are we beginning to take applications now? SUPERINTENDENT HORNBECK: Oh, we've been taking 'em. We've been hiring people since February. One of the things that we did a few years ago -- it used to be that we didn't hire -- actually offer jobs to people until August. You can imagine that impact on who was still around without a job in August. And three or four years ago, we began to move that methodically forward so that this year, we started offering people jobs in February and March.
I have a couple questions on the budget process. What is -- from your perspective, what's the level of involvement by the City in the School District budget process, the development of the budget up to the point where the budget is presented to the Board?
Basically what was it or what should it be? 199 6/5/00 - FISCAL STABILITY - RES. 000232
Well, tell me where it has been and then tell me what you plan to do.
As I said in my testimony, this has been an extraordinary year. We had started off in our initial lump-sum statement saying that we were going to work toward $15 million in cuts, learned that we were going to have to do twice that amount, and were -- at the same time, the new board was coming on. We had the benefit really of having a new Board member that could chair a finance committee, who is a veteran of these extraordinary circumstances. And, you know, through May 31st, at 6:45 at night, people were working on getting this done. That's not -- I mean, it's not the ideal situation under any circumstances. We'd like to work our way back to kind of more normal circumstances. Under those normal circumstances, I would hope that especially with the increasing committed from City Council and a change in the City Charter that we would use -- that we would 200 6/5/00 - FISCAL STABILITY - RES. 000232 use the meetings required under the change in the City Charter for the budget process. And, quite frankly, that it not -- that it be a more dynamic process throughout the year. We should have more formal briefings. But I would say that we also, more importantly, need to have the informal briefings to just -- so that when we get here, a lot of the background is already established. I mean we may want to repeat that for the public and so forth, but I think that that needs to happen. And I wish we would have had better circumstances this year to really communicate better to City Council.
Right. Well, I understand that. Now let me ask this more direct question. In the past, has the City's Finance Director had any particular official or unofficial role in the development of the School District's budget prior to its presentation to the Board?
Not that I know of. Our 201 6/5/00 - FISCAL STABILITY - RES. 000232 finance people regularly talk to -- at least have had some communications with Council and City finance people, but I don't think there's been a formal -- SUPERINTENDENT HORNBECK: Well, there's always the connection in the context of expected tax receipts and those kinds of projections so that the projections, as it relates to the City budget and the School District budget, are the same, but the kind of line-item-by-line-item considerations, no, there has not been a routine engagement.
Well, in the realm of increased communication, increased involvement, do you think that it would be helpful to have both individuals from the Office of the Director of Finance as well as City Council technical people involved at some level in your process, similar to the way that we are generally involved in the City budget process? SECRETARY KAHN: I would say a couple things. There was actually more City involvement this year in the sense of my presence and my participation, and I had the advantage of having 202 6/5/00 - FISCAL STABILITY - RES. 000232 been on the Board and having that perspective of having gone through the years of the budget-cutting from that vantage point and now here. To the extent that I discussed those issues, you know, at cabinet, I think that as we go through this again, we can, you know, start to formalize these and maybe get City finance more involved the process. Certainly, the Mayor was involved and kept apprised as we went through the process. There are other mechanism in place. As part of the mayor's Transition Team, there's the Fiscal Assessment Committee on Oversight of the School District, and they have -- members of that group have participated and attended the public budget hearings that were held at the School District. And we've got another initiative that's about to launch this week, was a part of the Mayor's challenge of seeing if we can reduce the cost, as he mentioned this morning, of over $100 million. This initiative we're putting together that we've dubbed for the time being "Project Connect," that Council President Verna has asked 203 6/5/00 - FISCAL STABILITY - RES. 000232 Charlie McPherson to represent her on and that the Mayor has asked and he's agreed, Councilman O'Neill. In addition, we have representatives from the City Controller's Office and from the School District and the City Administration, and we will be working together.
I'm sorry, I'm not as familiar with some of these particular committees and provisions. Could you -- the last part about Councilman involvement, could you go back over that, please? SECRETARY KAHN: Yeah. This was a new group that grew out of, again, the Mayor's challenge to the School District to find this $100 million over time and see if we could reduce costs. One of the themes of that was looking at -- it's been raised in this chamber several times, of looking at closer collaboration between the City and the School District, picking up on some of the recommendations and suggestions that had been made, for example, in previous controller reports and other initiatives, looking at things like Fleet Management, like Human Services, and looking at whether there is the potential to put 204 6/5/00 - FISCAL STABILITY - RES. 000232 those together. So what I did, at the Mayor's direction, to put that together is to have Pedro and I convene and cochair a group that, again, has representatives from the City Administration, from the School District Administration, from the Controller's Office, from City Council, from the private sector, and we'll be holding our first meeting on Wednesday to start to look at and identify what the topics would be and what the potential areas are that would be right for analysis.
I think you were here when I asked the Mayor this morning, and I didn't get an opportunity to ask Mr. Ramos on behalf of the Board the same question, which had to do with an increased involvement by the City and by City Council in the School District budgeting process. I'm, one, going to assume that you heard the Mayor's response to that, but I'd like to get your response on the record in terms of whether you would support such a change, which actually would need State legislative action to 205 6/5/00 - FISCAL STABILITY - RES. 000232 make that happen.
