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Near-broke Phila. schools must borrow to make payroll

Close to broke, the Philadelphia School District will soon have to borrow money to make payroll through the end of the year, officials confirmed Wednesday.

School Superintendent Dr. William Hite speaks at Zarwin Baum in Philadelphia on Tuesday, June 2, 2015. (STEPHANIE AARONSON/Staff Photographer)
School Superintendent Dr. William Hite speaks at Zarwin Baum in Philadelphia on Tuesday, June 2, 2015. (STEPHANIE AARONSON/Staff Photographer)Read more

Close to broke, the Philadelphia School District will soon have to borrow money to make payroll through the end of the year, officials confirmed Wednesday.

The School Reform Commission is to meet in coming days to authorize temporary borrowing that will allow the district to function until a state budget stalemate is resolved.

Superintendent William R. Hite Jr. said that if there was no Pennsylvania budget by the end of the calendar year, he could not keep schools open even with the temporary borrowing.

But for now, with 130,000-plus students and 16,000 employees, "it's important that we keep schools open for children to attend," the superintendent said at a City Council education committee hearing.

In 2012, the SRC floated long-term bonds to bridge a massive budget deficit - essentially using a credit card to pay its expenses. Officials said then that the district was close to its credit limit and could not finance another such borrowing.

But this one is different, said SRC Commissioner Feather Houstoun.

"This is, 'Can I borrow $20 until payday?' " Houstoun said. "We know the budget is going to get resolved. We could not go back and do another deficit borrowing."

It's not clear how much the district will tap - it spends, on average, $10 million per day - or what the fees associated with the short-term financing will cost, but chief operating officer Fran Burns said they should not exceed $2 million.

Still, in a tight budget, no dollar is spent without money coming out of another line item.

"It comes right out of the classroom," Houstoun said.

Burns said officials had heard that there was a possibility of the state's eventually covering the costs of the temporary borrowing, although there were no assurances.

She and Hite reminded Council that the district, as it does every year, in July borrowed a large sum - $550 million - to give it enough cash until state and city payments came through.

But with no state budget and Gov. Wolf telling districts Pennsylvania won't advance cash to them, Philadelphia's back is to the wall.

Wolf this week said he could not approve payments to districts until the end of the budget stalemate, threatening to drag into a fifth month. The Erie school system, in a bind similar to Philadelphia's, had asked Wolf for help.

Administration officials said they want a final budget that deals fairly with schools and thus can't offer stopgap aid, but confirmed they would assist districts in obtaining low-interest loans, and will advocate for provisions in any final budget deal that reimburses schools for loan fees.

Councilman Mark Squilla appeared frustrated with the district's move.

"If we keep borrowing, increasing debt service, we keep allowing them to play games in Harrisburg," Squilla said.

Across Pennsylvania, school systems that rely heavily on state aid are in similar positions. Hite said he had spoken to leaders of about 20 districts that will soon be forced to make similar decisions.

The news of the district's borrowing comes during a challenging time for the district.

Its decision to outsource substitute-teaching services has produced a crisis: The firm awarded a $34 million contract to manage vacancies has managed to staff only about 20 percent of them daily.

And the district itself is not faring well at filling vacancies. About 200 jobs are unfilled, meaning thousands of city students have had no permanent teacher all year.

"We do have many problems to address in and amongst our school district," Hite told Council. "Those problems have been well-documented. I plan to be relentless about solving the problems we have."

Lisa Zeiger, a teacher at Mastbaum, has had classes of 77, 71 and 68 students all year.

Once officials became aware of the physical education teacher's crowded classes in September, they pledged action. Hite personally promised a new teacher would be in place by Oct. 19.

That deadline came and went. Substitutes have shown up just two days, meaning other Mastbaum teachers are pulled from their prep periods to help Zeiger keep kids safe - not teach.

"The kids want more than to have organized recess in class," said Zeiger. "I tell them I can't do anything else until the class size changes.

District officials said that the clearances for the new teacher were held up, and that the teacher would be in place Thursday.

The system is also coping with a dearth of nurses. At three schools, there are no nursing services; 16 more have only sporadic services.

Officials announced Wednesday that the district was no longer thinking about outsourcing school nurses.

While the plan is dead in the short term, officials said, the door appears open to future privatization.

Fernando Gallard, schools spokesman, said the district "will continue to actively look for ways to increase quality health services for students and seek input from families, guidance from school nurses, and more information from health care and government service providers to better understand how to structure successful partnerships."

Council had strongly opposed any further outsourcing by the district.

Council President Darrell L. Clarke praised the district's move to quash nurse privatization.

"We all agree that every school should have a full-time nurse to ensure the safety and well-being of our kids," Clarke said in a statement, "but I continue to doubt that privatization or outsourcing of district personnel is an appropriate alternative."