http://thenotebook.org/blog/135903/school-budgets-are-down-25-percent
It does not take a genius to figure out what is going on here. Philadelphia is bankrupt. Without even seeing the details, it is safe to assume untenable union wages and pension benefits are at the heart of it all. A 47.6% funded pension is rather telling in and of itself.
Gutless Mayor Michael Nutter does not even have the decency to let the public or the press hear what is going on. Instead he invited Wall Street to a private tour of Philadelphia's assets, hoping to sell assets and stave off the inevitable.
What fundamental issues is Nutter solving?
Pensions? No
Schools? No
Union Salaries? No
Bloated Payrolls? No
Benefits? No
Instead of inviting Wall Street to a private tour, Nutter ought to be inviting the press and private citizens to a press conference to declare the city's bankruptcy.
We've been down this path before, most recently in Stockton, California. Here are some Stockton Bankruptcy Articles to consider in case you are not familiar with the story.
Most relevant to Philadelphia is a ruling the Stockton Bankruptcy is Valid, City Acted in Good Faith. The judicial ruling means bondholders are at risk, and the city will not be forced to raise taxes to pay off creditors.
Also see CalPERS Pension System in the Crosshairs of Stockton Bankruptcy Dispute.
With those rulings, Philadelphia's cost of borrowing is likely to soar. Regardless, the city is nothing but a walking zombie now. The end is at hand.
Mike "Mish" Shedlock
Hite: School budgets down 25 percent without more funds
by Dale Mezzacappa on Apr 18 2013 Posted in Latest news
Photo: Benjamin Herold
Superintendent William Hite (right) and Chief Financial Officer Matthew Stanski present the District's grim budget news.
Facing a $300 million structural deficit and still uncertain whether it will get the increased revenue and labor concessions it is seeking, the School District is asking schools to prepare to operate next year with a principal and a bare-bones allotment of teachers – and just about nothing else.
That means the contractual maximum class size in every classroom – 33 students in grades 4-12 and 30 in K-3. It means no dedicated money for guidance counselors, interscholastic sports, extracurricular activities, librarians, art or music.
No money, even, for secretaries.
“We can’t afford anything else,” said Superintendent William Hite in presenting the doomsday scenario at a press briefing Thursday afternoon, just before he went to tell his principals the grim news via webcast.
District Chief Financial Officer Matthew Stanski presented the budget to the School Reform Commission at its meeting Thursday night.
The school budgets that principals will get Friday are effectively reduced by $220 million, 22 to 25 percent from their already austere levels. It will stay that way unless the District gets the $120 million in additional revenue it is seeking from the state, $60 million from the city, and $133 million in concessions -- about 10 percent in wage and benefit costs -- from the teachers’ union.
“This situation is dire, it’s real, and it’s why we’re required to ask for sacrifices from all parties,” Hite said. The District’s blue-collar union last year agreed to about 10 percent in wage and benefit concessions.
The District has begun negotiations with the Philadelphia Federation of Teachers, whose contract expires at the end of August.
For the union, it could come down to a tradeoff between the salary and benefit concessions and what Hite described as “massive” layoffs. The class-size maximums specified in the contract are generally much higher than the norm in most suburban districts. Many principals were able to use discretionary funds to reduce class size in their schools below the contracted maximum, but will not have the discretionary funds to do that now.
But to maintain the relatively high class-size maximums mandated in the contract, Hite said, “requires us to eliminate some of the other things” -- sports, libraries, music -- considered essential in most school districts.
Hite did make it clear that even if the District gets what it wants in money and concessions, it will not be enough to give students a "quality" education.
"That is just to eliminate a deficit … even with the $304 million … we still need additional resources to actually provide students with what I believe would be a quality educational experience," he said. "I want to see art and music in every school, I want to see language in the elementaries, I want to see career and technical education programming for our high school students.”
Down to what’s mandated
But without the additional revenue and the labor concessions, schools are down to barely being able to fulfill state and contractual mandates, along with a few non-mandated services including kindergarten and school security that the District believes are indispensable.
The budget would maintain the current level of school police, but would reduce nursing services, which were already slashed, from one nurse for every 1,000 students to one for every 1,500. It will continue to fund special education and services for non-English speakers, Hite said.
UPDATE: In addition to the school-based cuts, the District’s budget reduces an already decimated central office by $23 million. Central office had about 800 positions in 2011 and is now around 450. It is still unknown how many more jobs will be lost, but ultimately central office will account for only 2 percent of the operating budget -- “unheard of for a district the size of ours,” Hite said.
That makes it hard to provide basic functions. The charter office, which oversees 84 charter schools, has only three people, for instance.
The budget, he said, “is grounded in reality and based on the revenue we know we have. Too many budgets and contracts in the past had been based on what we had hoped for and not necessarily what was real.”
