Philadelphia School District officials are staring down a gap of $430 million or more in next year's budget, and the deficit could surpass the half-billion mark under worst-case scenarios, according to officials briefed on the district's finances.
In October, the district's chief financial officer, Michael Masch, warned the public that the 2011-12 budget could be grim, with $234 million in stimulus money drying up without funds to replace it.
Additional costs for staffing, health benefits and charter schools have made the situation worse, according to one of the sources briefed on the looming crisis. Each district department head may be asked to come up with reduction proposals of 12 percent, 24 percent, and 36 percent, according to another source.
The $430 million is more than 13 percent of the 2010-11 $3.2 billion budget. The gap could grow with additional state cuts and maximum enrollment at charter schools.
Mayor Nutter and School Superintendent Arlene Ackerman said in a hastily arranged conference call Tuesday night that they did not know the amount the district would need to make up in next year's budget. Ackerman called any figures other than the stimulus money "purely speculative."
"I don't feel comfortable actually discussing this with the press, beyond the $234 million, as we are internally trying to look at a variety of scenarios," Ackerman said. "I really think it's unfair to report on budget exercises that may or may not be going on here."
Nutter and Ackerman called the news conference after The Inquirer began asking questions about the budget.
"We don't want to spend a lot of time speculating," the mayor said, acknowledging that the district, "like every other governmental entity, has some budget challenges."
Referring to his budget proposal and that of Gov.-elect Tom Corbett, Nutter added: "There are a series of unknowns that won't be resolved or get additional clarity for weeks." Both budgets are expected in early March.
For two years, the district has relied on federal stimulus money and hefty aid packages from Harrisburg to balance its budget. Of the current $3.2 billion spending plan, $1.68 billion - 55 percent - comes from state aid.
An additional $234 million came from nonrecurring federal stimulus money that expires this year.
With the first Republican governor in eight years taking office in January, and staunch district ally Rep. Dwight Evans (D., Phila.) out as ranking Democrat in the House Appropriations Committee, the district could be in a tight spot.
In October, Masch warned the School Reform Commission - the state-appointed board overseeing district finances - that "some very tough budget decisions" were "inevitable" in the 2011-12 budget.
Referencing only the evaporating stimulus money at the time, he said his plan would try to minimize cuts to instruction and other initiatives credited for raising test scores for eight-plus years.
Nutter and Ackerman on Tuesday emphasized the eight years of gains in test scores and increases in graduation rates as evidence that federal and state money has been well invested in the district.
"We want to make sure that programs that serve students, and serve them well, are not impacted," Nutter said.
The School District raises about $600 million each year from its share of property taxes. The district has approached the city about raising an additional $54 million by increasing its share of the property tax pie from about 55 percent to 60 percent, according to a source with knowledge of the district's budget.
But political observers question whether the city could afford to give the district extra funding after two years of tax hikes and austere budgets. Nutter said the district had not asked for a funding increase.
School Reform Commissioner David F. Girard-diCarlo foreshadowed the crisis in May, when he only "reluctantly" supported the district's 2010-11 budget and said he feared for the district's financial future.
At the time, Girard-diCarlo said a "potential financial tsunami of almost biblical proportion" could loom.
On Tuesday, Girard-diCarlo said it was too early to put a hard number on the looming budget deficit, before the new governor has taken office or Nutter has presented his budget.
"We do not yet know the parameters of our governmental revenue," Girard-diCarlo said in an e-mail. "It would be irresponsible to not do some modeling given the realities facing the new [governor] and the elimination of the Fed's stimulus money. What will be forthcoming is most uncertain."
The district's revenue gap could climb to more than $530 million depending on the levels of state aid and whether the district reaches its maximum levels of charter school enrollment, according to one of the sources with knowledge of the budget scenarios.
The district pays charter schools for each student enrolled.