PA. SCHOOLS Shortfall worries district officials

Political sparring between the governor and the Legislature has stalled funding.
HARRISBURG (AP) -- As Pennsylvania's 501 school districts prepare to open for the 2003-04 school year, administrators are trying to find ways to meet expenses amid a legislative stalemate over education subsidies.
Depending on how heavily they rely on state funding, districts have developed contingency plans that include dipping into their rainy-day funds, taking out loans, or both, said David Davare, director of research for the Pennsylvania School Boards Association.
"I have not heard of any districts saying, 'We're going to go broke' right now, but I would be willing to bet that if this drags out for too long, we'll probably see some districts basically bankrupt at some point," Davare added.
Pennsylvania began the current fiscal year July 1 with more than $4 billion in school subsidies frozen as legislative leaders and Gov. Ed Rendell sparred over money for new school programs Rendell wants to implement, such as preschool and full-day kindergarten.
State lawmakers have spent much of August in recess and are not scheduled to return to Harrisburg until Sept. 9.
Here's the problem
The districts normally receive their first state subsidy payments of the school year at the end of August.
Those payments have been held up by Rendell's decision to strike the education funding from a spending plan approved in March, as well as his promise since then to veto any education bill that does not fund his school initiatives.
Districts generally depend on the August payments to cover their payrolls because most of their local property tax revenue does not come in until mid- to late September, Davare said.
Additionally, those that have borrowed money for construction or renovation projects typically pay an entire year's worth of principal on their bonds in August or September, he continued.
For now, the Connellsville Area School District in Fayette County will get by with its $5 million emergency fund, but it is also securing a $2.2 million tax anticipation loan in case an education budget has not been passed by the time the fund balance runs out, district business manager William G. Harper Jr. said.
The basic education subsidy Connellsville is expecting accounts for about half of the revenue for its $54 million budget, and payroll costs eat up two-thirds of the district's spending plan, he said.
"Without a subsidy payment in August, we may have problems meeting payroll in the latter part of September," Harper said.
Circumstances are less dire in the Camp Hill School District in Cumberland County, where state funding makes up only 13 percent of a $11.5 million budget. The district plans to maintain its cash flow exclusively with its emergency fund, which amounts to about 12 percent of the budget.
"That's helping us now to hold us over until the legislation is passed," Business Manager Christine Hakes said. "We're not panicked yet."
The state Education Department is trying to come up with other alternatives for districts that have no immediate short-term options, spokeswoman Shanna McClintock said.
Forty districts told the department in a recent survey that they will need special assistance to remain open in the short term.
Officials are considering alternatives such as arranging for loans and calling creditors to seek deferments on any bill payments that are due, McClintock said.
"We've asked them to send us their cash-flow statements, what funds they have coming in. We're going to analyze each district to see what we can do to help," she said.