The huge budget hole is the product of a two-year-long crisis primarily brought about by sharp drops in state and federal aid. There was the end of the federal stimulus and decisions in Harrisburg to reduce the basic education subsidy and eliminate such big-ticket line items like reimbursement for charter costs, all of which meant that Philadelphia saw a more than $200 million reduction in revenue at a time when fixed costs were rising.
Last year, the District borrowed $300 million to make ends meet, but it has exhausted its borrowing power and doesn’t want to do that again in any case.
“To continue to borrow is to continue to put the District on a path to bankruptcy,” Hite said.
The structural deficit -- the amount where expenses exceed revenues -- is $304 million, but the District expects to end this fiscal year with a reserve that it will use to reduce the actual shortfall to $242 million.
Hite said that the District’s options for reductions are limited. Hite said that in its $2.5 billion budget, about $1 billion is mandated and nondiscretionary -- the costs it must pay to charter schools, $729 million, and its debt service, $280 million.
At the same time, it is facing increases in fixed costs. For instance, the state is requiring that contributions to the teachers’ retirement fund will go from 12 to 16 percent of teacher salaries.
Mayor Nutter is working to raise the $60 million asked of the city and to raise the money from Harrisburg, which has so far been cool to noncommittal on the District’s request.
Hite is hopeful that Harrisburg, historically hostile to requests from Philadelphia, is taking the request seriously.
“Individuals are listening,” he said, but are also reiterating that the commonwealth has its own budget challenges.
At the SRC meeting, Hite asked everyone in the room to “plead” for the additional revenue.
After listening to Stanski’s presentation, Commissioner Feather Houstoun said: “We need all the help we can get.”
And........
'Catastrophic' budget laid out by Philly schools
I
If the "catastrophic" budget picture Superintendent William R. Hite Jr. laid out Thursday comes to pass, Philadelphia schools would be virtually unrecognizable come September.
There could be no money for counselors or librarians. There might be no sports or extracurricular activities. No dedicated funds for secretaries, aides, or summer school would be provided. And that would follow the steep cuts made over the last two years.
There also could be 3,000 layoffs, including some teachers.
This doomsday scenario comes as a result of a deficit of more than $300 million in the district's $2.7 billion 2013-14 budget. Officials have asked for $120 million in additional funding from the state and $60 million from the city, as well as $133 million in concessions from labor unions.
But none of that money is guaranteed.
"Too many budgets and contracts in the past were being based on what we had hoped for and not necessarily what was real," Hite said.
Laying out the grimmest possible reality is a strategic move, as the district makes its case in Harrisburg and City Hall for more funding and sits at the negotiating table with its unions, including the 15,000-member Philadelphia Federation of Teachers.
But $220 million in additional school-based cuts is a very real possibility. Union officials have said they would not bow to demands for big concessions, and while Mayor Nutter has signaled his support for the district's request, early signs from the state are not promising and City Council seems skeptical.
Caught in the middle
Even Jerry Jordan, president of the Philadelphia Federation of Teachers, said this budget picture could come to pass.
"Clearly, this is a possibility," Jordan said. "Our kids are in the middle."
Commissioner Wendell Pritchett called it a "sobering presentation" that would cut not frills, but "basic things that every child should have."
This year, the district borrowed $300 million just to heat buildings and pay employees. That is not an option going forward, Hite and Chief Financial Officer Matthew Stanski said.
"To continue to borrow just continues to put the district on the path to bankruptcy," Hite said.
Principals will receive their individual school budgets Friday. They will be asked to absorb cuts of about 25 percent, receiving only enough money to fund a principal and teachers based on the contractual class-size maximum: 33 for older grades and 30 for kindergarten through third grade.
"We can't afford anything else," Hite said. "Schools will not be able to offer everything that's mandated, both by statute or contract. We're making a judgment call."
It's unclear what the ramifications of flouting contracts and state law might be.
Schools, under this scenario, would still offer services for special-education students and English-language learners, which are also mandated by law. There would also still be school police, food services, transportation, and nurses - but fewer of them: While the ratio is one nurse per 1,000 students, it would go up to the maximum of one per 1,500.
Rising costs
There is little room left to maneuver, Hite said. Many costs are rising - the district will pay more for employee benefits and must contribute more to pension funds - or fixed, including $280 million in debt service and $729 million for charter schools.
(The School Reform Commission on Thursday night budgeted up to $15 million over two years for a new cyber school, but officials have said that the figure was a ceiling and that the virtual school would bring back students now in cyber charters, meaning savings for the district.)
Charter advocates are pushing hard for a number of expansions, but those seem unlikely.
"Any seat would obviously add a cost to the budget," Stanski said.
Hite said he realized that many were wary of the district's financial pronouncements. But this time, he said, tough decisions have already been made, including closing more than 30 schools in 18 months.
"We are not crying wolf," Hite said. "Our budget situation is dire."
