PDF Scranton School District Watch Letter

COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF EDUCATION

June 23, 2017

Mr. Bob Sheridan School Board President Scranton School District c/o Superintendent' s Office 425 N. Washington Ave. Scranton, PA 18503

RE: Financial Watch Status

Dear Mr. Sheridan:

The Pennsylvania Department of Education (Department) was required, pursuant to Act 141 of 2012, to develop and implement an Early Warning System to identify and offer technical assistance to school districts experiencing financial difficulties. The Early Warning System identifies a number of indicators of financial difficulty that the Department evaluates to determine whether a school district should be designated in Financial Watch Status.

Pursuant to the Early Warning System, the Department conducts an initial analysis of the financial health of a school district. See 22 Pa. Code ? 731.2(1). Based upon the initial analysis, it was determined the following indicators are present in Scranton School District (District). These factors support the District's designation of Financial Watch Status:

? Fund Balance Ratio: The District experienced a steady deterioration in fund balance ratio from -7.6% in 2013-14 to -17.25% in 2015-16 in the General Fund as reported on the District's annual financial report. The District experienced a steady deterioration in fund balance ratio from .89% in 2013-14 to -7.36% in 2015-16 based on all governmental fund and all proprietary fund types as reported on the District's annual financial report.

? The District had a delinquent real estate tax rate of 17.1% in 2015-16. ? The District's outstanding debt was 115.8% of annual expenditures (based on all

governmental fund and proprietary fund types) in the 2015-16 fiscal year.

? The District experienced a deficit of -10.89% in 2014-15 and -14.05% in 2015-16 based

on all governmental fund and all proprietary fund types as reported on the District's annual financial report. The deficit as a percent of assessed value was 3.7% in 2014-15 and 5.0% in 2015-16. ? 2016-17 Market Value/Personal Income Aid Ratio: .7504 (ranked 43 rd highest out of 500 school districts).

Office of the Executive Deputy Secretary

333 Market Street I Harrisburg, PA 17126-0333 I 717.772.4789I Fax 717.787.72221 education.state.pa.us

? 2015-16 Equalized Mills: 25.9 (ranked 39th highest out of 500 school districts). ? The City of Scranton was declared financially distressed pursuant to Act 47 of 1987.

Based upon the results of the initial analysis, the Department gathered additional information from the District. See 22 Pa. Code ? 731 .2(II). The following indicators are present in the District, which further support the designation of Financial Watch Status:

? The District transferred bond proceeds from the Debt Service Fund to the General Fund to balance the General Fund in 2015-16.

? The District did not submit timely requests for Authority Rentals subsidy payments and has not submitted PlanCon Part K Project Refinancing for refinanced bonds related to PlanCon construction projects.

? The District submitted a General Fund Budget for calendar years 2016 and 2017 with a beginning fund balance of $0. The District had a negative fund balance on its 2014-15 and 2015-16 annual financial reports which does not support a beginning fund balance of $0 on its budget.

Based upon the existence of these indicators, both separately and cumulatively, the Department hereby notifies you that the District is designated in Financial Watch Status pursuant to section 611-A of the Public School Code of 1949. 24 P.S. ? 6-611-A; see also 22 Pa. Code? 731.2.

As such, the Department will offer technical assistance to help the District with its financial challenges. The Department will be contacting you soon to discuss and schedule this technical assistance.

Executive Deputy Secretary

cc: Alexis T. Kirijan, Superintendent Gregg Sunday, Chief Financial Officer

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