Philly can't keep bailing out schools to cover state's failure, analyst warns

Demonstrators protest outside the school district headquarters, Thursday, May 30, 2013, in Philadelphia. (AP Photo/Matt Rourke)

Philadelphia's "unusual" plan to bail out its public schools with a $50 million loan to ensure the state-controlled system opens on time this year will help slow the drain of students to charter schools -- which enroll one-third of the city's nearly 200,000 public school students, up from one-sixth just five years ago -- and is affordable for the city in its current financial situation, says credit analyst Michael D'Arcy in a report for Moody's Investors Service.

But bigger or more-prolonged school bailouts by Philadelphia city government "would be credit-negative for the city," and could result in a cut to Philadelphia's bond rating that would boost its future borrowing costs, D'Arcy warned. 

He blamed the Commonwealth of Pennsylvania's elimination of subsidies to districts that lost students to charter schools, and ensuing school funding cuts by the Corbett administration and the General Assembly, for making the city schools' "financial turmoil" worse. (Charter schools have also helped chase away the city's declining Catholic and private schools, leaving more students to be educated at taxpayer expense.) Mayor Nutter's $50 million loan offer "is unprecedented," D'Arcy added. "Typically, more senior levels of government, such as the state, assume such a role." 

Continue Reading