How Penn is Cheating Philly’s Public Schools

by Penn for PILOTs

“Colleges are building rock climbing walls for their students while our children’s classrooms are laced with asbestos.”

Philly public school parent

“Almost all of us have sacrificed during this pandemic, and almost all of us pay taxes to maintain the city… We shouldn’t be filling budget holes by taxing working people more. Wealthy institutions need to pay up.”

Philly public school teacher

In Philadelphia, the poorest large city in the U.S., Penn is both the largest employer and largest private landowner. It has a $20.5 billion endowment and a $13.5 billion operating budget. It continually pours money into ultramodern facilities and expensive renovations. In all, it owns over $3 billion worth of property spread out across more than 1,000 acres of land. However, due to its federal status as a nonprofit institution, it does not pay property taxes.

The city of Philadelphia as a whole has an extraordinary amount of nonprofit tax-exempt land. In 2019, a total of $29.6 billion worth of property, or 17% of the city’s land, was tax-exempt. In terms of tax revenue, this means that it lost out on over $400 million in 2019 alone. The federal nonprofit tax exemption was created with good intentions — to support small, charitable organizations that provide essential services. However, most of Philadelphia’s tax-exempt land is owned by multi-million dollar nonprofits, including universities like Penn, Drexel, and Jefferson. Penn alone accounts for over $100 million — about one quarter — of the city’s foregone tax revenue.

Nonprofit tax exemptions acutely affect the city’s ability to provide public services. The School District of Philadelphia is particularly impacted. It relies heavily on local revenue, most of which comes from property taxes. The consequences that schools face due to lack of funding are glaring. Many schools have been closed in recent years due to serious environmental hazards, and dozens of others remain open with airborne asbestos, peeling lead paint, and toxic mold, posing daily threats to the health of students and employees. Remediating public schools’ most pressing environmental issues would cost about $200 million, and properly maintaining all school buildings would cost billions due to an overwhelming backlog of deferred maintenance.

“For as long as I can remember, attending a public school meant dirty bathrooms, broken doors and chairs, never having enough textbooks, and always lacking supplies.”

Sophomore at Central High School

“Asbestos, lead, and mold spores…don’t belong in our classrooms, and neither do rodents, or leaking pipes, or crumbling ceilings, or overflowing toilets – all of which exist in my school and have for years.”

Senior at Masterman High School

Furthermore, public schools are grappling with severe resource scarcity. Many only have a nurse assigned to check in if there is a spare moment, and some have no nurse coverage at all, which has led to the deaths of multiple children. Many classrooms lack necessary supplies to the point where teachers are forced to put learning on hold or contribute out of their own pockets. The school district, which primarily serves low-income students of color, is struggling to make ends meet. Meanwhile, Penn exists as a predominantly white institution and one of the wealthiest in the city, whose tax exemptions deprive public schools of essentials taken for granted on its own campus.

This situation is not unique to Penn and Philadelphia. Other large landowning nonprofits, including Penn’s Ivy League counterparts such as Harvard and Columbia, likewise operate under nonprofit tax-exempt status. However, these universities and many other large nonprofits contribute to their host cities through Payments in Lieu of Taxes (PILOTs) agreements. PILOTs are a solution through which wealthy nonprofits pay a portion of what they would otherwise owe in property taxes to their cities in order to offset the lack of funding for services like public schools. In fact, Penn is the only Ivy that does not have some form of a PILOTs agreement. (Columbia does not pay PILOTs but does invest in a community benefits agreement.)

For years, student and community activists have called on Penn to stop dodging its financial obligations and pay PILOTs, which they define as 40% of foregone tax revenue. Undergraduates at Penn began a concerted campaign in 2015, conducting research, holding rallies, and winning a City Council resolution in favor of PILOTs. In 2018, the citywide coalition Our City Our Schools joined the fight. In 2020 and early 2021, Philadelphia Jobs with Justice led a year-long, concerted effort to advance the campaign. PILOTs Action at Penn, which formed out of Philly Jobs with Justice’s organizing work, is currently working with groups at Penn (including the faculty group Penn for PILOTs) as well as Drexel, Jefferson, and across the city.

These efforts are making a difference. In November 2020, Penn committed to paying $10 million a year for 10 years to help the school district combat lead and asbestos. However, Penn’s pledge fell far short of the 40% demand. It is also not an ongoing commitment and does not hold Penn accountable to the school district or to the city.

Penn is certainly capable of meeting activists’ demands. 40% of the university’s foregone tax revenue would constitute about 0.35% of its annual unrestricted revenues or 0.26% of its endowment. If Penn can budget hundreds of millions of dollars for shiny new buildings and capital improvement projects, and if Penn’s executives can be paid millions of dollars a year, then the issue clearly lies not in whether it can pay PILOTs but rather in what it chooses to prioritize. Currently, its own wealth and image take precedence over furthering equity across the city and ensuring a safe education for Philadelphia’s public school children and teachers.

More broadly, Penn avoids addressing calls for PILOTs directly. Instead, it makes statements that exaggerate its contributions to Philadelphia and distract from the real issue at hand. For example, Penn claims that it is compensating the city by being a large employer. However, this justification obscures the fact that Penn underpays employees and works at all costs to prevent and bust unions (see: Union-Busting). Penn also claims that the student service hours performed through community engagement programs, namely those run out of Civic House and the Netter Center, are an adequate substitute for tax payments. However, student service hours, while commendable, are not comparable to professional work and do not meet the needs that the school district faces. Lastly, Penn claims to compensate the public school system via its investment in the Penn Alexander School, located just west of campus. In reality, though, Penn’s annual contributions to this school have only created a pull for university professors and their families, gentrifying the school’s catchment area and displacing lower-income residents including families of color.

While Penn masquerades as a nonprofit, it operates unapologetically as a corporation, continually increasing its wealth and expanding its campus while its tax exemptions deprive Philadelphia public schools of essential resources. This legacy of extraction must be reversed and remedied, especially as President Elizabeth Magill steps into a position with the power to give Philadelphia’s public education what it deserves. More than ever, we must work to create a relationship in which Penn is accountable to its surrounding communities and plays an active role in their wellbeing. 

If you’d like to join or learn more about our movement by following Philly for PILOTs on Instagram @fundphillyschools. Fill out our interest form or contact us at pennpaypilots@gmail.com to join our team.