Wednesday, March 26, 2014

PPS's financial condition- as it really is

The real state of PPS' financial condition, Part 1

On another post Anonymous wrote:

 "On January 22, 2014 Pittsburgh Public Schools raised taxes for the second year in a row. Times must be tough, right?

-On February 5, 2014, CBS reporter Andy Sheehan exclaimed that the School District of Pittsburgh "could be broke in two years without dramatic cuts."

-On February 21, 2014 Eleanor Chute in the Post Gazette stated that the district "is projected to go broke in 2016."

-On February 27, 2014 Bill Zlatos at the Trib reported that Auditor General DePasquale hopes his ongoing audit of the school district will help "prevent financial collapse." Zlatos' story repeats the Bellefield line that the district "is projected to run out of money in 2016."

But what if the truth was much different than the story reported by our local media?

Would you be surprised to learn that Pittsburgh did not need a tax increase and that in fact the district's saving account has grown dramatically since 2011?

Stay tuned to this Pure Reform exclusive. Part 2 to follow... "


Questioner said...

On another post Anonymous wrote:

"Part 2, The Balance Sheet

When the 2014 budget was adopted in December 2013 the projected surplus was $2.4 million.

Our fiscal year ends on December 31st and the accounting includes a run out period through February 28th. By March 3rd - three days after the run out period ended - the projected surplus for 2013 was more than $12 million.

Now, by the date the Board agenda was posted for the 26th, our 2013 surplus is $20.6 million. Our total fund balance is now over $100 million, more than 20% of our budget.

I have many questions, but let us start with the balance sheet:

1. How can the projection be wrong by more than $18 million between the end December and the middle of March?

2. How, when all accruals will have been recorded, can the projection be wrong by an additional $8 million between March 3rd and March 26th?

3. The real estate revenues were $12.5 million less than expected. What if they had matched the expected yield from the tax levy? Wouldn't that have made the surplus $33.1 million?

4. How do we explain to taxpayers that we raised taxes for 2014 having concluded a fiscal year with a $20.6 million surplus?

5. The balance sheet includes a $16.1 million commitment for retirement, yet our Board policy 7.21 is clear that commitments are made after the Single Audit is completed. The policy states: "After the completion of the annual Single Audit, if the unassigned fund balance exceeds fifteen percent (15%) of the General Fund current year budget expenditures, the excess shall be specifically designated for one or more of the following: subsequent years expenditure increases; subsequent years revenue reductions; transfers to the Capital Projects Reserve Fund." Why are we not following policy, when the statement's narrative is clear that the audit begins on April 7th.

6. GASB statement 54 is clear that commitments are amounts constrained to be used for a specific purpose as per government’s highest level of decision making authority such as the school board. Pennsylvania's manual of accounting for public schools requires a board resolution to commit funds. When did the vote occur to commit those funds for retirement?"

Questioner said...

On another post Anonymous wrote:

"Part 3, The Income Statement (12/31/13)

Were you surprised to learn that fund balance has grown by 10s of millions of dollars since January 1, 2011? How does that make you feel about paying for a tax increase two years in a row that was not necessary? How will the Pittsburgh Federation of Teachers react?

Our investigation moves next to the income statement provided with the March 26th Board agenda:

1. The unaudited financial statement highlights note that the 36% decrease in Transportation subsidies is the result of a timing difference, and yet the department of education has a schedule by which it pays subsidy to every school district that files a proper report on time. When was our report filed? Was it late or incorrect? Did other school districts experience the same delay? Can post on the website a copy of any correspondence on the subject from the Department?

2.Why was the vocational education subsidy twice the amount budgeted? Why did we only budget $200,000 when the prior year's receipts exceeded $400,000?

3. The 2013 budget did not include an amount for Tuition from Other districts, even though we received $1.3 million in 2012. Why did we project $0 and collect $1.1 million in 2013? Wouldn't the child accounting records reflect out of district placements?

4. The district budgeted less than $100,000 for transfers to other funds, yet the statement shows that we transferred nearly $6.1 million. When were these transfers made? When did the Board approve those transfers? How was the transfer recorded without a budget transfer first being approved by the Board at a public meeting? It only appears on tonight's agenda, yet it has already been done.