Well, I didn't hear the reference this morning to State legislative action, but I did hear the Mayor respond to the question about more regular involvement and having some, I think in your words, more formal involvement on the part of City Council in the budget process.
Specifically, the question was, will you support additional oversight and involvement in the School District budget process by the City and City Council?
Okay, all right. Thank you. I would like to ask, 'cause I'm assuming that we're probably going to spend some more time together at a later point in time. There has been much made about the contract with -- primarily with the PFT, but it may be other contracts that come under scrutiny, but with regard to the PFT contract, could someone perform an analysis in a chart fashion to make a 206 6/5/00 - FISCAL STABILITY - RES. 000232 comparison on the major items that people like to talk about, about the contract -- whether it's number of days, prep time, salary, and a wide variety of, you know, whatever might be the top ten issues in a contract that have to do with how education happens in a classroom, and the resources that you have and who can tell who what to do and who has control over placement of the teachers and who hires and who fires, and all of those types of issues. More the big issues, the hot-button issues in a contract. Could someone provide a comparison to us, to the Chair, of the Philadelphia contract versus the contracts of other school districts in the Commonwealth, and whether they are the -- whatever anyone wants to call -- the high-performing school districts, as compared to some that might be on either these distress lists or empowerment lists or any other list. But I would like to see a comparison between the Philadelphia PFT contract, the School District contract, and what goes on in Lower Merion, what goes on in Radnor, what goes on in some other places near and far that are, 207 6/5/00 - FISCAL STABILITY - RES. 000232 quote/unquote, considered the better-performing school districts by someone else's standards.
There is at least one organization that I know of that has done some comparison of collective bargaining contracts, and it's more national than regional. And maybe the thing to do would be to ask for us to relay this request so that it's coming from a third party, not from the District. I mean, I don't want to --
We could be the third party making the request. I don't really care who makes the request.
'Cause I don't want to do something that would be seen as acting in bad faith with respect to the --
All right, I understand that and I respect that. While it would be interesting to see a comparison between us and New York and L.A. and Boston and all of those places, you know, they don't get funded by the Commonwealth of 208 6/5/00 - FISCAL STABILITY - RES. 000232 Pennsylvania. And so I need a comparison of directs that are all subject -- we had the discussion earlier about the formula, everybody's subject to a school code of 49. I mean, it's got to be-- it really has to be an apples-to-apples comparison between districts that are also subjected to the same provisions. I know Councilman Kenney is trying to get a question in.
Thank you. Could you explain -- I just was talking with a staff person and I kind of got a secondhand description of this committee that was formed by the Mayor. Could you kind of tell me what it's about, what the name of it is. SECRETARY KAHN: Again, this grew out of the Mayor's challenge in the letter he sent to Pedro. I believe it was in April, where it was -- yeah, it was after the passage of the preliminary budget, wherein he challenged the District to save -- $100 million was the figure that he put out over, you know, several years into looking at really new ways of doing things. And one of the themes in that letter 209 6/5/00 - FISCAL STABILITY - RES. 000232 was really picking up on certain controller's reports, for example, recommendations in the past, and other reports about looking at ways of potentially consolidating or closer collaboration -- and I believe you've asked about this in the past -- between the City and the School District.
That part you're telling me now I did hear. SECRETARY KAHN: Okay. So what he did -- or what I did and Pedro did, at his direction, was to convene or appoint -- and we sent out an initial memo on this -- a committee that we would cochair that would consist of members of the School District Administration and the City Administration, representing the City Controller and his representative. The Mayor discussed with -- Council President Verna certainly wanted Council participation on that, and --
Do you know when this conversation took place with the Council President? SECRETARY KAHN: I'm not sure exactly when it was.
Wednesday. 210 6/5/00 - FISCAL STABILITY - RES. 000232
Okay. I'm just curious as to whether there was any involvement with the Committee on -- the Education Committee Chair, members of the Education Committee, or any of other individuals that are, I guess, ordained with the task of dealing with education. SECRETARY KAHN: With all due respect, it was prior to Wednesday, and that's -- I mean, I had sent out the letter and I had been told a while ago that the President had requested Charlie, and I had sent a letter to Councilman O'Neill, again, you know, at his request, inviting him to participate.
At whose request? SECRETARY KAHN: At the Mayor's request. Actually, the Mayor sent the letter inviting him to participate, and I'd have to go back and look at the dates, you know, of those meetings -- of those letters.
Well, I guess it's 211 6/5/00 - FISCAL STABILITY - RES. 000232 not as important, but I think their recollection is, it was Wednesday. But I guess my question is, what is the view of the Secretary of Education and the Education Team when it comes to the Committee on Education of the City Council of Philadelphia? Just out of curiosity, what do you think their role is? SECRETARY KAHN: You know, I've had both telephone conversations and personal meetings with the Chair of that committee. I think, again, it --
As it relates to this particular effort? SECRETARY KAHN: I believe the last time we met, we did discuss it. I'd have to go back and check what, but I thought that we had discussed that. And, you know, this is both an education issue as well as, you know, a City operational issue and a School District administration management issue. I think, frankly, you know, we need to be a better job, as Pedro has indicated, of just getting the routine communications down, and 212 6/5/00 - FISCAL STABILITY - RES. 000232 that's something that we need to work on. If we want more representation from City Council on that group, I'm sure that we can do that.
