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Philadelphia union heads raided teacher health care fund to pay for offices

By   /   November 16, 2015  /   News  /   No Comments

Photo by Evan Grossman

HOUSE CALL: Philadelphia Federation of Teachers union heads borrowed more than $6 million out of a teacher healthcare fund to pay for building expenses at 1816 Chestnut Street with no indication the money would be paid back, according to forms filed with the Internal Revenue Service.

Philadelphia Federation of Teachers officials used millions of taxpayer dollars earmarked for teacher health care to finance the operation of its troubled Center City headquarters and offer free rent to at least one tenant, a Watchdog investigation has revealed.

While this does not appear to be illegal, it does put unnecessary financial strain on the School District of Philadelphia, which faced an $80 million deficit less than a year ago. The district looked to restructure teacher health benefits as a way to close its budget gap. Philadelphia teachers do not pay for health care and the union has refused to offer any concessions there.

“Once again, it’s evident that PFT leadership is putting its own political interests over the well-being of teachers and students,” James Paul, a senior education policy analyst at the Commonwealth Foundation, told Watchdog. “While teachers are working hard in the classroom, the union is secretly draining its insurance fund for its own political gain.”

Every year, the district is bound by its contract with the Philadelphia Federation of Teachers to pay more than $69 million for employee health care benefits.

The payments come in increments of $167.41 per teacher every two weeks during the school year, adding up to some $4,352 annually for each of the PFT’s 16,000 members. Those funds come from a pool of state and local taxes. The PFT’s Health and Welfare Fund receives a chunk of that money, which is earmarked for supplemental benefits, such as dental and vision, along with other programs like life insurance and its annual educational conference, which will be held in March 2016.

The Watchdog investigation found that more than $6 million from that fund was loaned, interest-free, to the union’s bleeding building fund, where it appears to have been spent on building maintenance and upgrades. According to Internal Revenue Service filings completed by the union, that money may never be paid back.

Part of the cash, loaned in five separate installments, was also used to subsidize the rent of the Jewish Labor Committee.

The JLC is a religious organization that calls itself “the voice of the Jewish community in the labor movement.” JLC Regional Director Michael Hersch confirmed the group did not pay any rent for office space at 1816 Chestnut Street and it is now headquartered at 2100 Arch Street.

The PFT did not respond to a request for comment.

The PFT’s building fund is registered as the 1816 Chestnut Street Corporation. In its Form 990 filed with the IRS in 2013, it states “The Philadelphia Federation of Teachers Health and Welfare Fund has loaned monies, interest free, to the Corporation for the acquisition of property and equipment and to meet operating expenses with no definite terms of repayment. At August 31, 2013 and 2012 the balance of the loan was $4,845,781.”

The building fund, with expenses of $3.4 million, reported a deficit of more than $3 million at the end of 2012. The union purchased the four-story building at 1816 Chestnut Street in 1973 for $475,000. PFT’s main offices are located there, and also at a satellite office at 440 North Broad Street, that is provided free of charge by the School District of Philadelphia.

The school district has been on rocky fiscal footing for years. In October 2014, the School Reform Commission, which has controlled Philly schools since a state takeover in 2001, attempted to cancel its teachers contract. The SRC sought to achieve cost savings in having teachers pay for their health care, a change the district estimated would have saved upwards of $50 million each year. Philly teachers currently pay nothing for health insurance.

RELATED: Philadelphia teachers to challenge union leadership

At the time, former SRC Chairman Bill Green had said, “Every single stakeholder has stepped up to help the district close its structural deficit — the principals, our blue-collar workers. Families and children have, too, through the loss of resources, increased class sizes, and lack of materials. It is time for the Philadelphia Federation of Teachers to share in the sacrifice.”

Green, who was demoted as chairman by Gov. Tom Wolf earlier this year but remains one of five SRC commissioners, did not respond to an interview request.

The PFT challenged the cancellation in lower courts. The case is expected to be heard by the Pennsylvania Supreme Court next year.

“It seems like a questionable use of funds at a time of a budget crisis,” Paul said. “It’s pretty outrageous that the PFT is using tax dollars meant for teachers’ health insurance as a slush fund for its own political operation. Especially in Philadelphia, where every year the leaders of the PFT speak in Philadelphia or come to Harrisburg demanding more funds and more money specifically for Philadelphia schools. But at the same time they’re demanding more state dollars, they are overcharging for teachers insurance and using some of that money to subsidize its own political operation.

“It’s really a shell game that must end if we’re going to ensure tax dollars are being used efficiently and wisely.”

In papers filed with the Pennsylvania Commonwealth Court last year, the district said the Health and Welfare Fund, which has “built up a large surplus,” is a massive financial burden. By restructuring its obligation to the fund, the district argued it could achieve $22.4 million in savings through a “School District-administered plan covering dental, optical, and prescription drug benefits.”

Overcharging the school district for these benefits, which are also available to so-called “ghost teachers,” seems to contradict the union’s annual calls for more money for kids and their education, said Gary Beckner, president of the nonunion American Association of Educators.

“This is precisely the kind of behavior that is driving teachers away from the union in record numbers across the country,” Beckner said. “Teachers deserve a professional organization that spends dollars wisely and only on member benefits and services. Educators are no longer interested in paying high dues to a hyper-political organization.”


Evan was formerly a Pennsylvania-based education reporter for Watchdog.org.