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Published in Print: December 2, 2015, as Pa. Districts Anxiously Awaiting End to Budget Standoff

Pa. Districts Anxiously Await End to Budget Standoff

Fourth-grade students at Grover Cleveland Elementary School in Erie, Pa., take recess as crews in the background repair a leaking roof of the school building. The roof started leaking two years ago; due to budget restrictions, it had not been repaired until now.
Fourth-grade students at Grover Cleveland Elementary School in Erie, Pa., take recess as crews in the background repair a leaking roof of the school building. The roof started leaking two years ago; due to budget restrictions, it had not been repaired until now.
—Dustin Franz for Education Week

Months of belt-tightening, borrowing take heavy toll

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Pennsylvania school administrators are hoping a five-month budget standoff that’s held up state education funding will end soon, even as they tally the toll of the belt-tightening measures they’ve been forced to endure since the 2015-16 school year began.

Already, districts around the state have pulled most of the money left from their reserves and borrowed millions of dollars in emergency loans from banks, withheld paying essential bills, and shuttered dozens of preschool and after-school programs. At least one charter school has gone to holding classes just four days a week, and a handful of districts say they soon won’t be able to make payroll.

“This forces us to live on very thin money because we’re so reliant on state revenue,” said Jay Badams, the superintendent of Erie’s school district, which has 12,000 students. His board recently gave him authority to borrow up to $30 million to pay its staff members. “We’ve been able to hold off from borrowing, but we can’t put it off for much longer. We’re already in a precarious financial situation. To take on additional debt is just bad management. This diverts resources that we desperately need in the classroom.”

Jay Badams is the superintendent of the Erie public school system. In recent years, he has closed three schools and laid off 300 staff members because of budget constraints.
Jay Badams is the superintendent of the Erie public school system. In recent years, he has closed three schools and laid off 300 staff members because of budget constraints.
—Dustin Franz for Education Week

A complex deal on the table as of this week aims to end the impasse between the state’s Republican-dominated legislature and first-term Democratic Gov. Tom Wolf over who should be responsible for narrowing a funding disparity between rich and poor school districts and how to pay down a ballooning pension fund. The two sides have been at loggerheads since the end of the previous budget year on June 30, when the governor vetoed a budget the legislature enacted.

The budget framework would modify the state’s pension plan, give additional property tax relief to homeowners, and raise the state sales tax by 1.25 percent. If approved, school districts stand to receive an extra $350 million in new funding, but school boards would be banned from raising local property taxes without a referendum.

Legislators were hoping to iron out final details by Thanksgiving and pass 40 separate bills required to enact the budget by early December. But wary education leaders worry about the continued impact if legislators don’t come to a resolution by winter break.

National Landscape

Pennsylvania is among a handful of states currently facing significant budget challenges of various kinds.

Most states’ laws require their legislatures to annually balance their budgets, so it’s rare that states go months at a time without a spending plan.

But politicians in Illinois are also at a standstill on how to close a $5 billion shortfall there, though the governor in the spring signed off on the state’s education portion of the budget so that school districts still get state aid during the impasse.

Elsewhere, education remains at the center of a debate in Kansas where the state supreme court will soon decide on a new funding formula. A special legislative finance committee there just passed along millions more to districts experiencing lower-than-expected revenue from local oil companies.

Separately, Washington state’s supreme court began fining the legislature $100,000 a day in October until lawmakers come up with a way to more equitably fund its schools to satisfy the court’s ruling in a school-finance case there in 2012.

But those situations are the exception. A recent report by The National Association of State Budget Officers concludes that most states modestly increased their budgets this year in response to rising tax receipts brought on by post-recession business expansions, lower unemployment, and increased consumer spending.

“Education remained a top priority for governors, with most budget recommendations fully funding school finance formulas, while some proposals also included extra funding to expand pre-K, increase school choice, provide teachers with raises, and allow for the hiring of new teachers,” the September report said.

The fourth-largest city in Pennsylvania, Erie sits on the banks of Lake Erie in the northwest part of the state.
The fourth-largest city in Pennsylvania, Erie sits on the banks of Lake Erie in the northwest part of the state.
—Dustin Franz for Education Week

In Pennsylvania, however, just 30 percent of school costs come from the state on average, one of the lowest rates in the country, said Michael Griffith, a senior policy analyst with the Education Commission of the States. Local taxes make up for most of the rest.

“In most other states, those places couldn’t function because they didn’t get a state check,” Griffith said.

Taking a Toll

The Pennsylvania impasse so far has had a disproportionate impact on poor districts that can’t collect enough revenue from property taxes to fund schools and depend on the state to make up for the disparity.

“We’ve heard of the ending of specific, wholesale programs like cutting out sports and putting field trips on hold,” said John Callahan, a lobbyist for the Pennsylvania School Board Association, who didn’t provide specific examples. “There are districts that are seriously talking about not being able to make payroll.”

The Carbondale school district, located north of Scranton, has just $200,000 left in its coffers. The district, which has 1,600 students, has borrowed $900,000 and owes more than $700,000 to its vendors. Fell Elementary Charter School in Carbondale holds classes just four days a week instead of five because of the budget crisis, and stopped paying its teachers as of October.

Charter schools, whose state funds are channeled through districts, are in “dire straits,” officials with the Pennsylvania Coalition of Public Charter Schools said. It was a point Anthony Pirrello, the vice president of the Pennsylvania Coalition of Public Charter Schools and the CEO of Montessori Regional Charter School in Erie, made when he testified to legislators in the state capital of Harrisburg last month.

“It’s one thing to sit here in [the state capital of] Harrisburg and be told that district and charter schools are extending their lines of credit, borrowing money, extending terms on payments, withholding payments on important but non-essential services, cancelling student events, and counting every penny just to stay open,” Pirrello said, according to a transcript. “It is quite another thing to be on the front lines facing teachers, parents, and children every day and hopelessly witnessing the devastation that the lack of agreement between the governor and the General Assembly is inflicting on our children and our educational system.”

Badams, Erie’s superintendent, said he not only owes Montessori Regional Charter School and the other charter schools in his district. He owes almost all of his vendors money—$18 million at last count, he said.

Water damage remains from a leaking ceiling in the auditorium of Grover Cleveland Elementary School in Erie, Pa.
Water damage remains from a leaking ceiling in the auditorium of Grover Cleveland Elementary School in Erie, Pa.
—Dustin Franz for Education Week

The current budget situation is just the latest fiscal squeeze to hit the district. Since Badams became superintendent in 2010, the district has been forced to close three schools, lay off 240 teachers, and cut arts and music programs because of spending cuts by the legislature, he said. A 2nd-grade classroom last year had 21 five-gallon buckets to catch water from a leaking roof; the repairs only now are being made.

“With that rather depressing review of our already challenging financial situation, you can see why the current budget stalemate is particularly frustrating for Erie’s public schools,” Badams told lawmakers in October. “We have no reserves. Our CFO is spending most of his time robbing Peter to pay Paul.”

If the state budget framework passes as it stands now, the Erie district, which receives 60 percent of its budget from the state, stands to receive $6.8 million, or $2 million more than it got last year. Badams compared it to winning the lottery.

“I’ll believe any of this when I see it pass,” he said. “We’re so starved right now that anything above and beyond to break even will put us in an enviable position.”

Vol. 35, Issue 13, Pages 13,17

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