Western Pennsylvania school districts brought down by pension debt

By Yaël Ossowski  /   July 31, 2015  / Watchdog.org

A frank assessment from Moody’s rating agency this week has given several Pennsylvania school districts sour financial notes, and western PA’s schools top the list.

Schools in Allegheny, Washington, and Fayette County have all been downgraded to junk status, according to the rating service’s latest report, deemed “unlikely to recover” and it seems exploding pension costs may be to blame.

Allegheny County alone has four separate school districts that have been downgraded since March, including McKeesport Area, East Allegheny, West Mifflin Area and Penn Hills school districts. They, along with the other school districts mentioned in Moody’s report, have a particular problem with mounting costs mandated by law.

The Pennsylvania Association of School Administrators and the Pennsylvania Association of School Business Officials put out a report last month detailing costs for the state’s school districts. They took special note of the costs that are mandated, including charter payments, health benefits, special education and costs related to retirement plans of school district employees.

According to school districts surveyed, pension costs account for 22 percent of all mandatory spending increases. Charter school spending, the next highest category, is set to increase by 11 percent on average.

Moreover, pension hikes will take place in every school district in the state, while charter payment increases will only take place in 72 percent of schools, according to the survey.

Because state law requires these increases to take place, school administrators essentially have their hands tied. They can only hope reforms take place at the state level.

“With no significant reforms being seriously considered in the legislature to fix these huge problems, more and more Pennsylvania schools could very well slide off the financial cliff,” warned Auditor General Eugene DePasquale in a press release Tuesday.

Looking to the western part of the state, the Allegheny Intermediate Unit, the regional authority over school districts in Allegheny County, blames charter schools for exploding costs.

“Charter school tuition payments are extremely costly to our districts, particularly those that are already financially stressed,” spokeswoman Sarah McCluan told Trib Live. “Charter school funding reform is desperately needed.”

But a look at several numbers reveals this may not be the case.

“I am much more concerned about the skyrocketing pension costs than the costs for charter schools,” said James Paul, policy analyst at the Commonwealth Foundation, a free market nonprofit think tank based in Harrisburg.

He offered the example of McKeesport Area school district in Allegheny County, which more than tripled its pension payments over the past year to $4 million, but saw an increase of 60 percent in charter school payments.

“It’s clear that pension costs are growing more rapidly,” he told Watchdog.org. “This is an obvious signal to lawmakers and citizens alike that pension reform should be the state’s top priority,” said Paul.

“Critics of school choice may jump on the Moody’s report as an opportunity to denigrate charters, but pension costs are the real problem in Pennsylvania.”

Yaël Ossowski is a Canadian-American journalist and writer living in Vienna. He is founder and editor of Devolution Review, deputy director at the Consumer Choice Center, and senior development officer for Students For Liberty. He was previously a national investigative reporter at Watchdog.org. He has a Master’s Degree in Philosophy, Politics, Economics (PPE) from the CEVRO Institute in Prague and a Bachelor's in Political Science from Concordia University, Montreal. Born in Québec and raised in the southern United States, he currently lives in Vienna, Austria, and his writings have appeared in newspapers, magazines, and online outlets across the world in multiple languages.
Website https://yael.ca
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