The Philadelphia School Reform Commission, the body that oversees the public schools in the city, opened up the sale of $300 million in bonds to be used to cover expenses such as teacher salaries, textbooks and keeping the building heated in the coming winter. Pedro Ramos, who heads up the SRC, said that the money sought by the district is vital to keeping the schools open and operating for the remainder of this academic year.
Ramos added that he was saddened to find the district in such dire financial straits and that he regretted being forced to take on a substantial debt burden not to expand or improve the schools, but to simply assure that they can continue to function.
The bond issue was unanimously approved — but the cost of servicing the debt over its estimated 20 year lifetime will be substantial. The financially strapped district will need to pay $22 million in interest in fees for every year the bonds are outstanding.
Although admitting that the loan was unavoidable, Ramos was quick to issue reassurances that continuous borrowing was not how the commission plans to solve the district’s problems going forward. The key to getting control over the district’s finances will come through strict cost-cutting and expense management.
“Extremely difficult” choices are approaching quickly, SRC member Wendell Pritchett said, and “we’re going to have to make them. We don’t have any choice.”
The SRC will soon be confronted with a whopper of a decision – deciding how many and which of the district’s 200-plus schools should be closed.
Officials have said they must shed roughly 40 schools at the end of this year to save money and “rightsize” operations in a district that has lost tens of thousands of students to charter schools in the last decade but did not shrink operations to compensate.
The list of which schools are to be targeted for closure won’t likely be finalized until early December, according to the district Superintendent William R. Hite Jr.
While attempting to keep schools afloat in the short term, the SRC is looking ahead with its recently adopted five-year plan to get the district schools on the right track and regain the faith of the communities they serve.
The current SRC, in place for roughly the last year, has begun to right the course, and that shows in investors’ reception of the district’s bond offering, Hite said.
“Nobody’s going to invest in something they think is broken,” Hite said.
And a state “intercept” program also gave investors confidence – guaranteeing creditors will be paid, as state aid is automatically sent to creditors to cover the district’s debt if it fails to meet obligations.
The market responded favorably to the opening of the sale, with 50+ investors reportedly moving to secure available bonds.