"I think there's a real issue with regard to what our credit capacity is at this point," Knudsen said. "We are walking the line right now."
SRC Chairman Pedro Ramos said that while the country is in an educational and economic crisis, the district is worse off than most - "because Philadelphia has been slow to respond to changes in revenue, the need to reduce labor costs or reduce the infrastructure commensurate with the loss of students in district-run schools."
In addition to proposing a wholesale transformation of the way schools are organized and run, Knudsen wants to close 40 schools in 2013 and six more in each of the next four years. The district is paying $33 million annually for empty seats, he said.
But beyond building costs, the district also spent well beyond its means for years, and is now paying the price for that, Ramos said.
"I believe in public service and in the public sector, and I am telling you that we need to stabilize this district now, or we will all be sorry later," said Ramos, who stressed that the transformation plan on the table is not a done deal - that community input is being sought and will be seriously considered.
But AVI carries great political risk in areas destined for large tax hikes, and Council members grilled district officials in an all-day hearing.
Councilman Jim Kenney asked Ramos what he would say to a resident whose family income was about $80,000, someone with three children not in public schools. What would he say if they told Ramos they couldn't afford the extra $200 a year AVI would mean for them?
In terms of what residents pay in school tax, "I think it's a pretty good deal," Ramos said. Good schools boost prosperity, he said.
Multiple Council members questioned why the district is asking for more money from the city, but not making a similar request of state officials.
"We're being asked to take a look at a $94 million heavy lift," Councilman Curtis Jones said. "We don't hear where the state has any responsibility to help with that heavy lifting."
Councilman Dennis O'Brien, a Republican and former speaker of the Pennsylvania House, was more pointed. He said he found it "astonishing" that the district was leaning on the city but not the state.
"What the hell is up with that?" O'Brien asked.
Councilman Bill Green, one of 14 Democrats on the 17-member Council, wanted to know exactly how much Ramos and Feather O. Houstoun had asked from Republican Gov. Corbett, who appointed both to the SRC.
"We've asked the governor for support in every way we can," Ramos said. "We are asking the governor to work with the SRC on fiscal sustainability, but this can't be done in quick sound bites."
Green emphasized that he and others had been critical of the district's spending and lack of clear answers for years. Officials, including Nutter, had defended past district budgets, he said.
"The appointing authorities are accountable to us for where we are today," Green said. Three SRC members are appointed by the governor and two by the mayor.
Several Council members expressed frustration over the district's lack of transparency over the years.
"We have been misled for years about the state of the School District's woes," Councilwoman Jannie L. Blackwell said. "There has not been the level of accountability that the public and that the Council expects."
Going forward, "I want the School District to feel that it is accountable to me," Councilwoman Maria Quiñones Sánchez said.
Still, Sánchez said, Council had some indication the district was in trouble. "I could really kick myself," she said. "We saw the tsunami coming."
Lorene Cary, who heads the SRC's safety committee, spoke about a new approach to school security. Though violent incidents are down district-wide, classrooms are not nearly safe enough, she said.
What's needed is a new approach - prevention programs, not more reactive, punitive measures, she said. Adult behavior needs to change so student behavior can change.
"We have not gotten every adult on the love train," Cary said. "We have failed to do that. That's part of safety."
Council members also asked questions about career and technical education, charter school enrollment caps, and special education. Jones and Council President Darrell L. Clarke railed against a small percentage of disruptive city students who make it tough for others to learn, with Jones earning laughs and nods by telling the story of Ray-Ray, a classmate who couldn't behave.
"When someone finally said, 'Ray-Ray, you will no longer terrorize this class,' " Jones recalled, it was "the happiest day of our lives."
But even after an all-day hearing, questions remained. Clarke asked district officials to return for more discussion, and they said they would. Public testimony on the district budget is expected at a Council hearing Wednesday.
Parents ask about schools
Emotions ran high as more than 2,000 people filled the sanctuary at Enon Tabernacle Baptist Church in East Mount Airy on Tuesday night to learn from Philadelphia school officials about the district's plans to reinvent the way it organizes and runs schools.
"My concern is, what schools are they going to close, and what will be the impact on our children, and what impact will this have on the remaining schools, as far as overcrowding?" said Gwen Brown of Mount Airy, parent of a sixth grader at Jenks School, as she went into the town-hall-style meeting.
Kamia Baylor, also of Mount Airy, with a sixth grader at McCloskey School, came to "find out what's going on. What's going to happen to my child's education? Will there be enough books? Enough computers?"
Tenth grader Joi Grant of Bodine High School drew applause when she urged that students be included in the decision-making.
Brown wondered: "Where is this money going? You've got people in charge making $100,000 or more. Our children are reading at level or below level. Our children are getting lost." - Linda Loyd
Contact Kristen Graham at 215-854-5146, email@example.com or on Twitter @newskag. Read her blog, "Philly School Files," at www.philly.com/schoolfiles.
Inquirer staff writer Linda Loyd contributed to this article.