“I'll take every dollar we can get, and we can certainly put it to good use,” the finance chief for Philadelphia schools told the court on Monday, “but we were behind to begin with, and it hasn't caught us up.”
Uri Monson, chief financial officer of the School District of Philadelphia for the past six years, was referring to the state’s funding formula and its failure to resolve the “structural deficits” facing Philadelphia schools – echoing concerns of officials from other school districts who have testified.
Philadelphia’s structural deficit persists, Monson said, “because our rate of growth in expenditures far exceeds our rate of growth in revenues.”
Moreover, the Philadelphia school board does not have taxing authority, leaving the district completely at the mercy of state funding and whatever they can collect from a “unique array of funding streams” set by the city. As a result, Monson explained, “we have almost no control over our revenues, limited control over expenditures.”
Monson oversees an annual budget of $3.5 billion and 20,000 employees.
He took on the role in February 2016, at a time when the district was “recovering from significant cuts.” In 2012 and 2013, after funding cuts by the state and the end of the federal stimulus grant program, the district cut 3,000 positions and eliminated half of its central office staff. While some cuts had already been restored, Monson started in the middle of a lengthy budget impasse between Gov. Wolf and the General Assembly, “so no state funding was going to school districts.”
“There were meetings that had been going on about literally which bills had to be paid now and which could be delayed,” he said.
Since then, the district has been able to stabilize its financial position with careful financial planning, and the district’s bond rating has been upgraded to investment grade for the first time since 1977.
Monson said that the end of a 16-year state takeover and return to local control, accompanied by a mayoral commitment to school funding, played a role in the upgrade, which makes it cheaper and easier to borrow for capital projects.
But austerity measures were also part of the district’s path to financial stability. Teacher pay was frozen for five years while teachers worked without a contract – average teacher pay declined during that time. And the district closed 30 of its schools.
Monson emphasized that the district’s needs are great.
“Philadelphia is usually referred to as the poorest big city in the country. Poverty rates are around 24%,” he said. “We have a significant number of students who are homeless, in foster care, communities that just don't have resources, don't have enough food, things that should be basic in order to be prepared for education.”
Yet Philadelphia ranks 473rd out of 499 districts in the state in current expenditure per weighted student, a metric tracked by the state as part of its need-based funding formula.
“We spend almost the least in the state despite having almost the highest need in the state.”
And again echoing testimony from other districts, Monson said this low spending happens even though Philadelphia ranks high in its tax effort.
The district was already planning layoffs in the face of mounting deficits when COVID hit in 2020, and Monson said the pandemic created new problems on both the expense side and the revenue side. These included “massive costs” for developing take-home assignments and getting technology in place for remote learning.
The district was able to secure private donations to cover 70% of the cost of the 80,000 Chromebooks it purchased. But meanwhile, local revenues were also dropping sharply.
The first two rounds of federal pandemic relief that the district received in 2020 were basically “survival,” Monson said, allowing the district to avoid school-based cuts.
The third installment of federal aid that arrived in 2021, totaling $1.1 billion, is intended to last for three years and “presents a different opportunity than the first two,” Monson said. But it is one-time money that goes away in 2024 – not resolving the structural deficit.
Substantial funding is being devoted to remedying learning loss and to facilities investments, he said. Philadelphia is also adding staff positions with the funding, including assistant principals, school psychologists, social workers, reading intervention specialists, English language teachers, general classroom teachers, and special education teachers. But these new positions will go away when federal funding goes away.
Monson showed projections that budget deficits return in 2025 and the district’s fund balance goes negative in 2026.
On top of the challenges in its operating budget, the district’s 320 buildings, with an average age of over 70 years, have a cumulative deferred maintenance price tag now estimated at $4.9 billion. Meanwhile, mandated costs for special education, charter schools, and pensions continue to rise faster than state aid, adding to the structural deficit.
This discrepancy brought Monson back to the question of the impact of the state’s 2016 funding formula. Most state funding for schools in Pennsylvania is not distributed based on need — the funding formula only applies to increases in funding since its adoption. Monson estimated that the weighting in the need-based formula has resulted in about $41 million in additional funding for Philadelphia, compared to what the district would have received if the formula had not been in place. This is just 1% of the district’s budget.
In contrast, Philly would gain $1.1 billion if it were funded up to the level of a target for adequate funding to allow students to reach state standards that is written into the school code, Monson said.
How could this amount of money be used? Monson talked about adding teachers, special education services, AP classes in every high school, behavioral health services, foreign language instruction in schools where offerings are limited to one language, and additional supports for English learners.
It would also allow the district “to get closer to the number we need to be able to deal with our deferred maintenance in our facilities, as well as ongoing reconstruction, and provide the facilities that our students should have in the 21st century,” he said.
“We have some very high-need students. We should be providing those resources for them,” he said. “I don't know if we can do all of them, but we can certainly do a lot more of them.”
Petitioners expect to complete their witness testimony this week. Legislative leaders will begin calling their witnesses next week.