5. The column labeled "YTD December 31, 2013" shows a different revenue and a different expenditure figure than the column labeled "Projected 2013" on your Comparative Statement of Estimated and Actual Revenue. How can that be if the fiscal year is over? The column labeled "Projected 2013" also does not match the Three Year Rolling Forecast. Who is responsible for reviewing the statements?

6. Total expenditures and other financing sources from the Comparative Statement of Estimated and Actual Revenue total $495,393,293.24 for the General Fund, but yet on the Statement of Expenditures and Encumbrances for the General Fund the total expenditures and other financing uses is only $489,705,432.41, with differences across major objects throughout the statements. The very largest difference is in other financing uses of roughly $6 million. So I again repeat my question: who approved transfers to other funds between the date the one statement was run on March 11th and when the other statement was produced on March 20th. The budget transfer to increase appropriations in the general fund was on our agenda just tonight. How did the transfer occur before Board approval?

It certainly appears that the transfers were done to hide what would have been an even larger surplus of $26.6 million instead of $20.6 million, and heaven forbid the real estate was right, the surplus really would have been nearly $40 million dollars.

Stay tuned, Part 4 is coming next..."

Questioner said...

On another post Anonymous wrote:

"Part 4, There is no free lunch (Food Service Fund)

Having reviewed the General Fund's balance sheet and income statement, we have not only discovered what should always have been obvious to the local media, that the action fund balance GREW between January 1, 2011 and December 31, 2013, but we dug deeper into the income statement to find illustrative sloppiness on the district's part.

But what if I told you the district really had a fund that was in financial distress?

Turning to the Food Service fund:

1. I note that expenditures exceeded the adjusted budget by nearly half a million dollars, including over $300,000 in salaries and another $1 million in supplies. How do we let a supply account be overspent by $1 million.

Doesn't the accounting system provide for budgetary controls. Who authorized those two accounts to be overspent?

2. Budgeted revenues and budgeted expenses in the food service fund did not equal one another. Isn't that basic accounting, that budgeted revenues should match budgeted expenses?

We ran a nearly $900,000 budget deficit in a fund that ended the year with $3,725.01 is cash. Who is minding the store?

3. In 2012, the food service fund ran more than a $600,000 deficit. What is the game plan to bring this fund back into balance?

Between that the two years the position of the fund has decreased by roughly 10% of its budget, even though actual 2013 revenues exceeded the budget by $1 million?

No one - including the $2.4 million visionaries - has paid attention. Under the present course, the food service fund will never be able to pay back the cash borrowed from the district's general fund.

This fund was run at a breakeven point in prior periods and there are other school districts that run a breakeven food service shop that could serve as models.

Stay tuned, Part 5 examines the balance of the district's funds as reported on this evening's board agenda."

Questioner said...

On another post Anonymous wrote:

"Part 5: What about the other funds?

[As a reminder to the readers, the financial information referenced in this series is drawn from the district's year end 2013 internal financial statements posted with the March 26, 2014 Board agenda (as accessed March 25, 2014).]

Looking at the Internal Service funds:

1. The workers' compensation fund ran an operating deficit of roughly $600,000 before a $1 million operating transfer. By simply transferring funds from the general fund, doesn't this mean that the general fund is subsidizing all other funds with payroll, since the contribution rate was not set high enough?

Onto the capital funds:

1. Why do we still have balances in bond funds from 2009? How long under Internal Revenue Service regulations do we have to spend the money?

2. Why are there more than $1 million in encumbered funds in the 2014 Major Maintenance Fund when our vote in December was quite clear that the operating period of this fund begins on January 1, 2014? Who approved encumbrances for a fund that was not supposed to be open yet? Why would we not make an effort to spend the older bond funds first?

3. The capital reserve fund had more than $4 million in revenues and transfers. When were those transfers recorded and when were they approved by the Board? The budget transfer to increase appropriations in the general fund was on our agenda tonight. How did the transfer occur before Board approval?

Moving to the Statement of Special Funds:

1. Why does our report include funds from 2005 and 2006 that were long ago closed out, such as Title 2 and Title 3. The report is littered was old accounts, rendering it virtually useless."

