September 29, 2015

Auditor General: School Districts Borrowed $346 Million+ Due To Budget Impasse

Auditor General Eugene DePasquale Tuesday said through September, the prolonged state budget impasse forced at least 17 school districts and two intermediate units to borrow more than $346 million to meet expenses and keep classrooms open. Interest and fees on those borrowed education dollars could reach $11.2 million.
“Our students have returned to their schools, but much-needed state funding is stalled by the budget impasse in Harrisburg,” DePasquale said. “It’s causing financial insecurity in schools across Pennsylvania and already forcing some to borrow money.
“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.”
In the past month, Department of the Auditor General staff spoke with officials at nearly 300 school districts across the state. The department will continue to reach out to school districts and release updated borrowing figures every month until the final budget is signed into law.
In addition to loan interest payments and fees, the drawdown on schools’ reserve funds results in a permanent loss of future investment income that could support school programs.
“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.
“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.”
Some districts are struggling to get loans. For example, Steelton-Highspire School District in Dauphin County reports that it has enough cash to last until the end of September, then it will need to borrow about $8 million. So far, multiple loan requests have been rejected by banks.
“We are seeing the bond ratings for many schools being downgraded, making it even harder and more costly to borrow money to keep classes open until the state budget is resolved,” DePasquale said. “Who is going to help these school districts?”
A list of school districts borrowing is available online.
Republicans React
Senate President Pro Tempore Joe Scarnati (R-Jefferson) and Senate Majority Leader Jake Corman (R-Centre) released a statement following Auditor General DePasquale’s press conference regarding Pennsylvania schools:
“Earlier today, Auditor General DePasquale showcased the very harsh reality of what Gov. Wolf’s budget veto has done to our schools.  They are left with uncertainty and without needed financial support.
“We fully understand the urgency to have a state budget in place.  The General Assembly presented Gov. Wolf with emergency funding legislation to provide our schools with over $3.1 Billion in funding. We urged Gov. Wolf to put our schools and vital services first and sign the emergency funding budget in order to provide stability while we continue to negotiate a final budget agreement.”
A list of funding for school districts that would have been provided in the stopgap budget is available online.