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School districts borrowing money as budget stalemate continues

Public school districts statewide have started borrowing money to help cushion the blow from the state budget impasse.

Auditor General Eugene DePasquale released a statement that said some districts, and intermediate units that oversee them, borrowed more than $340 million.

“Our students have returned to their schools, but much-needed state funding is stalled by the budget impasse in Harrisburg,” DePasquale said in the prepared statement. “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.”

Philipsburg-Osceola Area School District finance director Michael Conte said the district made a commitment for a $4.4 million loan from M&T Bank. The deal was made in August, he said.

“We haven’t actually borrowed money yet, but already made the commitment to the loan,” Conte said. “We’re missing about $3 million from state subsidies.”

Conte said the district is dipping into other fund balances to make up for “budget shortfalls,” and added that the district doesn’t anticipate using the loan until the end of the year.

“What’s also helping us right now is collecting taxes,” Conte said.

P-O collected about $1.5 million in taxes so far for the 2015-16 school year, Conte said.

Tax collection is part of the reason other area school districts are staying afloat.

Bellefonte Area School District director of fiscal affairs Ken Bean said the district is in “good shape.”

About 34 percent of district funding comes from the state, while real estate taxes make up the larger part of the revenue budget, Bean said.

“The district collects (taxes) from September to December,” Bean said. “As such, we are good until after the new year. Bellefonte also has committed funds for PSERS (Public School Employees’ Retirement System) and capital expenditures that we could use when our unreserved funds would run out.”

Bean said the district did not budget an increase from the state in the 2015-16 budget.

State College Area has a 2015-16 budget of $136 million, but has no plans to borrow money, said business manager Randy Brown.

“Being that we are 82 percent locally funded, we would not expect to borrow any funds in the foreseeable future of this fiscal year,” Brown said in an emailed statement.

At Bald Eagle Area, on the other hand, business manager Craig Livergood said the district is assessing the situation month by month.

​“The district’s financial status will be stable for the next month, and if the budget is not passed by then, the district will look at different avenues to continue providing the education our students deserve,” he said.

Penns Valley Area did not have information for the CDT by deadline, but business manager Jef Wall said in a July interview that the district plans for these kinds of circumstances.

“Fortunately, we have sufficient cash reserves for just this type of disruption in state funding,” Wall said. “The district taps into general fund reserves if necessary. Except for a small decline in interest income, delays in state funding will not have a significant impact unless the budget impasse extends into October or November,” Wall said, adding that reserve funds may need to be used starting at that time.

The report also said auditor general staff spoke with officials at nearly 300 school districts about financial woes, and added in the statement that the department will continue to reach out to school districts to provide information and feedback of progress without help from state funding.

“Based on our conversations with school districts so far, at least 28 additional districts and two more intermediate units will be forced to borrow an estimated total of $122 million in October,” DePasquale said.

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