William Penn is borrowing money due to the delayed state budget. Other school districts may, too.
School districts had to pass their own budgets but are stuck waiting on state funding while lawmakers and Gov. Josh Shapiro continue to negotiate. Some districts will need to borrow to make ends meet.
Pennsylvania’s delayed passage of a new state budget may go unnoticed by most people. But for school districts like William Penn, it comes with a cost.
Like districts statewide, the Delaware County district had to pass a budget before a new fiscal year began Tuesday. But without knowing exactly how much state money the district will be receiving, school board members like Jennifer Hoff could not definitively answer questions from the public about whether the district will have to make more cuts.
And without knowing when that state money will be flowing, the cash-strapped district had to take out a tax revenue anticipation note for $10 million — money it will have to pay back, with an expected cost of $100,000, Hoff said.
“That’s a teacher. That’s two safety officers,” Hoff said Tuesday during a news conference hosted by the Pennsylvania School Boards Association.
Other school districts — particularly in smaller or rural communities — may also be forced to borrow money to cover their bills, officials with the school boards association said.
Tuition payments that districts make to charter schools, for instance, are due July 5, said Kevin Busher, the association’s chief advocacy officer. Meanwhile, districts won’t be collecting property tax revenues until August.
The budget delay is “creating cash-flow issues” for schools, Busher said.
Lawmakers and Gov. Josh Shapiro have yet to reach a deal on a new spending plan as the state faces a $5.5 billion budget gap. Shapiro, a Democrat, has called for increasing mass transit funding — including for SEPTA — and putting an additional $2.5 billion toward Medicaid to keep the programs afloat.
But Republicans who control the Senate have balked, saying that the Medicaid increase would prevent the state from making other investments, and that any increase for SEPTA should come with more funding for roads and bridges.
While school funding is not one of the major sticking points, districts like William Penn are worried about being caught in the crosshairs.
William Penn — which in 2023 won a landmark lawsuit contending the state had illegally deprived children in poorer school districts of resources — is relying on the delayed budget to deliver the next installment of money to remedy that underfunding. (Even if the district gets that money, it will still be owed $23 million more a year from the state, according to a funding formula lawmakers adopted last year.)
It is also counting on the budget to include changes to how cyber charter schools are funded by districts. Currently, districts pay the virtual charters for every student who enrolls, based on what the district spends per pupil. Because school district spending in Pennsylvania varies widely, those rates do, too.
A bill passed by House Democrats last month would set a statewide rate of $8,000 per regular-education student attending cyber charters, in a version of a proposal put forward by Shapiro earlier this year that has long been pushed by Democrats and public school advocates. Cyber charters oppose the change, and Republican leaders have yet to agree to it.
The uncertainty has left William Penn in a tough position, Hoff said Tuesday. While the district — which has already cut academic interventionists and mental health services — passed a budget Monday with a tax increase of 3.9%, “we don’t know if that number works,” she said.
She received text messages from staff members after the district budget passed, questioning what it meant for William Penn’s arts and athletics programs, which are in jeopardy depending on the outcome of the state budget.
“It does undermine public confidence when I have to sit up there and say, ‘Not sure about this, not sure about this, not sure about this,’” Hoff said.
Busher said the PSBA does not yet know how many other districts may have to borrow money as a result of the delayed budget. While Pennsylvania districts have a collective $3 billion in unassigned fund balance, that amounts to about a month of spending, he said. And not all districts have meaningful cash reserves.
He called on lawmakers to pass a statewide cyber charter tuition rate of “not more than $10,000″ per regular-education student, and for Shapiro and legislative leaders to reach a budget deal that “provides predictability and sustainability for Pennsylvania students and taxpayers.”