But I'm not suggesting that; what I'm suggesting is that I was under the impression that we were going to have a different level of involvement and a different level of information if, according to Council President and her fiscal person, Wednesday seems to be somewhat inadequate. And also I would say that not having input from the Education Chairman is somewhat inadequate also. Making appointments of Councilmembers to various committees without at least talking to the Chair of the Education Committee, I think, is something that is somewhat lacking in communications. It's just my personal opinion. And if there is a desire to have a continued more open and more integrated involvement of Councilmembers, I don't know whether that's necessarily the way to get it done. SECRETARY KAHN: Your suggestion is well taken. 213 6/5/00 - FISCAL STABILITY - RES. 000232
Mr. Ramos, we probably won't get through all of this portion of the questions for today, and I would ask if you could be responsive upon your return. I have a copy of a letter dated April 26, 2000 from the Majority Leader of the House of the State legislature. Do you recall that letter?
From representative Perzel, which lays out in bullet point -- or I think these are actually diamonds.
It's a number of suggestions for ways that the District can reduce costs. He talked about the audits that have been out there, which this School Finance Committee, whatever it's called, has been looking at.
Has there been a 214 6/5/00 - FISCAL STABILITY - RES. 000232 response to that letter?
There has not been a written formal response to that letter, but there has been action consistent with that letter. And I -- and I -- well, no, there was not a letter back, but I was getting asked about it around the time that I was getting the letter from members of the press, and I did respond to it. I thought that not only were there many of the things we were already doing, we were going to continue to do. There were some other things in there. And, frankly, I thought there was a -- you know, I appreciated the positive tone of the letter from Representative Perzel. He's been -- you know, he's somebody we're seeking to build a better relationship with, and he's already been helpful with respect to funding for the alternative school.
Two things. One on of the letter, and I'd like to read it into the record and then I'd like to get your response to this. One of the points reads: "Philadelphia City government has not been as committed to the support of its own 215 6/5/00 - FISCAL STABILITY - RES. 000232 schools as other local governments in the Commonwealth. The statewide measure of local tax effort in support of public education is called the 'equalized mill.' "In the last year audited, 1996 to 1997, the statewide average equalized millage was 20.6. The average for the other urban 9 districts in the State (like Pittsburgh, Allentown 10 Harrisburg, and Chester Upland) was 26.2. 11 Philadelphia's was only 19.4. 12 "City Council is currently projecting a 13 budget surplus of over $200 million, yet has 14 indicated of that surplus, it only wants to 15 earmark to million more for the City schools. 16 If the City wants the State to show a greater 17 financial commitment to Philadelphia schools, it 18 is time for the City to do likewise." 19 Now, a couple questions. One, is there 20 any dispute or is there, in fact, agreement on the 21 statement or facts as laid out in the letter with 22 regard to the statewide average at 20.6, the 23 average of the other 23 urban districts at 26.2, and Philadelphia's number at 19.4? Are those accurate? 216 6/5/00 - FISCAL STABILITY - RES. 000232
I don't -- Councilman Nutter, I wouldn't have a basis for telling you that I have any independent information about whether those numbers are accurate or inaccurate. I would assume that they're accurate given the source. Local tax effort information that I'm a little more familiar with is the fact that Philadelphia residents are probably the most taxed residents in the entire state when you take into account the multiple layers of taxes. We are not like Pittsburgh, you know, that doesn't have to support a city county and a district all at once.
Okay. Is it possible, though, in the context of trying to get answers to either suggestions or question marks that are left hanging out there, one, is it possible to get the definitive answer to the accuracy of these figures?
Two, could someone calculate if the 19.4 figure is correct and if the average for the other urban 23 districts is 26.2, and it would be helpful to know what the actual 217 6/5/00 - FISCAL STABILITY - RES. 000232 number is for the districts, through which it was arrived at the 26.2 figure, and if the statewide average is in fact 20.6, what I would like to know and to ask someone to calculate is, what would the Philadelphia effort in dollars and cents be at the 20.6 level; or at this average of the other urban districts at 26.2? 9
Provide the statewide 16 average. You said the average of 23 urban 17 districts, you said you wanted to also see the 23 18 urban districts and what they actually were? 19
Right, what their 20 actual equalized mill rate was. 21
And then the Philadelphia 22 -- and then -- and maybe columns over what would 23 Philadelphia be if it were --
Right. Show us what the 19.4 is, if that's accurate, in actual 218 6/5/00 - FISCAL STABILITY - RES. 000232 dollar figure. Then tell me what it is when you go to 20.6, and then tell me what it is when it guess to 26.2.
Now, do you know what the Representative is referring to in this -- later on in that same paragraph, talking about the $200 million surplus, and yet the City is only indicating an additional to million more for the City schools; do you know what that means?
I don't know what the reference to or million dollars more was about.
Okay. Well, notwithstanding, I guess, your conversations with the Representative or with his people, if all of the items in this letter were given to you by one of us as outstanding questions or issues, is it possible to get an answer to all of the points that are raised in this letter so that we have the benefit of -- I mean, to some extent, we don't have benefit of whatever your conversations are with the Representative or other people in Harrisburg as it relates to some of these items. 219 6/5/00 - FISCAL STABILITY - RES. 000232 I think your testimony was, you have not formally responded in writing, but you've had conversations from the moment letter hit the airwaves.
