School District Budget 101: Follow the money

by Ron Whitehorne and Yulanda Essoka

Where does the School District get the money to operate Philadelphia's schools, and how does it spend it?

As the city's parents, students, and residents face another looming budget deficit that threatens cutbacks in school programs, these are important questions to consider.

They also take on added importance in an election year. All the candidates promise to fix the schools, but where will they get the money and what choices will they make about how to spend it?

What is the purpose of a school district budget?

The budget represents a plan for receiving and expending money. It tells the governing school body, its employees, and the public how much the district can spend during the year and for what purposes. It projects how much revenue will come from what sources.

The budget also satisfies a minimum level of financial and program information for local, state, and federal governments – requirements imposed by law. State law requires each school district to budget its income and expenses every year and to make the budget available for public inspection before final adoption.

There are actually two different school district budgets: the capital budget, which deals with long-term items like school construction, and the operating budget, which covers the day-to-day costs of running the school system. The capital budget is funded primarily by the sale of bonds. School districts essentially borrow the money and pay it off with interest over a long period, much like a homeowner pays off a mortgage.

In Philadelphia, it is the operating budget, which depends on revenue raised by taxation, that is facing a deficit. The budget is drawn up and then approved by the School Reform Commission every year, no later than May 31.

Philadelphia's School District budget is more than numbers. It is a record of the District's past decisions and goals. It is by looking at the budget, rather than simply listening to the pronouncements of School District officials and politicians, that we get a handle on education policy priorities.

To take just one example, charter schools are now a significant chunk of the School District budget, totaling over $266 million dollars (10 percent) in the 2007-08 budget. Nearly all that money goes out in payments to charter schools. In contrast, the School District's two-person charter school office, which is responsible for overseeing the city's 60 charter schools and ensuring that they comply with the law, does not appear to be a budgetary priority. Its budget of $300,000 pays for a director, a secretary, and expenses.

Where the money comes from

In Pennsylvania, schools obtain funds primarily from local property taxes supplemented by state aid (and to a much lesser extent federal aid). This means that wealthier communities can afford to spend more than poor towns and cities. The wealthiest suburbs spend up to twice as much on each student as the city spends.

The state: State assistance is based on a complicated set of historical and other factors that result in more money going to poorer communities. In the early 1990s, the state stopped using a funding formula and started making its allocations to districts based on adjustments to the prior year's funding level. For years, this change resulted in less funding for Philadelphia.