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Pa. school districts borrow and borrow as Wolf plans another budget veto

| Wednesday, March 16, 2016, 11:00 p.m.
Stephanie Strasburg | Trib Total Media
Dusk falls on Wilkinsburg High School on Tuesday evening, Oct. 27, 2015.

Another doomed budget proposal in Harrisburg will likely push school districts deeper into financial trouble as they borrow millions of dollars to compensate for a ninth month without a state budget, school officials said.

“We're treading water at this point,” said Terry DeCarbo, superintendent of the Sto-Rox School District. “That's unfair because this is the only senior year our twelfth graders will have. This is the only kindergarten year our kindergarteners will have. It's unfair that their educational experience this year has been impacted by a political debate.”

Gov. Tom Wolf said Wednesday that he plans to veto a $6 billion spending bill crafted by Republican lawmakers, arguing that it does not provide enough funding for schools or address a looming $2 billion deficit.

DeCarbo said Sto-Rox has used about $2 million of a $7.3 million line of credit it was forced to take out months ago. Without a state budget, he expects the district next month will have to use another $1 million and incur $9,000 in fees.

His district is not alone. Many borrow to pay salaries and cover daily operating expenses.

The McKeesport area school district already took out and repaid a $5 million loan — with more than $11,000 in interest — after emergency funds were released in December. The board will vote next week on whether to open a $7 million line of credit, business manager David Seropian said.

The Shaler Area school board will vote next month whether to borrow about $6 million.

The Plum School Board this month approved borrowing $14 million to cover day-to-day expenses through the end of the school year, which will cost taxpayers about $46,000 in interest over the 100 days the loan is used, plus $12,500 in fees, said business manager Eugene Marraccini.

The Wilkinsburg School District took out a $1.8 million loan at the start of the budget impasse in July and paid it back with an interest payment of about $10,000, business manager Rick Liberto said. If there is no budget by May, the district might have to borrow again.

The New Kensington-Arnold School District took out an $8 million line of credit, and the Kiski Area School District applied for a $10 million line of credit, but neither district has tapped them yet.

“Everyone's different and everyone's going through different things,” said Bart Rocco, superintendent of the Elizabeth Forward School District, which took out a $6.5 million loan. “We continue to plea for this to be settled and move on.”

Auditor General Eugene DePasquale, whose office is examining how much the budget impasse has cost school districts, said more of them will begin seeking loans again by mid-April.

That will be challenging because banks are likely to be more hesitant to lend to districts because it isn't clear when they will be able to pay them back, DePasquale said. If a loan is approved, it likely would come with a higher interest rate.

As of December, he said, Pennsylvania school districts had borrowed about $1 billion and incurred about $40 million in interest and fees.

“At some point, a bank is going to say ‘no' to this,” DePasquale said. “And then what?”

The latest budget proposal is an approximately $6 billion spending plan that Republicans say is designed to complete a $30 billion spending package.

It calls for the use of about $260 million in reserves while the state forgoes a $305 million payment it regularly makes for school construction projects and delays more than $200 million in Social Security payments to school employees and reimbursements to counties for child welfare costs.

The appropriations bill carries just over $3.1 billion for public school instruction and operations, which would bring the total appropriated for the year to $5.9 billion, a $200 million increase. Wolf originally had sought a $400 million increase, and the bipartisan deal that collapsed in December had contained $350 million.

It's unclear whether the budget will reimburse school districts for their fees and interest payments.

Seropian, with the McKeesport Area district, said he supports Wolf's veto, despite his district's desperation.

“We definitely appreciate what he's trying to accomplish in getting schools more funding,” he said.

But he and other district leaders are disappointed that lawmakers have taken money away from Pennsylvania's students as they fail repeatedly to come to an agreement.

“Our students are being held victims to this,” DeCarbo said. “It's time to really put the students first and make a decision.”

Elizabeth Behrman is a staff writer for the Tribune-Review. She can be reached at 412-320-7886 or Lbehrman@tribweb.com. Stephanie Hacke contributed. The Associated Press contributed to this report.

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