HARRISBURG (July 21) — A multi-billion dollar plan to eliminate school construction debt and balance the 2015-16 state budget didn't pan out the way the House Republicans originally envisioned.
Instead, a nine-month impasse came and went without fulfilling the $300 million annual PlanCon reimbursements to districts — or the $5 billion bond designed to settle payouts with every school stuck in the program's 11-step pipeline.
Three months later, lawmakers and Gov. Tom Wolf brokered a $31.63 billion budget deal for the 2016-17 Fiscal Year that still appropriated no money for PlanCon reimbursements. This time, however, the administration was securing an $850 million bond behind the scenes to ensure districts got, at least, some of the money owed to them.
Casey Smith, a state Department of Education deputy press secretary, confirmed Tuesday the Commonwealth Financing Authority “approved the initiation of the bond process,” and said further details wouldn't be available until September.\
Rep. Seth Grove, R-York, the House's architect of PlanCon reform, said the multi-billion loan strategy offered last summer will “hopefully” happen in the next budget cycle.
“We are still going to see the ultimate goal still happen,” said John Callahan, assistant executive director of public policy for the Pennsylvania School Boards Association. “It's just a matter of how you deal with the challenge that every school district is facing a different situation.”
“Moving this borrowing process along also provides districts with more certainty about the availability of payments in future years,” said Hannah Barrick, director of advocacy for the Pennsylvania School Business Officials. “This is also positive for districts that have projects at early stages of the PlanCon pipeline that have not yet begun receiving reimbursement —especially those that have been trapped in a backlog at Part G of the process and have been waiting for final approval for reimbursement for, in some situations, years. With the borrowing process moving forward, relief for these districts is on the horizon.”
The original bond strategy materialized in June 2015 as a way to balance the FY2015-16 budget without raising taxes, while still flooding districts with much-needed revenue, Grove said.
The plan hinged on borrowing roughly $5.4 billion to pay off some 500 projects owed money under the school construction reimbursement program, which Grove has called an “antiquated and tedious” 11-step process school districts navigate on a promise of state reimbursement for construction and renovation projects they've already financed.
Tensions over stalled budget negotiations forced the bond strategy to the back-burner, and when a resolution finally came in March, no bond had been floated and districts weren't getting their reimbursements, leaving a sometimes “sizeable” budget gap for some districts.
“Since there was no state PlanCon reimbursement for 2015-16, districts that had been receiving state reimbursement suddenly had to cover both their share and the state’s share of their school construction debt, which created some significant financial struggles in a lot of districts,” Barrick said. “The same is true for 2016-17 since there was no state appropriation — those districts with debt payments due in the next couple of months will need to make them without the state’s reimbursement.”
Jay Himes, executive director of PASBO, agreed the PlanCon bonds will be a good thing for districts — eventually.
“This will be very helpful for school budgets, but not this year,” he said in an email Thursday. “Final school budgets have been adopted so the savings will be next year. Those schools with funding approved will hopefully get their missed payments from last year restored as well as receive current year funding. We need a larger bond issue to get funding for stalled projects approved. The good news is that at least we are making progress. Slow progress is better than none.”
In the meantime, districts are doing what they can to fill the gap until the reimbursements come through, said Callahan.
“They are making due and know the money is coming, by the end of the year hopefully, so that's the good thing,” he said. “That's kind of the saving grace with this whole thing.”
By Christen Smith, Staff Reporter, Capitolwire (reprinted with permission)