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FAQs about the $75 million CUT in the 2015-2016 Republican budget

FAQs about the $75 million CUT in state funding to schools in the 2015-2016 Republican budget

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In the 2015-2016 Republican budget, many members of the General Assembly failed to deliver state funding owed to school districts and demonstrated that they are unwilling to pass a responsible budget that pays for the state’s obligations to public schools and meets the needs of Pennsylvania’s children.  

In the 2015-2016 budget, lawmakers eliminated $305 million in construction reimbursement payments that the state was and remains obligated to make to PA’s school districts through the Planning and Construction Workbook (PlanCon) program. PlanCon is a longstanding program that provides school districts with partial reimbursement for qualified new construction and renovation projects.  School districts are obligated to make construction payments with or without state reimbursement from the PlanCon program. The loss of $305 million in state funding represents a substantial decrease in money available to support academic programs and services for students.  

How does the Republican budget cut $75 million in state funding to K-12 schools?

The budget provides an increase of $150 million in Basic Education Funding (BEF), $50 million in the Ready to Learn grant (RTL), and $30 million in special education funding and eliminates -$305 million in construction reimbursement payments to school districts, resulting in a loss of -$75 million for schools.

Republican Budget Cut Image 2a

 

How many school districts were counting on PlanCon construction reimbursements from the state this year?

The majority of school districts in PA were owed reimbursement for construction costs in the 2015-2016 budget. These reimbursements range from less than $20,000 in some districts to over $1 million in others, depending on the project.

The PlanCon reimbursement issue extends beyond schools that did not receive money they were owed and expecting in the 2015-2016 budget. In recent years, many construction projects have received approval for reimbursement payments, but the state has not begun making payments for these new approved projects. Instead, the legislature has placed recent construction projects in a “pipeline” and failed to make any payment at all to school districts for these obligations.  PA is delinquent in more than $1.7 billion in reimbursements that are owed to schools in the “pipeline”.

Did lawmakers propose to fund PlanCon in the Fiscal Code by issuing $2.5 billion in new debt?

Yes. In the absence of adequate funding in the budget to pay for the state’s PlanCon obligations, lawmakers proposed a scheme to fund construction reimbursements in the Fiscal Code by issuing $2.5 billion in bonds to raise money that would be used to pay for this obligation to school districts.  

Why did Governor Wolf veto the Fiscal Code bill?

Governor Wolf vetoed the Fiscal Code bill because, given Pennsylvania’s poor credit ratings and the negative outlook signaled by credit ratings agencies after the passage of the Republican budget, borrowing $2.5 billion would have been prohibitively expensive. The interest rates the Commonwealth would pay to borrow money right now would be unaffordably high.

If PlanCon payments to school districts had been funded, would the state funding increase in the Republican budget be enough to meet the needs of Pennsylvania’s students?

Absolutely not.  The General Assembly’s failure to deliver on what it owes school districts through the PlanCon program is just one example of the state’s failure to pay its share of education funding.

More than 25% of the $200 million increase in BEF and RTL funding will go to banks instead of children’s classrooms because lawmakers did not include reimbursements to school districts for the extraordinary interest payments and fees they have incurred as a result of the budget impasse that was caused by the state government.

The $150 million that is left after school districts pay bank fees and interest is a meager increase that fails to begin solving the state’s long-term school funding crisis, continues to underfund schools that educate the most vulnerable children in the Commonwealth, and ensures that Pennsylvania will maintain the dubious distinction of being the state with the most inequitable school funding system in the nation.

Is Pennsylvania’s financial outlook/credit rating better now that the General Assembly passed a 2015-2016 budget?

No. Within hours of Governor Wolf announcing that he would not sign the Republican budget, three credit ratings agencies criticized the budget, signaling their continued negative outlook for the Commonwealth.

PNC stated, “We do not expect the budget to come close to solving Pennsylvania’s fiscal pressures, including its structural budget gap, which is sizeable and growing. Without broader policy changes, Pennsylvania’s structural deficit will worsen.”

Moody’s wrote, “The approved budget relies on nearly $1 billion of one-time measures to balance the budget, does not include a pension contribution at the fully actuarially required level and casts no light on the government’s ability to reach compromise on its long-term fiscal challenges.

What needs to happen now to get school funding back on track and Pennsylvania’s fiscal house in order?

Governor Wolf and the legislature must immediately begin working on the 2016-2017 budget and negotiating in good faith and in the best interests of our children so that the travesty of the 2015-2016 budget will not repeat itself.

Lawmakers must support a responsible, balanced 2016-2017 budget that:

 

  • raises reasonable new revenues to pay for the state’s obligations, closes the $2 billion structural deficit, and provides an increase of $400 million in school funding in the 2016-2017 budget; and
  • pays for PlanCon obligations to school districts either through new revenue in the budget that fully funds a line item or through issuing bonds that are available to PA at an affordable interest rate because lawmakers pass a responsible, balanced budget that triggers an upgrade in PA’s credit rating.

 

Lawmakers must dig deep and find the courage to make tough decisions and pass a responsible 2016-2017 budget.  They must not pass another budget that fails to pay for the state’s obligations, hurts children, and ensures that students throughout the Commonwealth will endure yet another school year in underfunded schools that cannot provide them with the opportunities they need to be successful in life now and after they graduate.