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December 11, 2016
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School districts to PA: ‘pay up;’ The taxpayer price tag for unfunded liabilities

What would you do if your school district were considering up to a 6% hike in your school taxes? Who would you complain to (besides the school board, of course)? Perhaps you’d take your complaint to a higher level—to state authorities, for example? (For all the good that might do you in Pennsylvania.) Let us explain.

Taxpayers in the Western Wayne School District (WWSD) in South Canaan Twp., Wayne County, PA, are bracing themselves for the possibility of a major tax hike, and the school district is putting most of the blame on the Commonwealth of Pennsylvania itself for not paying reimbursement money it owes WWSD for the construction of a new elementary school that opened in 2011. (Reportedly about 150 other public school building projects in Pennsylvania are in the same boat as Western Wayne.)

The $20-million EverGreen School in Hamlin is one of the greenest schools in the state. It is silver LEED-certified with geothermal heating and cooling, a “living machine” wetlands sewage treatment system, a system of louvered window shades that capture sunlight for lighting classrooms (plus LED light bulbs and motion sensors to turn off the lights), and more. Green construction materials and practices were used when it was being built.

From the 1970s to 2012, when a school district in Pennsylvania initiated a major construction project, it engaged with the PA Department of Education (PDE) in a process called PlanCon (short for Planning and Construction Workbook). If the district followed all the proper steps, it could receive some level of reimbursement to help cover the cost of construction.

However, since 2012, there has been a moratorium imposed by the legislature barring PDE from accepting any new PlanCon applications and the state has stopped paying what it owes on approved and/or fully completed projects. PDE says it would need millions of dollars it does not have to reimburse already approved and/or completed projects, plus $1.2 billion to cover the 354 currently unapproved projects now in the PlanCon pipeline (see tinyurl.com/jwhl45q; also see tinyurl.com/n2sq57y).

Over nearly the past year and a half, as overdue payments have piled up, school districts nevertheless have had to make bond payments without funds they had been promised. For WWSD this means the “state will owe [the district] $1,250,800 by the end of this school year, with the addition of another $687,821 in the 2014-2015 school year,” according to a letter to taxpayers posted on the WWSD website (tinyurl.com/l5eudva).

“Over the past two years, the [school] board has both raised taxes and dipped into its reserves in order to compensate for shortfalls in state and federal funding… and beginning with the 2014-2015 school year, the district’s reserves will either be nearly depleted or completely depleted,” a situation the letter called “a dangerous financial position.”

“Would the board have entered into the construction and bond securing process if we thought the state would not follow through on its part of the obligation? No,” the letter states.

The letter also blames state-mandated pension contributions for district employees. “This next budget will see an increase of approximately $700,000 in pension costs, raising the district’s contribution rate from 16.9% to 21.4%.” [WWSD’s] external auditors warn, “Pension contributions… would likely continue to increase into the near future until the district’s contribution rates reached 29%.”

Now, because the state has a 2% cap on how much a school district can raise its taxes, WWSD has applied to the Commonwealth for permission “if necessary” to increase taxes up to 6.01% without a voter referendum.

So here we are: the state says it cannot afford to pay, but what makes state officials think that local taxpayers, like those in Western Wayne, can afford to do so when the Commonwealth cannot?

The moratorium is slated to expire this summer unless the legislature extends it, and the governor is recommending an extension for another fiscal year. Today we call on the legislature to let the moratorium expire (at least for those school districts that have already earned PDE PlanCon approval and/or completed their construction projects, such as for the EverGreen School); to fully fund approved projects in the new legislative budget now being worked on in Harrisburg; and to instruct PDE to expedite reform of the PlanCon System under guidelines provided by the legislature (currently PDE reportedly has no timetable for completing this reform).

Finally, we believe that Pennsylvania missed an opportunity to properly fund education when it declined to implement a severance tax on natural gas extraction, choosing instead the governor’s preference for an impact fee, which saved the state’s natural gas industry millions. It is never too late for the administration to change its policies and implement the severance tax, earmarking the revenues for education.

The bottom line is that the state must not renege on its obligations to school districts like Western Wayne, which counted on these funds when it issued bonds for construction of the EverGreen School. Until this problem of paying school districts what they are owed is solved, it’s easy to see where this is headed—student education will suffer; arts, sports and extracurricular programs will be cut; faculty will be cut, and more. You’ve probably heard the saying, “contracts are made to be broken,” but this is about more than the Commonwealth breaking its contract with school districts. This is about a contract we have as a society to educate our children.

[For a news article about this, see page 5.]