I don't think we would 410 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET have any problem with submitting that document to you.
Who's on the negotiating teams on the City side and on the State side?
The negotiating teams that reached agreement back in December on the State side were comprised of the Governor's Chief of Staff, Secretary of Education, General Council, and Fritz Bittenbender whose title has changed since then.
Fritz Bittenbender who was on the Governor's staff at that time and is now Secretary of Administration for the Governor. For the City it was Debra Kahn, Janice Davis, myself, Joe McLaughlin, Phil Goldsmith, Deidra Farmbry and Dorothy Rush and Pedro Ramos.
And are all of those same persons participating in the ongoing either negotiation or wrap up of the particular document? Those are all still the same parties?
The primary attempt to resolve the documentation is going on between Secretary Kahn in Secretary Zogby. I've had some 411 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET discussions with the Governor's Chief of Staff, Mark Campbell, but the primary discussions have been between the two secretaries.
So the two main negotiators are Secretary Zogby and Secretary Kahn?
The primary negotiations were conducted by the groups that I've described. The attempt to resolve to get the document signed has been a work that Secretary Zogby and Secretary Kahn have been working on, I think, within the parameters of what Secretary Kahn indicated. The Governor was out of the country for two weeks and Secretary Zogby was out for several days. But I think we can -- we will fully apprise you of everything we've done with respect to this, but right now it is in the State's court to get back to us on this issue, and I simply cannot speak for them.
Now, how has the issue of either super majority on -- I think I've read in the newspaper requirement for super majority on the superintendent, or I guess technically the Chief Executive Officer, the CEO. Is there a super majority requirement with regard to the consultant? 412 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET That term is used usually with a capital C.
No. It was for the appointment or dismissal of the Chief Executive Officer and General Counsel for the incurring debt and for the adoption and amendment of the bylaws themselves.
And now how does the agreement work in conjunction with the statute, whether it's 46 or 83? Which I think neither of them makes any reference to super majority. Can an agreement outweigh a statute?
I think that, for example, just like the way the statute also says, that the Governor would have four appointments and the Mayor have one. We were able to execute that by agreement. I think in the case of the super majority votes, and we've discussed this to some extent with Council, it would be the position that the School Reform Commission can adopt its own 413 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET operating procedures, but certainly to be able to have the force of law it might be preferred to be able to amend the statute.
That the School Reform Commission itself, and they are, of course, getting started and haven't adopted all of their operating procedures yet, but that they would have the ability to adopt operating procedures for themselves. In order for it, though, to have the actual force of law to the extent that this would be contrary to anything that does exist in the current law, then you would need to amend.
Right. Because I think the statute talks about decisions being made by majority.
Now, let's go back to before all this happened. When the agreement was signed back in the summer between the Mayor and the Governor, then Governor Ridge, naturally, July 30th, tell me about events in the context of that agreement that address probably the two most 414 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET important issues in the agreement. One was "The Governor will examine the foregoing analysis and no 4 later than October 31, 2001, will provide to the Mayor a long-term proposal to address the educational and financial situation in the School District, including option to improve the educational performance and financial condition of the School District." What events or activities or meetings or discussions ensued from July 30th up to September 28th at which time a new agreement was signed primarily for the purpose of extending the deadline?
I'm getting old. I may not have perfect recollection here, Councilman. But largely the period from when the agreement was signed with the Governor and a number of us met with the Governor in Harrisburg that led to the signing of that agreement and the Governor appointed a consulting team, and that consulting team spent roughly those 60 days meeting with people in the School District --
The consulting team would be Edison and working with some people in state government, Secretary Zogby and others. But they spent 60 days putting together their plan and proposal. The September events intervened in 9 that, and Governor Ridge was called to Washington. 10 Governor Schweiker was sworn in and asked for an 11 additional 30 days to be able to get himself up to speed to review the Edison report and to make his recommendations to the Mayor as to how they proposed to go forward.
And I might add, the objective of the agreement was that Governor Ridge and then Governor Schweiker would present a plan to the City, and if we could work out a partnership, that we would go forward based upon the negotiations. And the 30-day period after the end of the first 60-day period was to determine whether the State and the City could negotiate an arrangement that we both thought was mutually acceptable. And if that were impossible, that the 416 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET State would then take over public education in the City of Philadelphia and become responsible for it.
And then what happened in the period between September 28th and December 21st, again in the context of the first paragraph from the Memorandum of Understanding?
What primarily took place between that period is in the 30-day extension Governor Schweiker put together his plan and his proposal, which was either akin to or a modification of what Governor Ridge was reaching a conclusion on before he left. He presented that plan first in draft form to the Mayor and then probably or so 15 days into the extension period. And at the end of 16 that, then he presented a plan. He took that plan 17 publicly around the City to a number of 18 constituencies. In the intervening time -- in the 19 post time after his delivery of that plan in 20 December 21st, we went through an extended negotiation period where we, the Mayor for the City and the Governor for the State reached what they thought was a responsible plan to go forward, understanding that we all didn't agree 100 percent on all the issues that were in front of us, but that 417 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET we did agree that the most effective way to potentially resolve the issues of public education in Philadelphia was through a partnership between the State and the City. And we thought that we had framed that in a way that allowed us to move forward.
And then the result was the agreement on December 21st?
Now, the plan before us, was that announced as a part of the December 21st agreement, $45 million in FY '02, $300 million deficit financing supported by $25 million millage shift and the $20 million direct to the School District which results in FY '03 in going forward $45 million additional contribution by the City as well as a $75 million FY '03 in going forward contribution by the State? Was that all announced as a part of the December 21st?
