PSBA General Counsel has provided legal analysis explaining why it is lawful for school entities to take two particular stop-gap measures for addressing the cash flow pinch caused by the commonwealth’s ongoing budget impasse:
- Delaying payment of employer contributions to PSERS; and
- Delaying payment of the portion of charter school tuition otherwise owed that represents the proportion of total budgeted revenue received from the Commonwealth.
PSBA has become aware that such measures are being considered or planned by some PSBA members, and legal review was directed by PSBA Executive Director Nathan Mains in order to provide guidance in response to member and media questions. The resulting opinion of counsel includes the following bottom line conclusions:
“As explained in more detail below, it is my opinion that both [measures] can be done consistent with statutory obligations, in recognition of a school district’s overriding duty to try to meet the educational needs of school children in the short term notwithstanding the lack of a commonwealth budget. However, when sharing my conclusions with our members is it important to stress that school districts considering these options should seek and follow the advice of their respective solicitors on these matters, as some local counsel may not completely agree with all aspects of my analysis.”
“Initially, it must be observed that once the commonwealth has failed to adopt a budget by the deadline established by law, and consequently is not distributing the state and federal education funding upon which large portions of local school entity budgets are premised, we have moved into uncharted territory beyond the contemplation of most of the laws governing public school operations. In a situation our laws simply were not written to address, and in which timely compliance with all of those laws can become impossible as a practical matter, local public school systems are forced to be creative and resourceful in finding ways to prioritize their essential governmental functions with respect to the education of children. In short, when the commonwealth stops paying its bills, it is inevitable that school districts might have to put off paying some of theirs.”
“Accordingly, local school employers have express statutory authority to delay payment of the entire employer share of PSERS contributions for as long as the payment of the corresponding reimbursements for that obligation are delayed due to the budget impasse, plus five days. . . . However, this authority to delay payment does not apply to local employers’ obligation to continue to make timely deposit into the fund of employee payroll deductions for employees’ contributions (no later than ten days after the close of the month in which deducted from pay). School employers do not have legal authority to delay remitting such payroll deductions.”
“[U]ntil the amount of state and federal subsidy allocations for each school district is known for certain and authorized for payment, it is entirely consistent with the intended operation of the Charter School Law and other statutory provisions governing public school finances and budgets that the amounts of any budgeted expenditures dependent on those revenues be regarded as purely hypothetical and properly excluded from the calculation of amounts paid to charter schools until resolution of the commonwealth’s budget impasse. Those amounts are not yet “real money”.”
“Accordingly, paying only that percentage of charter school tuition equaling the percentage of total estimated revenues derived from purely local sources, and delaying payment of the remainder until the budget impasse is resolved is a fair, reasonable and lawful stop-gap cash flow management measure in this time of abnormal fiscal constraints. Charter schools payments would be merely delayed, and when paid will be in amounts that accurately reflect what is allocated in the Commonwealth’s budget. Charter school advocates are fond of defending the current charter school funding mechanism with the dubious catchphrase, ‘the money follows the child’. Dubious or not, if the money hasn’t arrived, it most certainly cannot follow.”
MBM is in agreement with the legal analysis provided by PSBA General Counsel. Please contact our office at 412.242.4400 or at firstname.lastname@example.org if you have specific questions regarding how your district plans to address PSERS contributions and Charter School tuition during the period that the Commonwealth has failed to adopt a budget.