State's late subsidy payment causes cash-flow problem

The school board was presented with good and bad financial news.
SHARON, Pa. -- The state Legislature's failure to finalize a budget for fiscal 2003-04 is putting the city school district in a bind.
The district's anticipated $1.6 million state subsidy payment due Aug. 28 won't be coming on time and that presents a cash-flow problem, James Wolf, district business manager, told the school board Wednesday.
Sharon should be able to meet its Aug. 29 payroll but might not be able to make the Sept. 15 and 30 payrolls of $600,000 each, Wolf said.
The Pennsylvania Department of Education is looking for a way to make some advance payments to schools like Sharon that are facing serious cash-flow problems if the subsidy is delayed, but nothing is final yet, Wolf said.
In addition to payroll, Sharon will have a $231,000 employee health-care payment due in September as well as about $400,000 in regular bills, he said.
Property tax receipts are coming in, but they may not be coming in fast enough to cover those bills, Wolf warned.
The district received $654,000 in tax revenue in July, he noted.
Good news
The board did get some good financial news, however.
It voted to refinance 1998 and 1999 bond issues in a $10 million package that will save $267,475 in interest costs.
The board borrowed the money initially to help finance building renovations at interest rates ranging from 4.3 percent to 5 percent, but the bond market rate has dropped to the point where refinancing the debt will actually save money.
The rate on the new bonds is at 4.08 percent, generating a savings of $267,475.
The board will realize most of that savings, about $250,000, next year in the form of a lower debt service payment.
The new bond issue will run into 2019, the same term carried by the old bond issues.