White Paper: Sounding the Alarm
Pennsylvania Students in Harm’s Way as an Increasing Number of Pennsylvania School Districts are at Risk of Financial Distress
Pennsylvania’s public schools are in the midst of their toughest fiscal crisis since the 1930s. Following the nearly $860 million in cuts in 2011-12 and the proposal of $100 million more for next year, districts are being forced to make increasingly difficult decisions about how to meet the education needs of their students. Many of these decisions will result in cuts to programs necessary to provide the challenging, well-rounded, and comprehensive curriculum required for success in the 21st Century global economy. These cuts are not in the best interests of America’s students, therefore risking the future of our children.
Recent reports revealed that some school districts, such as Chester Upland and York City, had insufficient cash on hand to meet payroll. These are only the first instances of districts pushed to the breaking point. More will follow. If legislative action isn’t taken now, the financial viability of a significant number of school districts will be threatened by 2014. Pennsylvania could do a disservice to an entire generation of students who will not get a second chance.
- Long-standing issues in the funding of public schools, namely an inequitable funding formula, were compounded by the onset of the recession. Districts once considered financially strong are at risk of financial distress, and those that were struggling prior to the recession are in imminent danger of becoming insolvent.
- A statistical model created by John Trussel and Patricia Patrick and recently published in the refereed Journal of Education Finance, along with data on district fund balances, were used to assess the financial weakness of Pennsylvania school districts. We found that the school districts showing the greatest financial weakness by these measures had fund balances averaging 1.27 percent of total expenditures. The compounding effects of other factors specific to Pennsylvania school districts including payments to charter schools, pension costs, declining tax bases and rate limits, and state funding cuts are discussed.
- Districts of all types across Pennsylvania have adapted to cuts to education funding by depleting reserves, raising taxes, and/or cutting programs. In nearly every school district, professional and support staff are being cut, threatening school districts’ ability to provide students with valuable programs including, but not limited to, full-day kindergarten, tutoring, elementary and middle school languages, and the arts.
- Now more than ever, legislators must realize that money matters in education and that education matters in Pennsylvania. As Rutgers professor Bruce Baker notes in his 2012 review of the research on funding and school performance, “In short, money matters, resources that cost money matter, and more equitable distribution of school funding can improve outcomes. Policymakers would be well-advised to rely on high-quality research to guide the critical choices they make regarding school finance.”
1. Enact a Sound, Rational Formula for Funding Public Education
- The formula for funding public education in Pennsylvania should be adequate, equitable, accountable, and predictable. In the short term the Commonwealth should restore the funding cut to public schools and distribute those funds in accordance with a formula that focuses on equitable distribution.
2. Enact an accountable funding formula for charter schools
- If the state is going to authorize cyber and other charter schools, it should pay for them.
- The state should assume responsibility for payments to charter schools, rather than redirecting much-needed resources from public schools that serve all children.
3. Release districts from revenue limitations of Act 1
- The Legislature should suspend the referenda requirement until the state adequately and equitably funds public schools.
4. Keep the promise of the new pension law, Act 120 of 2010
- The General Assembly should keep the promise of Act 120 of 2010. Policymakers should never again create pension debt for the Commonwealth and for school districts by deciding not to pay actuarially determined and statutorily required employer pension contributions.
5. Seek new revenue sources
- Policymakers should use the Coalition for Labor Engagement and Accountable Revenues (CLEAR) report, “A Better Way for PA: Restoring Pennsylvania’s Fiscal Health through Fairness, Efficiency and Innovation,” to begin discussions about efficiencies, cost savings, and revenue generation.