District Refuses to Own Up to $630 Million Deficit

In a recent Inquirer commentary, CFO Michael Masch cherry-picks financial data to blame the District’s $630 million deficit on a lack of funding.   

by Christopher Paslay

On June 6th, concerned about the Philadelphia School District’s $630 million budget deficit, I published a commentary in the Inquirer headlined, “District spent its way into massive shortfall.”  In it I commented that the District had only itself to blame for its current financial mess—that officials spent freely on questionable initiatives, banking on temporary federal stimulus money as if it were permanent and ignoring their own five-year financial plan.

Coincidently, on the same morning that my commentary ran in the Inquirer, Phil Goldsmith, who served as interim CEO of the Philadelphia School District in 2000-01, wrote a piece in the Daily News headlined, “If it’s really about the kids, then we need some controls.”  Here, Goldsmith brought-up some of the same points I’d made about the District’s financial woes—that they stemmed more from mismanagement than from cuts in funding; Goldsmith took the argument a step further and called on city leaders (which he insisted had “misdiagnosed” the problem) to make the school budget more transparent and to hold District leaders accountable.

The articles by Goldsmith and myself did not fall on deaf ears.  On June 6th, the very morning our pieces ran, Bill Green, Philadelphia City Councilman-At-Large, wrote a letter to Mayor Michael Nutter asking him for more financial oversight and accountability from the Philadelphia School District.  In it Green wrote:

“The crisis at the School District is not over, but it is a crisis stemming more from a lack of meaningful oversight and good stewardship than from a lack of funding. I refer you to the excellent pieces in the Daily News and Inquirer today by Phil Goldsmith and Christopher Paslay, respectively, which define the issues and problem well. . . .”     

On June 28, Michael Masch, CFO of the Philadelphia School District, publically responded to the growing criticism over the handling of District finances in a commentary in the Philadelphia Inquirer headlined, “Philly School District’s spending under control.”  In it he insisted the District’s budget shortfall is not the result of mismanagement, or bad bookkeeping, or reckless spending.  It is simply the result of a lack of funding.   

“The district’s problem is not spending,” Masch writes in the article.  “It is funding.”

With all due respect to Masch and his recent efforts to raise money and balance the budget, his claim that the District doesn’t have a spending problem is a clear case of denial; it is a total lack of accountability.  He blames the District shortfall on funding cuts, and writes that they are “unprecedented and disproportionate.” 

The concerning part, however, isn’t that he and the District are trying to shuck all responsibility for the $630 million budget deficit, a shortfall that has adversely affected nearly everyone in the city—taxpayers, teachers, parents, children, and unions, to name a few.  The alarming part is that the numbers Masch uses in his Inquirer commentary to explain away all responsibility for the budget shortfall are cherry-picked and taken out of context.

According to the District’s Third Quarter Financial Report, dated April 13, 2011, eight percent of the District’s funding for the 2010-11 school year was federal stimulus, which totaled $258 million.  In the 2009-10 school year, the District received $227 million in stimulus money.  Yet Masch writes in his article:

“State and federal funding for the district is going down next year—for the first time ever, and by an enormous amount—more than $400 million, a 15 percent drop. And this is not due solely or primarily to the district’s loss of federal stimulus funds. The district received an average of $113 million in annual stimulus funds in 2010 and in 2011, but it is losing more than $400 million in total funding next year.”

It appears Masch is getting the number $113 million from “Directly Allocated Federal Stimulus Funds.”  What he fails to mention, however, is that in the school years 2009-10 and 2010-11, the District also received “State Allocated Federal Stimulus Funds,” which brought in an additional $130 million per year.   

Masch also writes in his piece, “The district’s annual operating budget spending grew by just 4 percent in the past three years.”    

He is again playing with words.  Although the District’s “Operating Funds,” which only include “Local Taxes,” “City Grant,” ‘Local Non-Taxes” and “State Funds,” may have only increased 4 percent in three years, the District’s total budget grew from $2.79 billion in 2008-09 to $3.12 billion in 2010-11.  I’m no accountant or mathematician, but 4 percent of $2.79 billion is $111 million.  And from 2008 to 2011, District spending increased over $300 million; interestingly, the student population in the District went down 7,000 students during this time.         