And many of these issues, as you know, are not issues first raised in the letter from Representative Perzel. These are all issues that have --
But if you'd like us to address those issues again, using his letter as kind of the reference point, we can do that.
Yes. What I would like is if a memo or whatever the form is --
"In response to the items raised in the April 26, 2000 letter from Representative Perzel, these are our specific answers to each of the points raised." That would be very helpful. That's all I have. Now that you've agreed to go through those points, I don't need to go through the letter. 220 6/5/00 - FISCAL STABILITY - RES. 000232
Are there any other questions from members of the committee? (No further questions.)
Thank you. Mr. Vignola, would you take the witness table? Mr. Ramos, I'm sure that you want to leave and get a bite to eat. I want everybody else to know, if they're leaving, that we will be recessing this hearing until Wednesday, June the 7th, at 1 o'clock, at which time we would like to have Mr. Masch and all of the other financial people in attendance, please. That's Wednesday, the 7th, at o'clock. (Witness comes forward.) 221 6/5/00 - FISCAL STABILITY - RES. 000232
Good afternoon, and thank you for your patience. I know you've been sitting here since 9:30, and I appreciate it.
Good afternoon Council President Verna and members of City Council. My name is Joseph C. Vignola, and I'm the Executive Director of the Pennsylvania Intergovernmental Cooperation Authority, known as "PICA." It's been a long day for all of us, and in light of your statement about the recess of this hearing into July 1 --
With the permission of the Chair, what I would like is, and for the benefit of stenographer is to have my letter -- or my testimony fully set forth in the record, you know, at this time, without my reading it. (Mr. Vignola's written testimony attached hereto.)
But what I would like to do, in taking a few minutes before I open up for questions, and I will make myself available on June 7th at what p.m. 222 1 6/5/00 - FISCAL STABILITY - RES. 000232 What I do want to say on behalf PICA is to quote from the bottom of , beginning of , I said, "While none can disagree that the fiscal stability of the School District is critical, it cannot be provided at the expense of the City's fiscal stability. Any solution which directs additional City General Fund dollars to the School District could require a revision to the City's Five-Year Plan, and any such revision would require approval of PICA. "One-shot fixes to the School District's Fiscal Year 2001 budget problem worked out with the Commonwealth on May 31st has, to my mind, done no more than provide little more time to work for a long-term solution for the School District's fiscal situation. Failure to act with a sense of urgency during this brief window of opportunity would be a dereliction of duty by all parties concerned with the education of Philadelphia's children." Madam Chair, my testimony goes a little bit further, but I think that's the critical point. I will make myself available now for 223 6/5/00 - FISCAL STABILITY - RES. 000232 questions. And as I've said, I will be back here on the 7th, when we start talking at fiscal issues more. And it's at your pleasure, Madam Chair, what you would like to do at this point.
Are there any other questions of Mr. Vignola at this point in time? The Chair recognizes Councilman DiCicco.
Thank you, Madam President. Thank you, Mr. Vignola, for staying. I know you went over this quickly. You mentioned something about the Five-Year Plan, that whatever action we decide to take could -- or would require approval by PICA. Hypothetically, if we were to agree to the $20 million, obviously, that would have an impact on the Five-Year Plan, based on the numbers that PICA has been supplying to us over the last couple of years indicating that at the end of the Five-Year Plan, we would have a surplus around $5 million, barring any unforeseen contract negotiations, etc. 224 6/5/00 - FISCAL STABILITY - RES. 000232 So, in effect, the million, if this Council were to agree to it, would require action on behalf of PICA, right? I don't think there's any --
I don't -- I don't 7 disagree with that statement, Councilman, but when 8 we look at a plan -- an example being -- and when 9 you look at the City Manager's quarterly reports, 10 the one that was just published on May 15th versus 11 the one that was published on February 15th, you 12 will see that there's an increase in revenues 13 projected for the City. Approximately $26 14 million. 15 So this year, there is -- in this 16 fiscal year ending June 30th, there's additional 17 revenues. If there's action appropriated that 18 money from this fiscal year, maybe there would be 19 an impact on the Five-Year Plan. But the concern 20 is that whatever the lawyers say about the Economic Empowerment Act, if that $20 million is then committed in addition to the $15 million that's already in the Five-Year Plan, then you have a $100 million impact, and that definitely causes a variance within the Five-Year Plan. Then 225 6/5/00 - FISCAL STABILITY - RES. 000232 when you add what labor negotiations the City's going to enter into, that causes a variance and we have to look at in total. But if it happened in the next three weeks, before June 30th, you know, technically, there may not be an impact on Five-Year Plan that City Council passed in March of this year.
The $26 million in -- I'm sure I read somewhere but maybe you could refresh my memory. Is that in anticipation of -- just for this one year, they're anticipating additional revenue.
Yes, above what was forecast in the targeted budget, and that's just from reading, 'cause I read those reports. I like to fall asleep at night and that's good for that.
The RNC probably has something to do with -- has everything to do with what we're today, I think, for that matter, more than I would like. Who blinks first, us or the other side, right? Thank you. Thank you, Madam Chair.
