SDL not only survives, it thrives SDL not only survives, it thrives
Early challenges Difficult decisions Revenue enhancers Out of the woods? Early challenges Difficult decisions Revenue enhancers Out of the woods? BY BRIAN WALLACE, Staff Writer
Times are tough for urban school districts in central Pennsylvania.
Saddled with stagnant tax bases and serving large numbers of low-income and special-needs students, they're struggling to stay afloat in the face of steep cuts in state and federal education funding.
But School District of Lancaster isn't experiencing the economic woes of its neighbors.
The school districts in York city and Harrisburg have been declared "financially distressed" by the state, which appointed financial recovery committees to develop radical plans to keep them solvent.
Harrisburg has amassed $437 million in debt and faces drastic cuts in personnel and programs, while York is considering widespread layoffs and switching all its schools to charters to reduce costs and stem enrollment declines.
Reading School District, named to the state's "financial watch" list, faces huge spending cuts next year to fill a projected $53 million hole in its budget.
Allentown School District also faces daunting financial challenges. A projected $22.5 million deficit could force it to cut 144 teachers and 12 administrators in 2013-14.
And then there's School District of Lancaster.
For the first time in five years, it isn't planning to lay off any workers or cut any programs.
The district's fund balance is so healthy, it needs to spend down about $2.5 million in reserves to stay within state guidelines.
And the SDL board has already agreed to limit a tax hike next year to 2.5 percent or less, despite facing a deficit of $4.5 million.
Not only does the district not plan any school closings, it actually opened a new one last year and is building a new $26 million elementary school to open in the fall.
SDL faces many of the same challenges as those other urban districts, so how has it weathered the economic storm so well?
School board members and administrators say the district's stable leadership has been key. They also point out that SDL actually benefited from its stormy past -- a financial scandal in the early 2000s that landed former superintendent Ric Curry in prison.
That forced the district to operate more efficiently, cutting millions from its budget well before other districts began to reduce expenditures in theirs.
"We're kind of atypical in the sense that we went from being really low and in crisis mode to being a bit more solvent and now trying to maintain that solvency as best we can," Superintendent Pedro Rivera said.
The SDL board also made a concerted effort to funnel more money into the district's reserves, which have grown nearly tenfold in five years.
"The outcome is better than I ever would have dreamed," said board member Richard Caplan, who took office four years ago, in the thick of the economic downturn.
"But it's not an accident that we're in this position. We always approached every issue with a view toward the long term, and as a result, I think we've made good strategic decisions before other districts did."
Even before Rivera took the reins as superintendent in July 2008, he had some difficult financial decisions to make.
In June of that year, Rivera was on the phone with Chief Financial and Operations Officer Matt Przywara discussing cuts to the district's after-school programs because of the loss of federal grants.
"I remember sitting down and reviewing numbers with Matt and the team and really noticing we had to make some hard decisions," Rivera said.
SDL had just emerged from five straight years of deficit spending, so Rivera and Przywara had to be more focused on cost-cutting than officials at many other school districts.
That first year, the district made a bold decision -- outsourcing the operation of its Buehrle Alternative School to a private company, Camelot Schools.
That move now saves the district about $770,000, compared with what SDL would spend to run Buehrle on its own, Przywara said. In 2010, Camelot took over SDL's Phoenix Academy, saving another $400,000.
The district also trimmed its central office staff by 12, implemented a bulk purchasing program and began commodity purchases of natural gas for its schools.
Spending freezes in 2009 and 2010 saved about $2 million, and administrators and nonunion support staff agreed to pay freezes that cut expenditures by $500,000.
The reductions were largely under the radar until 2011-12, when federal stimulus funds ran out, prompting the state to drastically cut education funding. SDL was expected to take a $7 million hit.
That prompted a spate of tough decisions that culminated in the elimination of SDL's elementary Spanish program and the gutting of its library staff. Instead of 19 librarians, the district now has five.
Residents didn't like the cuts, but they could have been worse, officials said.
SDL's music, art and athletic programs were largely spared -- something that didn't happen at many other schools in the area. According to Rivera, that was a deliberate move.
