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PA Auditor General says budget impasse is killing schools

By   /   October 1, 2015  /   News  /   No Comments

Pennsylvania’s budget impasse, which has frozen state spending for three months, is hurting public schools.

State Auditor General Eugene DePasquale said the stalemate has already led 17 school districts and two intermediate units to borrow more than $346 million to keep operating while politicians slug it out over a new budget deal in Harrisburg. DePasquale said interest and fees on that money could reach $11.2 billion.

paauditor.gov

FINANCIAL STRESS: A graphic published by the Department of the Auditor General shows a growing number of Pennsylvania school districts have been forced to borrow money to remain open during the state budget impasse, which has dragged on for three months.

“It’s causing financial insecurity in schools across Pennsylvania and already forcing some to borrow money,” he said. “Instead of focusing on education, schools across the state are having meetings to try and figure out how to get by every month and shopping banks for loans that will hopefully allow them to keep the lights on.”  

The School District of Philadelphia, which gets almost 50 percent of its money from state taxpayers, has already borrowed $275 million, which is more than any of the other 16 districts DePasquale cited. The next highest total is $10 million borrowed by the Stroudsburg Area School District.

If the budget impasse continues, at least 28 districts and two more intermediate units will be forced to borrow an estimated $122 million in October, DePasquale said.

Gov. Tom Wolf, who vetoed a stopgap budget the same day DePasquale sounded the alarm about Pennsylvania’s schools, has said that districts will be repaid for interest payments on loans taken because of the impasse. The stalemate wouldn’t have ended with the passage of a stopgap budget this week, but the temporary spending plan would have provided about $11 billion in state money to schools, local governments and state vendors to retroactively fund them from July through October.

Wolf said the stopgap he nixed this week didn’t do enough to increase taxes and provide for higher government spending on education — his spending priorities all along.

“Just like their sham budget in June, this stopgap budget makes it clear that Republican leaders not only want to do nothing to move the commonwealth forward, but they are intent on taking us backwards,” Wolf said in a statement.

Republican leaders from the House and Senate said they tried to meet Wolf more than halfway and called him out-of-touch for pushing a historic tax increase plan, as they have been doing for most of the summer.

“There are school districts across the state that are already experiencing financial hardships. They have borrowed money to make payroll with interest at the expense of taxpayers,” said state Rep. Tom Quigley, R-Montgomery. “I am disappointed that the governor does not support funding our schools rather than treating them as a pawn in budget negotiations.”

The war of words over the stopgap budget veto — the eighth veto issued by Wolf this summer — is the politics of blame. With the stop-gap budget defeated by Wolf, both sides will go back to the drawing board.

Schools are caught in the middle.

“Every available dollar of school funding should go to classroom education, not interest payments and loan fees,” DePasquale said. “We already are seeing extra costs through borrowing and lost revenue from abandoned investments, and it is certainly going to get worse each day this impasse drags on.”

Related: Pennsylvania budget impasse puts pressure on charter schools.

So far, the state has missed more than $1 billion in payments to districts. On Oct. 1, the state will miss a second payment. If a third is missed Nov. 1, DePasquale said, the “the cost of borrowing will well exceed $1 billion.”

While school districts have had their funding shut off, Pennsylvania charter schools are having a tough time, too. Their money comes directly from their home districts. Schools and districts can dip into reserve funds, but those may start to dry up.

“The relationships between school districts and charter schools has been tenuous at best ever since partial charter school tuition reimbursements to school districts ended in 2011,” DePasquale said. “This budget stalemate will just make the relationship between these educational entities even more strained, and that does not help students.”

In addition to loan interest, reaching into reserve funds could hinder future planning to improve schools and programming.

“Even if the commonwealth repays the borrowing costs to the districts and IUs — and that is not guaranteed — the money has to come from somewhere, and that could eat into other parts of the education budget,” he said. “This is already a huge problem affecting districts in rural, suburban and urban areas. And it is going to turn into a crisis if the budget doesn’t get passed now.”

DePasquale urged lawmakers to do “everything within their power not to cast blame but to try to solve” Pennsylvania’s budget problem, which, he said, is being fought “on principle.” 

Earlier this month, DePasquale offered a solution to the budget stalemate. He suggested finding a compromise on shale tax and to use that money for education.

“Then work out a fiscal responsible pension reform plan that I think all the parties can buy into and help save money and protect retirees,” he said. “On the liquor store side of it, all I can tell you is that consumers want more convenience and there’s a way to find a compromise to do that as well.”

“I think if everyone locked themselves in the Governor’s Residence for a weekend and were willing to come up with a deal on those three things,” he said, “they could do it within a weekend.”

The Department of the Auditor General interviewed about half of Pennsylvania’s 500 school districts to get a better understanding of the impact the budget impasse is having on schools. The department will release its findings each month until a budget is ratified.

“I’ll be back here in October,” DePasquale said. “I don’t care if it makes anyone uncomfortable.”

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Evan was formerly a Pennsylvania-based education reporter for Watchdog.org.