I’m not the only one who finds Masch’s representation of data a bit troublesome.  The City Controller’s Office has also expressed serious concerns about how the School District handles tax dollars, and has recommended that they be required to present a five-year financial plan to an independent accounting authority because of “material weaknesses” found in its financial statements.

If the entire city of Philadelphia is being asked to make sacrifices to help balance the School District budget, if kindergarten and transportation are going to be cut, if unions are going to make $75 million in concessions, if property taxes are going to go up nearly $100 a year and 1,200 schoolteachers are going to lose their jobs, than there must be some real accountability. 

How can Mayor Nutter and the SRC ask so many people to give so much money to District officials who take no responsibility and who spin their financial information?        

This is a question that state and local leaders must start asking themselves.

Are School District Leaders Protected by Powers in Washington?

by Christopher Paslay

“The school superintendent, Arlene Ackerman, is here and doing a great job.”

            –President Barack Obama’s remarks from his speech at Julia R. Masterman High School, Philadelphia, PA, September 14, 2010. 

There is one thing noteworthy about the way administrators have run the Philadelphia School District over the past three years: their education agenda and initiatives are right from President Obama’s playbook in Washington. 

Early in 2009, when the President chose former Chicago schools superintendent Arne Duncan as his Education Secretary, there emerged a new plan for public education in America.  Known as the “National Reform Model,” Obama and Duncan set in motion a movement that has radically changed traditional public schools as we know them (tragically, as test scores and graduation rates continue to show, not for the better).

There are four school intervention models included in Obama’s national reform plan.  They are titled “Turnaround,” “Restart,” “School Closure,” and “Transformation.”

As explained by PSEA.org:

“The Turnaround model requires schools to implement nine broad strategies, including replacement of the principals, high-quality professional development, adoption of new governance, and replacement of at least 50 percent of staff.

The Transformation model includes a new evaluation system for teachers and principals, high-quality professional development and design and development of curriculum with teacher and principal involvement.

The Restart model enables a district to re-open a school as a charter school or elect to have an education management organization run the school.

School Closure enables districts to transfer students to other, higher-achieving schools within the district’s boundaries, within a reasonable proximity.”

Do these reform plans sound a lot like those interventions contained in Dr. Ackerman’s Imagine 2014?  The Philadelphia Inquirer thinks they do.  In an editorial published in September of 2010, the newspaper wrote, “much of [Dr. Ackerman’s] five-year strategic plan almost mirrors Obama’s proposals.”   

In some places the Ackerman and Obama agenda are indeed identical.  In fact, in 2010, in order to receive stimulus money from the federal government’s SIG program (School Improvement Grant), the Philadelphia School District literally had to sign an agreement with the government stating that they agreed to commit to the four intervention models.       

And sign they did.  The District sold its soul to Washington and dove headfirst into a reform plan that took control away from the citizens of Philadelphia and placed it—along with millions of tax dollars—in the hands of charter schools and education management organizations and all manner of untested, experimental reform programs.   

The fact that District officials so eagerly embraced the National Reform Model and are pushing an agenda direct from Washington might explain why they are able to get away with so many missteps (think past the current $629 million deficit to the 2010 controversy over security contracts and even past that to the 2009 debacle with Asian students at South Philly High School), any of which would have normally cost a top administrator his or her job.     

In 2007, when former Philadelphia School District Superintendent Paul Vallas discovered a “surprise” $73 million deficit, he resigned.  Granted, he had another job waiting for him in New Orleans, but there was real pressure coming from Mayor Street to hold him accountable.  Likewise, there was pressure to hold James Nevels, the Chairman of the School Reform Commission, accountable; Nevels also resigned and was replaced with new leadership. 

It seems clear, however, that current District leaders have no plans of going anywhere.  Perhaps the powers that be in Washington have too much invested in the Philadelphia School District and the current direction it’s heading.  This just might explain why Mayor Nutter, as well as the rest of the City, continues to stand down to School District officials.       