That plan was negotiated in the period of time after the Governor presented 418 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET his plan in December 21st. That was the subject of the negotiations during what was first a period that was to end early in December in which the Governor and Mayor agreed to, to extend for three weeks when we reached a conclusion but had not reached agreement but thought we were close enough to extend the discussions, extended them for the three weeks and then came to an agreement on the 21st.
Now, was that back when there had been, I think, a three-week or so period of time when the Mayor and the Governor at least officially or publicly were not talking or not negotiating? The Mayor took a very hard-line stance that he wouldn't even talk to the Governor. Whether he was actually talking to the Governor or not, naturally, we'll never know. But the position was no discussion until Edison was off the table as the absolute 100 percent central office operation. And I think my recollection is that there was an actually meeting around about November 21st; is that right?
Well, don't hold me the exact times, but certainly the Mayor took the position after -- the sequence was there was a 419 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET meeting in which the Governor presented his plan. Subsequent to that, the Mayor took the position -- and once the Governor delivered his plan publicly and officially, the Mayor took the position that he would not negotiate as long as there was a proposal that Edison would run the School District, it would become responsible for the central management of the School District and it would fire and hire the top 55 employees.
Right. And once that was resolved, there was this more official first meeting which, I think, was at a law office down on South Broad Street somewhere in late November?
And was it at that point that there was also the three-week extension?
How enforceable is the agreement on Edison, legally enforceable?
I won't put my lawyer's 420 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET hat on. I think that we are -- I want to say this carefully. We are clearly functioning in an environment where many of the decisions that people will have to make will be driven by the desire to avoid the train wreck that Councilman Kenney referred to yesterday, in that people driven by those decisions will do the things that they've committed to do as a part of this process. The School Reform Commission, as you know, is an independently appointed body with independent authority. So that we don't have the power, I think, to bind them to do anything.
I think we do not have of the power to bind the School Reform Commission.
That we do not have the power to bind the School Reform Commission.
The Chair 421 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET recognizes Councilman Nutter.
Thank you, Madam Chair. So I think the answer is no. 6 So the meeting takes place in late November. Discussions begin. When did this three-week extension --
We spent the last week of November -- once the Governor decided -- you might remember that there was a meeting. The Governor and the Mayor held a press conference which they agreed that Edison would not centrally manage the School District. They also discussed the fact Edison would have a role in the consultant and operating of some schools within the District, immediately subject to that meeting they identified -- spent a week and a half trying to reach agreement. It led up to the December 3rd or 4th, whenever that date was, when the official end date to the 30-day extension came about. We had spent a week and a half negotiating. We had not reached agreement, but had reached a point where we thought there was an opportunity -- there was an opportunity if we move forward that we could reach agreement. 422 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET
Just so we better understand all this. During this week, week and a half period that you made reference to where there are negotiations going on, what was actually being negotiated?
It's hard to say -- I think you see in the results that we now announced on December 21st what the conclusions are that we reached, but we spent a fair amount of time making sure that we were all on the same page about how to move forward with public education in the City of Philadelphia. We spent a lot of time talking about the concept of community partner schools and what that meant. We spent a lot of time talking about the capacity of the City to provide funding resources and a series of other educational issues. We spent a tremendous amount of time, I think, on the financial capacity of the City and what we could afford to support this process going forward. But I think what was most important was determining, and I think this is a critical determination in all of this for everyone involved, determining whether we could partner with Governor Schweiker in a relationship where we could have confidence in one 423 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET another to do what it was that we had committed that we would do. And I think at the end of that period, as I said earlier, although we then and still disagree on some of the decisions that will have to be made in which we have now entrusted to the School Reform Commission making, we came away from those discussions believing we could work in partnership.
I think that Secretary Kahn who has a better recollection of them than I will could go though them. And she may have already gone through them. But they are the issues that we've agreed to with respect to those issues that have a super majority, with respect to the monies that would be necessary, with respect to our need for protection under Act 46, with respect to the FY '02 contribution that would be made and that the limit on the City's contribution would be $45 million going forward, that we would have some sense of comfort on Home Rule, and a whole series of those issues. And I may have left a couple out and Secretary Kahn can add to them. But they are reflected in our agreement. 424 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET
I had a different question, but you made reference to something. What is the comfort as it relates to Home Rule?
We think that what we are going to be looking for in the legislation that we would hope that the State will take up next week that the contribution of the City will be capped at $45 million.
Well, hopefully they would do that. But with every respect, what does that have to do with Home Rule? That's a financial issue. At least from my understanding or perspective, it doesn't have anything to do with Home Rule as it relates to public education. I think we gave up Home Rule in public education.
I don't want to have a major disagreement about it. But I'd be intrigued as to your perspective on what remains of the notion of Home Rule as it relates to public education in Philadelphia.
I think that you've heard from Mr. Nevels who I thought spoke eloquently about 425 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET a number of things yesterday and said very publicly and very consistently that it is his objective in chairing and leading the School Reform Commission to try to build a consensus to work in partnership. I do not think it is his intention to move the Commission, not to say that this won't happen on some issues, but I don't think it's his intent consistently to move the Commission forward with three/two votes that will look like they're broken down with State versus local interest. I think he is open to hearing from the City, what our concerns are and what our issues are. I think the Governor is open to hearing those. And I think that will continue, that partnership will continue through this process.
I don't disagree with anything you just said. Again, I don't think that any of those issues, though, have anything to do with the concept or even the legal aspect of Home Rule. Home Rule generally means that the local legislative people and the residents rule.
Bad choice of words. I will concede I made a bad choice of words.
So there is no Home 426 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET Rule.