Three years ago, he said, the district's top administrators began ranking all nonmandated programs in the district, dividing them on a color-coded chart by cost and impact on students.
"We never once said, 'What can we do without?' " Rivera said. "The question was, 'What do we have to continue to invest in, and what is high impact in terms of quality of life for kids?' "
From those discussions, they decided that art, music and physical education programs had too much positive impact on students to be cut, he said.
"When you think about us not having those programs, it's really taking a hit at our identity as a school district, especially as an urban school district that still provides a full art complement, a full music complement and full PE complement in each of our schools," Rivera said.
Sparing those classes meant more cuts in other areas.
Elementary school dean and curriculum coaching positions were eliminated, as were school outreach workers and several support staff and classroom aide positions. Seventy-five teachers took early retirements.
From 2009 to 2012, SDL eliminated more than 150 positions through layoffs and attrition, cutting its labor costs by $12.6 million, according to the district.
More savings came when unionized support staff workers, whose jobs were threatened with outsourcing, took a two-year pay freeze. District teachers accepted a one-year freeze.
"Folks really stepped up," Rivera said, pointing out that many workers added multiple new duties to their jobs without earning higher pay.
There was some burnout, and the district lost several top administrators, but the core leadership team stayed largely intact, something that hadn't happened at SDL for years.
"If you're constantly changing leadership, you're constantly going to have new ideas, new philosophies, and there's not good buy-in for the overall mission," Przywara said.
"We really have a pretty consistent message that's out there in terms of what we're trying to do and what we're doing, which is very helpful."
Because of SDL's stagnant tax base, property tax revenue did little to bridge revenue gaps caused by increasing pension and health care costs, so SDL had to look elsewhere for new revenue.
The district was able to land $7 million in federal grants to support after-school programs and efforts to increase college attendance.
SDL was one of only a few districts in Pennsylvania to get stimulus-funded school construction bonds with near-zero percent interest rates that are expected to save $28 million in interest costs over 20 years.
The district also reinvested existing bonds and sold its tax liens to generate more than $3 million. Last year, it launched an in-house cyberschool program that saved $700,000 on tuition costs had students attended outside schools.
But many of the changes were on a far smaller scale.
SDL extended lease agreements on many classroom computers instead of replacing them and greatly reduced the number of copiers and printers in its schools.
Lafayette Elementary, for example went from 65 printers to less than 20, cutting $9,000 from the school's operating budget, Przywara said.
Principals understood the need to cut costs, and often suggested areas of savings, he said.
"How amazing is it when you have principals who actually call the business office and superintendent's office and say, 'I don't need to spend any more out of my budget'?" Przywara said.
School board members also took a long view on spending.
When funding came in higher than expected from last-minute changes to the state budget, the board could have scaled back taxes or restored many cuts. But members decided to plow the bulk of the savings into the reserve fund.
SDL's reserves are now approaching $21 million -- about 10 times the level of five years ago.
While no major cuts are looming in next year's budget, district officials aren't convinced the worst is over.
"We work as though we're never out of the woods," said Przywara, who expects the district to face deficits of $5 million to $6 million per year over the next few years.
Soaring pension and health care costs are the main drivers. SDL also is bracing for federal budget cuts and increased operating costs related to the new Common Core curriculum standards that take effect in 2013-14.
In addition, the district likely won't be able to rely on savings from concessions from its employees, as it has in recent years.
Rivera said there's hope the state funding stream may improve. The Legislature this week approved a bill that could boost future special-education funding after six years of no increases.
And if a state logjam on reimbursements for construction projects is cleared, SDL could get about $3.5 million, he said.
But without changes on the state level, SDL could "eat right through its fund balance in four or five years," SDL board member Charlie Crystle warned.
While the future is uncertain, Rivera said the district is well-positioned to address the challenges ahead.
"I think stability is so important, in terms of the school board, the district leadership and the community that supports us," he said.
"Probably the biggest agent of change here is that this is a great community."
Przywara is already working up proposals on reducing health care and energy costs moving forward.
"We're not out of the woods yet, but we have to look ahead and see what the challenges are and then keep trying to get there," he said.
"We all know where we're going. We know what we have to do."
nOther school districts in central Pa. are sinking fast. That's not the case here.