Penn Hills School District $172 Million In Debt, According To Grand Jury Report

Feb 5, 2019

The Penn Hills School District’s financial position is “catastrophic,” according to an Allegheny County grand jury report released Tuesday.

The report states that it is unclear how the suburban district, 12 miles west of Pittsburgh, will continue to operate, let alone recover.

The financial downward spiral began in 2009 when the board approved a costly construction plan to build two new schools. At the time the suburban district was already operating at a deficit and enrollment was in decline. The report called the plan an “egregious example of abuse of public trust.”

“The dire financial condition is the result of years of poor leadership, inept decisions made to promote personal interests and ineffective oversight by those entrusted to serve the interests and ineffective oversight by those entrusted to serve the interests of the students of taxpayers of Penn Hills,” according to the report.

The grand jury found that the district hired an inexperienced architecture firm (Architectural Innovations) with political ties to at least one board member. That firm was allowed to expand the project and went over budget with expensive purchases including tiles imported from Italy.  

The district, which serves 3,400 students, is now nearly $172 million in debt. The report did not recommend criminal charges and instead attributed the financial distress to incompetence. It also blames the state department of education for failing in its watchdog role as the district overspent for years.

The report does suggest legislative changes around school construction financing that could prevent a similar situation.

Penn Hills, though, expects it will run out of cash by April according to district administrators. The district can’t raise taxes beyond the state’s index to pay for the shortfall. Under federal School Code, the district can’t seek federal bankruptcy protections from its creditors.

According to the report, “there is no precedent for what will occur in the Penn Hills School District when it reaches the point of financial collapse.”

Last month the state put the district in financial recovery status, which means a financial recovery officer is assigned to follow through with a plan.

The district has furloughed teachers, frozen some staff salaries, and eliminated administrative positions and educational programs.

According to the report, “further cuts in the budget will likely result in more students attempting to go to charter schools, as well as further loss of qualified teachers and other employees, and the inability to attract new, qualified applications to work in the district.”

The dire state of the district was highlighted in Pennsylvania Auditor General Eugene DePasquale’s May 2016 evaluation of the district. That report found that the district’s outstanding long term debt grew from under $11 million in 2009 to $167 million in 2015 and the General Fund decreased from a positive $3.4 million in 2010 to an $18.8 million deficit in 2015.

DePasquale said Tuesday that at the current rate it would take until 2043 to pay off the district’s debt.

“The fact that people who haven’t been born yet will be tax-paying adults before the district’s debt is resolved speaks to the urgency of finding solutions in Penn Hills,” he said.

DePasquale plans to hold a community meeting in late February in the district to discuss ways to turn it around.