Of course, Mayor Nutter will claim differently.  He will tell the public that he has things in control, that he just made the District sign an “Accountability Agreement,” but what is this, really?  Is it anything more than smoke and mirrors?  (Is the pending audit by the IRS, which is now in limbo, much of the same?) 

This isn’t to take away from the recent efforts of a few brave local leaders—such as Philadelphia City Councilmen Bill Green and PA State Reps Angel Cruz and Mike McGeehan—to try to bring an end to the District’s troubled leadership.

McGeehan continues to call for Philadelphia School Superintendent Arlene Ackerman’s resignation in order to bring some financial credibility back to the District in the eyes of Harrisburg. 

In a letter to PA Governor Tom Corbett, McGeehan stated the following: “I am requesting that you, on behalf of the taxpayers of the Commonwealth and the school children of Philadelphia, compel the School Reform Commission to remove Superintendent Ackerman. The continuing controversy surrounding Ms. Ackerman does not serve the best interest of the taxpayers or children of Philadelphia. I ask you to use your authority to request the SRC to immediately end her tumultuous tenure.”  

State Rep. Angel Cruz has also called for laws to regulate the power of the District superintendent.  “The SRC clearly is not properly managing the superintendent or the district,” Cruz told his colleagues in Harrisburg. “My bill would give voters the option to choose the people who are running our school district.”

Philadelphia City Councilman Bill Green, in addition, blasted District leadership in a recent Inquire article headlined, “School District has a management deficit.”  In it Green stated, “Recent events have shown that the crisis at the Philadelphia School District is more about oversight and stewardship than it is about dollars and cents.”

Even the local press seems to be questioning the District’s leadership.  In a recent poll philly.com asked readers, “Does the Philadelphia School District need new management?”  The results were quite telling:  371 folks said YES (97.4%); 3 answered No (.8%); and 7 responded Not Sure (1.8%).

Not that the District seems to care about what anybody thinks about their ability to do their job; they continue to operate as if it were business as usual.  And all the while Philadelphia’s children—as well as the tax payers—continue to pick up the tab. 

Tragically, perhaps because of a blessing from Washington, it appears as if this pattern of reckless management has no foreseeable end.

Tragically, District Ignored It’s Own Five-Year Financial Plan


by Christopher Paslay

 Recently, I was perusing the Philadelphia School District’s website when I stumbled across an interesting budget document titled, “Five-Year Financial Plan: Fiscal Year 2008-2009 through Fiscal Year 2012-13.”  (Click here if you want to review the document yourself). 

Dated June 30th, 2008, the financial plan was put in place to help close the $73 million “surprise” budget deficit left by Paul Vallas, former C.E.O. of Philadelphia public schools.  The plan went on to make several ambitious promises in its executive summary:


“In future years, District finances are projected to continue steady improvement based on strong continued state funding levels, combined with tight fiscal restraint for District spending. Accordingly, the first year of this Plan is critical for establishing sustainable fiscal health.


A Gap Closing Plan is in development to achieve full and sustainable balance for the fiscal year ahead. The SRC Chair has requested that the Commonwealth of Pennsylvania Secretary of the Budget and City of Philadelphia Director of Finance work with the District to construct this approach, and the process has begun. Assuming that at least half of the initiatives in this Gap Closing Plan recur, the District is projected to produce operating surpluses in FY2010-11 and FY2011-12 and to begin to rebuild a positive Fund Balance reserve.    


Here are the yearly budget projections quoted in the Five Year Financial Plan (p. 14 of the document):


FY2008-09:  $2,280,602,991

FY2009-10:  $2,483,103,289

FY2010-11:  $2,646,495,847 

FY2011-12:  $2,806,419,243

FY2012-13:  $3,025,631,379


To the credit of the newly appointed Dr. Ackerman and the SRC, the District did manage to successfully balance the books in 2008-09.  Shortly thereafter, however, the District’s philosophy of efficient spending went out the window.  This was undoubtedly due to the fact that a gigantic pot of Federal Stimulus money landed at their doorstep.  Here are the District’s actual budgets from 2009 to 2011:


FY2008-09:  $2,794,000,000

FY2009-10:  $3,057,000,000

FY2010-11:  $3,216,000,000


The District’s spending not only went up nearly a half a billion dollars in three years ($422 million), but their 2010-11 costs were 570 million dollars over their original budget projections in their financial plan issued in June of 2008.    


