Teacher Furloughs, But No Tax Increase For Financially-Distressed Penn Hills School District

Jun 29, 2019

Penn Hills School District leaders say the district is in good shape for the next school year thanks to a last minute funding increase from the state.

The board unanimously approved a budget and a long-term financial recovery plan Saturday during a rescheduled meeting. The board had postponed its meeting this week as it waited for the state’s general assembly to approve a budget.

In a last-ditch effort, Democratic state Senator Jay Costa secured more than $3 million dollars for the cash-strapped district during this week’s budget negotiations. The move helped the school board avoid collecting more tax money from residents who already pay one of the highest tax rates in the county. The board also re-appointed six of the 35 employees that were furloughed last month. 

Superintendent Nancy Hines said she is thankful for the support from Harrisburg, but cautions that this is only a one year reprieve.

“We cannot guarantee in this moment that this will continue. What is added in this year, this extra, will have to be accounted for and we will have to make it up in the next year,” she said.

Several of the nearly 50 community members at the meeting thanked the board for finding a way to sustain the financially-troubled district for at least another school year. 

A February Allegheny County grand jury report found that Penn Hills was $172 million in debt. The report noted that its financial position is “catastrophic” and that it is unclear how the suburban district would continue to operate, let alone recover.

The financial downward spiral began in 2009 when the board approved a costly construction plan to build two new schools. At the time the suburban district was already operating at a deficit and enrollment was in decline. The report called the plan an “egregious example of abuse of public trust.”

Before that report, the dire state of the district was highlighted in Pennsylvania Auditor General Eugene DePasquale’s May 2016 evaluation. That report found that the district’s outstanding long term debt grew from under $11 million in 2009 to $167 million in 2015 and the General Fund decreased from a positive $3.4 million in 2010 to an $18.8 million deficit in 2015.

DePasquale said that at the current rate it would take until 2043 to pay off the district’s debt.

Dan Mastook agrees that this work is going to take a long time. He is the chief recovery officer for the district appointed by the state to help dig the district out of that debt after Penn Hills was put in financial recovery status in January.

Mastook said Saturday that restructuring staffing was part of the solution. He called it “rightsizing” the workforce. Until now the district hasn’t kept pace with reducing the staff size as enrollment continues to decrease.

He said class sizes for the district’s 3,400 students will remain the same and in some cases will be smaller. As for the financial plan the board unanimously approved Saturday, Mastook said leadership has to implement the initiatives he has outlined.

“There is some additional savings and additional reimbursement for the district if we are diligent in the next 12 months when we get ready for the 2020-21 budget,” he said noting that there is still “a lot of work to do.”

Hines said the recovery plan is not perfect, but at least the district knows how to move forward.

“The implementation will not be flawless,” she said. “But the key is we are going to have ongoing review, monitoring and adjusting. Beyond that we will have to have discipline and courage to implement that plan with fidelity.”

The February grand jury report did not recommend criminal charges and instead attributed the financial distress to incompetence. It also blamed the state department of education for failing in its watchdog role as the district overspent for years.

Board president Erin Vecchio said the state’s issuance of bonds to pay for the construction projects nearly a decade ago was similar to “predatory lending”.

“The state should have to take that [debt] because they knew we could never pay back that money. The federal government should have never given us the bonds for those schools because they knew we couldn’t pay back that money. Somebody needs to be held accountable and until they are, the taxpayers of Penn Hills are screwed,” she said.  

The next step in the process is to deliver a copy of the financial recovery plan to state Education Secretary Pedro Rivera for review. If he approves the plan he could also approve transitional loan funds to help the district make changes indicated in the plan.

Mastook said as long as the board passes budgets where revenues exceed expenditures, “we have a chance here in Penn Hills.”