Why Is The Board Seeking a $3 Million Dollar Bailout

By Edward J. Maritz, Jr.

These are the underlying reasons the Majority School Directors are seeking a $3 Million Dollar Bailout.

1. Auditors found: Administration Violated the School Code. Direct quote from Audit: "The Budget of the District is the approved spending plan of the District for the year and the Board is prohibited from obligating funds in excess of these amounts....However.....Several functions had expenditures that exceeded the budgeted amount.......Total Expenditures exceeded the appropriations for the year which is a violation of the Pennsylvania School Code." (Source: Page 20, item #4 of the 2008 Audit).

On Friday, February 27th, 2009, the District Superintendent stated on WTAE-TV "we have proof we have been "favorable to budget" the last several years." If this statement is indeed accurate, why have the auditors found that the Districts Budget last year violated the School Code because total expenditures exceeded appropriations? Do not forget one highly relevant fact, the Board already voted YES to "accept" this audit, which means the Board agreed to the audits accuracy. HyperLink to the Superintendent's quote can be found at: http://www.thepittsburghchannel.com/news/18810806/detail.html

This leads to a rather obvious question. IF we have been "favorable to budget" then why are we seeking a 3-Million Dollar Bailout Loan? Being "favorable to budget" would be creating a surplus for the District, not a deficit. Being "favorable to budget" would NOT have resulted in the Auditors citing the District for a Budgetary School Code violation.

2. Auditors Found: Administration did not comply with laws and regulations last school year. Auditors tested Administrations compliance and noted: "criminal record and/or child abuse checks were NOT on file for two employees selected for testing." As a result of this, the District will be subject to a fine from the State Department of Education (PDE) because of this. This was also a finding in last years 2007 audit. (Source: Page 48 of the 2008 Audit). The District also will be subject to future fines as the State also found that the Administration did not have some properly certified teachers at the Secondary Level! How much will all these fines cost the District?

3. Auditors Indicated that: The District no longer qualifies as a "low-risk" auditee. (Source: Page 47 of the 2008 Audit). The District in past-years audits was always designated a "low-risk auditee." Given the Districts failure to attain and earn low-risk status designation in this most recent audit year, it is apparent that the auditors have found the Districts current and future financial health to be at risk.

It was requested that a representative of the Herbein and Company Audit firm be present tonight so that any concerned stakeholders could ask the Auditors questions. This seemed like a very reasonable request given the unique situation of the District wanting to seek a 3-Million Dollar Bailout. The Director of Administrative Services denied this request. (a copy of an email is available to substantiate this)

ITEMS FOR CONSIDERATION AND DISCUSSION:

1. If and (more likely when) the Board officially votes to seek a 3-Million Dollar Bailout Loan, said loan will require approval by a Common Pleas Court Judge. It only takes a ruling from the "Court of Common Sense" to prove that clearly something is wrong if the District needs 3-Million Dollar loan to stay open and pay bills. Incongruent information is being provided by District Administration, they are asserting the District is "favorable to budget" yet the fund balance has been nearly depleted and they are now seeking a Bailout. Citizens need to demand answers from the Majority School Directors and Superintendent on how the District got to the verge of bankruptcy and what is going to be done to prevent this from repeating in the future. How will costs be contained?

2. The 3-Million Dollar loan may temporarily fix today's problems in the short-term. What about next year or two or more years down the road? Significant increases lie ahead in salaries, retiree benefits, and pension contribution obligations in future years. If the District is unable to have its revenues match its expenditures today, how can anyone reasonably expect this to happen in the future, especially since the District will now have to pay this new loan back in addition to its current bond debt. Does anyone truly believe you can borrow $3-million dollars and pay it back in 10-years and NOT need a property tax increase to cover the loan payments?

3. Charter School Expenditures have risen substantially in the District; largely in part to the opening of the "Propel Montour" charter school. However, as this analysis has proven, Charter Schools alone are not the sole reason the District needs a 3-Million Dollar Bailout. It is relevant to note that the District was fully aware of the opening of Propel and did budget expenditures for Propel. One very logical question that remains unanswered is why are large numbers of students leaving Sto-Rox to enroll in Propel? Logic would suggest that the District should be extending all due diligence to examine the root cause as to why extraordinary numbers of parents are pulling their students out of the Sto-Rox School District.