Questioner said...

Maybe a good forensic accountant should be retained to take a look at finances? Maybe all the school closings and cuts to art and libraries and possibly to sports after a year don't have to occur after all?

Questioner said...

On another post Anonymous wrote:

"Part 6: Putting the pieces together

The School District of Pittsburgh's fund balance in the General Fund fluctuated by less than $1 million between fiscal year 2007 and fiscal year 2010 - that is 0.2% variance on a half-billion dollar budget - meaning that for some period of time, projections were pretty spot on and the budget's driver knew how to get more or less to a net zero steady state.

What happened since December 31, 2010 that caused our budget results, measured by year end outcomes, are wrong by tens of millions of dollars?

Here are the all-in rainy day fund totals for the general fund:

2007 - $73,403,945
2008 - $72,040,438
2009 - $71,520,707
2010 - $72,529,250

So, for this four year period of time the fluctuation in fund balance was less than $1 million, with the General Fund budget consistently run to virtually breakeven performance. Mr. Berdnik was our Chief Financial Officer during this time period.

Then, something dramatic happens for the years 2011 forward:

2011 - $82,100,594 ($9.6 million INCREASE in fund balance)

2012 - $88,958,227 ($6.9 million INCREASE in fund balance)

2013 - $109,801,155 ($20.8 million INCREASE in fund balance)

In sum total, the savings account GREW by $37.3 million from January 1, 2011 to December 31, 2013.

Key questions:

-Why did Pittsburgh raise taxes for 2013 and 2014?

-How do bondholders feel watching Dr. Lane, Mr. Camarda, and Mr. Joseph materially misstate the district's financial condition from 2011 to 2014?

-Will the Securities and Exchange Commission take an interest in the financial misstatements that may have lead bondholders to sell and buy at different price points than they otherwise would have?

-How will the Mayor and Auditor General react when faced with the actual data points?

-Will the Pittsburgh Federation of Teachers and other bargaining units sit quietly and let this pass, knowing now that program cuts were far, far, far deeper than necessary?

-How will this impact the next collective bargaining agreements?

-Should we ask for a $2.4 million refund from the visionary folk?

-Might student achievement have been different absent the excessive program changes imposed?

There is no question that all school districts in Pennsylvania are faced with the bleak reality of relatively flat state and federal funding, alongside rapidly increasing pension obligations. Some belt tightening was and may still be necessary.

But that in no way excuses the inability of Dr. Lane's administration to accurately portray financial results and adjust financial forecasts throughout the fiscal year.

The students, taxpayers, staff, and board of directors deserve better attention to detail and more skilled financial management."

Questioner said...

From Part 6 above:

"-Will the Securities and Exchange Commission take an interest in the financial misstatements that may have lead bondholders to sell and buy at different price points than they otherwise would have?"

There may be a real cause for concern here- "Over the last year, the U.S. Securities and Exchange Commission (the “SEC” or the “Commission”) has developed a new and aggressive focus on the municipal securities market."


Anonymous said...

I still wonder why Mr. Berdnik left and got a buyout with the help of his lawyer. What did he know?

Questioner said...

PPS says earned income was $10 million higher than expected... how would that happen?

Questioner said...

PPS explanation is very unclear; a whole mishmash of references; seems to be relying on what was "posted" but surely PPS has a pretty good idea of what income will be coming in to be "posted."

Questioner said...

Per a PG article, PPS attributes the extra funds to unexpectedly large receipts from earned income taxes and real estate transfer taxes:

So the City of Pittsburgh should also have much higher tax receipts than expected as well, right? Does anyone know if that is the case? And why predictions this year were so far off when that has not been the case in the past?

Anonymous said...

I watched the board meeting last night. Mark Brentley referenced Pure Reform and this particular posting about the budget fluctuations. He stated that the public needs to know whether the district is or isn't going broke. The message Lane and Co. keep sending out about going broke sends the wrong message to the public. Some parents will be looking to get out of PPS if they think we are going broke. Of course, Lane answered him by talking about a "rolling forecast."

