Philadelphia’s school district is about to learn a lesson it has already learned once before.

At the end of the federal COVID relief period, the District had roughly $695 million in savings. That cushion existed because Washington temporarily paid for many of the district’s operating costs through pandemic relief funds. Instead of treating that money as a one-time windfall, the district used it to expand its operating budget — hiring staff, creating programs, and increasing ongoing expenses that must now be paid every year.

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Now the federal money is gone, but the spending is still there.

The District has already acknowledged it faces about a $300 million annual deficit. To avoid immediate cuts, it is drawing down the savings account built during the relief years. The math is simple. If you start with about $695 million and run deficits of roughly $300 million a year, the cushion disappears quickly. After two years of spending at that pace, more than half the savings are gone. One more year and the reserve is essentially exhausted.

That is when the real cuts begin.

To close a $300 million gap without reserves, the District would have to eliminate an enormous amount of spending all at once. Even if administrative spending were rolled back to roughly the inflation-adjusted level of the last School Reform Commission year, that would save only about $49 million. The remaining $250 million or more would have to come from schools themselves.

At typical District salary and benefit levels, that translates to roughly 2,000 to 2,700 school-based jobs. The District currently employs about 17,000 staff in schools, so that scale of reduction would mean cutting roughly one out of every eight positions. If the cuts fell heavily on teachers, it could approach a quarter or even a third of the teaching workforce. Numbers like that are almost impossible to implement without severe disruption to classrooms.

That is why the District will do everything possible to avoid them. The usual alternatives are the same ones Philadelphia always turns to: Ask the state or city for more money, raise taxes, or spend down reserves while hoping something changes.

But the real tragedy is that the crisis did not have to arrive so suddenly.

The same mistake was made 15 years ago. During the Great Recession, the federal government sent large stimulus grants to school districts through the American Recovery and Reinvestment Act (ARRA). Those funds were explicitly temporary. At the time I was serving on City Council, and during budget hearings I warned the District that using stimulus money to expand operating spending would leave Philadelphia exposed when the funding ended.

If the District had treated the relief funds as temporary and limited how much it expanded operating spending, that $695 million reserve could have lasted five or six years.

The logic was simple then and it is simple now: temporary money should fund temporary needs. During one exchange in those hearings, Superintendent Arlene Ackerman dismissed the concern. The District, she argued, would continue receiving grants and other funds. In effect, the system was betting that new money would arrive before the stimulus disappeared.

It didn’t.

When ARRA funding ended, the District faced massive structural deficits. Layoffs followed. Schools closed. Programs were cut. The crisis became so severe that Superintendent Ackerman ultimately lost her job, in part because the consequences of those decisions could no longer be ignored.

What we are watching today is the same pattern, only at a larger scale.

The pandemic relief funds — more than $1.5 billion in ESSER aid — created another temporary windfall. Instead of using it primarily for capital investments or long-term structural improvements, the District expanded its operating base. Enrollment continued to fall while staffing levels rose. Programs grew. The system became more expensive to run.

Once the federal money expired, the gap appeared exactly where anyone paying attention knew it would.

If the District had treated the relief funds as temporary and limited how much it expanded operating spending, that $695 million reserve could have lasted five or six years. That would have provided time for revenues — property taxes, state aid, and other sources tied to economic growth — to gradually catch up with spending. The system could have made measured adjustments over time instead of facing a sudden fiscal cliff.

Instead we did what governments too often do: Spend the windfall quickly and hope something turns up before the bill comes due.

Now the bill is arriving.

Philadelphia’s schools are once again confronting the same three choices: Cut spending, raise taxes or seek more funding, or delay the adjustment by spending down the last of the reserves. None of those options is pleasant. But pretending the problem is simply that federal money disappeared ignores the real lesson.

Temporary funding should be treated as temporary. If it is used to expand permanent spending, the outcome is predictable every time.

The surplus vanishes. The cuts begin. And the cycle starts all over again.

Bill Green is a former City Councilmember and School Reform Commissioner, and now runs a healthcare company. This piece first ran on his Substack.

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