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Philly Reform Commission Approves $300 Million Bond Issue
In what they claim will be the last bond issue for several years, and the Philadelphia School Reform Commission announced their intention to seek a $300 million loan to close the district’s budget deficit. As part of the bond proposal, the commission members voted to approve a 5-year financial plan aimed at reducing district expenses, [...]
In what they claim will be the last bond issue for several years, and the Philadelphia School Reform Commission announced their intention to seek a $300 million loan to close the district’s budget deficit. As part of the bond proposal, the commission members voted to approve a 5-year financial plan aimed at reducing district expenses, and outlined how the money will be used to cover a current gap of $200 million and a further $100 million anticipated next year.
Thomas E. Knudsen, the district’s chief recovery officer, said that he was staggered by the fiscal situation in the district. Knudsen said that the overhaul of spending needs to happen now or the district will be underfunded to the tune of $1.35 billion over the next 5 years.
Knudsen was the author of the plan, approved by the SRC, that calls for savings by merging low-attendance schools and selling the unused buildings, renegotiating labor contracts and looking for new ways to bring in funding.
For months, Knudsen and the SRC have been talking about taking such actions to redress long-standing financial problems and bring expenses in line with revenue. By approving the plan, the commission signaled that it intends to implement the changes.
In July, the SRC reached a labor agreement with the district’s blue-collar union that preserved jobs but will provide $100 million in savings over the next four years through its restructuring of wages and benefits. Knudsen said the district intends to seek savings of between $167 million and $180 million per year as it negotiates with other unions.
Although providing quality education remains a priority, Knudsen said that there simply wasn’t enough money in the budget for initiatives to increase the number of seats available in the district’s specialized schools for bright students, or for additional money to allow for the expansion of high-performing charter schools. Although both charters and the high-performing public schools will get up to $194 million to operate, district officials believe that it is much less than what is needed to keep them successful.
According to Knudsen, the money raised via the bond issue needs to be allocated most carefully — because he didn’t think it was likely that the district could go to the banks or the voters seeking additional money for at least the next five years.
“We must proceed with the greatest care; a deficit borrowing is an extraordinary action that we will not be able to undertake again in this planning horizon,” Knudsen said in a letter accompanying the five-year plan.
“Under the best of circumstances,” he said, the bond deal will add approximately $22 million each year to the district’s annual debt cost of $264 million.
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