Facing a budget deficit in excess of $300 million, the School District of Philadelphia has announced the layoff of nearly 3,800 people. The layoffs amount to about 20 percent of the roughly 19,000 total personnel on the district’s payroll.
Why the big deficit? Based on the district’s proposed budget, the two largest causes of the shortfall are a sharp drop in Federal grants and the deficit from last year that required borrowing to fill the gap-borrowing that cannot be repeated. Another problem that is developing to exacerbate the funding shortfall going forward is the hike in the amount the school district will have to contribute to pensions. Unless there is agreement on pension reform legislation, Philadelphia, as well as most school districts in Pennsylvania, face ruinous increases in pension funding. And that means higher city taxes, more layoffs or both. Philadelphia, like many other communities across the state, is not in any position to absorb higher taxes.
Serious pension reform is needed and teachers’ unions must consider the pain they themselves will suffer in the short run as evidenced by the layoffs already occurring across the state. Layoffs that will grow as the pension burden gets larger in the years ahead. Fighting common sense reforms that preserve benefits earned to date and ward off major tax hikes is a train wreck in the making for the unions.