Thank you. The Chair recognizes Councilman Kenney. 226 6/5/00 - FISCAL STABILITY - RES. 000232
Thank you. Mr. Vignola, in line with Councilman DiCicco's question, I would like to go one step further and ask if PICA could -- and I don't know whether it's in your purview to request it, to do an examination of Act 46 as it relates to the potential request -- or not potential, but the actual request for the $20 million in addition to the $15 million from the City for this year. And to issue some opinion or advisory to us as to what problems we may be exposing ourselves to in the event that we approve the requested $20 million. And also, what I would also suggest is, based on Councilman -- or request is, under Councilman Ortiz's line of questioning, what effect would the raising of revenue estimates and/or the lowering of expenses, the raising of the ceiling or the lowering of the floor would do to our standing both with the rating agencies and with PICA and just in general.
Well, let me answer the first and the third part. The second part, for the $20 million, I will have to get back to you in writing. 227 6/5/00 - FISCAL STABILITY - RES. 000232 It wasn't until this Five-Year Plan that the City recognized the $15 million as part of the Five-Year Plan. The Rendell Administration consistently said, If we have the money available, we're going to do it. You may recall in last year's report on the Five-Year Plan, the one issued in June of '99, we were critical of the City in doing that. Mayor Street and this Council remedied that in this Five-Year Plan, so the $15 million is accounted for, not only next fiscal year, but in the fall, the outgrowing going fiscal years. As I said, in regard to the $20 million, I would like an opportunity to get back to the Chair and get back to you. In regard to raising revenue estimates, that begins the whole philosophy of PICA, and I guess it's my philosophy as being a former member of this body and not wanting PICA to dictate policy to the elected officials of the City of Philadelphia. But also, having been controller in the '80s, before we ran into the financial situation that we had, realizing that revenues are our concern. 228 6/5/00 - FISCAL STABILITY - RES. 000232 What we look at PICA is not so much how the City and how City Council wants to appropriate the individual line-item expenditures, but we look at the total revenue projections, and are they reasonable in light of what we foresee the economy to be, in light what we see all the other indices involving the budgeting of local government. Based on that number, we arrive at, well, is the gross number viable? And if the gross number is viable, then it's my belief -- and I share it with my board and my board has accepted it for the past four years I've been there -- that how the City wants to spend its money, as long as it fully funds its mandated services is fine. Right now, we have said that the revenue projections for the next fiscal year beginning this July 1 and for the four succeeding years are reasonable, and that the growth in those revenue projections are reasonable. If the Mayor came back and tried to tinker with the revenue projections, you know, although I wasn't in elected office in the late '80s, that does smack of what happened in the late '80s, and it's something that PICA would take 229 6/5/00 - FISCAL STABILITY - RES. 000232 a very dim view of. And I don't want you need me to further put that in writing. That just to say that, Well, we're going to get $20 million more from the sale of widgets in the City and the City's going into the widget business, that wouldn't fly with the staff of PICA or the Board. So tinkering with revenue projections to give some other governmental entity more money is not going to work with us.
Okay. But could you please check with the Board and your staff as to whether or not it's sensible and appropriate for you to give us an opinion vis-a-vis Act 46 and the current requirements and --
It's the takeover legislation. I mean, what happens next year if we put this money up and how it impacts the Five-Year Plan?
No. Pursuant to the PICA 230 6/5/00 - FISCAL STABILITY - RES. 000232 Act, when we're asked for those type of comments, we're allowed to comment on legislation, so --
Thank you. Any other questions? The Chair recognizes Councilman Nutter.
Mr. Vignola, good afternoon and, again, thank you for staying. I read through your testimony very quickly. And while it is crystal-clear in my mind what the relationship and responsibility with regard to PICA and the City of Philadelphia is, there from time to time is floated around, and I thought I read something in some two sentences of the voluminous PICA Act that may have had something possibly to do with the School District. Could you provide any clarity on the issue of what statutory authority exists with 231 6/5/00 - FISCAL STABILITY - RES. 000232 regard to PICA and any involvement with the School District of Philadelphia?
