Budget & Finance

Financial Collapse Threatens Pennsylvania District

By Christina A. Samuels — February 21, 2012 6 min read
Financial problems have haunted the Chester Upland school district in Pennsylvania’s Delaware Valley for nearly two decades. Now, the district is teetering on the brink of financial collapse once again.
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The financially troubled Chester Upland school district in Pennsylvania, which made national news when its teachers promised to stay on the job even if the district could not pay them, continues to teeter on the brink of financial collapse despite a court-ordered meeting with state officials this month to seek a rescue.

A week before the Feb. 9 conference, the 3,700-student school district and the Chester Community Charter School, which, with 3,100 students, is almost as large, had asked the state for $21.5 million to finish out the school year. The charter school is funded by pass-through money given by the state through the district.

On the day of the meeting, the district and the charter school said they were willing to pare about $8 million from that request by each making budget cuts. The district’s total budget for 2011-12 is about $96 million, and the charter school’s budget is about $37 million yearly. But the state made no commitments, said representatives from the charter school and the school district.

Without a resolution, district spokesman Joel Avery said, Chester Upland relied on a previously scheduled allocation of federal funds to make its Feb. 15 payroll. Now, he said, the community is once again left wondering if the district can keep its doors open.

Chester Upland’s financial and academic struggles have gone on now for nearly two decades. The impoverished community, located between Wilmington, Del., and Philadelphia, has a median income of about $27,000, and about 35 percent of its residents live below the poverty line, according to 2010 census data.

Academic Difficulties

Because of similarly long-running student-achievement problems, the school system is in its ninth year of state corrective action, meaning that it is subject to charter school takeover or reconstitution. In 2010-11, 35 percent of the district’s students scored “proficient” or above on the Pennsylvania System of School Assessment in reading, and 39 percent scored proficient or above in mathematics. The four-year graduation rate was 51 percent.

A student reaches for a laptop computer at the Chester Community Charter School. Part of the Chester Upland district, the school enrolls 3,100 students—nearly as many as the district's regular schools.

In 1994, the district was declared financially distressed, and the elected school board was replaced with a state control panel. By 2000, the state had taken over district operations and brought in a private company, New York City-based Edison Schools Inc., to run eight of its nine schools. (One school stayed under district control.) In 2005, Edison ended its contract a year before it was due to expire, saying it was not making a profit. The district returned to local control in 2010.

Adding to the financial struggle for the district is the nearby K-8 Chester Community Charter School, which has grown from 97 students in 1998 to more than 3,000 now. Chester Upland owes about $43 million to charter schools this year, which is close to half its budget.

Currently, the district pays the charter schools that enroll its students about $9,900 for a general education student, and about $24,500 for a student in special education. Special education funding to charter schools is based on a formula created by the state, not necessarily the actual number of special education students in the charter, or the specific cost the charter incurs to educate them.

‘In This Together’

The district is about $10 million behind in its payments to the Chester Community Charter School, said David E. Clark Jr. , the school’s chief executive officer. It enrolls 60 percent of the community’s K-8 students and is by far the largest brick-and-mortar charter school in Pennsylvania. Although the charter has filed a lawsuit against the district for that money, it is now making an effort to show that it and the district are on the same side, working on behalf of students.

Mr. Clark noted in an interview that of the 1,800 families who have children in the charter school, 40 percent also have children in Chester Upland schools. “We’re in this together. We have the same kids,” he said.

The state department of education, which says it has already paid close to $31 million above what the district would normally get, says that Chester Upland officials have badly mismanaged the district’s money. Chester Upland officials came to the state last spring asking for an advance in state funding because they said they could not make payroll and meet the district’s debt obligations. District officials were told at that time “this is a one-time situation. This can’t happen again,” said state Education Secretary Ronald J. Tomalis in an interview with the Pennsylvania Independent website, which reports on state politics.

Teachers Stay On

On Jan. 12, struggling again to pay its bills, the district filed a federal lawsuit against the Pennsylvania education department seeking funding to remain open. The judge ordered the state to advance the district another $3.2 million in state aid, which allowed Chester Upland to pay salaries through early February.

John Shelton, a 4th grade teacher, helps 11-year-old De’Jah Santiago with her math assignment at Christopher Columbus School. Teachers in Chester Upland made national news by pledging to work without pay until the district’s financial crisis could be resolved.

In the midst of that legal action, the district’s teachers and support staff passed a resolution saying they would continue working as long as they could without pay. For taking that stand, Sara C. Ferguson, a math and literacy teacher who has taught in the district for 21 years, was invited to attend President Obama’s State of the Union Address last month.

Thomas E. Persing, a former superintendent who has been running the Chester Upland district for $800 a day since its top administrators were laid off, says that state managers should shoulder the blame for the district’s financial mess because the state was in charge from 1994 until 2010. “It would seem to me that if a state is in control of a budget, that they have the responsibility to produce a balanced budget year after year,” Mr. Persing said. Instead, the local school board inherited unpaid expenses when it took over.

“The contention is, ‘We’ve given you plenty of money, and you’ve mismanaged it,’ ” Mr. Persing said, describing the state’s position. But the district has had to make draconian cuts, he said. “If anything, we’ve cut the education that these kids deserve.”

In contrast, the charter school has remained relatively financially stable, with smaller class sizes and better technology than the district currently has. But if it does not receive its pass-through funds, “I can’t say to you that I’m certain we can remain open,” said Mr. Clark, the charter school’s CEO. “We may have to close.”

More to Come?

William T. Hartman, a professor of education at Pennsylvania State University in State College and an expert in school finance, says that the specifics of Chester Upland’s struggles are unique. “Over the years, Chester Upland has been known to have fiscal and academic problems. They’ve appointed special masters, brought in consultants; nothing seems to have worked,” Mr. Hartman said.

However, the issues facing Chester Upland are taking place as every district in the state is dealing with budget cuts, he said. Pennsylvania reduced the amount of state aid it provided districts in the two years that the federal government was providing stimulus funding but didn’t restore funds to pre-stimulus levels after the federal stimulus dollars dried up, Mr. Hartman said.

For the fiscal 2012 budget year, school districts in the state received about $900 million less than they had the year before, Mr. Hartman said. “It was a substantial, very profound shock.”

Those decreases were disproportionately borne by less-affluent school districts like Chester Upland that don’t have a strong property-tax base, contends Joseph F. Markosek, the Democratic chairman of the Appropriations Committee in the Pennsylvania House of Representatives. Mr. Markosek has compiled a fact sheet on Chester Upland’s money woes, which says the state cuts led to a loss of about $1,144 per student in that district, compared with statewide average cut of $441 per student. He contends that six other school districts in the state are close to insolvency. Chester Upland’s problems are the “tip of the iceberg,” his fact sheet says.

A version of this article appeared in the February 22, 2012 edition of Education Week as Shutdown Threatens Long-Troubled District In Pennsylvania

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