Sunday, September 21, 2014
Inquirer Daily News

District borrows $300m to cover operating expenses

The Philadelphia School Reform Commission today authorized the sale of $300 million in bonds - money it needs just to pay teachers, heat buildings and buy books for the remainder of the school year.

District borrows $300m to cover operating expenses

FILE: Chairman Pedro Ramos, left, presides over a meeting of the School Reform Commission. CHARLES FOX / Staff Photographer
FILE: Chairman Pedro Ramos, left, presides over a meeting of the School Reform Commission. CHARLES FOX / Staff Photographer

The Philadelphia School Reform Commission today authorized the sale of $300 million in bonds - money it needs just to pay teachers, heat buildings and buy books for the remainder of the school year.

Selling the 20-year notes will cost the district about $22 million in borrowing costs annually, beginning in fiscal 2014.

In financial terms, the sale was successful - well received in the market, with over 50 investors placing initial orders, district staff said. Though the district is in financial shambles, its recently-adopted five year plan and greater public confidence in a new school governing body administration bolstered the bond sale.

And a state "intercept" program also gave investors confidence - guaranteeing creditors will be paid, as state aid is automatically sent to creditors to cover the district's debt.

But borrowing money to cover operating expenses is a dangerous, one-time thing, SRC members warned.  It can't be done again, and that means that for next school year's budget, the district is already $300 million in the hole.

Chairman Pedro Ramos said at a special SRC meeting held today that he "couldn't be more unhappy" that the district had to sell bonds to cover day-to-day operations. He said it was a sign of the school system's "dire financial circumstances."

"This is an opportunity to buy time to make really tough decisions," Ramos said.

The SRC will soon be confronted with a whopper of a tough decision - deciding which of the district's 200-plus schools should be closed.  Officials have said they must shutter roughly 40 schools at the end of this year to save money and "rightsize" operations in a district that has lost tens of thousands of students to charter schools in the past decade, but neglected to shrink operations to compensate.

Certainly less state and federal revenues and a brutal economy have contributed to the fiscal woes. But Ramos has acknowledged in the past that "poor fiscal policy" - too much borrowing, too much spending on the part of prior administrations - got the district into its current financial bind.

About this blog

Inquirer reporter Kristen Graham writes the Philly School Files blog, where she covers education in Philadelphia, both in and out of the classroom.

During the school year, you’ll frequently find her hosting live chats about the district on Philly.com.

Please do pass along the scoop about what’s going on at your Philadelphia public school; Kristen welcomes tips, story ideas and witty banter.


Kristen Graham Inquirer Staff Writer
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