Mark Gleason’s testimony before City Council in support of property tax increase for schools

Mark Gleason, Resident, Taxpayer, Public-School Parent, and Executive Director of the Philadelphia School Partnership

Good afternoon. My name is Mark Gleason. I am here today as a city taxpayer, a public-school parent and as executive director of the Philadelphia School Partnership, a nonprofit focused on increasing access to educational opportunity. I am here to urge City Council to commit to a multi-year phase-in of the proposed 9% property-tax increase.

Since 2011, PSP has granted more than 35 million dollars to 35 schools stretching across nearly every Council district in the city. Those schools include roughly 10 traditional public schools, 10 district-to-charter conversions, 10 traditional charter schools and five private schools. In all of these schools, our team works closely with school leaders to develop and review budgets and other matters of school finance. In four years, we have gained a deep knowledge of the differences in how schools spend funds and of the challenges that schools face in trying to provide a comprehensive, high-quality education. Among other challenges, we have seen how highly regimented district budgeting rules limit principals’ ability to tailor strategies to the particular needs of individual schools.

A clear finding in our work has been that the biggest driver of school quality is how schools spend their budgets. There are many examples in Philadelphia of schools with comparable budgets, similar student populations and vastly different academic outcomes. Notably, there are also examples of schools with comparable budgets, different student populations and vastly different outcomes. We should not expect that an infusion of new money into the city’s lowest-performing schools will by itself transform the educational opportunity in those buildings. To achieve dramatic school improvement, first must come clearly articulated goals. Second, a school must develop comprehensive and integrated strategies that are aligned to those goals. Third, available revenues must be budgeted to support those strategies above all else—taking into account the specific priorities and challenges that exist at particular schools.

It troubles me when SRC Chair Marjorie Neff says, as she did yesterday, that “there is nothing left to cut.” She also recently told Philadelphia magazine that the District doesn’t need to change its approach—it just needs more money. Yet when the District recently released its School Progress Reports, it showed that 83 of 218 district-run schools (nearly 40 percent of all schools) are in the lowest tier of performance. The District labels that tier “INTERVENE,” demonstrating that dramatic changes in strategic approach and how monies are spent are needed in those 83 schools. Yet Chairwoman Neff says that money alone, without important changes, is what will turn those schools around.

Clearly, much of what the District is spending money on is not working. There have to be cuts, so that funds can be redirected to more effective strategies. Every change in practice can’t be funded by new dollars. Some, or even most, changes need to be funded by existing dollars redirected from well-intended but ineffective approaches.

At the same time, it is necessary to ensure that revenues to the School District are growing over time. Another clear finding of our work is that school costs, no matter what type of school, increase every year. Salaries in district schools have not risen in the past two years, but the cost of health benefits, pensions and other benefits programs have. Because staffing accounts for nearly half of all school expenditures, and benefits account for more than 25% of staffing costs, rising benefits costs have a significant impact on school budgets. Schools need revenue sources that grow from year to year in order to keep pace with rising costs; otherwise, effective uses of taxpayer funds become threatened and principals lose a crucial margin of flexibility.

City Council members, you deserve plaudits for helping to significantly increase the city’s flow of dollars to public education over the past few years. But with schools still in crisis, and the city’s economic future threatened by the abundance of academically struggling schools, there is no opportunity to cap the revenue growth. What is needed is a move away from the annual drama of trying to identify new taxes and one-time, stopgap revenue generators, and a turn toward establishing a pattern of predictable, moderate and slowly growing revenues.

The recent redirection of the 1% sales tax and the city cigarette tax have netted the District roughly $180 million in recurring revenue. That’s a significant boost. Hopefully, a growing economy will lead to steady growth in the sales-tax revenue. However, experience in other cities indicates that the cigarette tax is likely to be a flat or even declining revenue stream.

The bulk of local revenue flowing to public education comes from the city property tax. Keeping the property-tax rate flat from year to year puts the School District in a vise. Rising costs are not fully matched by rising revenues from some of the smaller revenue sources, and the squeeze is on.

