FOR IMMEDIATE RELEASE: August 6, 2025

City Controller cautions budget impasse in Harrisburg could affect revenue gains if borrowing is required

PHILADELPHIA – With the start of the new school year around the corner for students and families, the School District of Philadelphia (SDP) will be operating with a $4.6 billion budget, reflecting a half a percent increase over last year. The slight boost is driven by an increase in local and state funding, according to City Controller Christy Brady’s August Municipal Money Matters report.

Local revenue, which is primarily driven by the SDP’s portion of the city’s Real Estate Tax, increased by almost $80 million over the prior year. The anticipated state funding grew by almost $100 million over the same period. These increases will help offset a $148 million decline in the one-time federal pandemic relief in the operating budget the SDP received.

“The loss in one-time federal pandemic relief underscores the ongoing challenge of replacing temporary federal support with sustainable local and state revenue,” said Brady.

Since Fiscal Year 2024, local and state revenues to the SDP have increased by 12% and 21%, respectively. During the same period, federal dollars to the school district declined from $551 million to $16 million.

Last year, Philadelphia City Council approved a budget that included increasing the SDP’s millage rate by 1%. The adjustment directed 56% of the total property taxes collected to the SDP and lowered the city’s share to 44%. Prior to this action, the tax rates were unchanged for nine years.

The SDP is the only school district in Pennsylvania without the authority to raise its own revenue through taxes. While other districts can directly levy taxes such as earned income, business privilege, and additional property taxes, the SDP relies on city and state sources for 99% of its operating budget.

“If the budget stalemate in Harrisburg forces the school district to borrow funds to open the school year, the associated borrowing costs could offset some of this year’s anticipated revenue gains,” said Brady. “Unfortunately, the state didn’t reimburse districts for the cost of borrowing during past stalemates.”

A future increase to the city’s Real Estate Tax millage rate is planned for Fiscal Year 2030 to support long-term financial projections and debt obligations.

Visit https://controller.phila.gov/ to view the City Controller’s August 2025 Municipal Money Matters review.

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