How will the city fund Philly schools? Here’s what local officials are suggesting

The School District of Philadelphia needs money, but municipal leaders can’t agree on where to find it.

Mayor Jim Kenney speaks to City Council in March of 2017

Mayor Jim Kenney speaks to City Council in March of 2017

Flickr Creative Commons / JARED PIPER / DOCUMENT THE STREE
michaelawinberg-square-crop-feb2018

If nothing changes, officials believe the School District of Philadelphia will be $700 million in debt by 2022.

But while local leaders agree funding must be found, they have not yet been able to agree on where the money should come from.

The issue isn’t exactly new. Back in 2013, the district had to close 23 schools just to stay afloat financially. In the five years since then, conditions haven’t gotten much better. Fights have broken out among parents and teachers. Journalist investigations have discovered toxic lead paint, mold and vermin inside classrooms. And more schools have been slated for closure.

In recent years, some money for the school district was provided by the state, but city leaders have realized they can’t depend on Harrisburg. In November 2017, when Mayor Jim Kenney called for the dissolution of the state-controlled School Reform Commission, he also suggested it was a good idea to remove dependence on the state capitol for funding.

So if the funds are to be provided by local means, where exactly will they originate?

In the annual months-long effort to pass an official city budget, Kenney and members of Philadelphia City Council have fought over the best way to get money inside public schools. Even members of Congress have jumped in with their own ideas.

Here’s a rundown of the recent proposals:

Property taxes

Kenney’s proposed budget for the 2018-19 fiscal year provides $20 million more for the school district (that’s in addition to last year’s budgeted $104 million), to be accumulated via three big ideas.

The first: increasing property taxes by 6 percent. He estimated this would generate $475 million for the school district, while adding about $95 to the average homeowner’s bill. He justified the tax hike with data: apparently properties in Philadelphia have increased in value by 11 percent in the past year.

Mayor Jim Kenney delivers his budget address on March 1, 2018

Mayor Jim Kenney delivers his budget address on March 1, 2018

Twitter / @PhillyMayor

A few weeks later, he made the idea a little more palatable, reducing the requested increase to 4.1 percent.

Still, the idea was contentious. City Council hasn’t exactly jumped on board — this month, Council’s proposed budget package cut the property tax increase entirely.

Real estate transfer tax

Kenney’s second proposal was to raise the real estate transfer tax to 4.45 percent — up from the current rate of 4.1 percent. Of that, the city receives 3.1 percent of revenue and the state receives 1 percent.

Basically, this tax collects some money evenly from the buyer and seller during real estate transactions. If you sell your property, or you buy a new one, you’ll probably contribute to it.

Kenney’s office estimated it would generate an additional $66 million for the city in five years.

City Council agreed to this one, sort of. The members voted to increase the real estate transfer tax to a total of 4.278 percent. But they did so on the condition that they could raise homestead exemption from $30,000 to $40,000 — meaning the first $40k in value of a property would be exempt from the tax.

Slow down wage tax reductions

Third on Kenney’s list of school funding vehicles: the wage tax. Starting July 2017, this tax was set to be reduced gradually over the next five years, from 3.89 percent down to 3.69 percent for residents and 3.29 percent for nonresidents. So, less of your income would be taxed every year.

Kenney’s idea? Keep reducing it, but reduce it more slowly (from 3.89 percent to 3.84 percent in six years). The revenue from that slow reduction would contribute $340 million for public schools over by 2023, per Kenney’s proposed budget.

City Council voted in May to move forward with this one.

Cuts to the budget

Councilwoman Cindy Bass disagreed with Kenney on his first two ideas — she called raising real estate taxes the “easy go-to.”

Back in May, she said she could think of a better plan — and she wasn’t alone. To avoid increasing taxes, Councilman Allan Domb suggested reducing the prison budget by 15 percent. Councilman David Oh wanted to cut at least $110 million from the city budget in the next year. Councilwoman Helen Gym recommended cutting the city’s 10-year tax abatement in half.

Meanwhile, some members of City Council have also suggested…doing nothing. Since the School District isn’t expected to get into the red for a few more years, they’ve considered holding off on solving the problem.

“If we have two more years of not going negative, why are we dealing with this now?” Domb asked Superintendent William Hite last month.

Ultimately, City Council came together and decided to act. It proposed a different plan for the next five years:

  • $95 million in prison budget cuts
  • $93 million in new revenue from increased delinquent tax collection
  • A $100 million grant from the city’s general fund

Council argues that plan — plus the $340 million from Kenney’s proposed reduction in wage tax cuts — would help dig the School District out of its budget deficit.

At this point, it’s unclear whether the mayor will support the package — so far, he’s complained that cutting the prison budget would derail existing criminal justice reform efforts.

But with the final budget package due June 30, Kenny and City Council will have to find some common ground.

More federal money

And then there’s another idea — one that isn’t local at all. Earlier this month, all three of Philadelphia’s congressman begged for federal help from the U.S. House of Representatives.

Democrats Bob Brady, Brendan Boyle and Dwight Evans penned a letter to the House explaining the state of Philly schools. They urged House Speaker Paul Ryan and House Minority Leader Nancy Pelosi to budget some money for school buildings in any infrastructure program they might consider.

Evans said in the statement: “It is entirely unacceptable for our students to be expected to succeed in classrooms that are crumbling right before their very eyes.”

“Philadelphia needs aggressive federal support,” Brady added. “In spite of best efforts, local and state tax revenues are not adequate.”

But this solution isn’t likely — federal officials have disagreed on funding for infrastructure bills recently and don’t seem close to a solution.