Submission

to the School Reform Commission

February 13, 2015
Joseph A. Dworetzky

To the Members of the School Reform Commission

My name is Joe Dworetzky. I served as a member of the SRC during the period from
2009 to 2014. I have a perspective on the matters before you and I appreciate the
opportunity to share my observations. My comments are made on my own behalf
and do not represent the views of Hangley Aronchick Segal Pudlin & Schiller, the law
firm where I am a shareholder, or of any other person or enterprise, including, of
course, the School District of Philadelphia or the SRC itself.

Before beginning let me extend each of you good wishes. You are in a hot seat on
this decision and will certainly make many people unhappy, no matter how you
decide.

As you consider your decision, let me offer five observations:

First, the District cannot afford new charters. The numbers are compelling. The
District is facing an $80 million shortfall next year to simply replicate the
demonstrably inadequate status quo. Attempts to obtain labor savings are in the
courts and accordingly uncertain. The Districts staffing of schools is sadly
inadequate. Dr. Hite has said that to begin a true transformation of the educational
program, the District would need not $80 million in new revenues, but more than
$300 million. Given these facts, the SRC must approach new spending in the most
conservative fashion.

New charters are extraordinarily expensive. If you work from BCGs analysis, the
average net loss to the District when a new charter seat is filled is $7,0001 per year.

1 http://www.williampennfoundation.org/ArticleFiles/327/BCG-Summary-
Findings-and-Recommendations_August_2012.pdf (Page 34):

Each additional seat that is created in non-Renaissance charter schools increases the Districts
costs by an average of approximately $7,000 per year. This incremental cost is due to two factors:
Roughly one-third of all students attending charters came from outside the District
school system, meaning a private or parochial school. The roughly $10,400 average perpupil payment SDP must make to the charter represents an entirely new cost to the
District.
When students transfer from District to charter schools, the District is able to cut some
costs, such as instructional personnel. However, many fixed costs remain, such as school
administration, facilities costs, and central office services. These costs remain until the
District loses so many students that it is forced to consolidate schools. Furthermore, the
extent to which some costs can be eliminated depends upon (1) the concentration of

That loss continues from year to year until if ever the District can recoup that
much from building closures and sale of facilities. Given the time it takes to close a
school and repurpose a building, the $7,000 loss must be anticipated to continue
years into the future.

Charter commitments are long-term commitments because in most cases the new
charter lasts 5 years. (Given the length of time to close or non-renew a charter, one
could argue that an even longer period is appropriate for planning.) The District is
no condition either financially or operationally to bear that type of long-term
burden.

In the table below I quickly estimate the loss the District would expect to incur over
a 5-year period if it were to authorize say 15,000 seats in that period, as some have
advocated:

A second reason why the SRC should not authorize any new charter at this point is
that the District has apparently not done or if it has done, it has not released to the
public - the financial analysis that is a pre-condition to the issuance of a new charter.
Under the SRCs Authorizing Quality Initiative2 (memorialized in Section 402 of the
SRCs official Board Policies3), the District must conduct a full 5-year financial

departed students from a particular school and/or grade level and (2) the Districts ability
to rationalize catchment areas in response to attrition. On average, the net cost to the
District of a student leaving for a charter is approximately $5,600.
The incremental cost of roughly $7,000 per student represents a weighted average of these two
factors.

2 http://webgui.phila.k12.pa.us/offices/c/charter_schools/authorizing-quality-

initiative

3 http://www.philasd.org/offices/administration/policies/

impact analysis and share the results with the public before the SRC authorizes
any new charter4:

Section 402. New Charter School Applications

7. SRC Decision to Grant or Deny an Application

Prior to the public hearing, the CSO, with input from the Districts CFO or his/her designee, shall
prepare a written report analyzing the financial impact of each application to the SRC in each
of the next five years. The report shall include a determination of whether the goals underlying
the application could be achieved at mitigated cost by pursuing an alternative approach or
approaches. The CFO report shall be made available to the SRC and the public prior to the
public hearing.

These rules were adopted in April of 2014 to ensure that the District did not make
short-term decisions on charters without fully analyzing the long-term costs.

Section 402 does not require a bare financial analysis; it requires the District to
consider whether the goals of the charter application may be achieved at a mitigated
cost by pursuing an alternative approach. This analysis of alternatives is crucial. We
know from experience that it is possible to open a new charter seat at a fraction of
the financial burden on the district that would result from this process. Experience
has shown that the District through the Renaissance Initiative - has been able to
establish seats in schools operated by charter schools with good track records at a
fraction of the $7,000 per seat that would be the financial impact of opening new
seat through this process. In fact, many of the operators who have applied for new
charters are existing participants in the Renaissance program. Why would the SRC
approve a new charter under this process when high quality operators can and will
operate Renaissance schools at 15 to 20% of the burden to the District? (Not to
mention the fact that Renaissance charters must take all students from the
catchment - reducing concerns over creaming).

But as the District considers alternatives, its main focus should not be on charter-
operated schools. Rather it should be looking closely at District-run schools. Before
the District commits to a single new seat with a price tag of $7,000 (or even $3,500
or $2,000) per student per year, it should figure out what a District-run school could
achieve with that type of money. I wont repeat here the sorry history of the
Districts failure to support Promise Academies, but District-run schools can achieve
more with adequate resources and sound planning, and that should be the primary
goal.

Third, when the District performs the required 5-year financial and alternatives
analysis, it should consider the philanthropy promised by Philadelphia School
Partners. Private philanthropy is needed and welcome, but the terms must be
carefully evaluated lest a gift horse prove to be a Trojan horse. From what I can tell

4 http://www.philasd.org/offices/administration/policies/402.pdf

from public reports, the PSP proposal will only cover a fraction of the losses that
would be caused by the charters it assumes will be granted. The SRC should do its
best to convince PSP to permit those funds to be used to accomplish the best
alternatives to the creation of new charter seats, particularly through investment in
District-run schools.

Fourth, the SRC should use this occasion to correct some of the misinformation in
the media that creates a distorted understanding of the current situation. Yesterday
I read that there have been no new charter schools in Philadelphia in 7 years. Of
course, that is ridiculous. Through the Renaissance process, more than 20 new
charter schools have been established.

Moreover, some have said that if the SRC doesnt grant the pending charter
applications, no new charter seats will be available next year. I am not certain, but I
dont believe this to be true. The SRC, despite the Districts dire financial
circumstances, has in prior years allowed many charter schools to grow their
enrollment within negotiated limits. I dont have the exact number, but pursuant to
previous authorizations, my recollection is that there are new seats coming online
this year and next as charters build out their classes pursuant to prior
authorizations. If my recollection is correct, SRC should insure the District releases
the numbers to the public.

My final point results from the inescapable fact that the SRC is a body with spending
power but no control over revenue. Given that fact and the current financial
situation, the SRC must consider not only the potential benefit of new seats for the
students (currently in District, parochial and independent schools) who will fill
those seats, but the impact on the students who remain in District-run schools. That
$7,000 per student per year loss is not a paper loss. The District must actually fund
it and the only place where most of those funds can come from is by way of further
reductions to the instructional services that benefit the remaining students. That
isnt fair and it isnt equitable.

I appreciate the opportunity to submit these observations.









Joseph Dworetzky