Pennsylvania School Boards Association (PSBA) released a Budget Impasse Impact report this week based on a survey of public school leaders in Pennsylvania. At this time, districts are without 30% of anticipated state subsidies and largely dependent on tax revenue, fund balance and borrowing options to continue day-to-day operations in schools. The survey shows, as expected, that districts most heavily reliant on state aid are quickly approaching a very perilous precipice.

PSBA's report analyzes data collected from a survey of Pennsylvania school leaders that was conducted in October and again in November for the purpose of gauging how deeply the lack of state funding has impacted school districts. The November survey update was distributed statewide, generating responses from school leaders in 225 (45%) of Pennsylvania's public school districts. More than a quarter of those surveyed indicated that non-receipt of state subsidies has had a direct, negative impact on programs and services within their districts.

As of Nov. 13, 2015, 10% of school leaders surveyed indicated that they have had to borrow money to meet immediate payroll or other costs directly as a result of non-receipt of state subsidies; and the total amount borrowed seems to be growing quickly. The November survey shows that districts unable to meet immediate financial needs have borrowed an average of $7.2 million each, with some districts (excluding Philadelphia) reporting loans as high as $25-$50 million. Districts reported paying an average of $32,000 each in fees and interest for loans. Almost 30% of all districts reported that they would be forced to borrow to cover payroll or other immediate costs in the next 30-60 days if a budget agreement is not reached.

In addition to a rising need for borrowing, the survey revealed other negative fiscal effects of the impasse. Respondents from 14 of Pennsylvania's public school districts reported that their credit rating has been negatively impacted as a result of non-payment of state subsidies. One respondent indicated that the district's overall credit worthiness was downgraded so severely that the district had been turned down for a loan.

More than 25% of respondents indicated that their districts had been forced to miss payments in contracted services, debt service, charter schools, and/or other agreements. School leaders in 36 districts reported missing charter school tuition payments. Districts also reported missing PSERS payments, payments for out-of-district placements, payments to outside vendors and payments to Intermediate Units.

Fund balances also have been dwindling due to the budget impasse. Prior to the impasse, a detailed look at Pennsylvania school district fund balances showed 16 districts with a negative total fund balance and another 24 districts with a total fund balance of less than 5% of total expenditures. In the November survey, about 25% of respondents said that non-receipt of state subsidies has had little or no impact on district fund balances. However, about the same amount of respondents indicated their fund balance reserves were either mostly or completely depleted as of Nov. 13, 2015. Half of survey respondents indicated some level of negative impact on the district’s fund balance. A full 16% indicated the district’s fund balance was either significantly depleted or nearly completely gone, and 8% said that the district is completely without fund balance reserves as a result of non-receipt of state subsidies.

Overall survey results show that while some districts do not report being significantly impacted by the budget impasse, many districts are hurting, citing the need to borrow funds, credit rating downgrades, and fund depletion. Responses from the survey highlight the importance of consistency and timeliness with regard to the receipt of state education subsidies.

The full survey results, titled, “Budget Impasse Impacts” can be found here: Budget Impasse Survey

 

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PSBA is a nonprofit statewide association of public school boards, pledged to the highest ideals of local lay leadership for the public schools of the commonwealth. Founded in 1895, PSBA was the first school boards association established in the United States.

 

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