School Reform, Philadelphia Style

On Monday, October 6, the Philadelphia School Reform Commission shocked the city by announcing that it would unilaterally cut health care benefits to city teachers rather than continue to negotiate with the teacher’s union.   The new policy will require teachers to contribute to the cost of their health care coverage, something they did not do under previous contracts.  Under the SRC’s directive, beginning on December 15 teachers will have to pay up to 13 percent of the cost of their medical premiums.  Lower paid union members will make a smaller percentage contribution.  For individual coverage, the monthly payroll deduction can be $71.  For family coverage, teachers could have as much as $200 a month deducted from their paychecks.  In addition, the SRC announced that it will no longer contribute to a union-run fund that helps to cover the medical costs of retired teachers.

What is this School Reform Commission?   It was created by state law in 2001 to replace Philadelphia’s local school board.  Its five unpaid members are political appointees, three are appointed by the state’s governor (currently a Republican) and two by the city’s mayor (a Democrat).   But the SRC’s decision to cut the teachers’ health benefit was unanimous.

The SRC claims that the 2001 state law gives the Commission the power to dictate the terms of teachers’ employment.  But, until Monday, it had never used this power and its use will undoubtedly be challenged in the courts.  One thing Philadelphia teachers are unlikely to do is strike.  Another state law states that any Philadelphia teachers who do so can lose their certification.

From one perspective, the SRC’s decision is understandable.  The Philadelphia school system has been struggling with severe budget cuts since 2011, and the teachers’ union has resisted serious cuts in compensation and benefits.  Moreover, in a country where very few employers provide a no-cost health-insurance benefit, many people thought this was an unacceptably generous perquisite in a cash-strapped system.  In the face of the crisis, the SRC has had to cut personal costs via layoffs.  Many schools were left without lunch-room aides, counselors, librarians, security staff, etc.  Schools were short of supplies and begged for in-kind donations to obtain such basic items as paper and ink cartridges.  The proposed cut to the teachers’ health benefit will free up significant funds (the SRC estimates as much as $54 million in the 2014/2015 school year and more in the subsequent year) to help meet some of these other basic needs.

At a more fundamental level, however, the teachers are the wrong target.  State data show that Philadelphia teachers are paid less than most teachers in the surrounding suburbs.  Philadelphia teachers do have a more generous health benefit than nearly all suburban teachers, but this only partially closes the compensation gap.  With these cuts, the compensation gap will grow, as will Philadelphia’s disadvantage in hiring and keeping the most desirable teachers.

The primary cause of the severe fiscal problems facing the Philadelphia school district is the state’s relatively weak support for K-12 education and the absence of a fair funding formula.  Only nine U.S. states provide a smaller share of support for K-12 education.  Although Philadelphia makes a significant effort to raise money for its schools, it is a poor city, and the state’s support does not make up for the difference between the city’s fiscal capability and that of most surrounding districts.  When it became obvious this past year that Philadelphia schools faced yet another round of punishing budget cuts that would shortchange its 140,000 students, the state government’s only response was to authorize the city to tax itself more heavily, by authorizing the city to continue an extra 1% sales tax and implement a $2 per pack cigarette tax.

Philadelphia is the state’s largest school district by far.  Over 80 percent of its students come from low-income households.  Yet, on a per student basis, it spends about 12 percent less than the average spending in surrounding suburbs.  It is time for the state government to step up and reduce the inequities in K-12 education.

– John P. Caskey

John Caskey is a professor in the Department of Economics at Swarthmore College.

For more background and analysis of the factors behind the Philadelphia school funding, see “The Philadelphia School District’s Ongoing Financial Crisis,” by John Caskey and Mark Kuperberg, Education Next, Fall 2014.

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