MERCER CO. SCHOOLS Court OKs borrowing for districts

A third party will examine the budget for Sharon schools.
MERCER, Pa. -- Farrell and Reynolds school districts won court approval to borrow money to cover unanticipated employee health-insurance costs, but the court wants a closer look at a similar request from Sharon.
The Sharon City School District and Farrell Area School District were each asking for court approval to borrow up to $900,000 to cover what they said were unfunded debts caused by midyear increases in health-care insurance. Reynolds School District sought $880,765.
Al three are members of the Western Pennsylvania Schools Health Care Consortium, which recently notified its 12 member schools that it was having a cash flow problem and needs an additional $4.6 million in insurance premiums between March and the end of June.
Some schools were able to cover their increased costs by tapping their fund reserves, but Sharon, Farrell and Reynolds decided they needed to borrow money to cover their expense.
What was requested
The consortium is asking for $680,000 from Sharon, $519,000 from Farrell and $412,000 from Reynolds.
The school districts asked the court to approve higher figures, anticipating that the consortium requests might end up higher than initially requested.
However, Francis J. Fornelli, president judge of Mercer County Common Pleas Court, didn't give them all they were asking for in a hearing Wednesday. In Sharon's case, he didn't approve any borrowing at all -- yet.
Judge Fornelli said the law on unfunded debt allows borrowing only for debts that actually exist, not for debts that might accrue later.
Farrell and Reynolds don't have much money to cover their increased health-care costs, he said, adding that he set their unfunded debts at $488,000 and $796,000, respectively.
They can borrow that much, but must first present him with formal bank proposals for those amounts, he said.
Budget examination
In Sharon's case, Judge Fornelli set the unfunded debt at between $673,000 and $750,000, but said he wants an independent party to examine Sharon's budget to determine if there might be other funds available to pay some of that debt.
Testimony presented in court showed Sharon might have $250,000 available in its fund balance and maybe more in its capital fund reserve and cafeteria accounts that could be used against that debt, Judge Fornelli said.
He asked Keystone Research Inc. of Greenville to examine Sharon's budget and give him a report within two weeks of how much Sharon might have to put toward the $750,000 figure.