Your podmaster recommends the Financial Affairs meeting where a
menu of financial good and bad news was on offer.
On the good news side, the administration recommended to the board
that any tax increase for 2016-17 be kept below the Act 1 index limit
of 2.4%. A 2.4% increase equates to 1.068 mills pushing the budget to
over $106 million. Of course, unless a wave of other school districts
in our area apply for waivers to increase above the Act 1 Index,
Cheltenham will still have the highest school tax rate in Montgomery
On the bad news side, The preliminary 2015 audit presentation detailed the
impact of a recent change in accounting practices (GASB 68) designed
to bring government bookkeeping in line with the private sector.
Specifically, the state has forced local school districts to carry
their share of the state's pension liability on their books.
The result of the change is that $140 Million of the state pension
debt has been assigned to Cheltenham's balance sheet. The district
has dived deep into the red with a 2015 deficit of $99 million. To
give an idea of the change it should be noted that a surplus of
nearly $38 million was reported in 2014. The finance director
indicated that there is no real impact on operations caused by this
The real question is: what is the effect of GASB 68 at the local level
when a state declares bankruptcy ? Do state creditors hold the
locality directly responsible for the assigned portion of their debt
if the state cannot pay ?
The question is timely in that the US Supreme Court
agreed this week to hear the Puerto Rico debt restructuring case.
While Puerto Rico is not a state, whatever decision is made in the
case will surely affect heavily indebted states like Pennsylvania.
The Governor of Puerto Rico, Alejandro Garcia Padilla, has stated
that the $72 billion public debt is unpayable and needs restructuring. His restructuring
plan calls for
further consolidation of public schools, with some 135 closures already implemented.
So will Puerto Rico local governments be forced to pay for their
share of state-assigned debt ? If so and if Pennsylvania goes
bankrupt, Cheltenham may find that the $99 million deficit we were
told "not to worry about" is real and will force the closure of some
of our newly-built schools.