Lori Shorr, the city's chief education officer, said that the district's budget scenario was "extremely concerning" but should not be surprising. This budget is "surely not what we want for children of this city - and we must all commit to ensuring it never becomes a reality."
Councilwoman Maria Quiñones Sánchez said that although tough, "this is what City Council has requested - real budgets. Over the next 60 days, we have to discuss and ultimately decide if we believe our children deserve better. I will certainly do what I can for them."
"The scenario that the district laid out today should be extremely concerning to us all, but it should not be surprising given the financial situation the district laid out last month in its budget," she said. "The vision of education within this scenario is surely not what we want for the children of this city - and we must all commit to ensuring it never becomes a reality."
State Rep. Bill Adolph (R., Delaware), chairman of the House Appropriations Committee, has met with Nutter about the district's finances. He sympathizes with the district's plight, but there is only so much money to go around, Adolph said, and Philadelphia's request is more than 1.5 times the amount of additional funding that Gov. Corbett proposed for all 500 districts combined.
"I listened to their plan, and all I said to them is that these proposals for funding requests come in, and we will listen to them," Adolph said.
http://globaleconomicanalysis.blogspot.com/2013/04/philadelphia-5th-largest-city-in-us-is.html
Tuesday, April 16, 2013 11:38 PM
Philadelphia, 5th Largest City in US is Effectively Bankrupt; Mayor Holds Closed Meeting With Wall Street to Discuss Asset Sales
You know a city is in deep trouble when its mayor invites Wall Street but not the press and not private citizens to a closed meeting to discuss the future, including a sell-off of city assets.
Philadelphia Mayor Michael Nutter, whose municipality has the lowest credit rating of the five most-populous U.S. cities, did just that.
My translation: Philadelphia is bankrupt. However, that easily discernible fact will of course be denied until it officially happens.
Please consider Philadelphia Holds Closed Meeting With Wall Street
Philadelphia Mayor Michael Nutter, whose municipality has the lowest credit rating of the five most-populous U.S. cities, did just that.
My translation: Philadelphia is bankrupt. However, that easily discernible fact will of course be denied until it officially happens.
Please consider Philadelphia Holds Closed Meeting With Wall Street
Philadelphia Mayor Michael Nutter, whose municipality has the lowest credit rating of the five most-populous U.S. cities, will address investors at a conference financed by underwriters and closed to the public and the press.Philadelphia, 5th Largest City in US is Bankrupt
The invitation bills tomorrow’s meeting as a chance to hear “Philadelphia leaders and investors discuss building the city’s future.”
Philadelphia is hoping to attract investors for the city, which is rated three steps above junk by Standard & Poor’s. The city and its authorities have $8.75 billion in outstanding debt as of September, according to bond documents. Philadelphia’s pension system is 47.6 percent funded this year, the documents say.
Tours of city assets are set for the second day of the conference, including the Philadelphia Gas Works, the largest municipally owned natural-gas utility in the U.S. The city plans to hire a broker to steer the sale of the system, which may fetch as much as $496 million, according to Lazard Ltd. (LAZ)
Sam Katz, chairman of the Pennsylvania Intergovernmental Cooperation Authority, created in a 1991 state law that oversees the city’s finances, said that with the conference being held locally, it “certainly created some concern on the part of people that it should be made public.”
He’s more troubled, however, by the fact the school district isn’t on the agenda, he said. Facing a $304 million deficit, school officials have asked the city for $60 million and the state for $120 million.
“The school district’s in a crisis,” Katz said. “They’re the same tax base.”
Philadelphia officials facing a $1.35 billion spending gap over five years voted in March to shut 9 percent of its public schools.
It does not take a genius to figure out what is going on here. Philadelphia is bankrupt. Without even seeing the details, it is safe to assume untenable union wages and pension benefits are at the heart of it all. A 47.6% funded pension is rather telling in and of itself.
Gutless Mayor Michael Nutter does not even have the decency to let the public or the press hear what is going on. Instead he invited Wall Street to a private tour of Philadelphia's assets, hoping to sell assets and stave off the inevitable.
What fundamental issues is Nutter solving?
Pensions? No
Schools? No
Union Salaries? No
Bloated Payrolls? No
Benefits? No
Instead of inviting Wall Street to a private tour, Nutter ought to be inviting the press and private citizens to a press conference to declare the city's bankruptcy.
We've been down this path before, most recently in Stockton, California. Here are some Stockton Bankruptcy Articles to consider in case you are not familiar with the story.
Most relevant to Philadelphia is a ruling the Stockton Bankruptcy is Valid, City Acted in Good Faith. The judicial ruling means bondholders are at risk, and the city will not be forced to raise taxes to pay off creditors.
Also see CalPERS Pension System in the Crosshairs of Stockton Bankruptcy Dispute.
With those rulings, Philadelphia's cost of borrowing is likely to soar. Regardless, the city is nothing but a walking zombie now. The end is at hand.
Mike "Mish" Shedlock
No comments:
Post a Comment