UPDATED: Auditor General DePasquale Says Dire Financial Report Underscores Need for School Reform in Pennsylvania

July 29 2015
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UPDATED: Auditor General DePasquale Says Dire Financial Report Underscores Need for School Reform in Pennsylvania

Moody’s says PA home to 20 percent of financially worst rated schools in nation

HARRISBURG (July 28, 2015 ) – Auditor General Eugene DePasquale today said a recent report by a credit rating service that ranks several Pennsylvania school districts among the financially worst in the nation underscores the need for fundamental reform of the commonwealth’s education system. 

Moody's Investors Service issued a report last week that listed eight Pennsylvania school districts that received downgraded bond ratings since April. Three districts dropped to speculative status, considered a “junk bond” rating. The downgrades were primarily because of a host of financial stresses including charter school tuition mandates. According to Moody’s, “Pennsylvania school districts now comprise 20 percent of all of our speculative grade school districts.” 

“This is troubling news for school districts and for residents because when bond ratings are downgraded it drives up the costs when schools need to borrow money to repair or upgrade their facilities,” DePasquale said. “Simply increasing funding is not enough. We need to stem the hemorrhaging of school district finances and look for long-term, systemic changes.

“As we find so often in our audits, many school districts face a variety of financial pressures, including tuition payments to charter schools, dwindling real estate tax bases, and the failure of the Department of Education to follow through on construction reimbursements,” he said. 

“With no significant reforms being seriously considered in the legislature to fix these huge problems, more and more Pennsylvania schools could very well slide off the financial cliff. This is not about some investment rating, this is about keeping our schools open and educating our students. Pennsylvania’s economy could be in peril if our education system crumbles. All options must be on the table.”

As evidence of school savings opportunities, the Department of the Auditor General reviewed audits of school districts, intermediate units, and other school entities in 2014, and identified $19 million in potential savings from many sources including: improper lease reimbursements to charter schools; excessive superintendent retirement buyouts and deficient contracts; employee leave payouts; errors reporting student enrollment; tuition waivers granted without proper approvals; and school districts being over charged for transportation services.  

To help address one of the financial strains on school districts, DePasquale hosted a series of public meetings in 2014 and developed a 22-page report on charter school accountability. A copy of the auditor general’s report on charter school reform, Pennsylvania Charter School Accountability and Transparency: Time for a Tune-Up is available here.

The Department of the Auditor General’s audit reports for school districts are available here.

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EDITOR’S NOTE: Moody’s report, “Small Group of Troubled Pennsylvania Schools Unlikely to Recover Soon,” lists the following Pennsylvania school districts:

Eight Pennsylvania School Districts Downgraded to a “Baa” rating or Lower Since March 2015

Mid Valley School District, Lackawanna County 

McKeesport Area School District, Allegheny County 

East Allegheny School District, Allegheny County

York City School District, York County

West Mifflin Area School District, Allegheny County 

Trinity Area School District, Washington County 

Frazier School District, Fayette County 

Penn Hills School District, Allegheny County

In Financial Recovery (state oversight program for distressed districts) 

Chester-Upland School District, Delaware County

Duquesne City School District, Allegheny County 

Harrisburg City School District, Dauphin County

York City School District, York County 

Watch List for Financial Recovery

Aliquippa School District, Allegheny County

Reading School District, Berks County

Steelton-Highspire School District, Dauphin County

Wilkinsburg Borough School District, Allegheny County

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