School debate still unresolved

Facing a Dec. 21 deadline for the state takeover of the Philadelphia School District, city and state officials continued their talks this week in an attempt to reconcile the differences that exist between them.

The major hurdle to overcome is to how to share the costs for financing the district, which faces an estimated $217 million deficit for the current fiscal year.

Financial experts from the two parties met in Harrisburg on Monday and continued their conversation by phone on Tuesday.

"The early part of this week has been dedicated to the financial picture and making sure that everybody is comfortable with the numbers, and once that has been nailed down, the next step is to resume negotiations," said Steve Aaron, Gov. Mark Schweiker's chief spokesman. "But we're not there yet."

As of Wednesday, no time had yet been arranged for Schweiker and Mayor John Street to meet to discuss the situation.

City Education Secretary Debra Kahn, speaking about the talks, said that "we're just working through some pretty detailed information."

The cut-off point for addressing these issues was originally Nov. 30, but with only hours to go until that deadline, Schweiker and Street announced that significant "gaps" still existed between each side and agreed on an extension.

Aaron said that the deadline would not be pushed back beyond Dec. 21. He said that while the state hoped to reach an agreement with the city by that date to avoid a hostile takeover, a takeover would occur on that date regardless.

The state takeover was originally planned to force an agreement between Street and Schweiker on how to revitalize Philadelphia's beleaguered schools, which have been plagued by poor student performance in addition to financial woes. Schweiker proposed privatizing even the central administration of the schools, but Street rejected that plan entirely and is still considering whether some of the city's worst schools should be privatized.

"I wouldn't say that I'm confident that we'll be able to achieve a partnership by the 21st," Aaron said.

The state angered many last week in the city and school district when it announced that it would not give the 215,000-student school system a $70 million advance that school officials say is necessary to meet its Dec. 21 payroll. The state said instead that it would only contribute half that amount and asked the city to supply the remainder.

However, Kahn claimed that the city does not have the money, and that even if the funds were available, she said that the city's bureaucracy could not approve that level of expenditure that quickly.

"For the immediate issue right now, it's just not possible for the mayor to comply with this request," Kahn said

This would leave the nearly 20,000 members of the Philadelphia Federation of Teachers without paychecks right before Christmas.

The school employees "should not be used as pawns in this battle of negotiation between the city and the state," said PFT Vice President Jerry Jordan. "I expect them to be paid."

Aaron said that the state's request was not inappropriate, given that the state has already advanced the school district $280 million this year alone. And since Street pledged $45 million to the schools last year that has not yet been delivered, Aaron said that the state is merely asking for funds that have already been agreed upon.

Aaron said that the state has "been the definition of flexibility" regarding school funding so far, and would cover the $70 million if Street makes a stronger commitment than he did last year to deliver that money within the next few weeks.

He said that the school district could defer other bill payments to meet payroll if it so desired.

The finances of for-profit Edison Schools, Inc., which the state plans to have play a large role in its takeover plans, have also been called into question. Edison has accumulated a deficit of nearly $200 million over the last five years and has never been profitable. It also has a rapid cash burn rate, going through $144 million over the last five quarters, according to the company's cash flow documents.

Edison spokesman Adam Tucker justified the numbers by saying that his company is a growth company, and that growth companies expend cash very quickly. He says that Edison has plans to raise additional capital.

"Do we need to raise money within the next year? Yes. Are we going to be successful at getting it? Yes. Should Philadelphia be concerned? No," Tucker said.

Aaron said that the state is comfortable with Edison's financial picture. However, others are not.

"If you just stand back and say, 'Gee, they lost well over $200 million and they have a high burn rate now losing on the order of $30 million a year, what's likely to happen?'" said Henry Levin, director of Columbia University's National Center for the Study of Privatization in Education.

"My own feeling is that the investment community hasn't run out of patience yet because [Edison has] excellent leadership in terms of access to Wall Street," he added.

However, Edison's leaders, all of whom bring an impressive record of accomplishments in education to the firm, have not won over many students and parents. The state's plan calls for Edison to run at least 45 poorly performing schools, as well as serve as a management consultant.

"In the schools that we're in, people are just not going to accept Edison," said Eric Braxton, director of the Philadelphia Student Union. "The students are really ready to take some action, and we're going to be planning some big actions for next week."

In the days leading up to the original Nov. 30 deadline, students marched out of their classrooms, and some even camped out in front of City Hall to protest the privatization component of the state's plan.

"What they're saying is that things are bad, and that from their perspective things are going to remain bad, but now someone is going to make a profit on the bad," Levin said.

Levin said that Edison faced opposition like that faced in Philadelphia under a similar arrangement with New York state earlier this year when it agreed to take over five poorly-performing schools in New York City.

However, misdirection by Edison in building community support eventually forced them to walk away from that project. Levin said that he sees the same thing beginning to occur to Edison in Philadelphia.

"They didn't learn a lot from that -- they thought they could make a deal from the top like they did in New York and that would fly," he said. "It just doesn't make a lot of sense for a very smart company that has a good product."

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