Does Dr. Otuwa still work for PPS? I didn't see her at the table. Why does Dr. Lippert sit and text during the meeting? Who is she texting and is the meeting so boring that she otherwise occupies her mind? It looked like she also had maybe an Ipad or something that she typed on. Finally, Ira Weiss looked bored and tired. How much do we pay him? Oh, we are "going broke" but have a surplus of nearly 103.2 million unreserved fund balance at the end of 2013! We can hire some more consultants.

Anonymous said...

One of the board members (maybe Brentley?) asked if Clayton was being brought up again and was quickly told "no." I wonder why the Clayton vote is still getting delayed? And speaking of that issue, Dara Ware Allen was not present. She is the person who was pushing for that vote months ago.

Anonymous said...

How in the heck can there be that much of a surplus??? Easy, taxpayers paying too much. I do however believe school districts in Pennsylvania being required to have a surplus on their balance sheets. This is supposed to be a percentage of the annual operating budget. Shifting of funds has been done before. During contract talks a few years ago, pft wanted an audit of the financial records. Members were told "We have seen the books, they are out of money" tarka encouraged us to accept the boards offer. After a monumental voting fiasco, didn't the board discover an extra 30 million or so? As for lippert's texting, she is probably looking for answers that will satisfy Mark Brently's questions. Or, she is making dinner reservations.

Anonymous said...

Dara Ware Allen was at the meeting. She sits behind Lippert. (Lippert is ALWAYS texting.) Did anyone know that she is very interested in Fox Chapel/ Did they hire a new Superintendent yet? J. Lippert is not knowledgeable at all about academics, yet she is Chief of Academics?

The representative from Success Schools was at the meeting. His name is K. Houston. He has been attending meetings frequently. Hmmmmm. Wonder what is going on with that?

It won't be long before PPS sells all of its schools to Propel. There is no one at CO that understands teaching and learning that works for urban students!

Anonymous said...

Sorry, I did not see Allen on the video. Yes, Fox Chapel has a new Superintendent and he is not from Broad.

Lippert's texting reminds me of The Tale of Two Cities when the woman is always knitting...

Anonymous said...

I was taken aback by the exchange between Brentley and Lane at around 1:20.

Is greenfield at capacity? It seems like the Hazelwood community kids who went to Mifflin might have been better off at Greenfield.

I guess we can add Brugwin to the same list Schenley occupies.

Anonymous said...

Is this the stupid bullshit that concerns you in this post? TWEETS? Ira looks tired? This financial revelation is beyond belief. When the Pittsburgh School District raised taxes 2 years in a row, I was in shock. I barely manage to live in the city, to hold on to a modest co op in Oakland.
I posted on The at the time how difficult this would be for me. I received a hostile post that said I should be happy to pay my "fair share". I don't know if the city, nor the school board want me to go broke or move out. Does this site even know how hard it can be to live here? It's expensive. I'm not rich and I'm not poor. I feel that the city schools will make me poor though. We have had real-estate increases that have affected me greatly. To read this today is enough to make me cry.
I'm almost speechless. Millions of dollars levied, surplus, expenditures, fund balances, revenue, designated, projected, food service, SEC... I could go on and on and name names. Birdnik, Camard, Joseph, Layne, the Board, Otuwa, Lippert... My heart is broken to know that apparently, my concerns were selfish and that basically it was all for the kids. We need to educate in a fundamental, basic way. Is it too much to ask when will we finally have enough?
Where does anyone see this city going? I know that the real estate tax funds education, however, we must be mindful of all citizens who hold a stake in this discussion
I think that there are a lot of us. At least, I know a lot of them, good stock, good neighbors, hard workers, middle aged, a lot of women, life long sons and daughter of mill workers. On this site, I hardly hear me. Where is our voice? This financial disclosure is an outrage, upon outrage.

Anonymous said...

Hostile responses are the worst and I am sorry anyone directed one your way. I feel your pain, the cost of living in the city is getting to be too much for many. It is truly frustrating to see money spent on programs and consultants and RISE and bonuses when the results are so poor. Even worse is that when the grant money is no longer available to sustain things like bonuses and RISE where will the money come from? Tax increases 2 years in a row? Well, Carnegie Library is on firmer footing thanks to tax revenue but keep it up and we will be taxed right out of the city.

