Last month, Harrisburg School District Chief Recovery Officer Gene Veno and Superintendent Sybil Knight-Burney stopped by TheBurg offices to talk about the recently passed school recovery plan, designed to lead the district to financial stability and improve academic performance. We share most of this extensive interview on these pages.
TheBurg: The recovery plan is designed so the district can achieve a budget surplus by 2017. That seems like quite a monumental task. Can you take us through how you hope to achieve that?
Veno: First, I’d like to thank you for having us here today. Anytime we can get out positive information about the school district, we’re very appreciative.
The plan is designed on a forecasted five-year model. The idea, when we came into the district, was first to see where we were financially. That was not known prior to coming in. We found out there was a deficit in the current general budget of which the superintendent had known previously, but we didn’t know the depths of how much. We started to drill down on what could we do without making cuts, what could we do without closing schools, what could we do without furloughing educators or eliminating any programs.
I’ve been saying this now in the community, and it seems to be really a catchphrase: this is really “Recovery 2.” “Recovery 1” was the board previously working on doing some of the harder decision-making as far as closing five schools; they had to furlough a number of employees; they cut $22 million in their operating budget. So, I call the recovery plan the Phase 2 process, which will give the board and the superintendent the opportunity to get through to the next stage of recovery.
Now, that being said: how do we get from where we were to a balanced budget in the 2017-18 school year? Well, there are very specific initiatives within the plan. If you’ve reviewed the 128 pages, there are guidelines that have to be followed, not necessarily just financially, but academically.
Financially, there are ways that we have now to manage our budget, and one of the areas that we have to look at is that we will see a dollar amount of $14 million. That will be from $6 million to $14 million in this budget year to next budget year of money going to charter cyber schools. We looked at 672 students at $15,000 approximately a student. That is money that we would like to see stay within the district. So, one of the initiatives to achieve that goal is to, hopefully within the next month, retain a cyber director who will oversee the cyber Cougar Academy, which we currently have, which is only 9-12. We’d like to expand it to K-12. It would be a blended model, where students will be both on site and at home. That’s one area.
The other area is looking at where we can bring in additional revenue. As I said, there were five shuttered buildings. One of them, we’re going to try to keep for the school administration building, that being Lincoln. The board had previously looked at the admin building cost and targeted about $40,000 a month. So, there’s about half-a-million there that will go away in the 2013, ’14, ’15 years. So, by 2017, we won’t be spending that half-a-million. So, if you add up there, we’re almost at a point of eradicating the current deficit that we see for next year, which would have been $14 million, if we didn’t do something, which we did.
Finally, there are many other aspects of the recovery, such as sale of buildings, which would come into the general fund, increasing student population (we average about $14,000 per student cost). So, we’re looking, as every student brings in revenue, our goal is to immediately to start to keep our 6,340 students and increase it. We want to see the population change, and that’s the challenge in the urban district.
TheBurg: The additional funding that comes in per student, does that essentially come in from state aid?
Veno: State aid, yes. But the point being: you don’t get it unless you have the students. So, it’s the average daily measure—the ADM as they call it. We want to stem the egress of students outside the district. We want to keep students in the district and increase the student enrollment in the district. And that’s one way of increasing the value revenue of the school.
TheBurg: Do you plan to do that mostly through the Cougar Academy?
Veno: That’s only one stage of that. We’ll have three academies, which I want Doctor (Knight-Burney) to speak on. It’s her vision to create special academies for children of [grades] 5, 6, 7 and 8, which we believe will inspire many parents to keep their children in our schools not only through 5, 6, 7 and 8, but on through graduation.
TheBurg: Getting back to this revenue question—if you have greater enrollment, you will get more money in from the state, plus you hope to get more students from the cyber charter school, correct?
Veno: If you take the number I gave, times the number we’re looking at, we’re looking at almost $10 million we’d like to stay in the district. So, right there, if we had $10 million this year, we’d have beyond a surplus, and we wouldn’t be looking at a 5 percent budget and 5 percent wage cut.
Knight-Burney: And provide options in our district so that families who are looking at other options can consider us.
Veno: So that was one area that we noted immediately in our discussions—that we needed to do something about the egress of students. When we got down to it, we said, “672 students times 15,000.” Right there, that was one area that we targeted. 672 are in a cyber school right now in the school district. Statewide, there are currently 103,000 students in a cyber charter school. That is their choice. We commend any parent who wants to do that. That is not for us to make that determination, but we have an obligation under the school code to pay that fee. We looked at it as, “Why are they going there?” And we are going to come out and do an aggressive marketing campaign to educate the community, the citizenry and the parents of these children that we do have a good product. We need to have a quality product, and one of the areas is through our academy. So, we’re going to do that.
Knight-Burney: This whole charter and cyber charter is something many districts are facing. Some districts have even higher charter costs than we have.
Veno: We don’t have a large number of charter buildings in brick and mortar. Ours is in cyber. So, that’s what we focus on, and we’ll do the best to compete. Again, what parents decide is their choice, but we’re going to try to give them a good choice in the Harrisburg City School District.
TheBurg: The accumulated deficit in the district is almost half-a-billion dollars. For a community this size, that number seems daunting. Do you really think that kind of debt can ever really be retired?
Veno: Yes. The number is $437 million. At one of the meetings, I asked our financial team, “What is our total outstanding debt? And if we were to pay it down over a period of time, what is that period of time?” Our total debt load right now is about $265 million. But I asked a question, “Well, when would it be paid?” And, if you look at it and amortize it over 25 years, it comes to the $437 million. And I put that number out there because that was kind of the benchmark for where we have to stop on our debt and have to reduce that.
