Philadelphia schools lose property tax revenue

At his first Board of Education meeting on Thursday, new Superintendent Tony Watlington Sr. reiterated his goal of making Philadelphia one of the fastest improving urban districts in the nation. But to achieve that goal, he and district officials will have to do without tens of millions of dollars they could have counted on, due to recent decisions by city leaders and the courts.

On the same day as Watlington’s first board meeting, the city council passed a budget for fiscal year 2023 that gives the school district $25 million less in property tax revenue than the planned district, based on of Mayor Jim Kenney’s original proposal. And a state Supreme Court ruling earlier this month on commercial properties means the district will have to repay taxpayers $35 million, all from the 2023 budget.

The combined $60 million impact on the district’s projected revenue will impact certain budget projections for fiscal year 2023 and the district’s five-year plan, district chief financial officer Uri Monson told the board. .

The Board of Education cannot raise tax revenue alone. It is entirely dependent on the city and state for the funds it needs to operate. The $60 million represents about 1.5% of the district’s proposed budget for fiscal year 2023 of $3.9 billion. The school district receives 55% of the city’s property taxes, which make up just over $1 billion of the district’s budget.

Board member Mallory Fix-Lopez said the city’s decision will “absolutely lead to staff cuts” at some point. Monson said in an interview that the layoffs are not imminent, but said the decision will make it “difficult, if not impossible, to maintain a range of investments” made with federal COVID relief funds, and that the impact of the reduction would increase over time.

The $25 million discrepancy between the district’s revenue assumption and what Philadelphia provides stems from the city council’s decision to increase the property tax exemption from $45,000 to $80,000 and to bring adjustments to a tax cap program for longtime homeowners in gentrified neighborhoods, all to mitigate the impact of the city’s first property tax reassessment in three years. This revaluation led to an average increase of 31% in property values.

Joe Grace, spokesman for City Council Speaker Darrell C. Clarke, said in a statement that council “heard loud and clear from landlords” regarding the impact of the reassessment on them. “This decision was not made lightly, and the Board understands the importance of property taxes in funding our schools,” said Grace.

Donna Cooper, executive director of the state education advocacy group Children First, expressed disappointment that the board made tax changes in a way that places the brunt of the consequences on the school district.

Kenney and the council could have mitigated the effect on the district by allocating more money to schools from the city’s general fund, but did not, she said.

Some of the investments made with federal COVID assistance that may not be sustainable in the long term to understand additional counselors, accelerated building repairs, more discretionary positions for schools, and improved before and after school programs,

Separately, the district must return $35 million to taxpayers due to an unfavorable court ruling on June 8. In this case, the Supreme Court of Pennsylvania denied city right to appeal a 2019 lower court ruling that the city violated the “uniformity clause” of the state constitution by reassessing only commercial properties in 2018, not residential properties.

A picture of state funding in full mutation

Grace said it was time for the state “to fund public education more fairly and equitably.” But such change, whether by the state legislature or the courts, is far from certain.

Gov. Tom Wolf, in his final year in office, has proposed a $1.7 billion increase in K-12 education spending for fiscal year 2023 to more than $15 billion. in total. Most of that money would come from an increase in basic education aid to school districts from $7 billion to $8.6 billion. He also wants a new funding formula that would redistribute revenue in a way that would likely benefit Philadelphia’s public schools.

But state Republicans — who support more charter schools in struggling districts like Philadelphia — are proposing a smaller increase, less than half of what Wolf wants and more in line with past increases, according to Cooper and other advocates monitoring the negotiations, despite a state budget surplus of nearly $14 billion.

Wolf also proposed changes to the charter school reimbursement formula that would save the Philadelphia district $145 million by, among other things, tying special education student payments more closely to their actual needs. Under the current formula, the district must pay charters approximately three times per student for special education students than for regular education students, regardless of the severity of the child’s disability.

Philadelphia has half of the charter schools in the state, and its charters educate nearly 80,000 students in the city.

But Republican lawmakers, who control the legislature, are likely to reject such changes to the formula. And they also propose a large increase in the state program which provides tax breaks to corporations that subsidize scholarships for students attending private and parochial schools.

The deadline for a final state budget is the end of June.

Meanwhile, an ongoing lawsuit (which Grace pointed to) seeks to overhaul Pennsylvania’s funding system so low-wealth, high-need districts, including Philadelphia, get more help.

Commonwealth Court Judge Renée Jubelirer is expected to rule on the case in the fall. But the final resolution, after likely appeals, is not expected much beyond that.

Dale Mezzacappa is a Senior Writer for Chalkbeat Philadelphia, where she covers K-12 schools and early childhood education in the city. She is a former president of the Education Writers Association. Contact Dale at [email protected]