Friday, January 3, 2014

Profits Over Pupils: Philadelphia's True Priorities

2013 is gone and, as far as public educators in the City of Philadelphia are concerned, good riddance. The worst budget crisis the School District of Philadelphia has ever faced is now last year's news.

Honestly, however, who can blame the city or state for vastly underfunding the education of our youth? After all, this budget crisis is a result of the greatest recession our city and state have seen in over a generation. A brief look at how Philadelphia's publicly traded Fortune 500 corporations fared in 2013 shows the dire economic situation our city is in, resulting in a School District underfunded to the tune of $304 million.

  • Cigna (NYSE:CI) climbed from $54 to $86 per share for an astronomical return on profits of nearly 58%.
  • Crown Holdings (NYSE:CCK) rose 23% from $36 to $44 per share.
  • Aramark (NYSE:ARMK) began trading publicly last month after its IPO and has already jumped an astounding 35% climbing from $20 to $26 per share.
  • Sunoco Logistics (NYSE:SXL) saw its shares jump from approximately $50 to $75 for a 52-week change of +39%. [Sunoco, formerly the largest corporation based in Philadelphia (NYSE:SUN) is currently a subsidiary of Energy Transfer Partners (NYSE:ETP)]
  • Comcast (NASDAQ:CMCSA), currently the largest mass media and communications company in the world in terms of revenue and the namesake of the tallest building in Pennsylvania, saw its stock value rise 36% from $38 to $52. According to Comcast's most recent SEC filing, the corporation's trailing 12 month revenue stands at nearly $64 billion with a gross profit of $42.64 billion. Those 12 month trailing profits, again, stood at $42,640,000,000. I thought I'd add the zeroes there for dramatic effect. Oops, there's one $0 I forgot: the amount of property taxes that Comcast pays to the School District of Philadelphia - NONE. Comcast has cost the children of Philadelphia $28.8 million since 2008 by not paying its fair share of property taxes.

Why, these aren't the numbers one would expect at all from a city and state that continue to cry that there simply isn't enough tax revenue. In fact, as the School District of Philadelphia hobbled along on a bare-bones budget, Wall Street saw record revenues in 2013. The S&P had its best year since 1997 and the Dow Jones hasn't seen these types of gains since 1995!



2013, however, wasn't a bad year for all educators in the city - just for those who choose to work with society's poorest and most vulnerable members. While the School District demands that we public school teachers take a 13% pay-cut, make 13% contributions to our healthcare, and forego all cost-of-living adjustment until 2017, other educational institutions in the city such as the University of Pennsylvania gave their professors and administrators exorbitant raises. PENN's President, for example, was given a whopping 43% raise in 2013 and now earns nearly $2.1 million... God forbid these educators who sacrifice themselves in order to mold the privileged future Wall Street gluttons of Wharton should not be properly compensated. 

PENN's Board of Trustees Chair, David Cohen, who heads the committee that determines salaries, claims, "We have the best university president in the country in Amy Gutmann and we believe her compensation should reflect that reality." Incidentally, PENN, Temple, Drexel, and the other universities in the city also do not pay any property taxes to the District, a loss of nearly $200 million a year in property tax revenue, because they claim "non-profit" status -- even though they had combined profits of over $1 billion last year.

David Cohen, by the way, is also the same person who recommended that Philadelphia public school teachers make the aforementioned 13% concessions in order to help solve the District's budget issues while he brokered a deal with Harrisburg. I suppose that, unlike PENN, he doesn't think we have the best public school teachers in Philadelphia -- nor should their salary "reflect that reality." What qualifies Cohen to make recommendations about Philadelphia's public schools? Well, apart from giving Gutmann a 43% raise and demanding teachers take a 13% paycut, here's what else he accomplished in 2013:
  1. As Vice President of Comcast, he cashed in an annual salary of $16.2 million (Pulling in that kind of money, I'm sure he's a public school parent with vested interest.)
  2. He held a $32,400 a plate dinner fundraising event for the Democratic Party at his Mt. Airy mansion. President Obama was in attendance as well, and why wouldn't he be? Cohen helped raise over $500,000 for Obama's re-election campaign back in 2012. 
  3. He held a Republican fundraising event at that same Mt. Airy home to help kick-off Governor Corbett's re-election campaign. Who cares about political ideology when you have the money to pay off both sides?

Meanwhile, as profits continue to skyrocket for private entities in the city, thanks to the machinations of special interest groups, the middle and lower class children of Philadelphia continue to suffer from the effects of shuttered libraries, devastated after-school activities, drastically reduced school staff, and a complete lack of support personnel essential for the operation of any large building - let alone one filled with children. Federal, State, and City funding of schools have stagnated for the past few years, clearly out of step with the vast profits being reaped by the aforementioned corporations and private universities.


The School District's adopted 2013-14 budget of $3.1 billion was laden with debt-service to, once again, corporate America. Aside from the actual $1.32 billion cost of instruction and the state-mandated payment of $704 million to charter schools (read my article on Philadelphia's Charter Problem HERE), the District's third most expensive budget item at $264 million was debt-service. In 2012, for example, the District was forced to once again borrow money due to lower than expected tax revenues and government contributions: $300 million through a bond sale just to cover operating expenses. That loan cost the District a whopping $22.2 million in interest payments for every year from 2014-2034 and effectively destroyed the District's credit rating into junk bond status, finally breaking the camel's back under a mountain of debt. The School District of Philadelphia now spends more money on debt-service than it does funding transportation, food service, and utilities in all of its buildings combined. To put it another way, that interest payment is enough to hire 2,400 teachers, with an average salary of $67,000 and an average benefits package worth $40,000 each.


So, where does that leave us teachers in 2014? Should public school educators be as optimistic about the coming year as the rising stock prices of our numerous Fortune 500 corporations? Not so fast. As those entities earning record profits continue to shirk their responsibilities, the District is forced to balance its budget on the backs of the only individuals they have some sort of control over - their teachers. The demands made upon the Philadelphia Federation of Teachers is degrading to the point of humiliation (you can view the full list HERE). Teachers have urged their union leadership not to budge as contract talks drag on, or there will be hell to pay. 


At least there's one thing to look forward to in 2014 - the School District has recently announced that its 2013-14 deficit of $304 million will most likely climb by yet another $100 million. So what's the good news? Well, it looks like there is no end in sight for the gains of Philly's Wall Street giants and the exorbitant salaries their executives pull in... I'm sure one of them will step forward, start paying the same amount of taxes as the rest of us, and do their civic duty for the betterment of society as a whole.

Right???

6 comments:

  1. Thanks George, great analysis. Unfortunately, general public is not familiar with these numbers (or just ignorant).

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    1. It's a little bit of both, actually. I'd wager that a great number of Philadelphians have no idea this is going on.

      The owners and stockholders and board members would like to keep it that way, hence a concentrated attack on what? Why, PUBLIC education!

      Thinks that make you go, "hm."

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  2. Good work, George. You use your data well to make the point. I wonder how many teacher's salaries could be paid for with what it took to clean up the Linc for tonight's football game?

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  3. Thank you, George. This should be on the front of the Inky.

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    Replies
    1. Yes, please submit it as an opinion piece.

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  4. Very impressive analysis.

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