Chapter 18 of the PA Code - Financial Recovery
NOTE: approved plans for school districts in financial recovery status are available on their websites.
Technical Assistance
Under section 611-A(c) of the Public School Code of 1949, the Secretary of Education is required to establish guidelines for the Early Warning System. The principal goal of the guidelines is to identify and provide technical assistance to school districts to prevent them from becoming Financial Recovery Status school districts. The Early Warning System Guidelines (PDF) are operational upon publication in the Pennsylvania Bulletin.
School district identified through the Early Warning System to be experiencing financial difficulty
The Pennsylvania Department of Education (PDE)'s Involvement/Process:
- PDE must notify any school district identified for Financial Watch
- PDE can request, from the district, all information needed to fully review the financial situation in the district – the district has 15 days to respond
- PDE may visit or correspond with employees at the district as part of the review process
- PDE shall provide technical assistance to a school district identified for Financial Watch status, which may include contracting with a financial consultant, to help the district avoid falling into Financial Recovery status
- Average Daily Membership greater than 7,500 AND receives an advance in basic education subsidy at any time; (moderate) OR
- Receives an advance of its basic education subsidy at any time AND is either subject to a declaration of financial distress OR engaged in litigation against the state where the district is seeking financial assistance to continue operation. (severe)
- Designated under 22 Pa. Code Chapter 18 (related to Financial Recovery). Chapter 18 sets forth criteria that the secretary may consider in determining whether to issue a declaration that a school district is in financial recovery status and whether a school district in financial recovery status shall be deemed a moderate financial recovery school district or a severe financial recovery school district.
- No more than nine school districts may be under a declaration of financial recovery status at any time.
PDE's Involvement/Process:
- PDE must make a public declaration that a school district is in Financial Recovery status
- The Secretary of Education may decline to issue a declaration that a school district is in Financial Recovery status, if in the last five years an emergency has caused the financial situation
- The Secretary of Education, within five days of the declaration of Financial Recovery, must appoint a Chief Recovery Officer (CRO) – This individual works with PDE and the district to create and implement a Financial Recovery Plan
The Secretary of Education shall petition the Court of Common Pleas, in the county where the largest part of the district resides, to appoint an individual to serve as a Receiver for the district if:
- The school board rejects the CRO's Financial Recovery Plan;
- The school board does not comply with directives issued by the CRO;
- The school board does not satisfy the objectives in the Financial Recovery Plan during a period of time after its designation of financial recovery is terminated; or
- In certain instances, related to severe financial recovery school districts, the school board votes to move to receivership.
When the Receiver is approved by the courts all duties of the CRO and the school board transfer to the Receiver, with exception to the ability to levy taxes
- The CRO could be appointed as the Receiver
- The CRO could stay in place to advise the Receiver
- The Receiver must implement the Financial Recovery Plan which is attached to the petition provided to the Court of Common Pleas
- A Receivership shall expire three years after the initial appointment of the Receiver – the Secretary may petition the courts for an extension
- When a school district exits receivership, the school board will resume full control
Act 86 of 2016
Act 86 of 2016 included the following revision to the Public School Code of 1949.
Addition to Article VI-A SCHOOL DISTRICT FINANCIAL RECOVERY
Section 694-A. Additional criteria.
The secretary shall notify each school district that receives educational access program funding that is equal to or greater than $2,000,000 in any one fiscal year that the school district has been identified for financial watch status. A school district identified for financial watch status under this subsection shall receive technical assistance as a financial watch district from the department as provided for in section 611-A(b) and shall develop a plan to improve the school district's finances based on the technical assistance provided by the department for approval by the secretary. The plan shall be submitted to the secretary no later than 180 days after the school district has been identified for financial watch status under this subsection. Each year after the initial submission of the plan, until the secretary determines otherwise, a school district subject to this subsection shall submit a report to the secretary outlining the status of the school district's plan, meet with the secretary or a designee of the secretary to review the report and the status of the school district's finances and hold an annual public hearing regarding the plan. A copy of the school district's approved plan and any subsequent annual reports to the secretary shall be posted on the publicly accessible Internet website of the school district and transmitted to the chairperson and minority chairperson of the Appropriations Committee of the Senate, the chairperson and minority chairperson of the Appropriations Committee of the House of Representatives, the chairperson and minority chairperson of the Education Committee of the Senate and the chairperson and minority chairperson of the Education Committee of the House of Representatives.