PA School Districts' Credit Ratings Threatened

Thanks to the nature of Pennsylvania’s charter law and underfunding from the state, the expansion of charter schools in recent years has debilitated the finances of Pennsylvania’s school districts.  As a result, by creating more educational options for a small share of students, state policy is undermining the conditions where most students go to school.  And nowhere has been hit harder than the School District of Philadelphia.

A new report from Moody’s raises a red flag about school district credit ratings finds that the charter boom increases districts’ debt and puts their credit rating at risk, and Philadelphia is the prime example.  The report points out that in Philadelphia, charter enrollment has skyrocketed from four in 1997 to 80 in 2012; a development which has had terrible consequences for the District’s financial well being.  The report points to many bleak trends without even mentioning the complete elimination of $266 million in state aid granted to the districts with the highest levels of charter enrollment.  Of course, given high charter enrollment Philadelphia was hit hardest, losing $110 million in charter funding in 2011 and none of it’s been replaced by other state aid.

“Pennsylvania requires school districts to use a portion of their revenues, including their basic aid allocation, to fund charter school tuition on a per-pupil basis.  As the result of this formula, the district’s revenue outflow to charter schools grew from $126 million, or 7.9% of General Fund expenditures, in 2003 to $533 million, or 23.7% of General Fund expenditures, in fiscal 2012.  With charter-related costs rising and state and federal revenues down, financial reserves turned negative.”*

But Philadelphia isn’t the only school district feeling the charter budget crunch.  In the York City School District, “from fiscal 2009 to fiscal 2013, charter school tuition expenses rose by $18 million, while state aid rose less than $6 million.”  This forced the district to layoff 20% of the workforce.

The problem with Pennsylvania’s model is the savings from a student leaving a district is less than what is being paid to the charters.  As Moody’s notes, “Shifts in student enrollment from district schools to charters, while resulting in a transfer of a portion of district revenues to charter schools, do not typically result in a full shift of operating costs away from district public schools.”  That difference is what caused York to layoff one-fifth of their employees.

You would think with a commitment to expanding charter schools, the Governor and legislature would do something to help school districts contend with charter costs.  When the Governor cut nearly a billion dollars from public education, he and the state legislature eliminated charter reimbursement, which refunded districts about a quarter of what they paid to charter schools.  Think of the financial struggles the Philadelphia School District has battled this year.  Now take a quarter of that $533 million they paid out to charter schools and give it back to them.  Suddenly, a good portion of the District’s financial problems are solved.

Now as the legislature is debating charter schools again, but they’re still unwilling to pay for stranded costs school districts must absorb as charters grow.  Senator Smucker has offered SB 1085, which would make charter expansion much easier in Pennsylvania—further putting a burden on our school districts—without offering to pay for it.  A major expansion of charters without a replacement of the charter reimbursement will have a crippling effect on districts statewide.

The truth is that as charter school attendance continues to rise—and it will—and the state continues to refuse to shoulder some of the burden, each year will be worse for school districts where the charter growth is most pronounced. 

*Moody’s, Special Comment: Charter Schools Pose Growing Risks for Urban Public School Districts

Rising Poverty Poses New Challenges for Delaware County School Districts and the Future of the County

Public education in Delaware County is a study in contrasts.  It has a countywide graduation rate 3% higher than the state average, but lags behind the other Southeastern Pennsylvania counties.  Delaware County’s median income is significantly above the national average, yet one in three students live in low-income households—and the share of low income students is rising.  Delaware County is home to some of the highest performing districts in the state, but nearly 25% of students in Delco are below grade level in reading and 27% are below grade level in math.  The annual per pupil spending in Delaware County’s top district is nearly two-thirds higher than in its lowest spending district.  One thing is for certain, without a fair funding formula for public education, Delaware County will remain divided between the haves and have-nots.

Chronic underfunding and rising poverty presents new challenges for school district and county leadership.  Radnor Township School District is a case in point.  There, median family income is three times the national average and about 90% of all students scored proficient or advanced on the PSSA math exam.  But that number drops to 60% or below for Black and economically disadvantaged students.  In the Chester-Upland School District, with highest concentration of low-income students, less than a third all students tested proficient or advanced on the PSSA, both in the math and reading sections.

PCCY’s analysis on school funding found that if Pennsylvania were to reinstate the funding formula adopted in 2008 by the Pennsylvania state legislature, Delaware County School Districts would receive more than $45 million in additional funding in this year alone. 

Unfortunately, right now that seems like a remote possibility.  Pennsylvania now ranks as one of only three states without a funding formula for education.  Without knowing how much money is coming in from the state year-to-year, school districts cannot properly project their budgets or target resources to students who need extra help.  Add this to the billion dollar cut from public education in 2011, and you have a situation where more than 93% of school districts in Delaware County currently receive less state funding than they did in 2010 and are in the dark as to whether that will change.

Money alone will not solve all of Delaware County’s educational issues.  Performance disparities along racial and economic lines will take a concerted effort to close.  But as long as we shortchange the County by nearly $50 million a year all while student needs increase, those gaps will continue to grow.


Chart Source: Pennsylvania Department of Education

In PA, Political Power Plays Biggest Role In School Funding

A lot has already been made about the nearly $1 billion the Governor and State Legislature cut from public education two years ago, and their failure to restore the cuts.  But the true effects of that budget go well beyond cuts.  Because Pennsylvania is one of three states without a funding formula, only $129 million of those cuts have been replaced.  This has left school districts to fend for themselves. 

Since the Governor and key members of the Legislature signed pledges to DC lobbyists to rebuff any and all tax increases regardless of the wellbeing of the Commonwealth, education funding has been slashed and school districts have been on the hook to raise taxes. 

To make up for the $74 million cut from the four suburban counties since 2010, 53 out of 63 districts have raised property taxes.  Each county has seen at least 70% of districts raise taxes once, at least 60% raised taxes twice.  Every district in Chester County has raised property taxes.

Of course, these tax increases haven’t been enough just to reinstate a public education funding formula; we need a fair funding formula.  Quite frankly, the current system is anything but fair.  The primary determinate in funding isn’t need but power of representation. 

Let’s take, for example, the $14.65 million the legislature gave out in “English Language Learner Supplement” grants.  This nearly $15 million was split between the Reading, Lancaster, York City, Lebanon and Allentown School Districts.  How they qualified is interesting, given that there were ten districts with a higher number or higher share of ELL students that didn’t see any money from the state.

Philadelphia, Norristown or Upper Darby all have more ELL students than those districts receiving grants.  In the last three years (2008-09 through 2010-11) of the old funding formula, Philadelphia, Norristown and Upper Darby combined to receive $116,644,386 for ELL students, which is $116,372,446 more than they’ve received in the three years since.

So how did the money end up where it did?  Four out of the five districts that got ELL grants are represented in the PA House and Senate by key members of the majority party.

If ever there was a reason to put into place a fair funding formula this is it.  Education in Pennsylvania—specifically in Southeast PA—cannot improve when funding decisions are made on appeasing high-ranking members of one party. 

Whether your child’s school is adequately funded each year should not depend on how well your legislator was able to get a piece of the budget pie.  Money should go where it is needed, plain and simple.  Until that is the law, things will only continue to get worse. 

Who Brought Home ELL Funding in 2013