Yes, Councilman Nutter. The PICA Act speaks to corporate entities of the City of Philadelphia and refers to the School District as "a corporate entity." The cooperation agreement between the City of Philadelphia and Pennsylvania Intergovernmental Authority talks about corporate entities and talks about the School District in that the City will provide information in regard to the School District to PICA should PICA request it. In fact, it was last year when we started talking about this $15 million that was not included in the five-year budget that part of our ongoing review, we had a telephone conference with Superintendent Hornbeck, and he indicated to us and said, well, he is counting on the $15 million, not only for the current fiscal year, but for future fiscal years, and that led to our comment in last year's report on the City's Five-Year Plan that the right hand's not talking to the left hand, 'cause one agency is saying, yes, we're going to continue to go get it; the other agency says no, case-by-case year, and 232 6/5/00 - FISCAL STABILITY - RES. 000232 that's why we were pleased that the Mayor and City Council in the current Five-Year Plan that's going to go in effect in less than a month allocates that money. So there is some fiscal connection in terms of reporting requirements. What you may also be referring to is back four years ago now, when Judge Smith entered her findings of fact and conclusions of law in regard to the school desegregation case, Judge Smith ordered the School District to open its books for PICA's inspection to determine if the $45.2 million, or $45.6 million, she was awarding the School District from the State to implement her ruling, what part of it was necessary. She could not order PICA to do it since we were not a party of it; she could only ask PICA to oversee. I polled my board at that time, and my board was very interested and wanted to cooperate with the courts in order to resolve the matter. That matter was stayed by the Supreme Court. And when the Supreme Court, May, a year ago, issued its new school desegregation opinion, it overturned Judge Smith's opinion, not vis-a-vis PICA's oversight jurisdiction, but because the 233 6/5/00 - FISCAL STABILITY - RES. 000232 judge didn't have the authority to join the City and the State as parties to an appellate proceeding. What is interesting to note, in the hearings before Judge Smith, on which she based her findings of fact, both the expert witness for the Commonwealth of Pennsylvania and the expert witness for the City of Philadelphia said there should be some sort of fiscal oversight board. And the board that was mentioned in the testimony of David L. Cohen, who was testifying on behalf of the City, the former Chief of Staff of the City, specifically recommended PICA, and the judge named PICA.
Let me ask you a quick question, and thank you for that response. When you made reference to the corporate entity language --
-- again, it was always crystal-clear in my mind that PICA had the right to do virtually anything, if you will, with the City, but I thought I heard you say earlier in your response that you had to get the information 234 6/5/00 - FISCAL STABILITY - RES. 000232 about the School District through the City. And I don't understand why, based on the Act -- and maybe I'm not reading some parts of it correctly -- why PICA would have to do anything through the City relative to the School District, which is a corporate entity of its own, and why you wouldn't be able to get the information directly because of PICA statute authority.
Okay. I apologize for the confusion. We asked the School District, you know, directly, in the event that an entity would resist turning that information over, then the City is obligated, through the cooperation agreement, to see that that information is supplied.
All right. Well, what I'm referring to is, in the Act, there is a Section C that talks about specific powers. And it reads as follows: "In addition to the powers and duties set forth elsewhere in this Act, the Authority shall have the specific powers: "1. To obtain copies of all reports regarding the revenues, expenditures, budgets, 235 6/5/00 - FISCAL STABILITY - RES. 000232 costs, plans, operations, estimates, and any other financial or budgetary matters of an assisted city or any corporate entity. "2. To obtain additional reports on the above matters in such form as are deemed necessary by the Authority." And there's another part of the same act that talks about documents and examinations to be reviewed or undertaken by the Authority. "The Authority shall receive from an assisted city and review the reports, documents, budgetary and financial planning data, and other information prepared by or on behalf of such assisted city, and which are to be made available to the Authority under this Act. "2. Receive from a corporate entity or school district and review the reports, documents, budgetary and financial planning data, and other information prepared by or on behalf of a corporate entity or school district and which are to be made available to the Authority under this Act as the Authority deems necessary to accomplish the purpose of this Act." I mean, I'm almost kind of getting the 236 6/5/00 - FISCAL STABILITY - RES. 000232 impression that you're potentially asking for permission to have something for which, from PICA's perspective, no permission is required?
No, I'm not saying that. What I was trying to say -- and I'll try to say it again -- is that we can ask for those reports, and we're entitled to them as of right. And we get the general reports, the budget documents and the reports. But unlike with the City, where we could go in and ask for individual work papers and individual supporting documentation, that is not, you know, so clear.
What gives you that authority to make that level of requests with the City?
The Act itself, the specific Act itself and the cooperation agreement.
And you can't do that with the School District because. . . ?
But what I'm also suggesting is, lawyers can disagree as to the 237 6/5/00 - FISCAL STABILITY - RES. 000232 level of detail that is appropriate, given the language of the Act and the cooperation agreement. So I'm -- I guess I'm being a little bit of a Philadelphia lawyer in answering your question. You know, I believe PICA has that authority. To the extent that we ask for information, we get the information, you know, we want, because we don't need the detailed information that -- with the School District that we need for, you know, for the City or for capital programs, you know, with the City. You know, we have requests for street pavings. There was a request put in for --
We've had a view projects over there that you really seemed interested in, and I didn't know why, but okay, all right. Thank you.
Are there any other questions of members of the committee or 238 6/5/00 - FISCAL STABILITY - RES. 000232 Councilmembers? (No further questions.)
Madam Chair, I'd just like to just make a statement. You were apologetic for me waiting here, but will tell you that on behalf of PICA's staff, it was better for me to sit here and listen to all of this so I could report back, and it was, you know, very worthwhile. So I did not mind at all listening to everyone's testimony that precede me.
Oh, I'm glad to hear that. Thank you. We had three witnesses that wanted to come in, and I don't know if they're still here. I believe Shelly Janoff was here earlier and apparently had to leave. Michael Churchill? (Witness comes forward.)
And I believe Reverend Robert Shine was on the witness list but apparently left. Good afternoon. Thank you for your patience.
Thank you. 239 6/5/00 - FISCAL STABILITY - RES. 000232 I have a statement here if people would like to distribute it. Essentially, I want to start from where Mr. Vignola just started, which was that you have a short time to take care of a long-term problem that's in front of you, and the long-term problem is not just dealing with --
I'm sorry. Mr. Churchill, before you proceed, just identify yourself for the record.
