Why Philly's School District is a money pit | Stu Bykofsky

"The perception is the Philadelphia School District is a money pit," I say, sitting in the district's boardroom at 440 North Broad. "No matter how much is poured into it, it's never enough, schools get closed, staff is laid off, and still the costs go up."

Superintendent William R. Hite Jr. nods in agreement — not with the statement, but that it's a widespread perception.

Test scores, attendance, and graduation rates are up, he says. And they are, modestly. Some teachers and counselors have been rehired, and that's good, but I am in Jerry Maguire mode. I want the district to show me the money.

The budget is $3 billion, two-thirds the size of the proposed $4.7 billion city budget — with Mayor Kenney seeking a 6 percent increase in the real estate tax for the school district, which projects an almost $1 billion deficit over the next five years. Kenney also wants an 8.5 percent increase in the real estate transfer tax and slowing cuts to the wage tax.

There are two issues here: Why can't the school district balance its books, and why can't the city figure out a way to better fund the district?

To answer the first question, I ask Uri Monson, the school district's chief financial officer.

Unlike other jurisdictions, our school district can't tax to raise money. It is given funding — think of it as an "allowance" — by the city, state, and federal governments. The feds provide less than 1 percent, the state offers 53 percent, and the city 46 percent.

Pennsylvania's Constitution obligates the state to provide "a thorough and efficient" system of education, but what does that mean? The state is accused of stiffing the school district and is being sued.

In a down economy, with tax revenue declining, taxes were raised four times during the Nutter years. The city also created what Hite calls "boutique taxes": the 10 percent tax on across-the-bar drinks, the $2-a-pack tax on cigarettes, and the beverage tax that's failed to produce predicted revenues.

That's where the money comes from. Where does it go?

Mostly to labor, Monson tells me, an astounding 84 percent of costs, which includes health care — and pensions, which are ballooning, and over which the district has no control. Labor costs are rising even as the number of full-time employees has declined from 22,619 in 2010 to 18,058 now. Monson says the district's administrative expenses are 3.5 percent of the budget, contrasted with 7 percent to 9 percent for other large districts nationally.

Then there's the cost associated with charter schools: $885 million the district has to spend on what amounts to a privately operated competing system.

Six percent sounds like a big increase, but it's misleading. Philadelphia's current tax rate is 1.3998 percent of assessed valuation, with the schools getting 0.7681 and the city getting 0.6317. The proposed increase would push the tax to 1.4838, which works out to $95 a year for the typical Philadelphian. The Philadelphia tax rate is significantly lower than the rates in the rest of Pennsylvania — which average 1.47 percent.

I don't like taxes; nobody does. But I also don't like living in a city where low-quality schools drive people with children into the suburbs. Monson says that where he lives, in Lower Merion, residents expect annual increases of 3 percent to 4 percent. It's baked into the cake, but so are quality schools. Spending more doesn't always guarantee quality, but it usually does.

If I don't want regressive so-called sin taxes, or taxes that unfairly target a single industry, I have to endorse something else.

So I do, but instead of the 6 percent increase, I'd go for 7 percent, with the understanding that this mayor would ditch the beverage tax and swear off taxes for the rest of his term. Pull a George H.W. Bush: "Read my lips. No new taxes."

The 7 percent increase would guarantee a reliable funding stream while Hite and Monson turn schools into something we can be proud of. While that is going on, Philadelphia can look for alternative sources of funding. I will explore those in my next column.