I will stand by what I said in describing what I think our relationship is with the State and with the School Reform Commission, I will agree with you that I made bad choice of words in defining it in the context of Home Rule.
Okay. Let's go back to the financial plan. Somewhere in the early December time period you're not actively in negotiations and discussions, everybody's trying to get on the same page, whether it's about Home Rule or not Home Rule, but just how the process is going to work. When did the plan, maybe the four or so elements of the financial plan, the $45 million in '02, $300 million deficit financing, $75 million in '03 going forward from the State, and $25 million in the millage transfer shift to support the $300 million offering, you can throw in the other $20 million as a part of that. Those four elements, when was that plan put together?
If we had the press conference on 4 o'clock December 21st, we agreed at 3:59 on December 21st. Literally, that agreement 427 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET came together at the end of the discussions when I think the State became convinced that the capacity of the City -- as you'll recollect, the Governor's proposal was that there would be a $75 million contribution from the State matched by a $75 million contribution from the City. So that we had started in those discussions at a much lower number from the City that the Governor, the Governor's staff, and the people involved in those discussions and negotiations, I believe became convinced that the capacity of the City to contribute really did not go beyond the $45 million that we had ultimately gotten to as a part of the discussions. And the Mayor agreed and the Governor agreed, as I said, literally moments before that agreement was announced on December 21st.
When did that idea start? I understand and I appreciate you laying out when you finally agreed to it. But when was that concept, the elements of that concept, when were they first broached or offered and where did they come from?
Again, I want to be careful on the record because I don't want to go 428 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET back and check the details and discover that I'm off by a day or two. But all of those issues were continually discussed from the very beginning of our negotiations going back to the end of November. The concept of deficit financing probably came in near the end of the first week and began to be a part of the discussion going forward. I think that there was -- at least none of the financial experts that I've heard from in this instance has believed that there's a way to get out of this problem without deficit financing. As you know, we started out arguing that the City had no capacity to go beyond the first $15 million that the Mayor put on the table. And so these discussions were ongoing, consistently, amicably, sometimes tensely, but through that whole period. And as in most negotiations, some ideas were on the table that wound up off the table that wound up back on the table. So through that period of roughly a month, there were lots of discussions about all of those issues. Mostly, though, in the negotiating group that I've described to you -- I don't believe that we broke up in very many side-bar groupings. Most of it negotiated by those groups collectively. 429 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET
And so let me even just say off to the side. Notwithstanding how strongly the Mayor felt about the City's capacity at the time, and I think the number was about $15 million, ultimately for a host of reasons, that position changed?
And the intent or serious negotiations around this particular idea was for about a month leading up to literally the 3:59, as you laid out.
The negotiations -- I would go back and say I think that this whole process was serious. I don't think that it was -- we as a City, even while the State was conducting its evaluation of the School District and putting together its proposal, spent a considerable amount of time thinking through what our positions were and what were going to be the discussions in those negotiations in working with the School Board and other interested parties. But certainly, from the time that the Mayor and the Governor announced that Edison would not centrally manage the School District, that the negotiations were ongoing and 430 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET they were serious.
All right. So that would be literally from about late November to the December 21st? Again, for some reason I think that it was around November 21st or so. I don't know, what was it, Tuesday, Wednesday, before Thanksgiving?
Just for the purpose of accuracy, I would think it's fair to say, though, this is not unique in the set of negotiations that after we went back to -- after we agreed upon the extension in the early part of the December, after we agreed on the three-week extension, there was about a week or so that we were not having face-to-face discussions. The State wanted to go back in revisit whether -- they wanted to evaluate the position that the Administration had put forward with respect to re-crunching some numbers in assessing. So there was probably a week or 10-day period in there when there were not any daily ongoing negotiations.
So it would be fair 431 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET to say, though, that in a five-week period of time, notwithstanding all other meetings, discussions and the like, this plan started taking serious shape, the State started more seriously -- not that they weren't serious before, but started -- why don't we say started having a better understanding of the City's capacity and ability to pay or not pay certain figures. And for an intense five-week or so time period, this plan started to take form and to gel and become the item of discussion which then led to the agreement and a 3:59 before 4 o'clock press conference, this is the plan?
I would say the answer to that is yes, but I would characterize it in this way: That when we agreed to the extension at the beginning of December, we were not -- I think we were at a point where we agreed and believed that partnership and partnering was the best way to confront this problem. I would say that there was fair distance between us with respect to the plans that we both were promoting and supporting at that time. So I would kind of break the negotiations into two stages and say that the second stage that began after the extension probably, both of us came 432 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET back to those discussions having revisited our own positions and with a new commitment to try to reach an agreement.
Just in a way of some context. Again, about a five-week period to come up with the plan, the details, crunch numbers. Each side kind of went back to their respective corners to make sure that their numbers were correct, and that was a fair amount of the time of that final month period; is that accurate?
It is absolutely accurate. But just, as I said, keeping it all in context, this was the continuum of a long period of work that went back months and before that.
Let me ask this question just for context. How long did it take to come up with the financial deals related to the two stadiums?
I would have to refer to our Finance Director and others to characterize how long it took to come up with those deals. I'm not able to answer that question accurately.
Just from your time around the office or things that you might have 433 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET heard. I mean, it took months, right?