Anonymous said...


The point about the "stupid bullshit" as you called it, is that while we have a supposed financial crisis, the powers that be sit and peck on devices and/or act unconcerned and inattentive. Do you think they have shown that they really care where PPS is headed? Believe me that I do understand your concern and outrage. Unfortunately, I don't think the public has a voice anymore. We have to hope that our new Board can help right the ship before it goes completely under.

Nero fiddled while Rome burned.

Anonymous said...

I do not have the financial knowledge that my wonderful colleague here have-- I do rely on your expertise. But what I see is that with the "old board" there was constantly chicken little "sky is falling" to justify outside money like Gates-- it confused the public-- even Perduto thought " PPS needs money= Gates is giving money" only teachers-- and PURE REFORM people know that NO MONEY helped PPS!
Now with the "new board" we are simply getting the truth at many levels.
Yes I agree that Burgwin to Propel is sad, but Brentley is right-- Propel has an "in" and it is hard even for the new board to stop. Resnik has been worming his way into PPS since the 80s. He really wanted to be like NYC and have a charter school "take over" and reform and public school in PPS as an example to launch PROPEL. But, the board back then was tougher and wasnt mesmerized by the magic of famous names.
Thanks to Mr. Brentley for the Pure Reform mention and the shout out for arts education! We can restore PPS--alot of folks are with you Mr. Brentley!

Anonymous said...

Ron Joseph's explanation of why the projected balance given in December 2013 was wrong by $18 million by the time March 2014 rolled around does not hold water at all.

The November 2013 internal financial statements from the December board meeting showed that earned income was running $9.9 higher in 2013 than 2012.

In other words, there was no rational reason to believe that trend would swing in the other direction, especially when almost every other school district in the commonwealth had reported a bump in collections from Act 32.

The same really holds true for real estate transfer tax. Over $9 million was collected by November 30, 2013 as reported in the board minutes in December. Unless the district's fiscal staff had knowledge of some biblical refund pending, that trend too would hold through the 60 day run-out period.

Frankly ditto for salaries. Sure, year end expenditures were lower as programs were gutted. But by November 30, 2013 salaries were already more than $7 million lower than the prior year. Unless the district's fiscal team expected a run on substitute teachers and the hiring of masses in the shortened month of December, there is no way anyone paying attention would have thought that trend wouldn't hold true for the last 31 days of the fiscal year.

I hope Mr. Brentley receives answers to his questions because those provided at the meeting were simply not adequate. The real story is that the fiscal ship is floating along with novices at the helm, while consultants are getting fat, taxpayers are pinched, and real programs (teachers) are cast overboard.

Our children deserve better.

Anonymous said...

And so what will it cost PPS year after year for the 200+ former PPS students to attend a Charter School?

That was a question not asked outright although Dr. Holley alluded to it.

In the long run, it costs PPS more and more every year for the students who leave to go to a Charter.

The Board does NOT approve the majority of Charter applications. Somehow when it comes to Propel exceptions are made and Propel takes up residence in a closed PPS school.

How does this happen? Why does this happen? What is the bottom line reason that PPS is losing students? Why are so many schools in total chaos with the worst achievement scores in the state?

Its not the parents! Its not the community! They are not different from the past. So what IS different?

It is the schools? Why are good things NOT happening for kids in PPS? Is it RISE? Is it Broad/Gates? Is it the curriculum? Is it the District's inability to select good teachers? Is it the one-size-fits-all approach? Is it the behavior modification philosophy?

Or is it ALL of the above? Does PPS have any chance of surviving this lack of constructive leadership? Sadly it looks like the new Board is going the way of the old Board! So so so sad!

Anonymous said...

10:52 you ask,

"Why are good things NOT happening for kids in PPS?"

There are plenty of good things happening for kids in PPS, despite the current situation. Most of good happens through the efforts of teachers who stretch themselves in many ways to offer more than just what is mandated.

p.s. I miss Think-A-Thon, but there are other enrichment activities offered.

