Three days after declaring Chester Upland’s school district depressed, Pennsylvania Secretary of Education Ron Tomalis named Joe Watkins of Philadelphia its chief recovery officer.
Watkins becomes the first such officer after the state passed a law in June providing for oversight of struggling school districts. Chester Upland, Harrisburg, York and Duquesne have qualified.
The bill creates systems for early detection of financial strain and the crafting of financial recovery plans. Moody’s Investors Service called the law a credit positive.
“I don’t like it when there’s a problem, but I like it when the state gets involved,” Alan Schankel, a managing director for Janney Capital Markets in Philadelphia, said Tuesday. “The Department of Education is engaged and they’ve brought that fellow in, which is a big plus.”
Chester Upland sits 15 miles southwest of Philadelphia and includes mostly the impoverished city of Chester as well as the borough of Upland and Chester Township.
It was about to close its schools in January when a federal judge ordered the state to fund it for the rest of the academic year. The state just previously had denied a request for an $18.7 million aid advance.
Pennsylvania in 2011 advanced money to the school district to keep it from defaulting on bond payments. The district has no underlying bond rating, though it has a “pre-default” credit enhancement through the Pennsylvania State Aid Intercept Program. Under that program, the state’s education secretary automatically withholds state aid from the school district and forwards it to the bond trustee, thus assuring on-time debt service payments.
Moody’s rates the program Aa3/STA, while Fitch Ratings and Standard & Poor’s rate it AA and AA-plus, respectively.
“The district’s financial condition is plagued by serious, systemic and aggravating financial problems,” Tomalis wrote in his 16-point declaration. Tomalis cited the recall of laid-off employees despite a projected operating deficit of up to $12 million for fiscal 2011-12, and millions of dollars of debt owed to the state and elsewhere.
The district, he said, does not reconcile bank statements, monitor accounts payable or submit regular financial reports.
“The preparation of the district’s annual budget is inept,” Tomalis said.
Messages were left seeking comment from acting superintendent Thomas Persing.
Watkins must devise a recovery plan, with the local school board’s power sharply diminished. If it rejects Watkins’ recommendations, he could petition a court to implement a receiver.
Watkins, now the pastor of Christ Evangelical Lutheran Church in Philadelphia, is a former associate director of public liaison on the White House staff of President George H.W. Bush and assistant state director on the staff of U.S. Sen. Dan Quayle, R-Indiana.
He also served as an assistant to the president of the University of Pennsylvania and was a managing director and equity partner in an asset management firm. He has also worked as a government relations professional at law firm Buchanan Ingersoll & Rooney PC.