Schools' new math: Digging out of deficit

June 10, 2007
Tom Ferrick Jr.
Inquirer Columnist

The study Michael Masch did on the Philadelphia School District's finances is grim reading, but then most autopsy reports are.

Masch, Gov. Rendell's budget secretary and a former member of the School Reform Commission, was brought in to examine the books this year after the district suddenly and unexpectedly developed a large deficit.

Masch's boss and Mayor Street wanted to know how it happened - not a casual question, given that they were being asked to pony up millions to help make the deficit go away.

They dispatched Masch, and he dug in. Although an expert on public finance, it took a while, so twisted were some of the district's budget numbers.

Finagling with the numbers - and hiding the deficit - had already gotten district CEO Paul Vallas into trouble with the School Reform Commission, the state-appointed board that oversees the district.

In fact, Vallas recently fled to a job in New Orleans, probably before he was fired by the SRC for his transgressions.

He left the district, the state and the city behind to clean up this mess: a $190 million deficit and a proposed $100 million in cuts.

Vallas' defense is that he did it for the kids and the cause of school reform.

That's like a father taking his family out for an expensive night on the town - big dinner, trip to Great Adventure, limo, the works - and then skipping out when the bill comes due. Gee, thanks, Dad.

As illuminating as Masch's report is (complete with a brace of bar charts!), he offers no easy solution to the district's financial woes.

Making $100 million to $150 million in cuts is going to hurt. More than the financial pain is the political damage the deficit has done to the cause of the public schools.

I know I have been hard on Vallas for his duplicity on school finances. That's not to say he didn't do good. He did, and the Masch report gives a bow to the CEO for progress made: improved student performance, new high schools, better after-school and pre-K programs, etc.

The problem is, all of those advances are now in danger, as the SRC confronts the issue of making cuts.

Speaking of the SRC, what do you call an oversight committee that doesn't oversee? I'd call it a failure.

The official SRC line is that it didn't know about the growing deficit because it was hoodwinked by its CEO, who concealed the nasty details for several years in maze of budgetary gobbledegook.

But that's a weak excuse.

As one insider familiar with the district put it: "If you look at the past five years, what becomes clear in retrospect is that the SRC and the CEO were co-dependent in avoidance of difficult decisions. So, they just said yes to everything. . . . They knew when he came that managing Paul was going to be a real challenge, and they abdicated it."

The person most to blame, alas, is Jim Nevels, the good-hearted chair of the SRC. Nevels' term doesn't expire until late next year, but he might want to consider an early departure, mostly because he now lacks the political credibility to do what needs to be done: convince the state and city to supply (yet more) money to the district.

Not that the state has been exactly slacking it - but even more money is needed.

People who criticize the state for not doing enough to help the district are just plain wrong. The state supplies 50 percent of the district's budget. State aid in recent years has increased at double the rate of inflation. It is $430 million more today than it was in 2001, before the creation of the SRC. Ditto the city. It's subsidy to the district has gone up by nearly one-third in recent years.

Where did all this extra money go? The Masch report cites three areas: charter schools, district debt service (i.e. paying off bonds floated for school improvements), and increases in special education costs. (Even though the number of kids on special ed went down. Go figure.)

Where did the money not go? To the basic function of operating the schools: paying teachers, operating buildings, paying for libraries, books, extracurricular activities.

According to Masch, that core part of the budget has actually declined since the SRC took over, both in real dollars and in expenditures adjusted for inflation.

Isn't something askew when the basics are shortchanged and the extras are so generously funded? I think so.

What to do? I think the issue of where the district goes next should be a community-wide discussion, involving parents and taxpayers, that seeks answers to two fundamental questions: What do we want from our schools, and what are we willing to pay to get it?

Simple questions to ask, but hard ones to answer.

Maybe we lack the political will to confront them. If we are, won't we be as much to blame for this mess as Paul Vallas and the SRC?