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Published in Print: March 14, 2001, as Philadelphia Schools Warn City Of Spiraling 'Fiscal Crisis'

Philadelphia Schools Warn City Of Spiraling 'Fiscal Crisis'

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The Philadelphia school system is looking at a whopping $235 million budget deficit by the end of fiscal 2002. Moreover, without new revenue and dramatic cost reductions, the shortfall will grow to more than $785 million over the next three years.

That was the dire outlook that district officials gave the Philadelphia City Council during two days of testimony last week on their proposed $1.7 billion budget for fiscal 2002.

"We are at a moment of fiscal crisis," Rhonda S. Chatzkel, the chief financial officer, summarized during her presentation to the council, which must approve the district's budget.

The budget plan for fiscal 2002 includes $50 million in added spending for a new teachers' contract, as well as $21 million in other salary and benefit increases. According to updated data, the Philadelphia school system this year has about 215,000 students.

But Philip R. Goldsmith, the district's interim chief executive officer, said that the district was chipping away at its outlays by cutting back on overtime pay, tightening up on travel and conference expenditures, and reassessing technology programs.

"We must look in every nook and cranny for unnecessary costs, such as unneeded phone lines," he told the City Council. "We have begun that process."

'Must Make Choices'

But now, Mr. Goldsmith added, the district must look at larger areas, such as how it manages its security force—which is the fourth largest in the state—as well as transportation and food services. More cuts lie ahead, he warned: "We must make choices. When we say no, as we must, it's not that we don't care. It's that we do care."

Philadelphia is no stranger to fiscal crises. After projecting year-end deficits for the past few years, local administrators threatened to close the doors last year before an agreement was reached with the state to help stop the red ink.

As a result of subsequent cost cutting, the district expects to close the fiscal year that ends June 30 with a $44 million deficit—just more than half the deficit that had been predicted last May.

But the district has run out of one-time solutions to the ongoing budget problems, officials said.

Schools in the City of Brotherly Love have been hit with rising costs for all-day kindergarten, charter schools, security, and an influx of students who do not speak English as their primary language—an enrollment that has grown since 1995 from 5,600 to 13,200 students.

At the same time, the city's contribution, which provides about 40 percent of the district's revenue, has been hampered because of a declining residential tax base.

And while the state provides nearly 60 percent of the district's revenue, the basic state subsidy has not kept pace with inflation, according to district budget data. If that aid had kept up with inflation last year, for example, the district would have seen $50.8 million in added state aid.

The state legislature is in the early stages of writing Pennsylvania's fiscal 2002 budget. Already, however, Gov. Tom Ridge, a Republican, has recommended giving Philadelphia schools $66.4 million in new state aid in the coming fiscal year, an 8 percent boost over last year. ("Fiscal Ills Persist in Philadelphia Despite Political Shifts," March 7, 2001.)

Meanwhile last week, City Council members urged school leaders to look at ways to streamline administrative costs, and to explore partnerships with other city agencies that provide similar services, such as the police department.

And while some council members praised the detailed, three-year budget outlook, others expressed skepticism that the district would be able to keep running in the face of such staggering budget forecasts.

As council President Anna C. Verna said, "They better start praying."

Vol. 20, Issue 26, Page 10

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