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BLOG: Failure to Fund Schools Would Result in the Loss of 23,000 Educators

By: Megan Healey, Deputy Press Secretary

February 22, 2016

Pennsylvania is at a crossroads. We can fund our schools and fix our deficit or we will be faced with an additional $1 billion in cuts to education funding. This $1 billion cut will lead to the immediate layoff of 23,000 educators in Pennsylvania.

In January of 2011, Gov. Corbett was inaugurated. Around this time, schools began to plan for the coming 2011/2012 school year, not anticipating there would be a budget cut. Governor Corbett’s budget cuts passed in late June of 2011 – after many schools had passed their 2011 budgets. They had prior year appropriations and were budgeting for the next school year. For the 2012 school year, they had to account for the new appropriations and cuts. Between July of 2011 and December of 2012, 23,000 educators were lost in Pennsylvania. For budgeting purposes, this is immediate. They were baked into the next school budget cycle – the cycle when the appropriation cut hit. A 2014 survey by PASA and PASBO says “data from the U.S. Bureau of Labor Statistics documents the loss of more than 23,000 education jobs in Pennsylvania through the end of 2012.”

Most importantly, while it is very useful to have a historic comparison to make when we estimate the impact of a $1 billion cut to education, that estimation and its impact – whether by size of the layoffs or timing – is much different today than it was in 2011.

There are three areas where local school districts can make decisions. They can cut programs. They can raise property taxes. They can reduce personnel. But the environment is significantly different today than 2011/2012.

First:

There are fewer programs to cut today than there were in 2011 and 2012. Since 2010/11, there have been 783 programs eliminated at schools in addition to 370 academic programs schools slated to eliminate according to a 2014 survey by PASA and PASBO. According to the survey, “the cumulative number of program eliminations and reductions is estimated to be well over 1,100 within the next school year.” Further, schools said 220 sports or extracurricular programs would either be eliminated or face a fee. This survey even adds that they might have underestimated the program cuts in schools, “This analysis may understate the depth of academic program cuts and reductions in two ways. First, substantial impacts were felt in the immediate aftermath of the financial crisis and in the first years of the recession, while this report documents program reductions only since 2010. Second, districts were asked to indicate cuts at the ‘program’ or category level—for example, ‘music/theater programs.’ Since a district could have made multiple cuts within a single program—such as marching band AND jazz band AND chorus for this example—the number of eliminations and reductions should be treated as a floor, not a ceiling.”

Schools are cut to the bone and there are fewer available options for schools to cut programs in order to make up for an additional $1 billion state education cut.

Second:

Legislation restricted local school districts’ ability to raise property taxes to make up for cuts. This means that state level cuts are more harmful today than five years ago. There simply is not the ability to compensate. School districts that were able to replace revenue and keep teachers in 2011 and 2012 do not have that option.

Act 25 of 2011 made several changes to the Taxpayer Relief Act, including reducing the number of referendum exceptions that could be requested from PDE. Exceptions that were removed were for new construction projects (academic and nonacademic projects), maintenance of local and state tax revenues, school improvement plans and health care-related benefits.

In 2011-12, there were seven referendum exception. Now, there are only three – pensions, special ed and school construction. (For this, all the school construction categories are counted as one.)

Third:

Even before these changes, schools identified staff reductions as a preferred means – of their limited means – of balancing their budgets. According to the 2014 survey, “ninety percent of responding school districts have reduced staff, and more than 40 percent of districts have, or will, furlough classroom teachers. Reductions continue to occur among all categories of school employees.” In 2014, with balanced funding – never mind a $1 billion cut – more than one quarter of districts anticipated furloughs.

Fourth:

The financial environment for schools is significantly different than 2011-2012. Pennsylvania’s credit has been downgraded many times, and the school district intercept program has faced similar downgrades. This limits a school’s ability to go to the market and issue debt to make up shortfalls.

July 17, 2012 – The programmatic rating of the Pennsylvania Act 150 School District Intercept Program was downgraded to A1 with a stable outlook from Aa3 with a negative outlook; the programmatic rating of the Pennsylvania School District Fiscal Agent Agreement Intercept Program was downgraded to Aa3 with a stable outlook from Aa2 with a negative outlook; and the programmatic rating on the Pennsylvania State Public School Building Authority Lease Revenue Intercept Program was downgraded to Aa3 with a stable outlook from Aa2 with a negative outlook.

November 4, 2015 – Moody’s Investors Service has downgraded the Commonwealth of Pennsylvania’s (Aa3 negative) pre-default intercept programs for school districts to A3 from A2. This action affects the State Public School Building Authority Lease Revenue Intercept Program (Sec. 785) and the Pennsylvania School District Fiscal Agent Agreement Intercept Program (Sec. 633). For districts enhanced by the commonwealth’s post-default intercept program (Pennsylvania Act 150 Program), Moody’s confirms the cap, or the highest rating districts can receive due to the post-default enhancement, at A3.

December 22, 2015 – Moody’s Investors Service has downgraded the school district enhancement programs of the Commonwealth of Pennsylvania (Aa3 negative) to Baa1, and changed our approach to rating pre-default enhancement programs in the commonwealth. All enhanced ratings in Pennsylvania carry a negative outlook. The negative outlook is based both on the outlook for the commonwealth and the ongoing uncertainty surrounding its ability to fund the intercept programs during budget stalemates.

After years of harsh and disproportionate cuts, there are districts that may be forced to close their doors before the end of this school year without the additional funding provided for in the bipartisan budget agreement and the 2016/17 proposed budget.

For example, the Erie school district is facing bankruptcy right now.

Put simply, 23,000 educators were lost the last time there was a $1 billion cut to education and this time there are far fewer tools in schools’ toolboxes to stave off those cuts for even an additional school year budgeting cycle.

Schools – already stretched thin by years of underfunding – are at their limits.

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