District feels state budget fallout

Oct. 8, 2009

By PATRICK E. LITOWITZ
plitowitz@ncnewsonline.com

The $5.3 million check is not in the mail.

Hiring a bill collector sounds tempting, but Joseph Ambrosini knows the effort would be futile. So the New Castle Area business manager — and his 499 counterparts — must wait for a resolution to the state budget impasse.

The city school board passed a $38 million budget for the 2009-2010 year. Ambrosini said that since July, the district paid $6 million for salaries, debt service and other expenditures.

“Most school districts have been able to weather the storm,” he said. “The biggest portion of state subsidy that we receive is basic education subsidy. We missed an approximately $3 million payment in August.”

The state also provides block grants and special education funding. Overall, New Castle has been shorted $5.3 million.

A $6.7 million budget reserve in addition to $2.5 million received from property and payroll taxes have kept the district operating. The school system also receives federal dollars.
Ambrosini does not foresee revamping the district’s spending plan. One casualty, though, is a study focusing on the future of the city’s primary and kindergarten centers. Those plans remain uncertain until budget details are finalized.

“School districts are required to have their budgets in on time,” board member Karen Humphrey said. “I would hope the people in Harrisburg recognize the importance of having their budget in place.”

Ambrosini said the next state subsidy payment of $3.5 million is scheduled for December.

“To go beyond that point, then districts would have to come up with financial mechanisms, such as a line of credit,” he said.

Ambrosini said securing credit would be the worst-case scenario. If a budget is not approved by December, he is prepared to propose to the school board that the district obtain a $4 million to $5 million credit line.

“There are financial institutions that are currently writing them for school districts,” he said.
Ambrosini said he is in preliminary discussions with Pittsburgh-based PNC Bank.
Humphrey said the Midwestern Intermediate Unit IV, which serves 27 school districts in Beaver, Lawrence and Mercer counties, discussed the loss of funding at the board’s September meeting.

“Business manager Bob Barber said he wasn’t ready to come and ask for it at that time,” said Humphrey, who sits on the 13-member board. “By the end of October, they would ask for approval.

“He said it would be the proper course of action he would need to take in order to meet payroll and other expenses.”

Ambrosini said the impasse has forced districts to keep cash readily available and out of investment funds.

“However, certificates of deposit are not getting the best return on investment.”