Philadelphia is on the brink of a return to local public school control

Philadelphia is on the brink of a return to local public school control after a state-devised board that has governed the city’s school distressed district for 16 years voted to dissolve Thursday night.

The School Reform Commission, which has governed the junk-rated Philadelphia School District since December 2001 when the Commonwealth of Pennsylvania took control of the city’s school system, voted 3-1 Thursday to start a process leading to a new locally appointed school board by July 1, 2018. The five-member SRC currently consists of three appointees from the governor and two by the mayor.

Michael Nagle/Bloomberg

“This year has been the strongest start of the school year since Dr. [William] Hite became superintendent and we continue to strengthen the current and future financial outlook of the School District of Philadelphia,” said SRC Chair Joyce Wilkerson in a statement. “Returning the District to Philadelphia will allow us to build on this progress and stability. The District is ready for its next phase and Philadelphia is ready to take ownership of its schools.”

In September, Moody's Investors Service upgraded the Philadelphia School District one notch to still-junk Ba2. Moody's cited “considerable improvement in the district's still strained financial position.”

Moody’s also revised the outlook on the school system’s roughly $3 billion of debt to positive from stable. The district has faced fiscal challenges in the last decade stemming largely from state mandated support for a rising charter school population and incurring a structural deficit of more than $500 million from 2010 to 2014.

Mayor Jim Kenney has aggressively pushed for local school control and is vowing to have the city fund much of the district’s $1 billion deficit forecast for the next five years. The Democratic mayor hasn’t given specifics on funding solutions and said in a Nov. 2 speech that expanding the city’s local cigarette and sales taxes is “highly unlikely.” The Pennsylvania General Assembly and Philadelphia City Council control the district’s taxing authority.

“No longer will our schools be run by a Board with several different patrons, which too often leads to disorganization or unproductive infighting,” said Kenney in a statement after the SRC vote. “The buck will stop with one person, the Mayor, and I fully expect Philadelphians to hold me and future Mayors accountable.”

Philadelphia City Councilman Allan Domb proposed legislation Thursday aimed at collecting delinquent taxes for the district by adopting a system that would securitize tax liens. Councilman Domb’s plan would involve selling tax liens to a trust created and managed by the city, which would hire servicers to help recover outstanding debt.

A Nov. 10 report from Fitch Ratings noted that the district is projected to have a $300 million annual deficit by the 2022 fiscal year equating to nearly 9% of spending. Fitch assigned the school district a BB-minus underlying rating, with an A-plus rating under Pennsylvania's credit enhancement program, late last year.

The City of Philadelphia has general obligation bond ratings of A2 from Moody’s and A-minus from S&P Global Ratings and Fitch.