Philadelphia School District ( SRC ) borrows $ 300 million to pay its bills

Philadelphia School District ( SRC ) borrows $ 300 million to pay its bills


Posted: Wednesday, November 7, 2012, 7:34 PM

The Philadelphia School Reform Commission moved Wednesday to borrow $300 million – money it needs just to pay teachers, heat buildings, and buy books for the rest of the school year.

Chairman Pedro Ramos made it clear that the SRC’s back was to the wall and that the state of its finances constituted “dire circumstances” for the district.

“I couldn’t be more unhappy that we’re in a situation where it’s necessary to do a borrowing for the purposes of merely paying our bills,” Ramos said.

The bond sale the SRC unanimously authorized at the Wednesday special meeting comes with a hefty price tag – an additional $22 million in debt service annually for 20 years, beginning in 2014.

It’s the second time in a decade the district has had to borrow money to keep schools open – the last deficit financing occurred in 2002 – and officials say the school system’s credit card is maxed out.

“Some people think the solution is that we can just keep borrowing, and we really can’t,” Ramos said.

Because it represents nonrecurring revenue, this bond sale puts the district hundreds of millions in the hole for the 2013-14 school year just three months into the current school term.

The message? The district’s current spending is not sustainable; the bond sale is a large and very expensive Band-Aid, but it only buys the district a little time.

“Extremely difficult” choices are approaching quickly, SRC member Wendell Pritchett said, and “we’re going to have to make them. We don’t have any choice.”

The SRC will soon be confronted with a whopper of a decision – deciding how many and which of the district’s 200-plus schools should be closed.

Officials have said they must shed roughly 40 schools at the end of this year to save money and “rightsize” operations in a district that has lost tens of thousands of students to charter schools in the last decade but did not shrink operations to compensate.

Superintendent William R. Hite Jr. said Wednesday that staff would make public their school closing recommendations in the next few weeks, but possibly not until the first week in December.

In financial terms, officials said, the bond sale was successful – well received in the market, with more than 50 investors placing initial orders, said Christina Ward, deputy chief financial officer.

Though the district is a financial shambles, its recently adopted five-year plan and greater public confidence in the path of a relatively new school governing body and administration bolstered the bond offering, officials said.

The current SRC, in place for roughly the last year, has begun to right the course, and that shows in investors’ reception of the district’s bond offering, Hite said.

“Nobody’s going to invest in something they think is broken,” Hite said.

And a state “intercept” program also gave investors confidence – guaranteeing creditors will be paid, as state aid is automatically sent to creditors to cover the district’s debt if it fails to meet obligations.

The state intercept, Ramos stressed, was crucial to the district’s bridging “the gap between the reality of our day-to-day life, living in an enormous operating debt,” and being able to borrow against it.

How did the district arrive in its current financial predicament?

A failure to cut costs as it shrank was a factor; certainly big cuts in state and federal revenue and the brutal economy have contributed to the fiscal woes. But Ramos has acknowledged that “poor fiscal policy” – too much borrowing, too much spending on the part of prior administrations – also landed the district in its tight spot.

The school system could face a $1.35 billion deficit over the next five years if changes are not made, the five-year plan warns.

School closings are a major component of that plan, but so are major givebacks from labor forces, including the Philadelphia Federation of Teachers.

“Everybody has to make concessions,” Hite said. “We can’t continue to operate in this manner.”

Existing salary and benefit structures were agreed to “in high-revenue times,” said Hite. “Now we don’t have the ability to sustain that structure.”

The PFT contract expires in August.




The School District of Philadelphia is governed by the five-member School Reform Commission. The commission was established in December 2001, when oversight of the district was taken over by the Commonwealth of Pennsylvania. The Governor of Pennsylvania appoints three of the members, and the Mayor of Philadelphia appoints two members of the commission.[1][10]

Wow…….I just caught this story on Internet Radio.

Philadelphia is the 5th largest City in the US (see link below)

Again, is this the sign of foreshadowing here in Canada ? ……..Seriously what’s the difference?

FYI….residential property taxes in the U.S…… N.Y. and N.J. areas, can be as high as $10,000 – $12 ,000 per year.


The SRC will soon be confronted with a whopper of a decision – deciding how many and which of the district’s 200-plus schools should be closed.

Officials have said they must shed roughly 40 schools at the end of this year to save money and “rightsize” operations in a district that has lost tens of thousands of students to charter schools in the last decade but did not shrink operations to compensate.

Charter Schools (From Wiki)

Charter schools are primary or secondary schools that receive public money (and like other schools, may also receive private donations) but are not subject to some of the rules, regulations, and statutes that apply to other public schools. Instead, charter schools are expected to produce certain results, set forth in each school’s charter.[1] Charter schools are attended by choice.[2] Although charter schools provide an alternative to other public schools, they are part of the public education system and are not allowed to charge tuition. Where enrollment in a charter school is oversubscribed, admission is frequently allocated by lottery-based admissions systems. However, the lottery is open to all students.[3] In a 2008 survey of United States charter schools, 59% of the schools reported that they had a waiting list, averaging 198 students.[4] Some charter schools provide a curriculum that specializes in a certain field—e.g., arts, mathematics, or vocational training. Others attempt to provide a better and more cost efficient general education than nearby non-charter public schools. Charter school students take state-mandated exams.[5]

Some charter schools are founded by teachers, parents, or activists who feel restricted by traditional public schools.[6] State-authorized charters (schools not chartered by local school districts) are often established by non-profit groups, universities, and some government entities.[7] Additionally, school districts sometimes permit corporations to manage chains of charter schools. The schools themselves are non-profit entities. Corporate management does not affect the status of a school. As of September 2012, in the United States, the only school system with the majority of children educated in charter schools was the New Orleans Public Schools.[8]


A need to borrow $300 Million to pay the bills for ONE YEAR ? As well as a projection of having to close 20 % of the current schools.? Seems like a problem that was allowed to get out of control. Reading between the lines…it seems that the Public School system had a lot of dissatisfied customers who opted to take their business to the charter school system. Rather than getting the hint and ” trying to compete “…the lowest common denominator “status- quo” was maintained.

Throw in a declining economy and hence a declining revenue base…the perfect $300 Million storm. I can’t see that band-aid solution being sustainable.  I doubt this is the last story on this issue we will hear about, and I wouldn’t be surprised if it occurs in Canada as well. In a collapsing economy , nothing is sacred ,nothing immune… just denial and entitlement become more entrenched.

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