Penn Hills School District to petition the state to lift financial recovery status

The Penn Hills School District may be on its way out of its “financial recovery” status.

A petition to the state Department of Education is in the works, state-appointed chief recovery officer Dan Matsook announced at a board meeting Wednesday, May 31.

He said there will be a lot of “give and take” between him and the state the next 30 to 90 days as part of the process of crafting an estimated 50-page petition to lift the district’s recovery status.

Status background

The district was placed in financial recovery in January 2019 and Matsook was named its recovery officer a month later.

At that point, the district was more than $172 million in debt — largely due to the construction of the high school and elementary school. It also had a negative fund balance, or savings account, of $12 million. The fund balance was accounted for separately from the overall debt.

Financial troubles were first revealed in a scathing 2016 audit report by then Pennsylvania Auditor General Eugene DePasquale.

A Tribune-Review investigation later found, aside from declining enrollment and charter school competition, factors such as unrealistic expectations, pricey wish lists, rampant turnover among key leaders and ignoring expert advice in favor of personal or political whim contributed to the financial problems that plagued the district.

Many financial checks and balances were put in place since then in order to get the debt-ridden, shrinking district back on track to solvency.

Tough decisions, including tax increases, teacher furloughs and a few program cuts were part of the financial recovery process.

The district fund balance has stayed in the positive for the past few years and was recently listed at about $14 million.

Board President Erin Vecchio said the financial recovery was also bolstered by refinancing a bond that saved the district $14 million, and the various times state Sen. Jay Costa, D-Forest Hills, secured millions in state grant money.

“That’s the only reason we’re getting out of recovery, because we have money now,” Vecchio said. “If it wasn’t for us working together, we’d never get out of recovery. The biggest ‘thank you’ I have is for Jay Costa. If it wasn’t for him, we would be bankrupt.”

New debt figures were not available at the board meeting.

Long road ahead

Penn Hills is one of five school districts in the state under financial recovery.

The other four are Chester-Upland, Duquesne City, Harrisburg City and Sto-Rox.

Recovery status declarations are available for review at PDE’s website, education.pa.gov.

Matsook said the Penn Hills will have to go through five years of oversight after recovery status is lifted.

“They’re kind of out of the woods, but not completely out of the woods,” Matsook said. “I have to convince (state Education Department officials) and all their different departments who will read this thing that Penn Hills has made progress and can maintain that progress.

“They have to make sure they continue to do all the things to get to this point. If they do anything to backslide, they go into receivership.”

Receivership is when the state petitions a county judge to appoint a receiver for the district. That person then assumes all duties of the school board and chief recovery officer and essentially makes all the district’s important decisions.

Matsook said he would not release any drafts of the petition to the public. The first draft is expected to be submitted to the state Education Department in about three weeks.

Education Department Press Secretary Taj Magruder said via email the petition review process could take 10-12 weeks.

That’s how long it took requests from York City and Scranton school districts to complete.

“The criteria for exiting financial recovery status will look different for each school district,” Magruder wrote. “However, districts must be prepared to demonstrate that they have made and can sustain progress in meeting and maintaining the goals of the district’s recovery plan.

“During the review of a request to exit financial recovery status, (state Education Department) will review progress toward the implementation of the recovery plan. The district must demonstrate that it has met or made substantial progress in achieving the exit criteria established in the most recent recovery plan. … This review includes an analysis of the goals and initiatives of the plan, academic programs, and financial projections.”

Being hopeful

Superintendent Nancy Hines said she is “hopeful” the petition process will go smooth, and that all the hard work done the past 4.5 years will prove worth it.

“Going into recovery in 2019 felt like a huge black eye,” she said. “It felt shameful. It was embarrassing. Certainly that was not something that felt good. However, now that I can look back and reflect, the level of support that that afforded us, I can appreciate that.

“I think the whole team is proud that it looks like we’re ready (to get out of recovery). We know that PDE has the final decision. We’re only four years in (to recovery status). If you look at the other districts, we’ve gone through that pretty quickly, assuming, again, that we’re ready and they’re going to grant that five years of monitoring.

“I think it’s a testament to our commitment to the community to take advantage of the supports and really focus on what needed addressed. We’re not perfect today, and if we really care about our community we should never be satisfied. We should always want to be more and better.”

District Chief Financial Officer John Zahorchak, who was hired near the start of this year and will assist Matsook in his petition preparation, said the pending petition is a “victory” for the district.

“They got put into recovery status because of poor finances, and in a very quick time the district was able to rebuild and get on a better path,” he said. “I think some schools have been in recovery for a decade. To me, it’s a pat on the back for people that had preceded myself and got us to a position where we don’t need as much oversight anymore.

“Based on our finances, it’s encouraging.”