Insolvency Travels North

Insolvency Travels North

Recall last year we wrote a reaction to the Auditor General’s audit of the Pittsburgh Public Schools and their claims of insolvency and how it kept getting pushed to the future.  That occurred even though the District was running surpluses.  The mention of insolvency was gone from this year’s budget.

Now the mention of insolvency has moved to the Erie City School District, which is currently in financial watch status under Act 141 of 2012, which is essentially the Act 47 for school districts.  The District was placed in watch status in September of last year.

An audit conducted pursuant to the law noted that the District’s ability to “…stay solvent and pay obligations on a timely basis” was in question.  Some comments in an article about the District’s status noted that insolvency usually applies to a private entity (since public entities can always raise taxes–it appears Erie last raised taxes in the 2011-12 school year), not a public one.  But districts in financial watch move to financial recovery when the district gets an advance on its basic education subsidy (if the district has more than 7,500 pupils) or is in litigation against the state for an advance in order to have the district continue in operation.  Whether or not Erie is there or headed there is yet to be seen.