For schools, Pa. budget fight means money goes to bank loans instead of students
January 11, 2016 12:13 AM
Part of the Milton Hall on the North Side campus of the Community College of Allegheny County.
By Bill Schackner / Pittsburgh Post-Gazette
At Community College of Allegheny County, $31,000 would be enough to send about 10 students to school tuition-free for a year.
But with the college’s state appropriation more than six months late, it’s unlikely that sum will be available for financial aid. Instead, it’s roughly the amount CCAC will be giving a bank to cover interest and fees.
That’s assuming the $8.1 million CCAC has borrowed so far to keep its doors open while Gov. Tom Wolf and Republican lawmakers spar over the state budget can be repaid by Jan. 22, about a month after the college borrowed the money.
If repayment takes longer, the interest owed will grow.
And the college doesn’t stand to recoup it, even after the state budget dispute ends and the college’s 2015-16 appropriation finally arrives.
The loan costs that CCAC and at least one other community college are facing — not to mention school districts and intermediate units across Pennsylvania — pose yet another financial headache for school administrators in a state whose classrooms already are viewed as inadequately funded.
Millions of dollars in those repayments, the product of a political fight, otherwise might have helped a struggling school district hire an extra elementary teacher, bulk up a high school's guidance staff or buy new classroom computers, said Jim Buckheit, executive director of the Pennsylvania Association of School Administrators.
“The things you can’t provide to students in the classroom during the school year are things you don’t get back,” he said.
Exactly how much borrowing has occurred is hard to gauge, but by one estimate this fall, it already was poised to pierce the $1 billion mark.
As of December, K-12 districts and intermediate units had borrowed more than $900 million, according to the estimate by state Auditor General Eugene DePasquale.
Interest payments and fees could be in the neighborhood of $40 million to $50 million, an estimate that is based on the prime rate and how long schools take to return the money, said Susan Woods, a spokeswoman for Mr. DePasquale.
Delayed state budgets are not new in Pennsylvania, but the extent of the wait this time has magnified the misery, said Ron Cowell, president of the Pennsylvania Education Policy and Leadership Center, a nonprofit in Harrisburg.
“It’s costing many millions of dollars that otherwise could be used to support student programs and services, and to create additional educational opportunities at the elementary, secondary and higher education levels,” Mr. Cowell said.
“Even more costly, perhaps in the long run, is going to be the fact that the delay, the unpredictability and the low state support annually are causing [debt] rating agencies to downgrade the status of many educational institutions across the state, including the Commonwealth itself by the way,” he added.
Experts say poorer school districts, already on weaker footing, are especially vulnerable to the budget delay.
After months of further negotiating between the Democratic governor and Republican leaders in the General Assembly, a partial budget was enacted in recent days that, after line-item vetoes, funds school districts through December.
But on Friday, the Pennsylvania School Boards Association sued both sides in the dispute in Commonwealth Court, saying state officials acted arbitrarily in deciding what spending to allow. The association said other areas of state government no more essential than education are operating unimpeded by the lack of a budget, even as money to educate children is withheld.
It called the matter “absolutely shameful.”
At the higher education level, Pennsylvania's state-owned and state-related universities have faced hardships, too. Those campuses have been forced to front millions in expenses including state student grant payments held up by the budget stalemate.
But community colleges, which charge lower tuition and have less financial cushion, are especially dependent on a prompt state appropriation. In addition to CCAC, Butler County Community College was forced to tap $2 million of a $3 million bank line line of credit to support operations. It is using $1.5 million in campus bookstore funds, too.
At CCAC, where nearly a third of the enrollment is low income, a year’s tuition for county residents is about $3,100. The school as of last week reported reserves of about $3.5 million.
Its operating budget last year was $109.6 million, and its state appropriation totaled $32.5 million. This year's appropriation is projected to be the same as last year, based on allocations in a still-incomplete 2015-16 state budget enacted last month.
A spokesman for Gov. Wolf said the funds will be forthcoming, but as of Friday CCAC officials said its money had not arrived.
Had the state met its July 1 deadline to pass a state budget, it would have meant four installments of $8,142,094 each for CCAC, the first due in July and December, said Joyce Breckenridge, CCAC vice president for finance.
The college initially compensated for the missed payments by tapping current operating cash or reserves, and was aided in part by fall tuition revenue, she said. But with December’s payment in doubt, it approached PNC Bank and received a $22 million line of credit.
College officials said the loan’s terms include a one-time payment of $12,100 in legal fees and that the bank estimates repayment by Jan. 22 would yield another $18,811 obligation for interest and fees.
Officials at CCAC including Ms. Breckenridge expressed optimism that funding delayed by the dispute in Harrisburg will arrive. The school has nearly 29,000 credit-seeking students.
“I’m confident our commonwealth is committed to higher education,” Ms. Breckenridge said. “They may have different views on how to get there. I’m confident at the end of the day everyone wants us to succeed.”
Bill Schackner: firstname.lastname@example.org, 412-263-1977 and on Twitter: @BschacknerPG.
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