The irony of the situation is two-fold.  One—the District somehow forgot to exercise “tight fiscal restraint.”  And two—there is no operating surplus for the year 2011-12.  In fact, there is a deficit of $629 million dollars, according to District projections. 


Most ironic, however, is the fact that if the SRC would have simply followed their own Five Year Financial Plan, which estimated a budget of only $2,806,419,243 for the upcoming 2011-12 school year, there would be a more manageable deficit of $111 million dollars, based on the District’s most recent budget projection for the 2011-12 school year of $2,695,000,000.   


Interestingly, as District spending went up almost a half a billion dollars in the last three years, the student population has gone down.  In 2008, there were 169,742 students enrolled in District operated schools.  In 2010, there were only 162,662 enrolled in District schools.          


The question is, where did the money go?  In the 2010-11 school year, nearly $200 million went into Dr. Ackerman’s Imagine 2014 reform plan.  According to an official District News Release dated April 21, 2010, “The proposed FY2010-11 budget provides $180 million for the implementation of Imagine 2014 Phase Two initiatives, including $119 million for the continuation of initiatives implemented last year and $61 million for new or expanding initiatives.”  (To read the whole document, click here.)


Specifically, the money was spent on things like expanding summer programs, Renaissance Schools, Newcomer Learning Academies, Reengagement Centers, Student Success Centers, Regional Talent Centers, Parent Ombudsmen and Student Advisors, expansion of the Parent University, improved counseling services, reading supports, and reduced class sizes, among other things.


Tragically, the District was investing in an ever-growing reform plan with money it didn’t have.  In the 2010-2011 school year, $116 million of the District’s budget came from Direct Federal Stimulus Funding, and $193 million came from PA-Provided Stimulus Funding ($309 million total).  It was public knowledge that both of the sources of this funding were temporary, and that they would be gone at the end of the 2010-11 school year.  


So why did the District recklessly continue to expand its programs?  The District News Release dated April 21, 2010 might give a hint at the answer: “Imagine 2014 builds on the District’s past successes in increasing student achievement and provides the District with a road map to accelerate academic progress over the next five years.”     


But exactly what were the District’s past successes?  If you turn to standardized testing data for the answer, the overall progress was slim.  From 2008 to 2010, after the District increased its budget by nearly a half a billion dollars, PSSA math scores went up a total of 7.3 percent (from 49 percent proficient and advanced in 2008 to 56.3 percent in 2010), and PSSA reading scores went up 5.2 percent (from 44.8 percent proficient and advanced in 2008 to 50 percent in 2010). 


It seems there is too little to show for the District’s overzealous spending.  When Paul Vallas left Philadelphia for New Orleans in 2007, he left in his wake tangible improvements.  He started the process of breaking large, factory model schools into smaller, more manageable ones.  He upgraded building conditions and replaced books.  He also brought Philadelphia School District sports to a new level, making city schools an official member of the PIAA and building new football and track stadiums (he called them “super-sites”) at Simon Gratz, Northeast, and Roxborough, among other schools; Vallas also partnered with Microsoft in 2006 to bring the city its first “paperless” high school—the High School of the Future—in West Philadelphia. 


Other than the expansion of charter schools (which suck money from traditional neighborhood schools), and the creation of a dozen or so special district programs and help centers, there isn’t an overwhelming amount to show for Imagine 2014, at least nothing concrete that will still be standing once the Ackerman administration moves on; to their credit, the current administration did greatly improve the District website and the use of technology, and work out a fair contract with the Philadelphia teacher’s union.     