It took a fair amount of time. And that is precisely the reason I expanded my response to your last question, that the five weeks that it took to reach conclusion on this partnership with the State is the product of a couple of years of work. There's a lot of work that went into it. The proposals and plans that we had put together for what we proposed to the State initially with respect to resolving this issue was not something that was put together in five weeks. Our discussions with the state, as you will remember, go back to the 1st of May of this Administration when the School District was then going to run out of money. And we reached an agreement with Governor Ridge to advance subsidies and do a number of other things in which we started the process then saying that in the next fiscal year we wanted to try to find a way to solve the school crisis. We've known for a long time, as has this Council, that there's a problem in the finances at the School District. So that I don't want to get into anyway suggesting that somehow in a five-week period we found the information, we put together a 434 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET plan or proposal and that that's how we got to the end of this road. All of what we agreed to, all of what we discussed, all of what we presented, all of what we proposed was based upon the work that we've done from the beginning of this Administration. In the same way that on stadiums, a lot of that was built upon work that was done in a prior Administration.
I understand. But it took, my recollection is a better part of a year. And, again, I thought your testimony earlier was that the serious negotiations around ability to pay, financial stability and the like really started in the late-November, early-December time period leading literally right up to the press conference. I thought that was your testimony.
And as relates to the time frame in which the negotiations were conducted to reach agreement that we proposed to you, that is correct. But it is also correct that over the last two years, the same players who were a part of the negotiations in the last five weeks when we reached agreement had been in intense discussions each year about the financial conditions of the Philadelphia 435 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET School District and about educational reforms that are necessary and required there. You will remember that the State was intimately interested in observing the negotiations that we went through with the PFT. In each of the last two years we've reached agreements with the State with respect to advancing subsidy and working with us to solve the financial issues at the School District. So that all of the people who were engaged in that last five weeks of negotiations have had probably a two-year education on the issues that confront the Philadelphia School District.
Well, let me ask this question now. The plan before us, how does it meet the test of the agreement from last summer where "The Governor will provide the foregoing analysis and no later than October 31, 2001, will provide to the Mayor a long-term proposal to address the educational and financial situation in the School District, including options to improve the educational performance and financial condition of the School District." How does this plan meet the test of that paragraph? 436 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET
In a perfect world, the proposal that the Governor presented publicly -- don't hold me to the dates, but when the Governor presented his plan publicly, I think it is the view of the Governor and it is the view of the State that if you implemented that plan as they propose it, if the State committed $75 million going forward and the City committed $75 million going forward, they believe that in their plan that they could solve the fiscal crisis that confronts the School District at the City of Philadelphia. The Mayor has been consistent and he has been clear in that the agreement that we have reached with the State is a bridge that gives us the time necessary to work with this Council, to work with other elected leaders in Philadelphia, and to work with other elected leaders around the State to address the issue of how public education gets properly funded in the Commonwealth of Pennsylvania. We believe that without some form or State-wide reform that we will consistently confront this 437 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET issue. We believe -- and there are some differences of opinion between us and the Governor and the School Reform Commission. We'll have to address these issues. I think you heard part of this from Mr. Nevels yesterday in saying that the Reform Commission believes that some kind of reform is necessary solve this problem over the long haul, that we've got to find out a way -- we are fully committed to and continue to be committed to charter schools within the Philadelphia school system. But we have to find a way to better fund them and the $94 million that they contribute to the projected budget deficit in the current year. And so that we believe that this is a good deal. We do not believe that this deal fixes the finances of the School District forever. We believe that with a new Governor in place next year and the legislature firmly ensconced again after this year's elections and with public hearings that were held by a state committee in Philadelphia as recently as two weeks ago where they have from hearings around the Commonwealth to address the issue of State-wide tax reform, this issue is everywhere in the 438 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET Commonwealth. A number of school districts, rural, urban, and suburban are struggling with the question of how to properly fund public education, and we will continue to do it here. We believe this is a good deal. We are 100 percent for this deal. We think we need to do it and move forward to do it, but it does not, it does not once and for all fix the fiscal crisis at the School District.
The earlier part of your response triggered a thought. It sounded like the title of a movie when you said that this was a bridge. There's a movie called "A Bridge Too Far." And what we see for the moment is -- I mean, this is a bridge without any information, no other action, this is a bridge to another deficit. The Chief Financial Officer of the School District testified yesterday that at best this plan gets us through a couple fiscal years and right back into a deficit. So let me ask again, in this context, does this plan address the particular section of the Memorandum of Understanding from last summer that talks about a long-term proposal to address the educational and financial condition of the School District?
I think I've answered that 439 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET question, Councilman. But this is bridge to an opportunity for responsible leaders who care about the children in our public system and who care about funding public education State-wide in the Commonwealth of Pennsylvania will take the time that is afforded by this bridge. It is only a bridge to nowhere if responsible leaders refuse to act responsibly.
Well, I understand that. But leaders have been on this road and we've actually crossed this bridge both in 2000 and 2001, which then leads me to ask a question that I asked yesterday. What do you believe is going to happen different after this bridge that has not happened after we crossed the other two bridges in 2000 in 2001? Same bridge.
I believe that the work that we did in 2000 and the work that we did in 2001 and the work that we're continuing to do is moving us in the right direction. I think that when the State Legislature authorizes the $75 million and when they empower us to do the borrowing that's necessary to be done, that they will join in this partnership and will have a shared responsibility 440 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET with us to solve this problem, but the problem --
The problem, with all due respect, Councilman, is not going to go away. If we do nothing --
I understand that. That's why I'm here at the hearing.
