One reason Philadelphia workers may choose – or feel compelled – to join a union is the promise of access to special funds to cover healthcare expenses. The Philadelphia Federation of Teachers runs one such fund called the Teacher’s Health and Welfare Fund. The structure is fairly straightforward.
First, the union establishes a trust with funding primarily from the employer, which in this case is the Philadelphia School District. Those funds are then distributed to public employees as health and insurance benefits via PFT’s fund. The PFT established their benefit fund in 1971, and their collective bargaining agreement with the school district provides for the district to make annual taxpayer-funded contributions to it.
At their best, these kinds of trusts can be efficient ways for unions to deliver health benefits to workers. But PFT’s Health and Welfare Fund has become a case study in how money meant to help workers can be mismanaged to cover up union bosses’ bad deals, leaving hardworking teachers out in the cold.
Financial documents reveal that between excess cash in the benefit fund and dues collected from its membership, the PFT has spent over $12 million dollars to bail out its failed real estate endeavors.
The Health and Welfare Fund paints a good picture of financial health. According to the latest financial disclosure which covers 2021, the Philadelphia School District deposited $65,133,008 into the fund. In total, the benefit fund brought in $9 million in excess revenue and holds a net financial position of $36 million.
The Health and Welfare Fund’s financial position was so strong that it was able to dole out money – $4.8 million – to an entity known as the 1816 Chestnut Street Corporation (1816). This loan dates back over a decade. Investigative reports revealed that the Health and Welfare Fund loaned this money interest-free and without any terms of repayment. Today, the loan balance is the same, with no payments made and no interest accruing.
What does 1816 have to do with providing health benefits to Philadelphia teachers? As it turns out, not much. 1816 is a nonprofit organization that was created for “holding title of property for the PFT H&W Fund and to collect rents and pay all expenses.” In other words, it is the real estate arm of the PFT Health and Welfare Fund. This might be surprising to anyone who knows PFT already occupies office space at school district headquarters.
And there’s another problem: the holding company doesn’t seem to be holding much. In its latest financial disclosure, 1816 reported selling its only real estate asset. But where did the building go? It seems that 1816 may have sold its only remaining real estate holding to PFT.
In 2021, the PFT itself acquired a building with a book value of $7.6 million, according to the union’s financial records. That same year, 1816 reported $7.6 million in loans receivable from the sale of a building. And while past disclosures show that 1816 had been operating in a negative net financial position since at least 2011, after selling the building in 2021, the organization’s net financial position improved by more than $6 million.
The initial $4.8 million loan to 1816 should have been the first sign of trouble for the PFT’s real estate arm. In 2021, over a decade after that loan was made, the union used $7.6 million in membership dues to buy out 1816’s holdings. In total, the PFT and its affiliated organizations spent $12.4 million to support what now seems like a failed real estate endeavor by 1816.
This $12.4 million was intended to benefit Philadelphia public school teachers. As healthcare costs continued to rise, the $4.8 million from the Health and Welfare Fund could have been saved to offset future healthcare expenses. The $7.6 million in dues could have been used for member training or paying for negotiation costs or any number of other benefits unions are supposed to provide for their members.
Instead, the teachers who paid their dues and signed up for health benefits – and all the Philadelphia taxpayers who fund those benefits – are owed answers from the union bosses turned failed real estate moguls at the PFT. It’s time they come clean about what they did with other people’s money.
