Strings Attached: Why Philadelphia Schools May Reject a $35 Million Gift

The commission overseeing Philadelphia’s public schools will soon have to decide whether to accept an offer of $35 million from the Philadelphia School Partnership, a local philanthropic group. For a district facing a projected $80 million budget shortfall, you might think this would be an easy decision to make. And you would be wrong.

The issue has opened a citywide debate, involving money, educational options, funder transparency, and political influence. It also once again raises the question of just how many strings funders can attach to the money they give. Actually, this episode raises even bigger questionsabout the role of private money in public life, and how to balance philanthropy and democracy. 

In exchange for $35 million, PSP wants the School Reform Commission (SRC) to authorize additional charter schools for up to 15,000 students. SRC has overseen the School District of Philadelphia since a 2001 state takeover subjected the financially troubled district to control from Harrisburg. In the years since then, the School District of Philadelphia has evolved into the kind of portfolio systemblending district-managed campuses and charter schoolsthat reform-minded funders have praised as part of a new K-12 public education landscape. Of the 300-plus campuses in the district, 86 are independent charter schools, authorized by and accountable to the SRC.

For the first time since 2007, SRC is poised to consider dozens of applications for new charters. However, the projected deficit means SRC may be unable to approve the applications because of the costs associated with opening new schools.

In walks PSP with its offer of $35 million, of which $25 million is intended to defray the costs of expanding the charter school program. The remaining $10 million will be allocated to district-managed campuses. PSP Executive Director Mark Gleason said the funder’s gift is designed to remove cost considerations and enable the SRC to “make decisions based solely on the merits of these applications and given more students access to a high-quality education.”

PSP describes itself as dedicated to the startup, expansion, and transformation of public and private schools. The investors section of its website reveals that PSP has received support from a wide range of individuals and funders, some of whom will be familiar to IP readers. Top donors, who have given over $5 million to PSP include charter school champions the Walton Family Foundation and some Pennsylvania-based funders. The latter includes the Maguire Foundation, which supports area private schools; the William Penn Foundation; and Philadelphia investment executive Jeff Yass and his wife, Janine. Janine Yass, a PSP board member, is the founder of the Boys Latin Charter School in west Philadelphia and serves on the board of the pro-charter Center for Education Reform in Washington, D.C. Other supporters of PSP include the Gates and Dell foundations.

Groups opposed to accepting the PSP gift say doing so could actually worsen the district’s financial condition. Whenever a Philadelphia child enrolls in a charter school, the district loses money. PSP estimates peg that figure at about $2,000 per child and based its gift on that estimate. The district, meanwhile, cites Boston Consulting Group estimates that charter schools cost the district about $7,000 per child. Considering not only the start-up costs that PSP’s gift is designed to offset, the district estimates opening additional charter schools to enroll 15,000 could cost $500 million in the coming years more than 10 times the amount of PSP’s gift.

The identities of the persons behind the PSP gift are another source of concern for opponents. The actual donors are anonymous, and PSP does not plan to reveal their names unless and until the district accepts the money. This justifiably raises eyebrows among opponents, who fear the gift could give currently anonymous donors undue influence over Philadelphia education politics and policy, even influencing the upcoming election for Philadelphia’s mayor, who appoints two of the five SRC members (the governor appoints the other three).

This year’s mayoral election features a wide-open slate of candidates, as three-term incumbent Michael Nutter is prohibited from seeking another term. The majority of mayoral hopefuls have panned the PSP proposal, calling it a loaded ultimatum designed to enrich charter school operators at the expense of district schools, already strained by past budget cuts. SRC has no taxing authority, and the district relies on a combination of city, state, and federal funds for its operations.

PSP insists it does not wish to make Philadelphia an all-charter district and that its agenda is simply high-quality schoolscharter or not. A look at the organization’s Form 990, however, shows that the funder has a clear preference. In 2013, PSP gave more than $10 million in grants, with 90 percent going to charter schools. One charter operator alone received $2.9 million, nearly triple the amount of grant funding PSP provided to the district in the same year.

This is not the first time PSP's actions have generated opposition from public school proponents (see our 2013 report on a PSP grant to district schools). In times of financial stress, it is difficult to refuse such a large gift. However, SRC may have to do just that, absent successful negotiations over the size of the gift and greater flexibility in how the funds are used.

Of course, Philadelphia is not the only strapped school district where financial donors have ridden to rescue—and asked for things in return. Is this how public school systems are supposed to operate? Clearly, not. And whatever you may think of the substance of the issues in play, there is something disturbing about private money wielding so much power over education, which has often been seen as among the most democratic spheres of American life. 

What's more, this trend is likely to grow as governments struggle with tight budgets and more wealth pours into the philanthropic sector.