Erie School District on the brink of disaster

Mar. 8, 2016 – PennsylvaniaWatchdog.org – By Evan Grossman

One of the largest school districts in Pennsylvania is on the verge of running out of money.

Unable to cut much more from its $168 million budget and unable to ask local taxpayers to dig any deeper into their pockets, Erie School District officials say they are on a runaway path to bankruptcy.

“We’re at the end of our rope,” Superintendent Jay Badams told Watchdog. “It’s just one of those situations where we are ready to wave the white flag.”

Even with deep cuts, Erie faces a budget deficit that officials says can be anywhere between $3 million and $9 million, depending on how much funding comes from the state through budgets that have yet to be approved in Harrisburg. A best-case scenario includes radical education spending proposed by Gov. Tom Wolf for this year and next that would still produce a $3 million shortfall.

“I honestly don’t know where to tell you we can cut $3 million,” Badams said.

Erie is the fourth-largest city in Pennsylvania. Yet, its school district seems to have been forgotten by state lawmakers.

Over the past five years, Erie Public Schools eliminated more than 200 jobs, closed three schools, cut central administration in half and froze employee salaries. Excluding pension costs, per-pupil spending is less than the $12,050 it was in 2008-09.

“We’ve become pretty good at guerilla warfare in cutting budgets,” Badams said.

Erie’s worst-case projections forecast a $9 million budget, assuming it receives no new funding for 2015-16 and only moderate 2 percent increases in subsequent years. If that’s the case, Erie Public Schools will be forced to eliminate 125 full-time positions to strip away $8.9 million.

With an enrollment of 11,815, Erie schools have a high percentage of students who don’t speak English and many who come from economically challenged households. District officials claim it has been underfunded for years through a flawed and much maligned funding formula that lawmakers have been trying to reform.

During the current school year, EPS is spending $12,904 per student. Erie officials said the budget would need an infusion of $6.9 million to match the county per-pupil spending of $13,414 and $25.7 million to be in line with the state average of $15,019.

Erie is among the poorest regions of the state. Its median income of $33,007 ranks 485th out of 500 Pennsylvania districts. More than 80 percent of its students come from economically disadvantaged homes. More than 9 percent of Erie students are learning English as a second language, placing the district in the top 3 percent. More than 16 percent of students are classified as special education and 16.9 percent of the district is enrolled in charter schools, which is also among the highest percentages in the state.

“Given that, you would think we would be near the top or even somewhere in the middle,” Polito said of funding levels. “But we’re not.”

Last year, the bipartisan Basic Education Funding Commission recommended a fair funding formula that would correct the situation in Erie. The formula takes into account poverty, population and the number of English language learners and special education students to determine a more comprehensive formula. Those recommendations, along with a 2015-16 state budget that was due last summer, have not been approved yet.

“This is exactly the type of district where the state needs to step up and provide additional, adequate funding … and Harrisburg isn’t doing it,” said Deborah Gordon Klehr, executive director of the Education Law Center. “There are a lot of districts in the same situation and the students are suffering.”

Klehr said the primary reason behind not passing any new education funding reforms boils down to “gridlock in Harrisburg.”

While state lawmakers fight over last year’s budget and prepare for another battle over the 2016-17 spending plan that was introduced last month, students in Erie and around Pennsylvania continue to suffer.

“If this is the ‘fair funding formula,’ what do you call the formula we have now?” Badams asked.

If all basic education funding were reallocated using the fair funding formula devised last year, Erie would be in line for almost a $44 million boost in state aid. Erie’s subsidy would go from $60 million to more than $103 million.

“To me, this would be like winning the Powerball,” Badams said. “I can’t imagine getting millions of dollars instead of having to cut millions of dollars.”

If that kind of money came from Harrisburg, Erie could immediately repair its structural deficit and begin pouring money back into classrooms. Per-pupil funding would jump from $12,904 to more than $15,000.

“This quantifies how underfunded we’ve been,” Erie CFO Brian Polito said.

Badams and his financial team made their case to PA Education Secretary Pedro Rivera last month.

“The Department of Education aims to be a resource for school districts on a variety of challenges they face, including fiscal challenges,” spokesman Casey Smith said in a statement to Watchdog. “PDE has worked closely with districts over the past several months, offering assistance to help them manage this crisis. However, despite that help, schools may be  faced with making difficult decisions, including Erie School District.”

“The department has implemented an early warning system to identify and offer technical assistance to school districts experiencing financial difficulty,” Smith added. “Erie School District has not been designated in financial watch status.”

Pennsylvania law is set up so that a district can qualify for state aid only if it goes bankrupt. When it reaches that point, when it can’t make payroll, the district is identified as a financial recovery district and is virtually taken over by the state. Under Harrisburg control, the district is appointed a chief recovery officer and is eligible for state aid according to a financial recovery plan.

There are eight districts in Pennsylvania already under state control. Badams does not want to become the ninth.

Other broke districts like Chester-Upland received upwards of $12 million in basic education enhancements in 2015-16, and Erie financial analysts found that it would require a $14 million per-pupil influx to meet the lowest allocation among the eight districts currently in recovery or watch status.

“Absent help from Harrisburg, we are going to go into financial recovery at some point,” Polito said. “But we also feel it would be cheaper for Harrisburg to help us out now.”

Without any real funding reform ratified in Harrisburg, Erie schools remain in a tough spot. Its roofs are leaking, its libraries are stacked with outdated books, its technology lags behind other districts and Erie teachers recently voted to give their union a green light to go on strike if a new contract can’t be negotiated. School officials have sounded an alarm, and their cries for help are falling on deaf ears.

“It’s as bad as I’ve seen it in Pennsylvania,” Klehr said. “This is just evidence of the need for systemic reform.”