Perhaps the most important learning when it comes to school budgets is the importance of planning time. This also represents the most important reason to establish a pattern of annual, moderate, but steady property-tax increases. This would go a long way toward making city-based school funding predictable for Superintendent Hite and the system’s 220 principals. When costs rise and city revenues are projected to be flat from one year to the next, and with the state not providing clarity about the amount of state funding flowing to Philadelphia schools until late June or even later, schools are unable to have firm knowledge of their available budgets for the coming school year—and as a result they can’t plan. They can’t accurately determine how many staff will fit in the budget, and so they must delay hiring and transfer decisions. This lack of planning impedes principals’ ability to establish goals and develop strategies. It essentially forces hundreds of schools to run in catch-up mode from September onward. This is one of the advantages charter and suburban schools have: Because charter funding is set by a state formula that is based on prior-year spending, charters know by May what their budgets for the coming year will be. Similarly, annual increases in property taxes, along with lower reliance on state funds, give suburban schools predictability that city principals can only dream of. Taking some of the drama out of the city budgeting process by establishing a pattern of annual but affordable property-tax increases would go a long way toward lessening this problem.

Let me be clear. As a taxpayer and former school board member, I do not see a one-year, 9-percent property tax hike as reasonable. Especially when the inflation rate is near zero. But phasing in a 9-percent hike over three or perhaps even four years—that would be enormously sensible policy.

Please don’t hear this and decide that I’m letting the state off the hook. It, too, needs to ensure stable, predictable, growing sources of funding for schools. Beyond that, the state needs to move to a weighted student funding formula that prioritizes the extra costs required to educate disadvantaged youth. But the state can’t do it alone. Both city and state revenues have to grow steadily over time, and because these are our city’s schools that we’re discussing, the city has to be willing to lead the way.

Nobody likes property taxes. Nobody likes them going up. But when it comes to education, they have important advantages. They yield more stable revenue streams, they create predictability for school leaders, and as Paul Levy, Jerry Sweeney and others have thoughtfully argued, they are less likely to scare away employers and jobs than taxes on income, sales and other activities.

If City Council passed a 3 percent property tax increase for next fiscal year, and signaled its intention to continue that trend in coming years, the School District would see about a $30 million increase in city funding for next year. That’s less than it is asking for, but in combination with rising sales-tax revenue and higher efficacy in tax collections, that number could rise to $40 million. Three years at that steady rate of increase would mean an increase of $120 million in annual district revenue, which is substantial. Phasing in such an increase would keep the financial burden more manageable for families. And the added predictability, combined with the extra revenue, would bring a higher return, as measured by school improvement, than extra revenue by itself would generate.

Finally, I understand that at yesterday’s hearing, Council focused on concerns about accountability. The instinct is proper: There needs to be greater accountability for those chronically under-performing schools. But I urge Council to be clear-eyed about accountability. It doesn’t mean extracting promises from the District to spend monies on this model or that program, on nurses or counselors or even teachers. Accountability isn’t about mandating the inputs. When you do that, you actually weaken accountability because now instead of holding school leaders accountable for results, you give them the opportunity to pin poor results on your mandates. No, accountability has to be about setting goals for student achievement and school improvement. You judge a police department based on its effectiveness in controlling crime and respecting the rights of citizens, not by how many officers are employed or what color their uniforms are. Yet too often we try to judge schools based on teacher-student ratios or extracurricular activities or the number of smartboards. I’m not suggesting we should judge schools based solely on test scores. But we should judge schools on how good they are at providing education: Are kids reading? Comprehending? Learning the math skills that are important in just about any field of work? Are they going to college, a quality trade school, or joining the military after graduating? Set goals for these things, ensure stable, moderately growing and predictable funding, and hold schools accountable for delivering. If schools aren’t delivering, don’t keep pouring more money into them. Insist on consequences for chronically struggling schools, and leverage resources to give students access to new schools or better schools. As part of all this, urge Superintendent Hite to give school leaders true autonomy over their budgets. Yes, some will make mistakes. But others will make brilliant decisions and innovate. And collectively schools will learn from the innovation, and the mistakes. Stop insisting that all schools follow the same budget rules when some schools have very different needs: such as a high non-English speaking student body, or kindergartners coming from a neighborhood with very little quality pre-K.

I served on a school board in New Jersey for six years. When I started, our problem was property taxes that were rising too fast. We were scaring away residents and depressing property values. I am not advocating that we do the same in Philadelphia. In that district in New Jersey, we worked to bring down the rate of increase—not to zero, but to 2 percent or 3 percent annually instead of 6 or 7. At the same time, we set clear goals and pushed the superintendent to manage according to those goals. That led to important changes in strategy: full-day kindergarten district-wide, for one example, funded in part by the transfer of funds from other less strategic programs rather than entirely by new money.

Thank you for listening. I wish to add that I support PILOTs for certain nonprofits in the city, stronger efforts to market tax liens, and planning for a campaign to allow businesses and homeowners to be taxed at different rates. I don’t pretend that property taxes alone solve the problem. But to truly improve schools, they have to be a meaningful part of the conversation.

Thank you.