Credit report shows Philly school budget puts enrollment in danger

A decline in enrollment in Philadelphia district schools could mean a further decline in credit rating.

By Maura Pennington | Watchdog.org

PHILADELPHIA — The School District of Philadelphia’s inability to maintain services for students at current levels of funding could endanger their enrollment numbers.

A decline in enrollment as students look to other education options such as charter schools will only further eat away at the district’s budget.

It’s a vicious cycle.

In its credit report this week, Moody’s Investors Service noted, “the district’s further deterioration of services will likely result in additional student flight to charter schools and other alternatives, which could further increase the district’s expense for educational alternatives.”

When a student opts to attend a public charter school, the district is responsible for covering the per-pupil cost. The district may take deductions, but the money adds up. In 2011, charter payments accounted for 18 percent of the district’s budget. This year, that number is 29 percent.

There are 60,000 students in Philadelphia’s 86 charter schools. By comparison, there are 131,000 students in district public schools.

The district is well aware of this trend of growth in the charter sector and has been looking for ways to stem the flow of funding out of district-run schools.

In Superintendent William Hite’s Action Plan 2.0 to stabilize conditions in the district and transform schools, he explicitly cites a need to stem charter enrollment.

“The district will continue working…to ensure all charter schools have signed charter agreements and manage their enrollment to ensure that they stay within their enrollment limits, to facilitate the equitable and successful distribution of resources across families of students in district and charter schools,” said Hite.

It is illegal under Pennsylvania law to unilaterally impose any enrollment caps on charter schools. They must be accepted by the charter school first and written into charter agreements.

However, with SRC-1, a measure that allows the School Reform Commission to suspend that provision, the district has extraordinary power to limit the number of seats, and therefore the number of students, in charter schools.

Already, a charter school has filed a lawsuit against the district and SRC for its attempt to curb enrollment. West Philadelphia Achievement Charter Elementary School serves 600 students, though the district will only make payments for 400. If the charter school doesn’t accept the limit imposed by the district, it could face non-renewal.

Yet, even with this challenge to charter schools, the district’s financial outlook continues to be bleak. It is facing an almost $30 million year-end deficit, $216 million budget gap for next year, and possible cuts from a state revenue shortfall.

The district’s credit rating is already Ba2 negative. Earlier this year, Moody’s wrote that the district was in danger of a further downgrade for its “historically weak budget management.”

Even when students who moved to charter schools are included, enrollment in the district is falling. Overall enrollment is down 11 percent since 2008 and 29 percent since 2001.

Contact Maura Pennington at mpennington@watchdog.org and follow her on Twitter @whatsthefracas.

Rob Port is the editor of SayAnythingBlog.com, a columnist for the Forum News Service, and host of the Plain Talk Podcast which you can subscribe to by clicking here.

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