I also looked at other districts, and we’re running about 12.5 percentage of debt to budget. And I’m looking at most universities and most other high schools and districts, and they’re running about pretty much from 9 to 12 percent, as well. Now, the thing I feel good about, in this respect, finding this, is that the money was not wasted. It was spent on refurbishing and reforming all of these schools—actual structural buildings. So, we have good schools. So, that part is done.
We have now set the stage for the next five years. That (debt payment) will grow another $6 million this year, from $14 million to $20 million, and then flatten out for five years. So, once I saw those numbers trending, I felt more comfortable knowing that I know what my fixed is for the next five years. And that’s predicated in the five-year plan, as well. That being said: $20 million a year is a lot of money. Our goal is to try to trend that down. How do we do that?
We’d like to place three of our buildings into the marketing of the KOZ (Keystone Opportunity Zone): Hamilton, William Penn and Shimmel. We already had some interest in William Penn through the State Museum Archive Society. We had a few medical facilities taking a look at it. But our biggest challenge the last month was looking at the property at 1901 Wayne Ave., which is not in the city. It’s in Susquehanna Township—42 acres. We would not receive all of that money because that money would have to be in context with the state because they’re the ones that gave it to the city school district to build a public education facility. If it should move forward, we would generate a net, at this point, of almost $1.8 million, which would have to go back to the state. Then the state would have to determine how much we would receive.
So, we’ll put these other buildings into the same kind of a process. We’re not going to sell them immediately, but we’ll do our best to market them so they become a viable source of revenue not just for the district but for the city.
Hamilton, for example: we had one interested party coming to rent it. I saw him, and it’s just not going to work out. We don’t want to be in the lease business; we want to sell it. We had another developer taking a look at it to make it into an apartment complex. We don’t base a dollar value on this. Any of that dollar that comes in will go right into the general fund.
TheBurg: You received significant interest in William Penn? Any potential action?
Veno: We gave some tours of the building. Again, we haven’t marketed any of the buildings. The property needs to be rezoned, and we met with City Council and the mayor and that will take place. I just think it’s a beautiful facility of 25-plus acres that could be turned into just about anything. I’d like to see it tax-driven too. So it would be a revenue-producer for the city, as well as the school district.
TheBurg: How is the search for the proposed CFO (chief financial officer) going?
Veno: We just finalized the job description. It’ll be posted on our website in the next day or two.
We’ve been in deep negotiations with the labor unions. On May 17, the plan was approved. Once it was approved, one item on my list was to get to the bargaining table with all the labor unions, and we did, and they’re completed. We will have hopefully this checked off our list very soon that two bargaining units (AFSCME and HEA) and the meeting group, which is for administrators. I was looking for a sign-off by all three groups. HEA signed off on it. They agreed to the 5 percent wage and benefit [cut]. All administrators and principals have signed off on it. And AFSCME—the non-certification employees—will sign off on it hopefully. If they do not sign off on it, we do not go into receivership, but we will go into furloughing employees. We do not want to see that happen. [Ed. Note: Days after the interview, AFSCME negotiators rejected the district’s offer, but then reversed and accepted it.]
Knight-Burney: Over the years, after closing five buildings, after furloughing over 300-some-odd people, we were out of ideas. Every year, we were able at the minute to balance the budget. But the point has come that we can’t close any more buildings. We’d have kids sitting on top of each other. We won’t have teachers to teach them. We’d have 40 to 50 kids in a classroom. In an urban school district, where we have kids with so many needs, that’s crazy. We already are looking at downsizing more with our psychologists and our counselors and, in an urban school district, they are vital to the academic environment. So we will do everything we can to hold our district together and to make it the high-performing, high-achieving district that it once was. I know we can do that.
Veno: We will make this turnaround. This is not in a receivership mode. It is an actual recovery plan . . . this a five-year forecasted model. This will be the key to the recovery of the district. We will stick to it. In the out years, the revenues increase, the costs go down, no tax increases in the fourth or fifth year, plus increases back to the teachers, employees, non-certification. And, if we can get there sooner, we will. One thing I keep saying: this is a five-year plan, but we really have three years. We can’t miss a mark in the next 36 months.
TheBurg: Have you gotten a lot of pushback from the teachers?
Veno: Yes, and they should. I don’t feel this is a win to ask anybody to accept any reduction in salary or benefits. They’ve been asked to take a lot of hits in the past three years. They have been invested in this district to stay and teach at wage freezes. They have not had a signed wage agreement in two years. They have not received a cost-of-living. They have not received a step increase. I’m very saddened this has to be the case for the next two years [5 percent salary cuts] and a freeze in the third year, but, if you work with us and you continue to stay with us, we’re going to try to resolve this quickly before the third year.
Knight-Burney: It beats the alternative, and the alternative is that we don’t have a district. We don’t have any place for our kids.
Veno: I’m trying to save the district. We all need to save the district. I would not go for charterization of the district. That’s one thing I said: I’d like to keep a traditional program. I’d like to keep the Cougar pride. But more importantly, I didn’t want to see anyone furloughed. We did not furlough an educator. I did not want to see us closing schools. I did not want to see tax increases at 10 percent. And the only way we can get to that was to get to some of the tougher decisions on wage cuts and benefit cuts.
Knight-Burney: One of the good things about having an outsider come in, they also bring in resources, and we’ve had a good relationship with the Department of Education, but it’s even better now. One of the things Gene was able to do was to bring in some experts to look and assess what we’re doing. One of the things we had started doing is building that academic piece, which is important because, if the academics don’t approve, we’re not going to have a district. It doesn’t matter what the finances are. If you’re failing, you can’t justify pouring any more money into it. So we’ve been able to be a part of pilot programs on teacher effectiveness, principal effectiveness. Gene has been able to go in and negotiate classes for our principals.
The only thing that’s going to make a difference is the instruction in the classroom: what the teachers are teaching and how the kids are learning and how they perform.
