WITH SCHOOLS set to open next month, the Nutter administration and the Philadelphia School District are calling on City Council to move forward with a plan to send funding from an extension of the 1 percent sales-tax increase to the financially troubled school system.
Part of Gov. Corbett's rescue plan allows the city to borrow $50 million against an extension of the sales tax, which beginning in fiscal year 2015 would bring in $120 million for schools annually.
The Nutter administration's original plan to help the district close a $304 million budget hole was to enact a new $2-per-pack tax on cigarettes, but that failed to get approval in Harrisburg. (State lawmakers plan to try their luck again in the fall.)
"This was not our first choice," city Finance Director Rob Dubow said yesterday of the sales-tax extension. "We understand that [Council has] legitimate issues about what came out of Harrisburg, but these are the tools that we were given, and we need to use them to make sure the district gets the funding it needs."
Council president Darrell Clarke and other local elected officials had hoped to use some of the money generated from a permanent extension of the sales tax to help cover costs for the city's underfunded pension fund, which is projected to soak up nearly 18 percent of the city's budget.
Clarke, who is continuing to push an alternative plan that would split money raised from an extension of the sales tax between the school district and the pension fund, will meet with Mayor Nutter this week to discuss school-funding options.
And although Council is not due back from its legislative break until next month - after school starts - Dubow says Wall Street would need assurance soon that Council will make the once-temporary sales tax permanent so that the city can borrow that $50 million. The school district, which issued 3,859 layoff notices in June but announced two weeks ago that it would restore 300 jobs, is banking on that money.
"It's a true urgency for us to get access to the $50 million as soon as possible," district spokesman Fernando Gallard said. "We thought we would have had access to that money by now, which would allow us to bring back personnel critical to allowing us to open schools by Sept. 9."
Jane Roh, Clarke's spokeswoman, said that Council will approve an extension of the sales tax but that the sum of money going to the schools has not been determined. Roh added that ongoing discussions about the final plan should not impact the city's ability to borrow $50 million.
Last week, Councilwoman Maria Quinones-Sanchez suggested that the city send a onetime grant of up to $50 million to the district, but Dubow said the city can't afford Sanchez's plan because any funding provided to the schools must continue in subsequent years.
"A five-year $50 million annual commitment is something our plan shows we cannot afford," Dubow said. "It's not like it just eats into our fund balance. It erases it and would cause deficits."
Sanchez noted that tax revenues for fiscal year 2013 are up.
"When is it a good idea to use the fund balance?" she asked, adding the city could free up money by delaying the implementation of new initiatives. "When is it a good time, if not now?"
So, should Council approve Corbett's plan?
City Controller Alan Butkovitz said Clarke's plan, unlike Corbett's, allows the city to fund the school district and the pension fund.
"I think it's better to solve both financial problems facing the city, instead of dealing with one and sweeping one crisis under the rug," he said.
- Staff writer Regina Medina
contributed to this report.