Penn Hills financial crisis inspires bill aimed at keeping districts from similar fate
A state lawmaker presented a bill package April 17 that seeks to avoid school district financial crises and allows for greater punishment of school officials if poor decisions are made.
State Rep. Tony DeLuca, D-Allegheny, along with state Auditor General Eugene DePasquale, unveiled the bill package, dubbed “School Board and Administration Financial Reform Package,” together at a news conference in Harrisburg. The bills have yet to be formally introduced to the House.
DeLuca said the bill would “guarantee that the financial disaster that took place in Penn Hills will never happen again.”
The state Department of Education recently placed the Penn Hills School District into financial recovery status and appointed a chief recovery officer, Dan Matsook. The district is $172 million in debt.
The crisis first was spotlighted in a 2016 state auditor report, in which DePasquale detailed the school district’s “mismanagement and lack of oversight that led to the district’s enormous debt problem.” The report led Allegheny County District Attorney Stephen A. Zappala to launch a grand jury investigation, which concluded Feb. 5 and resulted in no indictments.
Instead, the report said the district is guilty of “inexcusable” carelessness that brought “economic ruin.” It also cited concerns over possible ethics violations and conflicts of interests and recommended state lawmakers enact new legislation to avoid future such scenarios.
“What took place in Penn Hills School District quite simply could be described as a complete disregard to taxpayers, the community and its students. I’m disgusted and downright disappointed that a once-renowned school district could dig itself into such a financial hole that its only option was to ask its taxpayers to bail them out,” DeLuca said in a news release.
The bills, according to DeLuca, would require a referendum from the state legislature for “any borrowing by a school district which would amount to 50 percent or more of its borrowing base limit.” Furthermore, the bill would require the legislature to include a district’s revenue and expenditures when determining a borrowing base limit. Currently, only revenues are considered in the calculations, DeLuca said.
The bills also would allow the PDE to review the most recent audit of the school district to certify it is capable of fulfilling its financial obligations before borrowing funds. If borrowing funds for school building construction, the audit will be required to be made viewable at a public hearing.
Under the legislation, the PDE also would be afforded the chance to review construction plans and total project costs “to see if a referendum is required under current law.”
A referendum would become necessary if “the maximum building construction cost authorization exceeds the aggregate building expenditure.”
The bills also attempt to hold officials accountable by changing a five-year statute of limitations for Ethics Act violations. The legislation proposes the violations to start at the discovery of the act instead of when it allegedly occurred.
The legislation also would punish school officials for making false statements to the PDE, which could result in second- or third-degree misdemeanor charges.
Penn Hills School Board President Erin Vecchio called DeLuca’s legislation “garbage.”
“It’s a little too late what he’s trying to do,” she said. “It has no effect on Penn Hills because we’re not going to be able to afford another thing in Penn Hills. He could have stopped the schools (from being built) in 2009 and he chose to look the other way.”
Dillon Carr is a Tribune-Review staff writer. You can contact Dillon at 412-871-2325, [email protected] or via Twitter .