If we do nothing, it's not going to go away. If we do nothing, schools will close in a couple months and we will have a whole other group of problems that are associated with them. This is --
Secretary Burrell, I've made no suggestion that we do nothing. I am asking questions in a public hearing about a plan that has been presented that, you are correct, it is a bridge. The bridge at the moment is not connected to anything. People generally are reluctant to proceed over bridges like that that apparently are still under construction. I'm just asking questions about your level of confidence that notwithstanding the fact that we've been in this position before and those problems have not been address -- and they 441 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET didn't start or become evident when this Administration came into office in January of 2000. We have known this for a long time. The School District's been running deficits for a while. The partnership that you talk about and the responsibility of the Legislature, that argument has been made on numerous occasions. I think some people have even gone to court about that particular issue. Legislature was directed, I think, 10, 11 years ago to take responsibility for funding the 12 court system. We spent just about every year for 13 almost eight years denying funding or giving half 14 funding to the courts in some ploy to force somebody 15 to do something to only come back and do a transfer ordinance and give them the rest of the money. I'm not disputing that we should try. I'm just trying to understand from your perspective, because you're much more intensely involved in these matters and talk to people at the State level, unlike myself, what do you think is going to happen different and why? What's the basis for your belief that things will be different, given the fact that these circumstances have existed for a long period of time with most of the same players? I don't think 442 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET there's been a tremendous amount of change in either house in the State Legislature. Governors have, to some extent, kind of come and gone. And I don't necessarily know that anybody believes there's going to be a significant change in the Legislature one way or the other in this round of elections. Do you?
I don't anticipate -- I don't want to get into a political discussion, but I don't anticipate a substantial change in the legislative leadership.
So my only question is -- and I blew my time probably a half hour ago. Why do you think now, what is the circumstance, what is the situation, and quite honestly, from a political standpoint, why is it easier for people to make critical hard decisions when through this plan pressure is actually not increased, it is decreased? Why do people make tough decisions under difficult circumstances when there is no pressure versus making the tough and difficult decisions when there is pressure?
Councilman, I think -- I don't want to keep invoking your name, Councilman 443 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET Kenney, but I think Councilman Kenney posed this question accurately yesterday and I think Jim Nevels answered it equally accurately. That in a political environment people tend to operate and function in crisis situations.
Whether they are created or whether they're real, people like to operate in crisis situations. Councilman Kenney perhaps does not believe that we are at the point of crisis right now with respect to the public school system of the City of Philadelphia with respect to its finances. I think we all agree --
I don't know what Councilman Kenney believes or doesn't believe.
Can I be recognized? I never said that. I recognize there is a crisis. As a matter of fact, I think the crisis is what's going to cause people to fix this thing. And if you want to borrow $750 million over the course of 30 years through this toll bridge to nowhere simply to get through an election, that's 444 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET fine. You go ahead in do it. You may have the votes in here to do it. But don't tell me I don't know about the fiscal crisis of the school system. My point is that if we face the fiscal crisis in June through September, you might just get enough people to turn around and do something about it as opposed to plugging a hole in this sinking boat with $750 million taxpayers' money so you can get through 2003. So don't characterize my statements or what I think. This school system is in bad crisis. I understand it. And the way to face the problem is to face it, not to put it off for two more years and we're back in this room again spending more money. Don't characterize my comments.
Councilman Kenney, I will apologize if you think I mischaracterized your comments. But I will say again --
Known it for a long time. You guys keep putting it off and --
I will say again that what was said in this Chamber yesterday is that we were speeding on this train towards collision and we weren't at the point yesterday. What I disagree with is that we're at -- 445 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET
I said we're at the collision point. I said that we're feet from the 4 wall. 5
We're at collision point. 6 We don't have the ability to propose what the State 7 will do. It is the State here that proposed their 8 plan of action. Their plan of action is to put up 9 $75 million going forward and -- 10
Your plan of action is to let us borrow $350 million to get Governor Schweiker out of there, to get Mayor Street through this election, and then come back with the same situation and make us face something they're still not going to resolve. Now, if you don't believe that, that's fine. If that's your position of external affairs, then you believe that. I'll tell what. I've seen this over years. I've seen them 19 do this. Now, if you trust them, trust them. But I 20 don't want you trusting them with taxpayers' money. 21
Councilman Kenney, we 22 simply disagree with respect to the proper course of 23 action with respect to resolving the crisis that is 24 in front of us. 25
I didn't put this 446 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET train on the track. Remember who did it? It was the last mayor and the last council president who put this train on this track going to this wall. I remember at the press conference what they said, "We're going forward. We're going to knock up programs, we're going to deficit spend until this train runs into the wall." Not my words; their words. Now it's into the wall, "Oh, let's borrow $300 million to keep it from hitting."
What they said and acted consistently with then was to say that we cannot solve the problems School District of the City of Philadelphia simply by making cuts without partnership and participation by the State. And thier argument then was that State was not providing additional new funding for public education.
I think the State is today coming forward. The Governor has proposed, and I believe that the Legislature will support --
I believe that the Legislature will support -- 447 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET
We have spent time both with the Governor and in Harrisburg with the Legislature, and I believe that the Legislature will support -- the leadership will support --
You can spend all the time with any governor you want, but you don't spend enough time at that legislature. And I can assure you that according to many of them, they're not voting this. Now, you may have a different view and maybe you'd be right, and I hope you are right. But I'll tell you what. What happens when they don't do it, if they don't do it? What happens then? Does the train still hit the wall? Maybe it's a bad example. We can use a plane, a train, use a car, I don't care. Whatever the example is, something is going to hit something soon. And if the Legislature doesn't pass that $75 million, which in my opinion, I don't think they're going to unless there's some significant increase for their own districts more than percent. If that doesn't happen, what happens in June? Do we announce closure? 448 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET
I will leave to the Governor and the leadership in Harrisburg to figure out how they deal with their environment there. I believe that we are confident that they are going to make a 1,000 percent effort to deliver and will deliver $75 million of new funding for the Philadelphia Public School System.
