Is There a Catch in Receiver Plan?

The Duquesne School District is about to move into the next step of school district financial recovery under state law as the Secretary of Education has just asked the County Common Pleas Court to appoint the person who has been acting as chief recovery officer to become a receiver under Act 141 as the Duquesne School Board opted to reject the plan to send the remaining students of the District (all of elementary age) to neighboring districts. That request has been made on a voluntary basis (several have already said they won’t) so there is a possibility that a state mandate would come to pass.

The court does not have to take the person nominated by the Secretary to be the receiver; it can name its own or ask for an alternate. Whoever becomes the receiver essentially becomes the school board, except the receiver cannot levy or raise taxes. The receiver has the power to implement the recovery plan, communicate with the state on a quarterly basis, make sure employees of the district are following the plan, tell the school board to raise taxes, and go to court to get a directive to get employees to comply with the recovery plan.

The act says that receivership is to terminate three years after the receiver is appointed unless the state petitions the court for an extension. Even after receivership is terminated the district remains in oversight from the state for a five year period, most likely to ensure that the district does not slip back into distress.

An “Act 47” for Schools

Legislation has passed both houses of the General Assembly that would put in place financial recovery and receivership provisions for the state’s 500 school districts, though it is a safe bet that, like the fiscal distress provisions that could apply to all of the state’s 2,000-plus municipalities, not all will ever encounter any sort of fiscal oversight or guidance.

A side-by-side comparison of Act 47 and the proposed school legislation is instructive:

Act 47

Proposed Legislation

Steering Department

Community and Economic Development

Education

Person Who Determines Status

Secretary of Community and Economic Development

Secretary of Education

Title of Official in Charge of Recovery

Coordinator

Chief Recovery Officer

Key Document

Recovery Plan

Financial Recovery Plan

There are some key differences as well: under Act 47, there are parties besides the state that have standing to make a case that a municipality has qualified for distress. In the proposed legislation, it appears only the Department of Education can make the case. There is no cap on the number of municipalities that can be in Act 47 at one time (right now there are over 20) whereas the legislation for schools says that "no more than nine" can be in financial recovery, or the more drastic receivership, at one time. While Act 47 spells out much of the criteria on what it means to be distressed, the State Board of Education is supposed to determine the criteria for "moderate" or "severe" distress. And what causes the cessation of distress/recovery? For both, it is the determination of the respective Secretary.