Nevertheless, it’s still time to pay the piper.  According to the latest District projections, an unlucky number of teachers, nurses, school police, and counselors will be losing their jobs in the 2011-12 school year.  Athletics might be cut, as well as summer programs, music and art classes.  (Were opening Regional Talent Centers and Parent Universities really worth cutting sports programs and laying-off teachers, nurses, and school police?)


Of course, the new PA governor is also to blame for the shortfall.  Tom Corbett has proposed cutting $293 million in education funds for the Philadelphia School District in 2011-12.  This decline in state education funding is unprecedented in Pennsylvania history.      


Still, $293 million isn’t even half of the projected $629 million budget deficit.  Over $300 million is the fault of the District, a gap in revenue that was waiting there like a hole in the road for all to see; everyone and their mother knew the stimulus money would run out in 2011. 


So how in the world did we get into this mess?  How could the District’s financial officers be so reckless with the budget?  It seems to me that the District was its own worst enemy.    


Maybe in the future, such mistakes can be avoided.  Maybe in the future, the SRC will heed its own advice and follow the financial plans they’ve carefully laid out for themselves.       


Witch-hunt mentality is hurting morale of principals and teachers



by Christopher Paslay


In a recent Inquirer article, Dr. Ackerman spoke about a wounded spirit in the city, a sadness that she described as “ever-present”.  


Although she was referring to the community’s frustration over its troubled public school system, her words could have just as easily applied to the district’s principals and teachers. 


While attending several city-wide professional developments this school year, I’ve come in contact with dozens of principals and teachers from all over the district, and there seems to be a common feeling among many of them: They feel tired, beat-up, and unappreciated. 


A frequent complaint is that they are overwhelmed.  In particular, principals and teachers are buckling under the new administration’s constant threats, the increased paperwork and bureaucracy, and the negative atmosphere in general.


And it appears that the district’s policy of negative reinforcement is only getting worse.    


Like a state trooper trying to meet a quota for speeding tickets, Dr. Ackerman has recently vowed to make sure more teachers receive an unsatisfactory on their performance rating this year, and that more principals are disciplined for failing to meet academic standards (this will undoubtedly attract more talented young people to the district).         


“We can’t have this kind of performance,” Dr. Ackerman told the Inquirer.  “There will be changes in the principal staff, and there will be many more teachers rated unsatisfactory this year.” 


Ackerman said that regional superintendents have been given instructions and training to toughen their standards for observations.


Apparently, by giving more teachers and principals an unsatisfactory rating, the district will raise the educational “bar”.


“. . . we’re setting a standard and a bar that’s much higher than it’s ever been,” Ackerman said.  “Once you set that standard, then people know they can’t produce below it, because there’s a consequence.”


A consequence for teachers and principals, sure (and I’ll be the first to admit there is room for teachers and principals to improve, given the proper supports).  But what about the consequences for the district’s other “stakeholders,” such as parents? 


Incredibly enough, the district doesn’t even require parents to perform the most basic of tasks, such as filling out an application for free school breakfasts.


District officials, as well as state politicians and advocates of the Universal Feeding Program (a plan that requires no application for free meals), have already publicly declared that filling out meal applications is too “daunting” a task for our city’s mothers and fathers, and that we should refrain from using such forms because urban families tend to “reject” paperwork.


Wayne Grasela, the district’s senior vice president for food services, said that the task of getting families to start filling out meal applications would be “monumental”. 


If getting parents to fill out meal applications is “monumental,” how do you think our city’s families handle homework?  Report cards?  Summer reading?  Registration deadlines?  


Of course, this didn’t stop Dr. Ackerman from inviting parents to walk into their child’s classroom—unannounced, mind you—to check things out. 


“The district has no policy that says parents need to make an appointment,” Dr. Ackerman said, explaining that schools “belong to the parents.”


I found this particular comment quite interesting.  If our public schools “belong to the parents,” why then are they not held accountable for these schools, the same way the teachers and principals are?  Why don’t they face consequences for being chronically absent from parent-teacher conferences, for failing to show-up for IEP and CSAP meetings, for failing to sign and return progress reports, absence notes, and insurance forms? 