My suggestion is you start talking to those individuals individually and you find out what they really think, because I don't know who's selling you this bill of goods, but it's not a real strong sale, believe me. But I would appreciate you not characterizing my understanding of the fiscal crisis of the School District, because I do understand it. As a matter of fact, I may be the only one or one of the few people in here that are willing to face it in reality that it is. And that is, borrowing this money is not going to fix this, it's going to put us further in debt and it's going to bring us back here in two years, of course, after the municipal election which always is convenient, come back here in two years and deal with this thing again.
With all due respect, I 449 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET think we will be dealing with this issue on a going-forward basis. We'll be discussing it next year in the middle of municipal elections as we go forward.
Not with this deficit financing plan we're not going to be discussing it.
Well, we believe that there are going to be continuing issues that will have to be grappled with. And, again, as I said, Councilman Kenney, I do want to apologize if you thought I was misconstruing your words, but I was giving my interpretation of what I heard.
I would just like to add something. I agree with my colleague, of course, that we'll have it in Harrisburg. We have to do our role, but ultimately it will be the Governor and the Legislators who will work that out. But in terms of what the Legislators have said on the record, the concerns that they've expressed are really about not so much not supporting Philadelphia, but it's about their own needs in their districts. And that's a position that we share and we understand, which I 450 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET think gives fuel and adds weight to the argument and to the position and to the prospect that there will, in fact, be significant change in Pennsylvania over the next several years for funding schools.
Let me tell you. You are the extreme optimist, because let me tell you something. The only way, as I said to you earlier and I said to Nevels yesterday, the only way this happens is if pressure is put on elected officials to act. If pressure is not put on them to act and they get enough time to breathe and enough time to put off and enough time to delay, we will be back here again and the only difference will be the taxpayers of this City will be saddled with a $750 million toll across this bridge to nowhere. Thank you.
Thank you. The Chair recognizes Councilwoman Tasco.
Thank you, Madam President. Good afternoon. I'd just like make a comment before I ask a couple of questions. Secretary Burrell, you said that this is a good deal. I think the problem is it's the only deal. 451 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET We don't have any other deal that's before us that has been thought about. The only deal would be for the State to do the right thing, and that is to find a way to deal with school funding across the State. And I think it's a predatory deal. I put it in that category, it's predatory. The people who are responsible and can help us out have abandoned ship and left us to the sub-prime lenders and we're going to spend 50 percent interest to get $350 million. And that's not a good deal, it's a sub-prime deal. It's not a good deal, it's not a prime deal. The prime deal is for the State to come up with a way -- and I agree with Jim Kenney that they have to put people on the line to make sure that they deal with the whole issue of State-wide funding for the School District. So it's not a good deal. It may be a good deal in your mind because that's probably the only deal we could get right now. It's not a good deal; it's a desperate predatory deal. I want to ask you a question about moving forward. If we deal with the school reform and what do we do moving forward to come up with a plan that states what Philadelphia really needs in 452 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET terms of funding? Is there any effort on the part -- because this Administration is going to be in place for the next two years and probably the four years after that. What is the plan that we put forward that says, "These are the reforms" -- and we should get some reforms out of this Commission, as they're saying they are. But what is the plan forward? Because at the end of the months, we 10 are back to a deficit, and what do we do? Are we 11 going to at that point in 18 months say, "Well, 12 we're counting on the State Legislature. They're 13 going to come up with something." 14 Or do we go back to the predators and 15 borrow some more money? And would we be able to 16 have the ability to borrow money? What is the plan 17 moving forward to deal with the structural debt of 18 this Philadelphia School District? Where is the plan to deal with that? Where is the plan that we offer not only Council, but to our state reps who represent to us in Harrisburg that they can put on the table in Harrisburg to say, "This is Philadelphia's plan for recovery and these are what our needs are." Where is that? Does that exist? And if not, are you going to get on it? Who's going 453 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET to be a part of it? And how does the happen?
I think in think end, Councilwoman, I think that's an excellent point. That is the $64,000 question that confronts us all. Part of it, I think, an important part of is Jim Nevels' testimony in the Reform Commission's testimony yesterday that they understand that's a problem. It would be a -- I'm not saying it's going to be easy, but it would be much more difficult if the School Reform Commission were testifying before the Council that if we do what we're going to do in Harrisburg this year and we do what we're asking this Council to do here in the City of Philadelphia that we will have solved this problem going forward. I think that it's to their credit that they've acknowledged on the record that that's the case. The fact is, I think, we have an understanding of what the funding needs are for the School District of Philadelphia going forward to be able to solve its fiscal problem. I think we have a pretty good sense -- and Secretary Kahn can talk about this better than I. We have a good sense of what we think the reforms are that are necessary to improve the public education product in the School System of 454 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET the City of Philadelphia. But solving the funding issue is beyond our capacity locally. We are never going to be able to fix this problem within the boundaries of the capacity of the taxpayers of the City of Philadelphia. It becomes a State-wide problem. It is bound up in State-wide tax reform. We cannot make State-wide tax reform just a Philadelphia issue. We've got to be part of a coalition that takes this message that I think is beginning to build and is beginning to come together. Unfortunately for us -- and I wish this were different. I wish that there were a political environment in which we could fight the battle for State-wide tax reform right now. That environment just does not exist. And it will not exist until this year's elections are over; a new Governor elected and a new legislature is in place. But the long-term is not our inability to know what the needs are of the district both in a financial sense and in a programmatic and educational sense, but it is the ability to impact at the State level the need for State-wide tax reform which goes back to an issue that we've heard repeatedly solving the $75 million in Harrisburg this year. And the 455 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET discussions at least that we've been part of this point is not a discussion about the $75 million for Philadelphia, which is the traditional arguments that you hear up there, but how can we support $75 million for Philadelphia and take nothing back to the districts that we represent that are having similar problems. That issue on a bigger scale is the issue for tax reform, that you can't just do it for Philadelphia. And that is an issue -- the Mayor has said it consistently and repeatedly in all his public discussions and speeches on this issue going forward, it will be at the forefront of our legislative agenda in Harrisburg next year and going forward with respect to reform. In the end, this is one of those issues that no matter how well intentioned any of us are individually or collectively, we cannot solve it locally.
