Fresh off an oversubscribed $252.9 million bond deal and promises of new city support, the Philadelphia School District received approval for the framework of a 5% budget increase from its lame duck governing body.
The School Reform Commission, which will expire on June 30 following nearly 17 years of controlling Pennsylvania’s largest district, voted unanimously Thursday to adopt a lump sum $3.2 billion spending plan for the 2019 fiscal year that factors in promises of additional city aid. After the SRC voted in November to return to a mayoral-controlled school board, Mayor Jim Kenney pledged in his March 1 budget address to send nearly $1 billion of new revenue to the junk-rated district to cover a looming $900 million deficit projected for 2023.
“Our goal every year is to propose a budget and spending plan which strives for structural balance, while determining investments designed to achieve the mission of achieving equity in educational opportunity for all children,” Philadelphia School District Chief Financial Officer Uri Monson said in a statement. “The City’s proposed new funding plan provides resources to accelerate and further expand progress while ensuring fiscal stability for years to come.”
The district's financial plan outlined Thursday followed the issuance of $251.8 million of general obligation bonds through Bank of America Merrill Lynch that saw heavy market demand, according to traders. The district is planning to use proceeds for capital projects.
Moody’s Investors Service upgraded the Philadelphia School District's underlying rating one notch in September to Ba2 citing improved reserve levels. Fitch Ratings revised the outlook for its BB-minus underlying rating to stable from negative in October 2016. Its recent bond sale was enhanced through a Pennsylvania intercept program, rated A2 by Moody’s and A-plus by Fitch.
District officials said that the city’s cash infusion and improved bond ratings are allowing it to boost annual capital spending to fix aging buildings to $250 million from $200 million. The district is also planning to up its debt service by $25 million to $300.5 million and payments to charter schools by $79 million to $983.8 million.
“The budget proposed by Mayor Kenney allows us to build on our achievements and expand progress,” Superintendent of Schools William R. Hite said in a statement. “Under Mayor Kenney’s proposed funding plan we can expand our early literacy work, make significant capital improvements, increase high school academic program offerings across the city and keep schools safe and welcoming places for children."
District officials are projecting to end the 2018 fiscal year with a $135 million surplus marking the fourth straight year with a positive fund balance. Monson said the district will receive at least $58 million from the continuation of a city cigarette tax and around $2.6 million in new ride-sharing revenues. He said a bond refunding in November 2016 will result in more than $100 million in estimated present value debt service savings over the next 20 years.
The district is slated to release a more detailed budget plan in late April showing how expenses will be allocated. The SRC is scheduled to vote May 24 on a final budget.