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Philadelphia Schools to Open With Cuts Awaiting Smoking Tax

Aug. 15 (Bloomberg) -- Philadelphia schools will open as scheduled Sept. 8 with temporary cuts in transportation and cleaning as the district awaits state authorization of a city tax on cigarettes, Superintendent William Hite Jr. said.

Hite had said he would decide by today whether to fire employees or delay the first day of school after state lawmakers canceled an Aug. 4 vote on a bill allowing Philadelphia to levy a $2 tax per pack of cigarettes to help fill an $81 million budget gap.

The district’s $3.2 billion of general obligation debt was cut one step deeper into junk to Ba3 from Ba2 by Moody’s Investors Service with a negative outlook. The cut reflects the district’s struggles to deliver its core services, the New York-based ratings firm said today in a statement.

The levy would generate $49 million for this fiscal year if implemented by Oct. 1, he said. Without the tax and benefit changes agreed to by unions, class sizes would increase and grades would be combined, Hite said.

“As we cut so deeply into our core services, we again implore our funders and several labor unions to help prevent further harm to our schools and our students’ educational experience,” Hite said today in a statement.

About 7,500 high school students won’t get transportation, about 300 students will see reduced services in graduation programs and schools will be cleaned less frequently, Hite said.

Governor Tom Corbett, a Republican, last week advanced $265 million in already-budgeted state aid for the district.

The district serves about 200,000 students, making it the eighth biggest in the U.S., and has a $2.55 billion budget.

The state assembly is scheduled to return Sept. 15.

To contact the reporter on this story: Romy Varghese in Philadelphia at rvarghese8@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Mark Schoifet, Mark Tannenbaum

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