Yes. I'm Michael Churchill. I'm chief counsel of the Public Interest Law Center of Philadelphia.
The long-term problem that you have is not just the structural deficit but is the full issue of how to make and solve the underfunding problem that has been confronting Philadelphia school children. Councilwoman Miller had asked, how much money does the School District really need? The Superintendent has prepared a budget for the Opportunities to Learn, which would cost around $300 to $350 million to enable Philadelphia 240 6/5/00 - FISCAL STABILITY - RES. 000232 students to have the same class sizes as suburban students, summer schools, a longer school day for children needing more instructional time, better trained teachers, sufficient preschool classes. In addition, the structural deficit that you've heard about arising from the changes in the funding in the State's formula from now almost ten years ago is around $100 million. These are large numbers, and many politicians have dismissed them as unrealistic and "Never-Never Land," even if you were to phase those in over three to four years. But expenditures of that level are not out of sight and they're not considered unrealistic for students in many other districts around the State. The $400 million approximately that we're talking about, when divided by the 230,000 students in the District, is a little less than $2,000 a student. And as you heard from the Superintendent, the average suburban district spends $2,000 more per student than the District currently does. And if we use the New Jersey standard 241 6/5/00 - FISCAL STABILITY - RES. 000232 for parity, that the level of average expenditures should be the same as for the top percent of 4 the districts in the State, that amount would be 5 about $2,429 more per student a year, or 6 $509 million for Philadelphia. 7 So the Superintendent's budget is not 8 far from the goal, which I urge you to set a 9 parity. And I believe that is the goal that ought 10 to be the long-term issue that is on the table for 11 next year. 12 Now, if we were to receive funding at 13 that level, we'd have to deal with a lot of myths 14 in Harrisburg saying that say we are already 15 getting our share -- in fact, more than our share 16 -- and to end the political isolation that has 17 been the main problem -- part of the problem for 18 so many years up there. 19 The first myth is that we already get 20 more money per student than any other district in the State, and that is just plain wrong. There are 187 of them that get more, including Pittsburgh, more per student, including York, and including Reading. The State funds in those districts are also a larger portion of those 242 6/5/00 - FISCAL STABILITY - RES. 000232 districts' budgets than it is in Philadelphia. A second myth, which you also heard, I think, answered this morning was that State funding has been going up. 9 percent, according to the Five-Year Plan, when measured in real terms between Fiscal Year '93 and Fiscal Year '98. That comes out of the Five-Year Plan that was submitted to and recently approved by the PICA Board. Even when you take inflation out, Philadelphia has been receiving a much smaller share of the increase in State funding in the last ten years. And if Philadelphia had gotten the same share increase in State funding that the rest of the State had gotten since 1990, Philadelphia would have an additional $118 million this year. Now, that is a measure of how the State has been treating Philadelphia since they changed the formula. Some -- I believe you asked, Madam Chair, what had been the effect? And when all is said and done, the rest of the State had gotten an increase that would have given us, if we had gotten the same increase, $118 million more. 243 6/5/00 - FISCAL STABILITY - RES. 000232 Finally, you just asked, Councilman Nutter, what is the effect of the amount of the relatively low share that Philadelphia gives out of its own local funds? 3.
And at that difference, if we 10 were to reach the statewide average, it would 11 require $125 million more from the City to reach 12 the State average. 13 Now, we know how much difficulty it is 14 just reaching $20 million that we're talking about 15 here. We understand how far out of sight that 16 $125 million is that Representative Perzel was 17 alluding to. The reason, by the way, that it is 18 so much more difficult for Philadelphia to come up 19 with the same share as so many other districts is 20 because of the huge amounts that have to go into 21 county-based programs in the City's budget -- essentially courts and children's services. The Greater Philadelphia First study that Superintendent Hornbeck referred to showed that if we were paying the same taxes for county 244 6/5/00 - FISCAL STABILITY - RES. 000232 functions as Pittsburgh, we would have $479 million, which we could free to the school system. But we're not in that situation, which is why we must look to the State for this difference. Finally, I think it is clear that the School District has shown that additional funds would be well-used. The increases in the scores that have come about, with the very small amounts of additional money that they've had, is very impressive. They have a plan. The plan is very specific about where the new money would go to: reducing class size, upgrading teacher competency, increasing early-childhood programs. This is a very ripe situation for the State to put whatever controls they would like, either through a PICA oversight board, through your own oversight here, or any other mechanism they would like, to be assured that any additional funding would go for the very specific purposes that we all agree on are necessary. So I want to close just by saying that we have a -- not just a Philadelphia crisis going on in the State, however, but a statewide crisis. 245 6/5/00 - FISCAL STABILITY - RES. 000232 As Superintendent Hornbeck said, it is -- we've gone from 55 percent funding for public education coming from the State to about 35 percent. This has affected many, many other districts. There are 181 districts that have gaps greater than Philadelphia's, who have lower spending than Philadelphia. There are 360 who have gaps of over $1,500 between what they can spend and what the top 100 schools -- the average of the top 100 school districts could spend. So there are potentially a lot of allies if we were to end up saying, Fix Philadelphia's problem and fix the rest of the State's problem. At $400 million, there's no way that you're going to get Philadelphia's problems fixed by themselves. But if you start to think there are other districts who have similar problems from around the State, almost two-thirds of the districts with very substantial gaps because of this large underfunding, I think that we can finally end the isolation that we have held in Harrisburg. And I urge this group to use its influence with both the School District and with 246 6/5/00 - FISCAL STABILITY - RES. 000232 the Mayor and yourselves to start brining in the school board chairmen and the State representatives from those other districts so that we can begin to forge that kind of an alliance. If we do that, the numbers that I am talking about will no longer seem in "Never-Never Land," but you would agree with me that they are just and also realistic. Thank you.
