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City Council President Darrell Clarke has been roundly criticized for penning a bill that seeks to split revenue from a state-approved one percent city sales tax between the School District of Philadelphia and the city employees’ pension fund.
Clarke’s proposal would give the schools $120 million from the sales tax this year, and the money would steadily decline over the next four years, eventually becoming a 50-50 split between the school district and the pension fund.
On the surface, this is a bad idea, because the School District is crumbling beneath its own weight. With deficits in the hundreds of millions, and thousands of students leaving regular public schools for charter schools, the district is not only bleeding money. In some ways, it is bleeding hope. Siphoning off even a portion of money that could readily go to the district seems foolhardy, at best.
But sources familiar with the thinking of Philadelphia’s state legislators say Clarke’s move is just the first in a series of maneuvers designed to bring long-term solvency to both the Pension Fund and the School District. For the gambit to pay dividends, however, state legislators will need to convince their mostly Republican colleagues to pass a two-dollar-a-pack cigarette tax levied on all sales in the city. Then they’ll have to convince them to pass enabling legislation to allow the City to split the revenue from the sales tax add-on between pensions and schools, essentially undoing a bill they passed last year giving the district all the money.
My sources, who requested anonymity because their discussions were private, estimate that the sales tax could bring in nearly $138 million in the first year. The schools would still receive their $120 million, with the rest going to pensions. The cigarette tax, if passed in the upcoming session, could bring in an additional $45 million for the schools over the remainder of this year, for a total of $165 million in new funding for the upcoming 2014-15 school year.
That sounds promising if it happens, but with the schools needing between $216 million and $440 million for next year, that’s not enough money, and everyone knows it. Sadly, that’s not the worst part. The worst part is that the city pensions, in many ways, are an even bigger issue than the schools.
In 2004, six percent of the city’s budget went to pension-related expenses. In 2014, it’s nearly 17 percent. Still, the fund has a long-term deficit. How bad is the deficit? The current pension deficit/unfunded liability adds up to a whopping $5.1 billion dollars. That’s $1.1 billion more than the city’s overall budget for 2014.
Why does that matter for the schools? I know no one wants to hear this, least of all public-school parents like me, but if the city doesn’t get its pension house in order, the city could see its credit rating downgraded, which could impede Philadelphia’s ability to borrow money, and throw a monkey wrench into future budgets.
The state, which faces its own pension problems, should understand the city’s position all too well. Late last month, Standard & Poor’s warned that it could downgrade Pennsylvania’s credit rating if it did not see significant strides to structurally balance the budget and long-term pension liabilities.
But even with those very real fiscal issues staring legislators in the face, there is still the politics of it. Councilman Curtis Jones, who introduced Clarke’s bill, told reporters it’s the kind of maneuver that makes everyone angry at first. In the long run, however, if the state legislature cooperates, we could all be glad we did it.
That leaves just one question: What would make a Republican-dominated state legislature want to go back and revisit a tax they’ve already approved for schools in a Democratic town like Philadelphia?
There are those in the Philadelphia delegation who believe the Republicans could want to deal. For example, Republicans have long wanted to privatize state-owned liquor stores. Democrats would probably remain against such a move. However, what if Democrats were to offer a compromise, such as allowing beer and wine in supermarkets?
Would that kind of semi-privatization of liquor sales be enough to get Republicans to the table? More importantly, would semi-privatization of liquor sales be palatable to Philadelphia voters?
I’m not sure. But in an age where liberal Democrats are making convincing arguments for marijuana legalization, a push to sell wine in neighborhood supermarkets might not be that much of a heavy lift. This is especially true if that compromise resulted in more money for Philadelphia’s schools.
One thing is certain. Clarke, who along with Mayor Nutter and others was part of a working group at Temple University’s Center on Regional Politics that came up with a plan to address pension reform, has had allies on this issue in the past. He still does, but with criticism raining down on him, Clarke looks a lot like a knight on a political chessboard.
He’s just made a move that is the first in a series of maneuvers.
Now, it’s the state legislature’s move.