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Officials see better financial days for the beleaguered Penn Hills School District |

Officials see better financial days for the beleaguered Penn Hills School District

Natasha Lindstrom
| Saturday, January 19, 2019 7:30 a.m
Lillian DeDomenic | For The Tribune-Review Penn Hills residents protest the lack of indictments and public information about Allegheny County District Attorney Stephen Zappala’s ongoing investigation into school district finances at the old municipal building along Frankstown Road on Jan. 12.

Days after Penn Hills School District’s plunge into financial recovery status, state lawmakers and district officials are touting optimism that state intervention will catapult the debt-ridden district out of its dire straits.

“Locally, we feel we have exhausted all reasonable options to manage the burden of our crushing debt, most of which results from the simultaneous construction of two mega schools,” Penn Hills Superintendent Nancy Hines wrote in a message addressed to the school community and posted to the district’s website Thursday. “We have reconfigured programs and employment positions we consider essential and eliminated many others. Our local taxpayers have done their fair share, and their contributions have been supported by a majority of employees who have willingly taken multi-year pay freezes.”

Unless the district appeals the oversight decision, the state will assign the district a full-time chief recovery officer by Feb. 4.

The recovery officer will be located in Penn Hills and charged with working with the school board, administrators, consultants and a committee that includes residents and officials from neighboring schools to develop and implement a financial plan that incorporates goals for academic success. Officials with the Allegheny Intermediate Unit, which will have a seat on the committee, “look forward” to assisting, AIU spokeswoman Sarah McCluan said.

“It puts you on a definitive course, and I think that’s what’s important. It gives you more tools that you can have that you otherwise might not have,” state Minority Leader Jay Costa, D-Forest Hills, told the Tribune-Review. “There’s going to be tough decisions to be made moving forward.”

The district of about 3,800 students in the sprawling northeast suburb of Pitttsburgh has been flagged as financially flailing for years, including via a scathing audit by Auditor General Eugene DePasquale in May 2016 and an ensuing — and still ongoing — grand jury investigation into the district by the Allegheny County District Attorney’s Office. Aside from financial challenges, multiple audits found evidence of poor internal controls, bad business decisions and alleged mismanagement.

“My 2016 audit of Penn Hills was one of the worst school district audits I’d ever seen,” DePasquale said in a statement. “We found a stunning level of mismanagement and a lack of oversight that led to enormous debt. Penn Hills had years to do something about turning around its financial problems, but it never happened. The financial issues have only deepened, making the state’s action an unfortunate necessity.

The district spent more than it budgeted for five consecutive years while ballooning its debt burden from $11 million in 2011 to more than $170 million by 2016.

Its debt burden of more than $172 million and climbing — mostly due to bond-funded construction projects riddled with cost overruns to build two new schools — is approaching nearly double the amount of the district’s annual budget of about $89 million.

A Tribune-Review investigation found, aside from declining enrollment and charter school competition, factors such as unrealistic expectations, pricey wish lists, poor planning, rampant turnover among key leaders and ignoring expert advice in favor of personal or political decisions contributed to the financial problems plaguing the district.

Business Manager Eileen Navish, who will work alongside the recovery officer, is the district’s fourth business manager in four years.

District seeks funding, ‘creative’ options

Hines said she does not believe that Penn Hills “will get out of this huge hole without some type of sizeable and renewable, nontraditional revenue source” or debt forgiveness. She said she remains hopeful that “creative options” could become available.

Hines also wrote in her message that after years of work and state technical help, district officials “feel confident that, finally, our Business Office records, budgets and forecasts are accurate!”

Costa and other lawmakers helped secure Penn Hills $4 million in state grants in recent years — a $2 million grant in the 2017-18 school year and another $2 million in the current school year.

“While this ($4 million) supplement has been much appreciated, it has not been sufficient to address inflationary costs, and it has not allowed us to make additional debt-service payments beyond those already scheduled,” Hines said.

The grants followed an $18 million short-term loan to fund day-to-day operations in 2015 and at least $5 million in advances in 2016-17.

In fall 2016, the state Department of Education told the Tribune-Review that Penn Hills did “not currently meet any of the criteria under that law.”

The district still did not qualify for a recovery officer, according to state officials in 2017, when the state placed Penn Hills on its financial watch list, which is a step below financial recovery.

By email Friday, Department of Education spokesman Eric Levy said that Penn Hills “was designated for recovery because its finances have continued to worsen, including its fund balances and operating capital.”

He was not able to provide further details as to why the district qualifies for the recovery status now but did not three years ago.

State Rep. Tony DeLuca, D-Penn Hills, said he hopes the recovery officer will expedite a turnaround. But he was a bit surprised by the decision because he thought the district had been making progress while on financial watch, which provides a district with support without mandates.

“Evidently the watch program didn’t work for them,” DeLuca said. “I certainly don’t want to see (the state) take it all over.”

DeLuca said he

does not want to see his local district forced into receivership — a possibility if the recovery process does not go smoothly.

In 2013, the state sued Duquesne City School District and won, placing it under a three-year receivership after the school board rejected their chief recovery’s plan.

Other districts that have undergone financial recovery include Harrisburg, York City and Chester Upland.

The Penn Hills School Board plans to discuss the state’s decision during a finance committee meeting open to the public scheduled to begin at 6 p.m. Tuesday at Linton Middle School.

Natasha Lindstrom is a Tribune-Review staff writer. You can contact Natasha at 412-380-8514, or via Twitter @NewsNatasha.Michael DiVittorio is a Tribune-Review staff writer. You can contact Michael at 412-871-2367, or via Twitter @MikeJdiVittorio.

Natasha Lindstrom is a Tribune-Review staff writer. You can contact Natasha at 412-380-8514, or via Twitter .

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