Harrisburg School District feels state squeeze on multiple fronts

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As the Harrisburg School District braces for possible receivership, an additional layer of state intervention has emerged in Pennsylvania’s capital.

Auditor General Eugene DePasquale intends to conduct a “real time” audit of the district, which he said would be the first of its kind for his office.

The investigation will focus on the district's operations including finances and contracts, and its implementation of changes the commonwealth's Department of Education has suggested.

“We will be giving updates throughout the tenure of the audit as opposed to waiting until the end,” DePasquale told reporters. “There is simply no time to waste.”

State education Secretary Pedro Rivera on June 3 requested the Dauphin County Court of Common Pleas to appoint a receiver to run the district. The petition nominated the district’s chief recovery officer, Janet Samuels, as receiver. The court has scheduled a hearing for Monday and Judge William Tully could rule by the end of the month.

Attorney James Ellison, in a 31-page response, said the school district has complied with DOE directives. He called the state's request for receivership "arbitrary and capricious."

Villanova School of Business professor David Fiorenza said DePasquale's new audit approach could set a precedent.

“[It] could not happen soon enough,” said Fiorenza, a former chief financial officer of Radnor County, outside Philadelphia. “The special audit should be a pilot program that can be implemented across other school districts within the commonwealth.”

Harrisburg’s district has been operating under state-imposed financial recovery status since 2012. The city's own debt crisis at the time generated national headlines.

In October 2011 the City Council filed for Chapter 9 bankruptcy protection over the objections of then-Mayor Linda Thompson, but a federal judge negated the petition six weeks later, citing a restrictive state law.

Two years later, the city and its creditors agreed to a financial recovery plan on which the Commonwealth Court of Pennsylvania signed off.

DOE, in its receivership request, accused the district of not implementing key initiatives of a financial recovery plan its board of directors adopted and the DOE approved.

It cited missing student achievement targets; not hiring a chief financial officer and a qualified business manager; not developing a plan to mitigate staff absenteeism; and $700,000 of improper health-care benefit overpayments to 54 former employees.

Additionally, according to the filing, placing teachers on incorrect salary steps during fiscal years 2017 and 2018 resulted in “protracted and costly” grievance proceedings.

“Harrisburg School District officials and school board of Directors stand ready to cooperate with the auditor general’s ‘real-time’ audit,” the district said in a statement. “We remain committed to transparency, the process of financial and academic recovery, and a continued effort to put students first.”

Harrisburg Mayor Eric Papenfuse and some lawmakers have been calling for a state takeover.

Under receivership, Fiorenza said, the commonwealth should take responsibility for expense disbursement. “If a school district receives state appropriated funds, then the business administrator and superintendents have accountability to spend the funds in a fiduciary manner.

“Look at receivership as consulting and not overregulation, in this particular case,” Fiorenza added.

DePasquale called state receivership “an absolute last resort” and said he has often opposed such moves. “But there come rare times when it is necessary and I think this is one of them.”

Multiple challenges to improving a district take time and resonate throughout regions, Fiorenza said.

“It takes years to tear down a city or school district and it takes about the same amount of time to rebuild it. A great school district is key to economic vitality in a community and is paramount to home values in the surrounding municipalities.”

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