Districts can ask for state money
Instead of receiving state subsidy payments, some school districts in Pennsylvania have resorted to borrowing as much as $500,000 in emergency money from the same source.
The Legislature has yet to approve a budget, which includes millions of dollars school districts usually depend on to operate.
Inflation, rising insurance and employee costs, a struggling economy and unforeseen expenses from a bad winter left most local school boards hoping at budget time this summer that state money would ease their financial woes.
But, the longer it takes for state budget approval, the more drastic financial conditions will become for some districts.
Monessen School District Superintendent Dr. Alex Warren said his district would run out of money in November.
Warren said reports that Monessen schools would have to shut down were “overblown.”
He said he is working with school officials to ensure that worse-case scenario does not occur.
“At a point in time when we think we’ll need money, we’ll probably look to the state first because it will be the quickest route,” he said. “We’re going to borrow from the cheapest lender.”
Warren said state dollars make up roughly half of the district’s $10 million-plus budget.
To Belle Vernon Area School District Superintendent Robert Nagy, the idea of asking for a handout from the same source that is creating the problem is unreasonable.
“It’s kind of hypocritical,” he said. “There’s kind of an irony there. They’re willing to loan districts money, but there’s no money from the state (budget).”
Nagy said his district expects to receive about $7.5 million, roughly $1 million a month, in state subsidy – once the budget is passed.
That money would help cover the school district’s operating costs for basic education.
The district carries a $25.2 million budget, which includes approximately $1 million in operating costs and about $200,000 in employee benefits each month, Nagy said.
A $3 million tax anticipation loan the Belle Vernon Area School Board obtained in June to help solve local problems will now be a godsend as the district feels its way through the state budget blackout, Nagy said.
The borrowed dollars have been “invaluable” to the district at a time of year when tax revenue is low, he added.
BVA has received smaller amounts of tax revenue for this year and the payments should pick up in October, Nagy said.
Nagy said his district has not been forced to dip into its monetary reserve and borrowing from the state might not become an option.
Nagy said he hopes Belle Vernon can stretch its finances until the state comes through.
“I don’t have a crystal ball,” he said. “It clearly depends on the amount of real estate revenue we get in the next 60 to 90 days.”
While the state’s budget position has some school officials guessing, others are confident they are financially solvent.
Charleroi Area School Board President John Rotheram said he expects the state budget to be passed in the coming weeks – adding that the district is in good fiscal shape.
With money left in its general fund and more than $600,000 in reserve, Rotheram said Charleroi Area likely will be able to operate without state aid for months to come.
“We can go until the middle of January to be truthful with you,” he said.
California Area Superintendent Dr. R. Tim Marks said the district is drawing on both its general and reserve funds to pay bills.
“Our cash flow is OK until the end of December,” he said. “After the end of December, we’re not going to be OK anymore.”
He said that if the school board does not receive “concrete proof” of state subsidy by the end of November, it will “start strategizing ways to fund the programs.”
Department of Education spokesman Brian Christopher said schools experiencing cash flow difficulties need only request advances from the state.
“The money is there. They just need to show what they need it for,” he said. “This is money that was not blue-lined by the governor.”
Money for social security, special education and transportation will be funneled to schools in need, he said.
Most schools will endure by drawing on reserve funds or by obtaining tax anticipation loans, Christopher said. However, 10 school districts have applied for, and received, emergency advances.
“It’s money they would get anyway,” he said, adding that districts can receive advances within a week of requests.
But Ringgold School District will soon need the extra cash.
District Superintendent Larry Golembiewski said he was not aware of the state loan program.
The school board and administration struggled to develop the budget with state numbers, and the delay has brought more uncertainty.
“It’s hard to run an organization as large as this and plan for the future when the future is in limbo,” Golembiewski said. “I think it’s totally irresponsible of the people we elect to office.”
Golembiewski said this year has been the longest state budget holdout in the eight years he has served as eight years as superintendent and three as assistant superintendent.
“We’ll run out of money in December,” he said. “We’re going to have to borrow from the state. I can’t imagine them charging us interest. We’re not at fault for this.”