The Court heard testimony Monday from Matthew Przywara, the chief of finances and operations for the School District of Lancaster, who said the district is both “well-managed” and “underfunded.”
In his 14 years at the district, Przywara said, he has worked hard to find budget efficiencies. But it is not possible to trim expenses enough to make room for the needed support for students that Lancaster Superintendent Damaris Rau testified about last week, he said. Significant additional resources are needed.
“To hire teachers or staff members, in general, in the numbers that [Dr. Rau] was testifying to takes millions of dollars,” Przywara said. “Printing on double-sided paper throughout the school district is not going to achieve millions of dollars of savings.”
Przywara explained how the state’s formula for distributing basic education funding, commonly known as the fair funding formula, accounts for differing needs of student populations in districts across Pennsylvania, considering economically disadvantaged students, English learners, and other factors. The formula then adjusts student counts, crediting extra students to districts who have greater needs to meet. In 2019-20, the fair funding formula calculated that Lancaster had to meet the needs of the equivalent of 17,387 students, an increase of 52% over its enrollment at the time of 11,418. This increase is the 15th highest in the state.
State funding, Przywara said, is not keeping up with the increased costs faced by the district. While many in Harrisburg have touted this year’s budget as a “historic increase” in education funding, the amount of basic education funding available for general use by the district has actually decreased since the 2019-20 school year, he said, because growth in special education and retirement costs outpaced increases in basic education funding by $5.7 million, using inflation-adjusted dollars.
Budget projections show a deficit for the school district every year for the next five years, he said, including a big jump in 2024-25, after federal pandemic relief funds expire. If state aid increases follow past trends, the district would face a deficit of about $30 million.
A deficit of that size for the district “is extremely significant and what I would call draconian,” Przywara said. He recalled the large cuts to education funding when federal aid expired following the Great Recession in 2011.
“In 2011 we made very material cuts to programs, we furloughed staff, we laid off staff,” Przywara said. “That [projected 2025 deficit] is more than double what we would experience from 2011.”
Fund balance 101
Przywara discussed how fund balances are used by school districts to ensure financial stability. For example, Lancaster typically ends its fiscal years with
millions of dollars due from the state or federal government in reimbursements and payments-–but without the cash in hand. They are still obligated to pay their vendors and employees while they wait for these funds, Przywara said, so “we have to use resources we have on hand” – typically the fund balance.
Fund balances are also used for unexpected expenses, Przywara said. One year, the district had to rent an offsite building for six months to educate 200 of its students when flooding damaged a school building.
Additionally, Lancaster and other school districts use fund balances as upfront costs for large projects. The district has spent $13.5 million on projects it anticipates will be covered by pandemic relief funds, such as enhanced ventilation and extended summer school, but it has not yet received the federal funds.
Lancaster cannot responsibly use its fund balances to hire teachers or intervention specialists, Przywara said. Hiring staff creates new recurring expenses, which would need to be offset with recurring revenue for the district to support those positions long-term.
The district’s current unassigned fund balance—the fund balance that the district is able to use at its discretion—is about 8% of a $250 million budget, Przywara said. This could only fund the district’s operations for about six weeks, he said.
“We need space that kids deserve”
Shortly after Przywara started in Lancaster, the district undertook a 10-year plan to renovate 17 school buildings. At the time, many buildings in the district dated back to from the 1920s to the 1940s, and they had never been renovated. Fourteen years later, Lancaster has completed 12 renovation projects.
The bonds Lancaster issued to fund these projects have resulted in the district taking on $13 million in recurring debt service costs. The state has not reliably provided reimbursement for construction costs, he said.
Deteriorating brick inside Carter & MacRae Elementary School in Lancaster.
These renovations mean less money to hire staff, Przywara said. The most recent renovation project, Wickersham Elementary, added about $900,000 per year in debt service for the next 20 years, which could fund about 10 teachers, he said.
Despite facing regular budget deficits and shortages in instructional staff, the district took on these building renovations because they were necessary, Przywara said. He viewed and described dozens of photographs of conditions in School District of Lancaster buildings that had not been renovated, including water damage, crowded classrooms, and hallways made into instructional spaces.
A trailer that serves as a classroom outside Martin Luther King Jr. Elementary School in Lancaster. The school building, which has yet to be renovated, does not have sufficient space for all students, Przywara said.
“We have non-secure entryways, we have roofs that leak, and we have bricks crumbling outside, we have boilers that break,” Przywara said.
The School District of Lancaster needs safe learning environments, Przywara said, and “we also need space that kids deserve. Our kids deserve things that kids deserve in neighboring school districts.”
“Their future is our future,” he said, “so we need to invest in them.”