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PA may take over school districts in fiscal chaos

By   /   May 24, 2012  /   No Comments

Leaves Philadelphia out, blocks districts from declaring bankruptcy

By Eric Boehm | PA Independent

HARRISBURG — Pennsylvania’s four most financially distressed school districts could be facing a state takeover, and more districts may be on the way.

Pennsylvania’s four most financially distressed school districts could be facing a state takeover, and more districts may be on the way.

The state Senate moved forward this week with a plan to allow the state Department of Education to appoint an officer to oversee the financial recovery of districts in fiscal chaos that must turn to the state for an advance payment of subsidies.

The plan advanced out of the Senate Education Committee on Tuesday as part of House Bill 1307 and is set for a vote in the full Senate in June.

If the bill passes, the state House must approve it before it reaches Gov. Tom Corbett’s desk.

Senate Majority Leader Dominic Pileggi, R-Chester, said the recovery proposal is similar conceptually to Act 47, the state’s recovery program for financially distressed municipalities that has existed since 1987.

“I think everyone acknowledges that there needs to be an ability to have the resources in the department to take the steps necessary to properly manage those districts,” he said.

Act 47 has not been particularly successful — only three of the 27 municipalities in the program have left it — and lawmakers are trying to retool it by restoring the state’s ability to target collective bargaining agreements as part of the financial recovery process.

Any district that has asked the state for an advance payment or sued the state to get additional funding would enter the program. Currently, four districts out of 500 would meet those qualifications:

  • Chester Uplands in Delaware County,
  • Duquesne City in Allegheny County,
  • Harrisburg in Dauphin County,
  • York City in York County.

The bill would allow the state to implement a “special board of control” that would:

Have all the powers of the elected school board to control the district’s finances, except renegotiating teachers’ contracts.

Be allowed to impose a special tax for the specific purpose of paying off a district’s debt and the district would be eligible for a low-interest loan from the state.

The legislation also would prevent any school districts from declaring bankruptcy. Districts would exit the program when the Department of Education certified that they had recovered.

As a last resort, the legislation allows the state to petition the Court of Common Pleas to appoint a receiver for any school district that failed to develop or properly implement a recovery plan.

The Philadelphia School District is excluded from the recovery plan because it is in a different program. The district consumes about 20 percent of state funding and has about 10 percent of the state’s total public school enrollment.

The four districts targeted by the takeover bill may have lots of company.

In a survey released this week by the Pennsylvania Association of School Business Officers and the Pennsylvania Association of School Administrators, two groups advocating for more state spending on basic education, half of the 281 school districts that responded indicated they would be in financial distress within three years, unless there was an uptick in state spending or local revenue.

Three percent of responding districts in the survey said they were in financial distress.

The total amount of money spent on basic education from all sources has doubled in the past 15 years, from $13 billion in 1997 to $26 billion in the current year.

Even so, the state must spend even more money, said Michael Crossey, president of the Pennsylvania State Education Association, the state’s largest teachers’ union.

“There is a serious funding crisis in a growing number of our schools,” Crossey said. “But this bill isn’t a solution. The problem was manufactured largely by state underfunding in the first place.”

Districts that would be affected by the legislation did not return calls Thursday, but James Duff, a business consultant for the York City School District, told the York Dispatch this week that the district needs money, not oversight.

“We don’t need a Chief Recovery Officer. We need the money,” he said.

State Sen. Jeff Piccola, R-Dauphin, chairman of the Senate Education Committee and the designer of the recovery plan proposal, said the plan would leave districts in charge as long as they followed the proper procedure.

“My legislation offers a carrot-and-stick approach by offering long-term financial assistance but with the expectation that the district adopts the state’s rescue plan,” Piccola said in a statement.

While the state is moving to set up the takeover plan, the General Assembly is debating the specifics of next year’s budget proposal.

A key factor there: the state Senate added $50 million to Gov. Tom Corbett’s initial plan to be earmarked for financially distressed school districts.

Republican Senate leadership repeatedly has said there is no formula for determining which districts would receive that additional $50 million next year.

They also have declined to say whether the dollars would be targeted for the same four districts or spread more broadly to the group of about two dozen school districts that are also reporting financial difficulties.

There are political factors at play too.

Piccola is not only chairman of the Education Committee, but has represented Harrisburg for more than 25 years — first in the state House and now in the state Senate — has one of the most financially distressed schools in his district. Chester-Uplands School District lies within the boundaries of Pileggi’s senate district.

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