Philadelphia Schools headed toward fiscal cliff; superintendent asks board to dip into reserves

PHILADELPHIA (WPVI) -- Leaders of the School District of Philadelphia unveiled a $4.6 billion budget for the district and also an expected budget shortfall of more than $300 million for the coming fiscal year.

Superintendent Dr. Tony Watlington laid out his solution to the board on Thursday.

"We're being good stewards of the dollars, however, we have a budget shortfall. We're recommending to the board that we dip into our fund balance for the next school year so that we can prevent any classroom cuts and any cuts to keep programs that clearly are working," Watlington said.

However, under this recommendation, school district data show reserves would be depleted by fiscal year 2027.

"I think it's very concerning that we're looking at in two years from now, actually one and a half years from now, at a negative fund balance," said school board member ChauWing Lam.

The district says enrollment is up, graduation rates are up, dropouts are down, and proficiency among students continues to improve. They want to keep building on that momentum.

Longer-term solutions are being sought, but Watlington says if the district doesn't dip into savings now, jobs and other cuts are on the line.

"This is the time to stay the course, have no impacts to our classrooms, have no impacts to keep programming that's working. Certainly, when we get to next year, we'll have to take a hard look at where we are in terms of revenue, and we'll likely have to make some hard choices. But for this year, I think we need to stay the course, dip into the fund balance, and keep this progress going," Watlington said.

The district's chief financial officer said revenue is up, but not by nearly enough to fill the hole. Over the next five years, budget deficits are only projected to grow.

Roadblocks include long-time, historic underfunding of the school district and the expiration of crucial COVID-19 relief money in September 2024.

"Over the last couple of years, as we've had federal funding available, we've been able to use that to make significant academic progress. What we need to do to avoid larger cuts in the future is to really prioritize now and to work with our state and city funding partners on additional money going forward to help close those deficits. This is a time for action," said CFO Mike Herbstman.

Philadelphia is the only school district in the state with no authority to raise taxes for itself, leaving it to rely heavily, almost solely, on state and city funds.

"It will take our governor and mayor, who are moving our school district in the right direction, but we have to work with them because it's going to take them some time to get us to adequacy," Watlington said.

More budget hearings are scheduled in April. The board is expected to adopt a budget at the end of May.