Pennsylvania Intercept-Based School Ratings on Negative Watch

Standard & Poor's, citing Pennsylvania's budget impasse, placed all school district and community college ratings based on the state aid intercept program on credit watch with negative implications.

The two-month impasse, said S&P, creates uncertainty whether state aid for school districts will be enough to cover any debt service payments if there is a notification to the state regarding a debt-service deficiency.

Gov. Tom Wolf and lawmakers are at odds over how to fund the proposed $30 billion budget for fiscal 2016. Wolf vetoed the budget and the legislature failed to override him.

"We understand that there is some current appropriation authority for education aid but as the budget delay continues, the sufficiency of these aid flows to cover debt service is uncertain in our view," S&P credit analyst John Sugden said Sept. 4.

The state enhancement program rating is based on the withholding provisions of Act 150, a state law.

Under these provisions, the secretary of education automatically withholds state aid from any school district or community college that fails to meet debt service or fails to pay lease rentals due to the State Public School Building Authority, a municipal authority, or nonprofit corporation. The withheld amount is the lesser of unpaid principal and interest or lease requirements, or the amount of state aid remaining for the fiscal year.

State Auditor Eugene DePasquale has ordered an audit to see how the budget impasse is affecting school districts. Employees of the distressed Chester Upland School District have been working without pay.

 

 

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