And when is the district going to step up to the plate and hold the community accountable?  When are they going to start a campaign to recover the almost $5 million in computer equipment that’s been stolen from city schools since 2005, most of which has been taken from impoverished neighborhoods that “lack” resources?


And what about addressing the unruly behavior of the students themselves?  What about the 15,000 criminal incidents reported last school year?  The 1,728 students who assaulted teachers?  The 479 weapons discovered inside elementary and middle school hallways and classrooms?  The 357 weapons that were found in high schools? 


Besides a lot of “zero-tolerance for violence” rhetoric from district officials, not much has been done. 


But who’s solely to blame for our troubled school system?  The teachers and principals. 



Now we know why there is a wounded spirit in this city.   


How About the Teachers?

by Christopher Paslay

Here is a reprint of a commentary I published in The Philadelphia Inquirer last Thursday, headlined, “How about the teachers?” To comment, please click on the link below.


After six months of failed negotiations with the School Reform Commission, the Philadelphia Federation of Teachers is still without a contract. The Sept. 1 deadline has come and gone, and both sides remain at an impasse.

But can you really blame SRC members for the stalled talks? It has been a long year for them.

In March, they voted to hire Arlene Ackerman as the district’s new CEO, and I can only imagine that this was an extremely exhausting process.

First they had to work out Ackerman’s base pay – which ended up being $325,000, the second-highest superintendent salary in the country.

Then they had the task of formulating Ackerman’s retention bonus, which is estimated to be $100,000.

Next the SRC had the matter of extending the contracts of the city’s education management organizations, the private consulting firms that charge the district millions of dollars to run some of the city’s public schools.

The decision to extend their contracts must have been daunting, given that studies show these private managers perform no better than Philadelphia’s traditional public-school officials.

Last year, Research for Action, a nonprofit organization working in educational research and reform, conducted a survey on the private managers.

The report stated: “We find little evidence in terms of academic outcomes that would support the additional resources for the private managers.”

In other words, education management organizations aren’t worth the money.

How did SRC members react to this? In June, they decided to extend the contracts of 32 of the 38 privately run schools.

And then there’s the issue of renewing the contracts of Philadelphia’s charter schools.

In April, the SRC approved a new five-year term of operation for 13 of Philadelphia’s 16 charter schools whose charters were due to expire at the end of the 2007-08 school year.

As with the private managers, statistics show charter-school managers perform no better than traditional school officials.

Research for Action also published a study evaluating the performance of Philadelphia’s charters.

The study concluded: “Students’ average gains when attending charter schools are statistically indistinguishable from the gains they experienced while at traditional public schools.”

And then there are the Philadelphia Academy and Northwood Academy charter schools, both now under federal criminal investigation for missing funds and illegal land deals.

How did SRC members respond to these findings? They had a meeting of the minds and decided to approve the opening of seven more charter schools by the fall of 2009.

The SRC has had quite a busy year. This probably explains why it hasn’t gotten around to ironing out that new contract with the Philadelphia Federation of Teachers.

I mean, why make time for the teachers? All we really do is educate the kids, right? Teach them how to read, write, communicate. Mold them into critical thinkers and productive members of society.

And where has Mayor Nutter been during contract talks? Did he take the PFT’s endorsement and run? What about “Putting Children First,” his plan for public education?

As a Philadelphia public school teacher, I remember his plan well. He was supposed to use his influence as mayor to reduce class sizes, improve safety inside schools, expand programs to retain quality teachers and principals, among other things.

Of course, when Jerry Jordan, president of the PFT, put these very issues on the table during contract negotiations, the SRC balked.

Jordan wrote in a recent letter to union members that the SRC was “not willing to put into the contract any language that addresses these serious issues.”

In fact, the school district is moving in the opposite direction. According to Jordan’s letter, the SRC is now fighting for a one-year contract.

Failing charter schools and ineffective private managers get three- to five-year extensions, but the workhorse known as the Philadelphia public school teacher deserves only a one-year extension?

This is a slap in the face on so many levels.

The school district needs to get its priorities straight. It must show its teachers some respect and offer us a fair, multiyear contract.