In grave fiscal trouble, SRC introduces big changes

Thomas Knudsen is going to be new "chief recovery officer" - chief financial officer and superintendent in one. (David Swanson / Staff Photographer)

6:40 p.m.

Facing a fiscal crisis of previously unimagined proportions — it must cut $61 million by June and isn’t sure how to get there — the Philadelphia School District’s governing body on Thursday moved to tear up its leadership structure and name a “chief recovery officer” to get the battered organization through the next six months.

In plainer, starker terms than it has ever used before, the School Reform Commission laid out the district’s financial woes to the public in a meeting Thursday night.

Commissioner Feather Houstoun, who chairs the district’s finance committee, said the situation is much worse than people realize, she said.

“We’re basically going to limp through May and June. We’ll cover payroll. We’ll cover debt service because we absolutely have to. But we’re going to have to have such a pile up of cash deficit that we’re basically not going to be able to pay people in July for work they did in June. If we haven’t fixed this and have a credible plan for next year and the next year, we may not even be able to go to credit markets,” Houstoun said.

The SRC will name Thomas Knudsen to a new title of chief recovery officer — he will function both as superintendent and chief financial officer. Knudsen, who previously led a turnaround at the Philadelphia Gas Works, will work on a $150,000, six-month contract.

Penny Nixon, formerly associate superintendent for academics, becomes chief academic officer. She will report directly to the SRC.

Leroy Nunery, the former acting superintendent, and Michael Masch, former chief financial officer, are both staying on as special advisers, but will take pay cuts.

Nunery will report directly to the SRC and focus his work on examining how business and services are delivered to schools — essentially heading up an effort to decentralize some of the district’s operations. Masch will report to Knudsen and continue to work on the financial side of the organization.

How did the district get in such straits? Hundreds of millions in federal stimulus dollars went away, but officials knew that was going to happen. Big chunks were stripped away with cuts in state funding, but it was clear that a Republican governor was not going to help Philadelphia the way previous administrations had.

SRC Chairman Pedro Ramos took his seat in October, when the district had already cut almost a half-billion dollars, laying off thousands and making deep cuts to programs. But he quickly became aware that some of the savings the district had banked on weren’t materializing, he and Houstoun said in an Inquirer interview.

When the district moved to cut school budgets by $10 million and lay off more than 100 employees, including some school nurses, in December, it wasn’t enough.

“They should have occurred sooner,” said Houstoun.

Was it a leadership problem?

Houstoun, formerly New Jersey’s state treasurer, said the district had gotten used to years of rising revnues. It was was “deeply traumatized” by the problems of the last year — the budget and the dramatic, painful exit of former Superintendent Arlene C. Ackerman.

“Clearly,” Houstoun said, “the leadership team didn’t get it done.”

But organizations rarely face the deep, fast-moving problems the district faces, and the former leadership team “did do more than a lot of others could do under the same circumstances,” Ramos said.

“The will to do it just wasn’t there,” she said. “The discipline to go and do even more after what they faced just wasn’t conjured up. The diagnosis is: you’ve got to act, you’ve got to act fast. You’ve got to decide immediately if you’re not going to be able to pull it off…and that just didn’t happen.”

Though much of the gap-closing plan remains unclear, some changes are already decided, Ramos said: non-represented employees will not get a planned raise; they will take furlough days and start sharing the costs of their healthcare premiums. Employees who make more than $75,000 will see pay cuts.


As Kristen Graham reported today, budget will be the main story of today’s SRC meeting. Sources say that the Philadelphia School District’s remaining budget gap is much higher than the $14 million previously stated. Follow along on Twitter.