But, Knudsen said, for fiscal 2013, "there clearly has to be a discussion with labor" about ways to cut costs. He said "conversations" with the district's largest union, the Philadelphia Federation of Teachers, had already begun.
The 2013 budget has revenues of $2.358 billion but expenditures of $2.547 billion. But it's only a first draft, and will debated and likely adjusted before final approval, which must happen by May 31.
The district is coming off a brutal year where officials had to slash spending by more than $600 million, with some cuts made mid-year and $26 million still left to cut. SRC Chairman Pedro Ramos told City Council this weekthat "bad fiscal policy" - not just a decrease in state and federal funds, as officials had maintained for months - was to blame for the district's fiscal woes.
But Knudsen and Feather Houstoun,chair of the SRC's finance committee, said at a news briefing that this was a new era for the district, which will no longer spend money it does not have and will be more open about its budgeting practices.
"It's not a pleasant exercise to put up a negative number rather than show a zero," Ramos said, but it's necessary.
So how does the district balance the budget, as required by law? Some savings will be realized by restructuring the district's operations. The Boston Consulting Group, brought in to help overhaul the district, has made some preliminary recommendations, which Knudsen and Houstoun declined to divulge.
Houstoun said that once the reorganization is launched, the district can expect a savings of about $90 million annually, but that amount will not be fully realized in 2013.
But going after tax delinquents should help the district close the $185 million 2013 gap, Houstoun said.
"We would like to accelerate the level of tax collections," Knudsen said. "We would like to engage with the revenue department and finance in grabbing some of those dollars more quickly. We are in discussions with them right now to do that."
It's too early to say just how much the district might see from more aggressive tax collection, but "even a fairly small yield would be significant for the school district," Houstoun said.
Philadelphia has an abysmal tax collection record, with roughly 19 percent of all parcels behind on taxes. In 2011, delinquents owed the city and district $472 million.
Still, other administrations have vowed to go after property taxes - why does district leadership now believe it can make good on a promise that has eluded others, especially when the city, not the district, is responsible for collecting taxes?
"Tom Knudsen and I have collected taxes and receivables in the past," Houstoun said, a nod to her background as New Jersey's state treasurer and Knudsen's as the architect of a turnaround at the Philadelphia Gas Works, where under his watch collections improved from 86.5 percent in 2003 to almost 97 percent in 2006.
One area not likely to yield any more savings is school budgets.
Schools are cut to the bone now, Houstoun said. The SRC would love to provide them with "an enriched program," restoring some of the cuts that have been made over the past painful year, but that seems unlikely. Still, she said, for next year, schools will not have to "operate in a fiscal fire drill."
School cuts are "absolutely the last place we'll go; it wouldn't even show up on a list at this point," Houstoun said. "This is all about providing as much certainty and stability in the schools as we can. We want to not have people think about budget all the time - that's really destructive of the classroom climate."
No teacher layoffs are planned, either, Knudsen said.
The proposed budget includes about $274 million in new expenditures, including $42 million in new salary costs, $72 million in new benefit costs, and what Knudsen described as a "whopping" $110 million in additional debt service costs.
Also planned is $20 million more for "managing the portfolio," officials said, a nod to the district's new characterization of its organization as not just a school system but a system of different types of schools, including district and charter.
Knudsen would not be more specific as to what the $20 million would pay for, but it seems likely to include set-asides for expansions of some existing charters and for district schools to be turned over to charters.
Even with what officials described as a more solid plan in place, they acknowledged that question marks still loom.
"Things could break the wrong way, and we could have a much bigger problem," Houstoun said.
State lawmakers must still adopt a budget, and the outcome could be even less favorable than the governor's proposal.
"They could authorize a large voucher program," Houstoun said. "They could authorize any number of things that might end up being funded out of the basic ed budget."
Also still up in the air is how the district will balance its 2012 budget. Knudsen said he hoped to close the remaining $26 million gap without further concessions from the unions or imposing terms.
"I'm trying to avoid that," Knudsen said. "I'm working around that."
But, he warned, if other gap-closing measures aren't found, "I may go back to the unions" to close the 2012 gap as well, he said.
Contact Kristen Graham at 215-854-5146, firstname.lastname@example.org or on Twitter @newskag. Read her blog, "Philly School Files," at www.philly.com/schoolfiles.