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Laura Seitz, Deseret News
Philadelphia schools teeter on bankruptcy while the state and schoolteachers fight over teacher contracts. Experts disagree on root causes and what to do about it, but the start of school is around the corner, and the money isn't available.

When a major school district can't pay its bills, does it shut down? Or does it beg, borrow and steal to keep going?

Faced with a $304 million deficit last June, Philadelphia schools slashed payrolls and budgets earlier this summer, issuing thousands of pink slips. Now with fall school opening around the corner, the district is scrambling to find the funds to open.

Philadelphia is dealing with a problem hitting school districts around the country on a smaller scale. From Newark to Los Angeles, school districts are in crisis as state funds are constrained by continuing revenue shortfalls and expensive employee contracts that prove difficult to fix.

To teachers and their defenders in Pennsylvania, the problem is funding. To the governor and his supporters, the problem is spending. And so with children in the crossfire, the street fight over how to repair and fund a flailing school system that cannot balance its books continues.

“The problem is the whole system is designed for adults,” said Piya Abraham, a policy analyst with the Pennsylvania-based Commonwealth Foundation. “It’s high time to think about reforming the entire system so that it is genuinely student-centered.”

Stop the bleeding

Over the summer, a deal was reached among Pennsylvania Gov. Tom Corbett, the city of Philadelphia and the city’s teachers to keep Philly’s schools afloat for one more year. The trouble is that the deal required a collective bargaining agreement with the teachers that included cuts in teacher pay and pensions. The deal has not yet been reached.

Now with school opening just around the corner, Philadelphia has scrambled to cover its share, which it still does not know how it will fund. And Corbett has held back $45 million of the state’s share of the deal, pending an elusive agreement with the teachers, who are expected to make major concessions.

The teachers are not ready to give ground. "They say you have to stop the bleeding," said George Jackson, a spokesman for the Philadelphia Federation of Teachers, "but first you have to stop the guy wielding the knife."

Jackson argues that the governor is asking the teachers to “make up the bulk of the deficit. And that’s something that is not sitting well with our members.”

Root causes

The root problem, according to Sharon Ward, director of the Pennsylvania Budget and Policy Center, is a statewide collapse of funding. “Pennsylvania has lost about 20,000 teachers and staff over the past two years,” Ward said. “It’s as if 100 factories employing 200 people had closed down.”

Some see a big part of the Philadelphia funding problem in retirement benefits. In a recent study, the Thomas B. Fordham Institute projected the annual per pupil cost of funding Philadelphia teacher retirement benefits will rise from $438 in 2011 to $1,923 per pupil in 2020 as baby boomer teachers retire on generous pension and medical benefits written into generous contracts in the 1990s and 2000s.

Not surprisingly, teachers disagree. "Chronic lack of resources has brought this crisis to our schools, not work rule provisions in collective bargaining agreements," said Philadelphia Federation of Teachers president Jerry Jordan in a statement, blaming the governor for holding children's education "for ransom in order to force reforms that will do nothing to improve education."

Looming on the horizon is a new prison on the outskirts of Philadelphia that will cost the state $400 million. Jackson wants the funds spent on schools instead.

A crisis every year

But skeptics say that shifting funds would paper over a systemic problem.

Philadelphia’s school district is in fiscal crisis most years, notes Hess. Indeed, for each of the past few years the district has faced deficits larger than $200 million. And in 2006, a boom year with strong tax revenue, the district still managed a $73 million budget gap.

“The idea that another $100 million or $200 million is going to transform a persistently low-performing, dysfunctional district confuses cause and effect,” said Frederick Hess, director of education policy studies for the American Enterprise Institute, noting that the city spends between $14,000 and $15,000 per pupil, in line with national norms. “The real problem is unaffordable contracts and benefit obligations.”

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“Philadelphia school teachers don’t contribute anything to their health care,” said Abraham. “This is a crisis that has been building up for many years, and the district has been poorly managed for a long time.”

The district is so poorly managed, Abraham said, that in 2001 the district was essentially put into receivership, with its elected school board replaced by state officials and the entire district governed from the state capital under the so-called School Reform Commission.

But the SRC has made little progress in the intervening 12 years, in large part, according to critics, because hiring, benefits and salaries are so rigid — and so generous.

Email: eschulzke@desnews.com