Anonymous said...

I always said, "Follow the Money!" As for Berdnik, he was the most honorable employee PPS has ever known and for that the likes of Roosevelt wanted him GONE! As for Lane, Lippert and Otuwa all three lack the qualities of a leader. Instead of leading, they bully.

Is anyone amazed that extra cash has been built up since RISE? Just look at how many seasoned teachers were either forced to resign or retire. You can even add school based administrators into the mix. So many just said, it's not worth it anymore. Working for folks in Central Office who are clueless is difficult and makes the job of operating a school just about impossible. Now we have clueless administrators in schools known as PELA's to match the clueless administrators who are at Bellefield. This new Board has a lot of cleaning up to do. The question is, will they?

Anonymous said...

Meet the new board, same as the old board. Every meeting, Mr Isler would ask about our finances. Were we on track? How do we look? Everything good? I always admired him for talking about finance and voting against this recent tax increase.
But now, I am in shock that this appeared to have been smoke and mirrors. Isn't it correct that PPS will have and audit shortly? They better damn well get to the bottom of this money grab. Do they think it grows on trees?
Everyone wants to help the schools, Peduto, Kale Smith, Harris and more. I'm afraid this will lead to more public money and spending for every cockamamie scheme to help PPS.
All I ask is to consider the taxpayer!

Anonymous said...

Can anyone explain why Dr. Sims now occupies the "right hand" seat at board meetings and Dr. Lippert has kind of become "once removed" seat away? ?

Anonymous said...

3:02 - The reason Connie Sims sits next to the Superintendent is because she is replacing Jeannine French who formerly sat in that spot. The position/place for Chief of School Performance is a higher rank than J. Lippert as Chief Academic Officer.

Anonymous said...

Maybe a bored look is Ira's poker face.

Anonymous said...

Watching the broadcast, we see that much of the nastiness and distrust of former Board members (and one current member) has been blatantly transferred to new Board members.

What a disappointment Mrs. Kennedy has become with a very transparent hostility being expressed publicly to say nothing of a reversal of her campaign promises!

Anonymous said...

Spoiler alert: If you haven't read the Monday PG article about the pps surplus and you prefer not to be in a bad mood all day, skip the article.

Anonymous said...

From the article:

In January, the board voted 7-2 to raise property taxes by 2 percent, which is expected to yield $3 million.

In an interview, board member Bill Isler, who along with Sherry Hazuda opposed the tax increase, said he doesn't see the operating surplus as a bonus to the district.

"I see at as very good management from the human capital point of view and also from the fiscal point of view but not something we can look forward to every year."

He said the district will have to "continue to hold the line on costs.

Can anyone explain the "human capital" comment? Does it mean that Mr. Isler believes the cuts to teaching staff were right despite the surplus? People are human capital, right?

Anonymous said...

Eisler means the dumping of experienced teachers for cheap transient workers was quite wise but cant continue as we are running out of seasoned teachers to exit.

Anonymous said...

Why aren't the board minutes online yet? The agenda is the only thing available for the most recent meeting.

Anonymous said...

you have to do a search in boarddox using the date. then scroll down the left column and pick the item.

Anonymous said...

I did that but couldn't get HR report or financial to open up. How do you access reports?

Anonymous said...$file/March%2026%202014%20(report%20%23%204793.pdf

should get to the human resource report using the above.

Anonymous said...

Thank you.

Anonymous said...

The word is that at tonight's Education/Policy Workshop meeting, members will be presented with a proposal to lower the physical education requirements in the district. Obviously this will come at a time when obesity is a major health concern in our society.

I'm sure Lane is looking for ways to cut more teachers which will result in larger class sizes and less activity time. Hopefully the new Board members will not vote for this change.

Anonymous said...

Airing the committee meetings is really helpful and I recommend watching. it is even live.

Anonymous said...

to 6:55
I could not find it "live" yesterday. Today on the website is a link to the video but when you click on it, it can't be found. It is very frustrating trying to navigate the PPS site.

Anonymous said...

While the meeting was airing the message was highlighted on the pps mainpage.

Anonymous said...

The videa of the meeting is now available from the mainpage.