Title
Urging the Pennsylvania Auditor General to conduct a forensic audit of the School District of Philadelphia to provide a greater degree of transparency into the District's finances so that the City of Philadelphia can consider solutions to the School District's current fiscal crisis.
Body
WHEREAS, The School District of Philadelphia's Fiscal Year 2012-13 budget reflects a gap between revenues and expenses of at least $218 million. This gap is projected to grow in future years if the structural imbalance in the School District's budget is not corrected. If unchecked, the budget shortfall could lead to a $1.1 billion gap over the next five years; and
WHEREAS, The School District has entered into interest rate swap agreements with disastrous results. In the mid-2000s, the School District entered into swap agreements with several major financial institutions. These swaps are contracts between the School District and investment banks which speculated on the direction that interest rates would move. After the financial crisis of 2008, drastic drops in interest rates resulted in unfavorable terms for the School District. The School District expended a total of $86.6 million between 2010 and 2011 to cancel nine of its interest rate swaps; and
WHEREAS, In the March 2011 Performance Audit Report of the School District of Philadelphia, the Pennsylvania Auditor General characterized such swaps as ". . . complicated, risky financial instruments that can needlessly waste taxpayer funds if the District bets incorrectly on which way interest rates will move . . . [t]he School District of Philadelphia is, in effect, gambling with a very large quantity of taxpayer's money"; and
WHEREAS, Recent reductions in federal and state funding have further endangered the fiscal sustainability of the already distressed School District; and
WHEREAS, According to the Independent Auditor's report dated February 10, 2012 by the Office of the Controller of the City of Phila...
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