Judge allowing Wilkinsburg schools to take out $3M loan
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An Allegheny County Common Pleas judge has granted the Wilkinsburg School District permission to borrow up to $3 million to get the financially struggling district through the rest of the school year.
The district petitioned the court to approve the loan last month, saying it would "not be able to meet its payroll or debt service obligations" beginning in March. The petition cited a significant hike in payments to charter schools as one source of its financial woes.
But the approval Wednesday from the courts is "just the first step," district solicitor Matthew Hoffman said. "The board hasn't yet determined whether or not to take out that loan."
Typically, Mr. Hoffman said, districts faced with a mid-school-year funding shortfall have to take out loans to cover expenses due to "an unforeseen significant expense."
Wilkinsburg this year has faced both unanticipated expenses and a loss of revenue, he said.
The district saw the number of students enrolling in charter schools rise from 306 in the 2011-12 school year to 342 this school year, resulting in a $630,000 increase in charter school tuition payments, Mr. Hoffman said.
The Department of Education recalculated in January what the district is required to pay charter schools per student, causing an unexpected mid-year increase in the district's bills, Wilkinsburg assistant business manager Philip Martell said.
That resulted in an additional $950,000 expense, Mr. Hoffman said.
"It's a very difficult situation," superintendent Archie Perrin Jr. said. "Because of the funding issues and sources, more and more districts are going to have the same problems we're having."
But Department of Education spokesman Tim Eller said the district used incorrect data in calculating the charter school tuition rates.
"If the school district had used the correct membership data in August, their rates would likely have been much closer to what was recalculated in January," Mr. Eller said in an email.
The district also finished the past fiscal year with less revenue from current and delinquent taxes, Mr. Hoffman said, resulting in an $850,000 shortfall.
Mr. Martell added that the district spent more than $3 million from this year's budget to cover last year's bills, and it spends between $3.5 million and $4.5 million annually on charter school payments.
The petition says the district needs to incur unfunded debt of up to $3 million "because the taxes and other revenues remaining to be collected in the fiscal year and funds on hand will not be sufficient without curtailment of services to an extent endangering proper public education."
The order authorizes the district to take out a loan of up to $3 million from PNC Bank with an interest rate of approximately 2 percent.
Mr. Hoffman and Mr. Martell noted the district has taken steps to address its fiscal hardships. It increased its property tax rate to 36.672 mills for the 2012-13 school year, the maximum increase allowed under the school code and other laws, according to the petition.
The district also furloughed 87 teachers over the past two years and closed Johnston Elementary, one of the district's three elementary schools. Mr. Martell added that the district will try to sell Johnston to bring in additional revenue.
Mr. Hoffman said the board will likely discuss the loan at its workshop meeting on Tuesday and vote on it Feb. 26.
First Published February 15, 2013 12:00 am