So I guess the message to our citizens in Philadelphia, particularly the school children, that politics does impact your life. Their whole future is predicated on who's going to be Governor next year. So I hope they understand that. Thank you very much, Madam Chair. 456 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET
Councilman Nutter, your light is on. Do you still want to be recognized?
Well, I wasn't finished from earlier, but I knew that my time had expired. There may be other members who have questions, so I want to be as accommodating as possible.
Thank you. Let me ask this question. With regard to the proposal that is front of us, I'd like to talk about some of details of it. How was it decided that it should, in fact, be a 30-year debt financing as opposed to -- I know presently -- and you have a legislative proposal before the State Legislature to extend the current ten-year limit. Let me go back to an earlier response that Ms Kahn made. Ms. Kahn, did you say that you did not have a copy of the proposed legislation which actually does or proposes to do two things, one, exempts the $45 million in FY '02 from the provisions of Act 46; and secondly, extends the 457 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET current limitation of ten-year deficit financing to 30? Do you have a copy of that legislation?
I said that, one, I didn't have anything with me; in two, I'm not sure whether I actually have the final version, but certainly it exists. I just don't have it here.
I thought I understood someone to say yesterday that the legislation had been put together by the City Solicitor and the Council for the School Reform Commission.
You're Secretary of Education. Why wouldn't you have a copy.
Is it possible to get a copy here while we're here? I'm not even trying to be difficult. But it's a hearing about the pertinent matters. You can't do what you're even asking us to do if that legislation is not passed. And I think Councilman Rizzo touched on a bit of this. I mean, sometimes there are just some fundamental things that you kind 458 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET of have to bring to class: School books, syllabus, a couple other things. We're in a legislative situation. Of course we're going to have questions about that particular legislation. I mean, did anyone think that we might ask a couple questions about that?
How was the decision made to do the deficit financing for 30 years versus the present limitation of 10?
I think that's an issue more appropriately to the School Reform Commission. But in the end, I'm sure it became an issue of numbers that we --
The School Reform Commission doesn't care how long we borrow for. They just want the $300 million. It's a City issue. The issue for us is $25 million a year for 30 years versus some other figure possibly for 10 years. The School Reform Commission could care less, I believe. This is a City of Philadelphia issue. I'm just 459 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET asking how did we decide to do $25 million for 30 years? I mean, the School Reform Commission didn't negotiate the deal. Your testimony earlier was City and State negotiated all these discussions, whether it was five weeks, five months however long they went. There was no School Reform Commission during that time. Someone put an idea on the table. You laid it out, the $45 million, the 45 going forward, the $300 million deficit financing. I'm just asking the question how did we decide to do 30 years versus 10 or some other number?
I think this clearly is within the boundaries when our initial discussions were that the City of Philadelphia would offer $15 million as a part of our negotiations with the State. We ultimately -- we got into the question of getting rid of the next year deficit. And when Secretary Kahn comes back, she can give you the numbers. I don't want to give you a wrong number. We, the City, proposed as we modestly increase the amount of money that we would put into the deal in the first step proposed to pay for the deficit financing in the amount of it so the numbers, I'm 460 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET sure, were backed into it. The amount of money that we were willing to pay is $20 million a year. And then the question is how much will $20 million a year --
Well, it became 25. As I say, it went through gradations. It started at 15. It got to 20. It got to 25. But it ultimately was a question of what the money that we were putting on the table would finance and over what period of time.
I understand that. But I know that you also know because of your various backgrounds, this is one of those where the math is pretty simple. $25 million a year, 30 years, gets you $750 million, which we know from yesterday's discussion or even the Chief Financial Officer indicated in two, possibly three fiscal years, we're back to deficit. But the cost has already been obligated by the City for $750 million on a $350 million offering. I'm just asking -- I'm not saying that we should borrow a dime less. If 300 million is the figure or whatever will get 25 you, I just asked the question in an effort to 461 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET possibly save the City a little money over the 30-year period of time versus some other period of time, how do we decide that we were willing to be in for 750 versus some other number in an environment where we know, again, we're only doing the bridge to somewhere. We know that this is not the solution. Seems to me that we'd want to try to limit our exposure as much as possible, shorten the amount of time of the borrowing. If $300 million has to be a figure, then there's another number that the City would have to be able to provide to support debt service on that same amount of money, but for a shorter period of time.
I think the calculation -- I believe I agree with everything that you just said.
But I would add that at some point in time the way this got constructed -- and I won't say this is perfect math, but at some point in time we said the amount of money we need to borrow is $300 million. The amount of money that the City can afford to pay to borrow to service that 462 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET $300 million is $25 million. When you wind up over the time frame --
It computes itself. And you have a much better propensity for this, having been in business, than I do. But if you reduce that, I can't do the quick calculations of if you reduce that $300 million to a 10-year borrowing what the debt service is and what the ultimate aggregate payment is on that also, but it's also still a big number.