Thank you very much. You've been extremely patient.
Well, I'm glad to be here because you've been asking all of the right questions about the very fundamentals of how we've gotten into this situation, and it's been a pleasure to listen to.
And may I say that I found your testimony very informative. At this time, the Chair recognizes Councilman Ortiz.
Hi, Mike. We had hearings here seven years ago and we brought the grouping that was taking the State to court at that time. And we asked at that 247 6/5/00 - FISCAL STABILITY - RES. 000232 point -- City Council held hearings for a few days, and we published a report, and we asked for that relationship to begin to be established, and nothing happened. Actually, we were told at that point that it would disturb the backroom deals that were being done to try to secure funding. And that didn't work. And your statement here about the myth that -- and I think we all see that, and I like your strategy of recommending that we begin getting everybody together and for us to begin and initiate this political process of bringing the school board members from across the State. But in essence, isn't that running counter to this deal that we just made? which a lot of us have a lot of questions about, because it doesn't resolve the issue, and I don't know how it takes us any nearer to resolving the issue since the structural and political conditions remain the same. Could you elaborate on that? And could you say to me how it was that we came to drop the lawsuit? And were all of parties to that lawsuit consulted before the lawsuit was dropped, or postponed? 248 6/5/00 - FISCAL STABILITY - RES. 000232
Or even postponed. I assume that there will be motions that will be submitted to the court to have that happen, but I can tell you no, all the parties were not consulted before the City and the State agreed that that would be the request that they would make. On the other hand, there is -- it is clear that the State and the City are now engaged in a process of consulting. And I think what I've heard in your question is, should we just sit back and let that consultation work as if there was good will that would solve the problem? And I would like to urge you that you're correct, that it will take more than that, and that finding allies and the State who have the same interests will help you in getting more money. I don't think -- I mean, one of the excuses that the Governor made why he is putting in so little money this time was that he didn't have the legislature with him. And I think it's 249 6/5/00 - FISCAL STABILITY - RES. 000232 important to move on the legislature and show them that many of their own constituents would benefit from solutions to the declining State's share of the education budget. It's been well publicized that in Delaware County, the Chair of the commissioners there, Wally Nunn, has been complaining about the impact that has been on those school districts from underfunding by the State and the severe consequences it's had for tax rates there. They are not alone. There are a lot of people around the State that have been complaining about the high impact of high school expenditures, and that's happened because the State has been shifting them; they've been shifting from the State budget onto the local property taxes. And that's in part what's been happening in Philadelphia. Philadelphia has less resources to put into that than many of these other places, and that's why we need to get together with them and say no, it is time to start using the State budget as a way of dealing with a statewide problem. Because if Philadelphia students can't 250 6/5/00 - FISCAL STABILITY - RES. 000232 read and can't write and if Philadelphia students stay on welfare and if Philadelphia students aren't participating in the economy, the whole state is going to suffer. It's not just a Philadelphia problem.
That is the perception, isn't it? That is the perception.
Well, they think that it's just a Philadelphia problem, but it's not. And one of the things that the PICA Five-Year Plan says is that the quality of public education in Philadelphia remains a critical factor to the ability to attract and retain businesses and residents. This is an economic development issue. And it is not -- as all other economic development issues, it's not just for the City; it affects the whole region. And we need to have allies. And it was interesting to me in that in that lawsuit that you were talking about, the rural school district one, in the end, even the associations of suburban school superintendents came and filed an amicus brief to say, We support that litigation, and got together and -- 251 6/5/00 - FISCAL STABILITY - RES. 000232
Well, we had an opportunity to early on join in partnership with that, and we refused -- the executive branch --
I think that was one of the missed opportunities, but perhaps it probably wouldn't have made any difference because the State and the courts in the end said that the lawsuit was not the way to handle the problem. But we need to, at any rate, I think, get to the place where that court said to handle the problem, which is the State legislature, and try to find as many allies in that as we can. And I think it's useful to know, we are not the only people with this great big budget gap around the State.
Thank you so very much. Are there any other questions or comments from members of the committee? (No further questions.)
Again, Mr. Churchill, I thank you for your testimony and 252 6/5/00 - FISCAL STABILITY - RES. 000232 your patience.
This meeting will stand in recess until Wednesday, June 7th, at 1 p.m. Thank you very much. (Adjourned at 3:40 p.m.) - - - 253 C E R T I F I C A T E I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Monday, June 5, 2000, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COUNCIL COMMITTEE ON FISCAL STABILITY AND INTERGOVERNMENTAL COOPERATION RESOLUTION NO. 000232 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter