Chester Upland School District is Out of Money – Can Other School Districts be Far Behind?

 There is some chilling news for public education out of Delaware County. . .  is this a ‘sign of the times’. 

With no help from the state and no fund balance, the Chester Upland School District (CUSD) has announced they have no money to pay their teachers. CUSD has a cash crisis and this past week the district ran out of money. Unless emergency funding arrives immediately, the CUSD will not meet its payroll on January 18 – which means no paychecks for teachers.  Also, means no money for electricity or heating in the schools.  To satisfy the January 18 payroll crisis, CUSD needs $7 million immediately and approximately $20 million to finish the school year.

When Gov. Corbett cut the education budget last year, we know that the cuts hit the poorer school districts the hardest – such as CUSD.  Because CUSD relies on the state for nearly 70% of their funding, the district now finds themselves in the hole by $19 million and unable to disburse paychecks.

In an impressive show of support for the students, the CUSD teachers resolved through their union, to stay on the job as long as they can.  As altruistic as their intentions, how long can the teachers realistically work without a paycheck.  Still it shows a remarkable level of compassion from the teachers and indicates ‘who’ really cares about the students.

In mid-December, the CUSD school board and teachers union begged Corbett and PA Department of Education (PDE) for an advance 2012 emergency funding of $18.7 million — $17.5 million for basic education subsidy plus $1.2 million for special education funding. (click here  to read CUSD letter).

However, on December 24, CUSD received word from Harrisburg that their advance request was denied.  It was suggested in the response from PDE that the CUSD’s economic crisis was a result of their own making — suggesting that the school board had mismanaged the school district’s operations and finances.  As a result, regardless of their cash crisis, the letter states that no help will be coming to CUSD from the state.  (click here to read PDE’s response to CUSD).

Before the start of the 2011-12 school year, CUSD already laid off 40% of their professional staff and 50% of their unionized support staff.  Because of those actions, the teachers now have class sizes exceeding 40 students. If emergency funding does not arrive by January 18, CUSD may be forced to close schools.

As minority chair of the Senate Education Committee, Sen. Andy Dinniman had harsh words on Friday for the Corbett administration’s handling of the CUSD financial crisis, claiming that PDE is set on a path to destroy public education in the Commonwealth and an orchestrated attempt to fund charter schools versus public schools.

In his press release, Dinniman indicates that Corbett’s unwillingness to help CUSD is politically motivated, suggesting, “Is it just a coincidence that the operator of the for-profit charter school serving the students of this district [CUSD] is also one of the biggest Republican contributors in the Commonwealth?’”

Dinniman goes on to say, “The callous action to not advance the basic funds to allow the education of students in Chester Upland is not school reform; it is a purposeful and harmful attempt to destroy public education. No matter what side of the education you are on, all of us need to stand up to make sure that the basic funding continues to be available for the students in this district. We must stand as one to assure that the politics of education in Pennsylvania is not done on the backs of these students and these teachers.”

Sharing the sentiments of some of the T/E school board members, Dinniman looks to PDE for the answers. However, I don’t know how realistic this is – if PDE is willing to allow the Chester Upland School District to implode why should we think that the state will help the healthier, more financially secure school districts.  The school districts, like T/E  that are sitting on hefty fund balances are not certainly not going to find themselves at the front of the line, if and when, the state decides to offer financial assistance.

Several school board members have suggested that the financial problems facing our school district, and every other district across the state, is a problem that needs fixing in Harrisburg.  I probably would not disagree that the state needs to help.  However, based on CUSD’s dire financial situation, I think that the ‘hoping for Harrisburg help’ position may prove futile and unrealistic.

It appears that Corbett and the PA Department of Education is willing to throw the financial crisis back at the feet of the local school districts and their taxpayers.

Please, before anyone jumps in and suggests that I am somehow comparing T/E School District to Chester Upland School District– I am not.  These two school districts represent opposite ends of the spectrum in probably every way . . .  from property values to student test scores.  And whereas, CUSD has no fund balance, our school district has one of the largest fund balances in the state.

BUT . . . realistically, how many school districts ‘away’ from a Chester Upland School District cash crisis is T/E? 

Due to PDE funding cuts and looming PSERS costs, all the school districts across the Commonwealth are sitting on the edge of a cliff.  Sure, T/E and other local school districts with their significant fund balances, may be at the end of the line to fall off the cliff but, . .  .  how far off is that fall?

15 Comments

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  1. Pattye,
    .
    It appears you bought Dinneman’s politically motivated story hook, line and sinker. Usually, your posts are neutral with both sides being presented equally. I would have appreciated a few statements from the PDE letter to counter Dinneman’s tirade. The DelCo Times has, what I would consider, a fair representation of both sides. http://www.delcotimes.com/articles/2012/01/05/news/doc4f05f7108b101471744651.txt

    I have to disagree with this statement.
    .
    When Gov. Corbett cut the education budget last year…
    Corbett did cut the higher education budget, but not the K-12 portion. If anything, there was a slight increase in state funding for K-12 education. What did disappear were the temporary federal stimulus funds. School districts were warned that the stimulus funds were temporary, but some districts like Chester Upland used the funds irresponsibly.
    .
    Please consider my comments a minor complaint about a very valuable service you provide.

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    Pattye Benson Reply:

    Thanks Keith for your comments.

    I’m sorry if it appeared that I “bought Dinniman’s politically motivated story hook, line and sinker” — actually, that isn’t the case. I know that school districts knew that the stimulus funding was temporary and from what I can tell, CUSD lacked fiscal responsibility when it came to their own planning and spending. The point I was trying to make was if CUSD (even considering they acted irresponsibly) appears to be ‘on their own’ to figure out their financial mess — why should T/E or any other school district expect that the PDE is going to help bail them out. Sure, I think school boards can suggest that the problems (especially PSERS) lie in the hands of Harrisburg to help fix but I don’t think it’s realistic to assume that PDE will be providing that much help.

    I’m suggesting, that concurrently to any help school districts may (or may not) get from Harrisburg in the form of ‘Plan A’ — that the school board of T/E (and all other school district boards) better be working hard on their own ‘Plan B’ because that may be all we have in the end.

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  2. Bob Byrne, editor of TE Patch left the following comment to this post online at his site, te.patch.com

    This post frames the dilemma facing school districts in Pennsylvania well.

    Faced with huge pension costs that they had no control over, local school districts, including T/E, must now meet those costs. On the other side of the coin is political reality. There is little sympathy outside of Southeast Pennsylvania for the problems of Chester-Upland or especially Philadelphia.

    The Governor ran on a platform of shaking up the economic status-quo, which was a popular political message until it hits home. Now local districts are left to cover the pension costs that are too high to bear in most local districts or make difficult spending cut decision.
    State reps may be caught in the middle with a governor pushing to cut state spending and local voters demanding a restoration of the funds. And there are the unions. They did their job and got what they were able to negotiate for their members. Now it is coming back to bite some as teachers in Upland may not get paid at all due to a lack of funds.
    A big picture then emerges of every man (or in this case constituency) for himself. A daunting picture indeed as the T/E Finance Committee and T/E teachers union begin work on a new teacher contract.
    As Benjamin Franklin famously said at the singing of the Declaration of Independence: “We must all hang together, or assuredly we shall all hang separately.

    Perhaps it’s time for all Pennsylvanians to find a way to take a broader view of the very complex issues of school funding.

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    Township Reader Reply:

    Unions do not negotiate. They hold districts hostage. Now the hostages are dying….and they have no way to stop it.

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  3. One thing I have read about Chester Upland is that 45% of its students are in charter schools. Possibly we are seeing the inevitable result of siphoning off the more motivated children of more motivated parents?

    Bob is quite right to highlight the “big picture” problem. Advocates of unfettered markets fail to see that the system is set up to favor the already well-off. Just take simple arithmetic – a 3% salary increase would hardly be noticed by someone earning $1 million a year, yet that $30,000 would give a 25% increase in wages – and quality of life – to 4 people earning minimum wage.

    Anyway, back to the seemingly intractable school funding problem. No-one took me to task regarding my “Fund Balance for PSERS deferral” idea, which may be good, but runs into the realities of Act 1 – under which there is no mechanism to defer the Exceptions. The only way to, say, spread out the 8 year PSERS 6.2% tax increase evenly would be to use some of the index increase in the last 3 years.

    I’m thinking more and more that there is just no way to use the Fund Balance for anything other than one time expenditures. At some point any fund balance used for operating expenses would have to be made up by tax increases, and the only way to increase taxes beyond the index/exceptions is through referendum.

    (Note that one other high risk approach would be to use up the Fund Balance for a couple of years and have a referendum between a large property tax increase and an EIT, which would cost TE taxpayers in aggregate $3 million less. We’ve seen how hard this would be fought!)

    So, maybe it’s time to either a) designate and use most of the $30 million for capital. or b) repay some of the debt that’s costing us 4 or 5% a year. The $15 million for “PSERS stabilization” is meaningless.

    Then we have to face the real world fact that expense growth (beyond PSERS and special ed) has to be limited to the Act 1 index plus any assessed value increase. As I noted elsewhere, the PSERS increases can be manageable: Exceptions equivalent to tax increases of (merely!) 1.2%, 1.4%, 1.4%, 0.8% and 0.7% over the next five years and then 0.2% for 3 years. (PSERS contributions assume “market returns” of 7.5%………)

    (Note: the Index is the average of “the percent increases in the Pennsylvania statewide average weekly wage and the Federal employment cost index for elementary/secondary schools”. The higher the historic wage increases, the higher the future ones will be ….)

    What that means for employee compensation is that there is no foreseeable way to increase the matrix salary levels. Any taxpayer funds available for that are going to the pension contribution increase. (Note that those at the top of the matrix are heading for pensions much higher than the current $24,000 a year highlighted by teacher advocate Kris Graham at the least Board meeting).

    We know that the benefits contribution needs to be restructured. If there is meaningful progress on this in the negotiations, then perhaps there will be some funds to allow step movement to benefit those at the bottom of the scale.

    Hopefully the Board will be more strongly linked to the negotiations than is implied by the make-up of the team. The Administration members will certainly have some conflicts. I certainly hope that the public gets a chance to assess the implications before anything is signed. Maybe we can talk about the Neshaminy strike later on here, too.

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  4. Ray,
    .
    I was hoping you were smart enough to know the deferral idea would have a small probability of working. I had started a response, but didn’t have the patience to explain and simplify the Act 1 Index limitation problem.

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  5. Ray — good points but I don’t think the readers are too engaged in the details. And I’m sad/glad that you see that the fund balance can ONLY be used responsibly for one-time issues. It SHOULD be used for PSERS stabilization, but given that the board can claim that and still apply for the exception is silly — and disingenuous on their part. The fund balance and the way they use it is exactly why there should have been far more debate on the last bond issue — when the presentation was made, I asked KM and he told me point blank the presentation was only for information and there was no way the board would borrow more money. Silly me — I thought the “financial expert” on the board would be able to control that outcome. “Cheap money”….but money that clearly should have been fund balance sourced.
    Your comment that the benefits contribution needs to be restructured is true, but as I have posted and given up saying (because no one listens and the board doesn’t care), it will not happen. Educators consider paying a bigger contribution of a defined benefit to be the most they can ask. Once the administrators gave up the defined contribution, where would the energy to find more affordable plans come from? The whole purpose of the admins having a defined contribution was to spur them to push personnel to find creative plans — balancing costs of coverage vs. costs of insurance….sigh.

    I think one thing should be explained: when the board looks to Harrisburg for help, the only help they really reference is PSERS contribution changes in the planned numbers. They have claimed (and are obviously correct) that if TESD is stressed by paying the increasing required contribution, districts statewide will be more so. THAT’s the help they will expect and no doubt have to get.

    When GWB and Ted Kennedy put in “NCLB”, educators in the know saw that it was ultimately going to usher in charter programs. TESD spent significant strategic planning resources to educate the community. Again, no one seems to have believed it, and here we are. In the first strategic planning session in TESD in the 90s, it was suggested that TESD should charter itself and get free of state mandates. Committee member Dariel Jamieson ironically stepped up to suggest that what was good for TE was good for the state, and it would be unworthy of us to bail on the system — we should fix it from within.

    Well — within didn’t work. And now we have a board that doesn’t even want to face it.

    [Reply]

  6. TR,
    .
    I need some additional clarification on this statement –
    They have claimed (and are obviously correct) that if TESD is stressed by paying the increasing required [PSERS] contribution, districts statewide will be more so. THAT’s the help they will expect and no doubt have to get.
    .
    Do you forecast that the PA legislature will provide additional money, PSERS or otherwise, to help districts? I see the opposite. Corbett changed the PSERS exception calculation last fall to limit the dollars that can be claimed and Corbett has made it clear that no help is coming to CU to bail out the current board. He’s tightening the noose for those districts that have mismanaged their finances.
    .
    The “stress” you mentioned above is caused by the basic decision boards must make. They have three options.
    1)They can satisfy the union demands for higher salaries and continued lavish benefits by increasing taxes.
    2)They can keep tax increases reasonable by limiting salary increases and restructuring benefit plans (as you have suggested).
    3)They can keep tax increases reasonable and give into the union salary and benefit demands by cutting educational programs.
    Corbett has made it as difficult as possible to chose the first option. The board and the union will have to decide which of the last two options to choose.
    .
    I see the Neshaminy board is going for option #2.

    [Reply]

    Township Reader Reply:

    No one will give up any money…..what I believe will happen is what always happens — they will kick the can down the road by changing the “assumptions” associated with setting the PSERS contribution rate.

    Under Act 1 (or whatever it’s called nowadays), option 1 is not really relevant I think. The board cannot raise taxes enough to satisfy union demands. and maintain the program. The “stress” really is about state rules for local control. I’m not sure Corbett has anything to do with it. Nothing has changed around here except the country is in a pretty big recession (we keep calling it that) and not enough people/businesses are buying property (transfer taxes), building property (interim taxes) and improving property (assessment appeals taking it the other way).

    Option 2 requires more creativity than our board will apply. . Hate to be a cynic but the level of understanding is just not there — and the initial suggestion that the board won’t be negotiating bears out the “like me” mentality of the board. And by the way — I understand that. The Dem materials about protecting our kids in the last election said what everyone invested in the schools was thinking — we have a good system — it’s not broken so why change and why take the personal public scrutiny and backlash if they do. Board members serve for free and give countless time and effort. Why buck the system?

    So #3 is the most likely outcome — at least until they figure out that unless they at least threaten that, the union demands will not ease. And they HAVE to restructure benefits — but the system is not only not likely to do that, there is no evidence that they have any incentive to do so…. If they threaten programs (i.e., LAYOFFS) then and only then will the teachers have to figure out who/what goes — younger teachers furloughed or older teachers with wage freezes.

    Too much thinking. Bottom line for me is that the state put every district in jeopardy by doing property tax reform — and games resulted in tax limits that do not come with the options required to cut costs (tenure, economic furloughs etc). Sorry for the long answer. Or the long non-answer.

    Ironic huh?

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    Kevin grewell Reply:

    Township reader is right about one thing – act 1 limits on tax authority without corresponding reform truly aimed at giving school districts the tools necessary to control costs – this is the real genesis of the problem. As I have said many times, this “leveling of the playing field” needs to be done by the state legislature. It is much more than simply providing more Monet for psers.

    I can understand why many people conclude there is an anti-public education agenda- cap taxes, but do nothing about unfunded mandates or board bs. Union power balance.

    [Reply]

    Kevin grewell Reply:

    “Monet” should read money and bs. Should read “vs.” damned I – phone!

  7. Township Reader is mistaken, I was not at the meeting he references so could not have made the comment he attributes to me. Ironic isn’t it?

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  8. It is not meant to criticize Ms. Jamiesen. I am not mistaken — and she can be proud of the comments as it was part of the process of strategic planning. Sorry if the context makes it sound bad. “Ironic” doesn’t apply. Your comments were earnest and well said — probably stuck with me because I have watched the process deteriorate as to charter vs. public support across the country. The person who suggested that TE charter itself said it to be provocative. I apologize that I attributed the comment to you — it was not necessary to be part of the anecdote. You were a member of the original (1996?) strategic planning process I believe. Went on a retreat and everything. Your comments were absolutely correct — the point is that the state and fed government don’t understand just how complicated school governance is — so keeping TE a public school is a worthy goal, but one that’s not working. Ironic is not applicable.

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  9. The problems in the Chester Upland School district have nothing to do with unions. Governor Corbett earlier in the year visited the Chester Charter School and said it was the face of future education in the state.He is anti public education and he has demonstrated it numerous times.If the Chester School District was more prudent and fiscally responsible it would not be enough to stem the loss of public money and resources going to a main line multimillionaire who runs schools for profit.

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  10. Hmmmm….. The Governor won’t bail out a school district that happens to have a charter school competing with it. A charter school founded by his top political contributor. Sounds like politics as usual. Disgraceful to use the education system as a vehicle for self promotion…It shows the integrity of those involved. Teachers working for free so some of the poorest children in PA can get an eduction. Doesn’t sound like the money hungry people media, politicians, and personal investors claim them to be. Dig into any “non-profit” charter school like Chester Community Charter Schools and you will see how these entrepreneurs manage to siphon tax dollars into their pockets.
    Bottom line is Public Education has been chosen as the battleground for those wanting to make a profit and those seeking political power. It is a disgrace that the middle class continue to fall for all the rhetoric thrown out by these people and the media. You want to see what really goes on in public schools…shadow a teacher for a week. Your eyes will be open to the reality and realize how skewed the media spin is.
    This isn’t a Republican vs. Democrat issue, it is a bipartisan issue that needs to be cleaned up by the voters. Keep education out of the political battleground.
    The victims will always be the children and the teachers – THE UNIONIZED TEACHERS – will be the ones sacrificing the most to defend them.

    [Reply]

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