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Reality Check: How Do We Pay for Local Control of the Schools?

With the SRC disbanding, WURD’s afternoon host offers two ideas to avoid raising taxes

With the SRC disbanding, WURD’s afternoon host offers two ideas to avoid raising taxes

With Philadelphia now in the post-School Reform Commission world and headed rapidly towards local control of its schools, the question turns to something city officials have given little thought to: How to pay for it.

Forget, for the moment, whether a new school board should be appointed by the Mayor or if it should be elected. The more important issue centers on how the city can reasonably sustain the budget of a troubled institutional colossus that’s burdened with a nearly $1 billion shortfall by 2022. Conveniently, the hype of local control—combined with the distraction of public #FreeMeekMill lunacy—has allowed both Mayor and City Council to casually gloss over this question.

WURD’s Charles Ellison

City policymakers aren’t concerned since most seem either resigned to raising property taxes or creating a fiscal environment no different from the Republican tax plan: a deliberately designed tale of two cities where the city’s poorest residents are disproportionately slammed to make up for the shortfall created in part by a culture of tax-and-fee leniency for the city’s wealthiest, well-off and business classes. Even as Commissioner Bill Green voted against dissolution of the SRC last Thursday night, he indicated city leaders would have little choice but to raise taxes.

So, we already know what’s coming next. The inevitable squeeze will soon set in, and both Mayor and City Council are fairly unapologetic in their view that increased taxes are just the unfortunate reality residents will have to accept.  

But, with 58 percent of the Philadelphia School District budget already reliant on local property taxes we should ask: Why does it have to be that way?  

It doesn’t, for two simple reasons: the 1) increasingly unpopular property tax abatement; and 2) Philadelphia Parking Authority (PPA) revenues. If both Mayor and City Council, along with the blessing of the state Education Department, are going to move rapidly towards local control of schools, the least they can do is align that rushed plan with an effort to immediately eliminate the property tax abatement and wrestle back control of the PPA from the state.  

Doing so would put the city ahead of the nearly $1 billion shortfall expected in five years, and  put the school district in the black for, at the very minimum, those next five years. That should give it time to not only recover fiscally, but to also recalibrate itself into a quality, locally-controlled school district servicing over 200,000 students.

There’s basic math and common policy sense in that formula.

On Thursday, Councilman Allan Domb introduced legislation that would target tax deadbeats, a proposal he predicts could collect hundreds of millions of dollars in back real estate taxes to go towards the schools. His fellow City Councilmembers should put that into law, and soon. But that is not enough.

Currently, the District’s annual debt runs about $272 million—which means 9 percent of its annual budget is dedicated to paying for an alarmingly high red position. Meanwhile, a 2016 Pew Charitable Trusts study on lost revenue from both city tax incentives, such as the property tax abatement, and industry specific-exemptions found the city losing over $216 million a year in revenue. The most noted Philadelphia Coalition Advocating for Public Schools study estimates $50 million of that could be going towards the schools (that’s about 18 percent of the District’s debt).

We already know what’s coming next. The inevitable squeeze will soon set in, and both Mayor and City Council are fairly unapologetic in their view that increased taxes are just the unfortunate reality residents will have to accept.

But the Coalition is being generously modest. Why stop at $50 million? What if Philly got a bit ambitious and—dare we use this term—truly radical in its commitment to improve the school situation? If the Mayor and City Council really cared about the future of the schools and the kids in them, if they really want to put their money where their mouth was, then they’d eliminate the abatement and other exemptions. Think about it: $216 million cuts the District’s debt by nearly 80 percent annually.

Supporters of the abatement and other incentives will argue that these exemptions are already growing the city’s tax base with $48.1 million in annual revenues flowing in from the slow drip of expiring abatements. They’ll also say that by 2026, when the program comes to a close, we’ll see an additional $169.4 million in annual tax revenue.

But, 2026 is a whole four years after the School District’s debt reaches $1 billion. It will be too late by that time for city officials to play catch up. And it’s unclear if city schools are receiving much—if any—of that $48.1 million in estimated revenues from currently expiring abatements.

It shouldn’t stop there: We’ve got a little over $45 million to go on wiping out District debt. And we still have the problem of just 3.75 percent of annual PPA revenues going to the schools. That’s after the state sold us on the line that in exchange for their takeover of PPA they’d provide the schools with a spigot of cash. Obviously, it didn’t work out that way.

So, now it’s time for both City Council and Mayor Kenney to also demand a city takeover of PPA, thereby giving it the ability to plug the remaining $45 million in our hypothetical school-debt elimination scenario.  

If the Mayor and City Council really cared about the future of the schools and the kids in them, then they’d eliminate the abatement and other exemptions. Think about it: $216 million cuts the District’s debt by nearly 80 percent annually.

That actually works out to a fair swap between the city and the state. The city of Philadelphia is now gracious enough to take that $3 billion fiscal monstrosity of a school district off the Commonwealth’s hands. So, why won’t the Commonwealth return the solid by giving back that $274 million dollar honey pot called the Philadelphia Parking Authority?

Predictably, Governor Tom Wolf and the rest of Harrisburg would get mum on that question. Wolf needs any cent he can find to plug state budget holes. And mostly rural and suburban/central and western Republican legislators need any parasitic agency they can get their hands on to continue punishing the state’s eastern “liberals,” poor and folks of color—while fining them to death to keep coffers afloat.

Charles D. Ellison is Executive Producer and Host of “Reality Check,” which airs Monday–Thursday, 4-7 p.m. on WURD Radio (96.1FM/900AM). Check out The Citizen’s weekly segment on his show every Tuesday at 6 p.m. Ellison is also Principal of B|E Strategy, the Washington Correspondent for The Philadelphia Tribune and Contributing Politics Editor to TheRoot.com. Catch him if you can @ellisonreport on Twitter.

The Philadelphia Citizen will only publish thoughtful, civil posts. We want to be a communal space. But that doesn’t mean you have a First Amendment right to be an idiot. Send us an insulting, offensive and/or wildly off-topic comment and not only will we refrain from posting it -- we will laugh at you before we hit delete.

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