I understand. I think the quick math on that was somewhere in the 40 million, 41, 42, possibly 43 million range for a 10 years offering versus the 25 for 30 which gets you in the neighborhood of about $420 million in total borrowing cost versus $750 million in borrowing costs. I guess part of the question here is whether or not in an effort to save $330 million over that last 20 years, is it worth it to the City to up the percentage or the shift in the millage from to 42? 25
Councilman, we'll get you 463 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET an answer on this. But I'm sure the lawyers -- and I don't want to speak for the lawyers who have advised us with respect to this, but we'll get you an answer as to why the lawyers have advised us that we think it's better to do this over the term that is currently proposed to be done.
Okay. Lastly on that piece -- it may be it doesn't matter if it's a packaged deal and people are going to vote for it in Harrisburg. Maybe it doesn't matter at the end of the day. But rather than having to ask them for two items -- and I don't know whether they're going to be packaged together or not. Under that scenario, you'd only be asking for one which is the Act 46.
Councilman, excuse me. Mr. Burrell, will you be available in an hour? Because we were thinking of calling a recess. However, if you're not available, we'll continue on.
Fine. Then we'll recess until 2 o'clock. 464 3/20/02 - CONTINUED FY '03 SCHOOL BUDGET This committee will stand in recess until 2 o'clock. Thank you. - - - (Recess taken at 12:40 p.m.) - - - 465 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY (Council proceedings now being stenographically recorded by Josephine Cardillo, Registered Professional Reporter.)
The Committee of the Whole is now back in session. Councilman, I believe you were requesting Mr. Burrell when we recessed.
Excuse me, Councilman Nutter. I think Joan Stern would like to present to the President a copy of the legislation that you requested this morning.
Thank you. That was actually going to be the first question.
Obviously, the lunch helped your disposition, and you are now prepared 466 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY to be cooperative. (Laughter.)
Thank you. You resent the implication that were not being cooperative in the earlier session.
Anyone who has a palate that looks like -- I mean a head that looks like mine, Councilman, I'm always trying to be cooperative with, but I can't grow that hair around my face but --
You could do it, you could do it. Try harder. Thank you for providing the legislation, the legislation that we were discussing earlier that basically does two things. When we see it, we'll know better, but I assume it has both elements in it with regard to proposed amendments 467 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY to Act 46 as well as an extension of the deficit financing terms. I won't talk about that for the moment until we know we have copies. What I'd like to turn our attention to is, when we were talking earlier about time frames and timetables with regard to various negotiations and when the -- what I've started to refer to as the "four-part financing plan." We don't have to go -- you know it's the 45, the 20, the 25, and the $300 million deficit financing, which is at the end of it. What I wanted to try to get a sense from you at this stage is, were any other options or plans discussed during the course of those negotiations, whether during -- you made reference to a week- or a week-and-a-half time period, where there was an intense amount of discussion, or the longer, possibly four- or five-week time period. All of the elements of the plan that is in front of us today, I know you indicated earlier, had been discussed over some period of time, bits and pieces of them, a deficit financing, maybe not an amount at a particular point, and then it became an amount. 45 million, the old 45, the new 45, all of 468 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY these numbers. Was there ever another plan discussed during that time that had some of these elements, possibly other elements that are not in front of us today or various iterations of different proposals that, as a package, would be a plan?
And I'll defer to the specifics to Secretary Kahn but, you know, we started all of the discussions with the Governor's plan, and the Governor's plan had Edison operating the School District, running the central management of the School District, Edison being contracted with for all of the consulting services that the School Reform Commission has put out an RFP for and had a competitive process. So there were a number of issues that were on the table at the beginning of the discussions that got modified or changed or dropped out over the course of the negotiations.
I would add specifically on the piece, you know, the basic elements in various forms had always been, what are the savings that are possible to be achieved, what new revenues, and from what sources and how much new revenue could be 469 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY expected? And then some aspect of borrowing. And if you take this back in talking at the length of time that we actually had spent in crafting this, if you take this back even to last spring, when we looked at the Workout Plan that I know Mr. Nevels referred to yesterday and which we've certainly shared on a couple of occasions with the members of City Council, those same components and elements were in that version as well. Specifically, when we looked at different aspects of new revenue, we even talked about, for example, in addition to the kind of appropriation that's under consideration by the General Assembly now, looking specifically at the problem of charter school funding as an example of maybe that being an appropriate new vehicle and a source of new revenue.
Specifically with regard to charter schools. I mean, charter schools 470 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY obviously are not soley a Philadelphia problem, which, by extension, the whole school funding issue is not just a Philadelphia problem. But for the moment, on charter schools, which, it appears that virtually every school district in the Commonwealth of Pennsylvania, even if they don't have a problem with the overall funding formula, all of them seem to have a problem with the charter school funding mechanism. Where is that discussion?
The issue actually came up on Monday, when we were testifying before the House Appropriations Committee, and at least two of the members of that committee raised this subject and said similar to what you just did, you know, that it --
And isn't this a way of potentially, you know, solving the problem and getting Philadelphia the revenue it needs for this year also, but addressing other districts' needs, 471 3/20/02 - CONTINUING FY '03 SCHOOL BUDGET TESTIMONY and our position was that whatever the vehicle is chosen, you know, it really doesn't matter. What we need is the revenue.
What's the magnitude of the, quote/unquote, Philadelphia portion of the charter school problem? Or let me phrase it another way. Do you know the magnitude the charter school funding program statewide? And what is the Philadelphia component of that, recognizing that we have more charter schools than anybody else?
I actually don't know the figures statewide. I mean, I think that our enrollment -- and actually, Mr. Doosey might be more current on some of the figures, but I'm guessing that right now, we have still at least, you know, probably over half of the, you know, two-thirds of the enrollment in charter schools in the State. For Philadelphia -- and, again, he has more current numbers -- it had also been about a $100 million problem and accounting for about half of the projected deficit of the School District.