Pennsylvania School Districts May Lose Ability To Borrow

HARRISBURG, Pa. (KDKA/AP) – Another blow in the ongoing state budget crisis could force some school districts to close as soon as the New Year.

The budget impasse in Harrisburg has led a leading loan rating agency to, in effect, restrict the ability of school districts to borrow money to keep their doors open after the holidays.

“Depending on the district and their financial situation, there will be districts that will not be able to continue to offer services,” said Dr. Linda Hippert, CEO of the Allegheny Intermediate Unit.

Standard & Poor’s says it has withdrawn its ratings on a state government program that helps school districts borrow by giving a guarantee to repay bondholders.

In a Friday note, Standard & Poor’s says Pennsylvania can’t ensure the timely payment of debt service because of the stalemate.

 

School districts have gone five months without any payment from Harrisburg, and some have already borrowed money or are looking to do so shortly.

“Borrowing money is one alternative for them to be able to manage what’s becoming a financial crisis for them,” said Scott Sloat with the Pennsylvania Treasurer’s Office, “and if other rating agencies follow suit, this could really cut off their ability to raise money through loans.”

The Pennsylvania Treasury Department’s chief counsel, Christopher Craig, says if the other ratings agencies were to follow suit, some of the state’s poorest districts would be effectively cut off from the debt market, or the cost would be so high, they couldn’t afford it.

Standard & Poor’s downgrading is likely to affect more affluent districts just as they run out of resources.

“The budget is taking its toll on us now,” said Dr. Randy Lutz, superintendent of the Baldwin-Whitehall School District. “To date, we should probably have right around $7 million of state money that we would have coming into the district, of which we’ve received zero.”

The state auditor general’s office has tallied about $900 million in borrowing by Pennsylvania school districts to pay bills during the impasse.

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