Lackawanna County school leaders worry about impact of Pa. budget impasse

Public school leaders in Lackawanna County are concerned the lack of payments from a late state budget will affect their operations.

Administrators say they are relying on other sources to fund their districts but worry the four-month-late budget will cause them to make decisions that could affect students, faculty and taxpayers.

Old Forge School District Superintendent Christopher Gatto outlined the struggles of his district in a letter to Republican lawmakers last week. He said the approximately $4 million in state funding the district hasn’t received from the state represents roughly 40% of its annual state allocation.

“While the Commonwealth continues to earn interest on funds that have not yet been allocated, districts like ours are being forced to take out Tax Anticipation Notes just to make payroll and cover operations,” he wrote. “We are paying interest on borrowed money that we never budgeted for, while the state benefits from holding the very funds owed to our students. The state’s accounts are accruing interest while small districts like Old Forge are draining reserves and borrowing to stay open. Every day that passes without resolution deepens that inequity and drives up local costs.”

Public entities like school districts have the ability to take out a specific kind of loan, called a tax revenue anticipation note, that is paid back with future tax revenue. They typically are paid back within a year.

Gatto said in the letter that the district’s limited tax base and rising needs make raising $4 million impossible, adding 23% of students require special education services, there are 60 English language learners in the district, and safety and mental health concerns are growing. He said the district is delaying intervention programs, freezing positions and deferring maintenance to remain solvent.

“These choices weaken the very foundation of public education that both parties claim to defend,” he wrote.

Gatto said in a phone conversation Wednesday that the district has had to prioritize paying salaries, benefits and utilities and hold off on paying bills from vendors that are nonessential.

“We’re working through the bills and we’re trying to pay them as we can,” he said. “but there are a lot of vendors that we have had to put on hold and not pay them.”

He said officials have explained the lack of a state budget to vendors and most have been understanding. Officials are also looking at freezing professional programs for teachers that take place after school.

To stay afloat, the board agreed to take out a $1.5 million tax anticipation note last month to fill the void left by the lack of state funding. Gatto said that money will get the district through to the holiday season. He worries the district will have to either take out another note or increase the amount in the current one if a budget isn’t approved before then.

“The one thing that is completely discouraging is that we’re not hearing much coming out of Harrisburg, and right now the money that they have that should be coming to us is earning interest in Harrisburg’s coffers while we sit here and we have to take out tax anticipation notes and pay interest on those that we did not budget for,” he said. 

Lakeland School District, which is waiting for around $3.4 million from the state, also took out a $3 million tax anticipation note.

Superintendent Marc Wyandt said revenue from the district’s fund balance and local taxes has allowed officials not to cut programs but he anticipates they may have to consider doing so if a budget isn’t approved.

“Should this drag on further, at some point in the not-too-distant future, we will definitely be curtailing programs that will impact opportunities for our students,” he said. “The real impact is that our students only get one senior year or one junior year and a lot of these opportunities, while they may be recurring in school districts, students themselves may only be getting one opportunity to participate in a lot of these programs, and so anytime you enact a freeze or a cut to programs, the impact on students is profound.”

Wyandt said only supplies that are critical to school operations are being purchased and the district is not making purchases beyond that.

Administrators in the Valley View School District said real estate taxes, which are received between August and December, are keeping them and other districts in the state afloat.

“We’re getting all of our real estate tax money now but the concern is there’s no idea when this budget is going to pass and how long it’s going to go on for,” Business Manager Corey Castellani said. “Once we start hitting the point where the real estate money starts slowing down, I think a lot of school districts are going to be in the same situation and it’s really going to start affecting the day-to-day operations of the district.”

Superintendent Brian Durkin said if the state budget isn’t approved, they will have to look at prioritizing funding for education and safety of students and hold off on nonessential items like field trips.

“Right now we’re keeping everything status quo, we’re doing everything tight, we’re looking at things coming through, is it critical for the education of our students,” he said. “We’re doing no wasteful spending whatsoever.”

In the Scranton School District, administrators already cut after-school and before-school tutoring for students and professional development classes for teachers at the start of the school year, and they are not authorizing overtime. This will ensure the district can keep paying its teachers and keep the lights on through the end of the calendar year.

Democratic Gov. Josh Shapiro proposed a $51.4 billion budget in February, up from $48.3 billion last year. Much of the proposed increase accounts for rising Medicaid costs, along with continued aid for poor school districts and more money for mass transit. However, Republicans who control the state Senate have balked at such an increase.

While it isn’t the first time state lawmakers have missed the June 30 deadline — Pennsylvania’s budget has been late every year since Shapiro took office — this year marks the longest impasse during the governor’s tenure. Recent impasses have been resolved by the fall, allowing schools to obtain state funding by the time students return. However, this year’s stalemate has stretched two months into the school year, forcing an increasing number of districts to make difficult funding decisions.

The impact is being felt especially hard in districts that serve poorer areas, which have less robust tax bases and tend to get a bigger percentage of their budgets from the state.

Both Wyandt and Gatto are calling on the Legislature to pass the budget. Gatto concluded his letter to lawmakers urging the state Senate leadership to pass a continuing appropriation or interim budget, to immediately release education funds and fulfill the 2016 Commonwealth Court mandate by fully implementing the adequacy formula that corrects funding inequities.

Wyandt said the district is calling on the Legislature to approve a budget that fairly funds all school districts and includes priorities such as cyber charter school reform.

“At the heart of this is students who are impacted in a profound way by this budget impasse,” he said.

Spotlight PA contributed to this report.