Financial firm lists options for the Scranton School District

Jan. 14--The Scranton School District should consider cutting teacher salaries, eliminating health insurance coverage for spouses, consolidating schools and reopening its transportation contract, according to a list prepared by the firm tasked with monitoring the district's dire financial problems.

The suggestions come as the school board attempts to balance the 2018 budget, passed last month with a $3.5 million shortfall and a call for saving $1 million by laying off teachers. The Sunday Times obtained the list through a Right to Know Law request with the Pennsylvania Department of Education.

Many of the initiatives require agreement from the teachers union. Others, such as reviewing programs and procedures, have already begun.

"There's a lot of work to do, and a lot of communication has to take place with all parties involved in order to get us where we need to be," Superintendent Alexis Kirijan, Ed.D., said. "You really are looking at priorities and how you can get this done in a methodical, systematic way without hurting the students, the educational program or the employees."

Budget plan

The Department of Education put the district on financial watch in June -- the first in a series of steps that could eventually lead to state takeover.

Because of the financial watch status, the district has until April 1 to balance its budget. The $161 million spending plan calls for layoffs, though the board has not named the employees. A plan by administration called for 89 layoffs in art, music, physical education, library, family and consumer sciences, industrial arts, German, Latin, Spanish and special education. The school board has not determined a final plan.

PFM, a Philadelphia-based financial consulting firm, began working with the district last year. Now its state-appointed financial monitor, PFM is aiding the district as it attempts to find solvency. Beyond the 2018 budget, the district faces a general fund deficit estimated at $40 million.

The district already laid off 23 members of the maintenance and clerical union -- effective July 1 -- and has called for administrators to take a 4 percent salary cut. Property owners will see a 3.6 percent tax hike this year. The board may also authorize the district to borrow money to balance this year's budget, a practice that helped create the problems the district faces now. The district remains far from solvency.

PFM suggested more than 100 initiatives for the district, some with savings already determined. The suggestions include:

n Eliminate 43 positions this year, resulting in $479,249 savings in 2018, and $2.7 million in 2019. Eliminate an additional seven teachers each year through attrition.

n Staff pre-kindergarten with paraprofessionals instead of certified teachers.

n Change wage and step patterns. The teachers contract that expired last year had teachers with master's degrees jumping from $59,148 to $81,226 from their 15th to 16th year of employment.

n Implement single or multi-year wage freezes for employees. Compare compensation levels to regional peers and reduce salary for all professional staff.

n Move to six teaching periods at the secondary level. Officials say requiring teachers to teach for six periods a day instead of five will decrease the number of teachers needed.

n Eliminate underutilized academic programs. The list does not include what programs, but PFM previously suggested industrial arts and family and consumer sciences. The administration's plan called for the district to eliminate both programs at the high school level and considerably scale back the programs at the intermediate schools.

n Implement block scheduling and use the cyber program to offer identical offerings at both high schools.

n Limit middle school specials -- such as art and music -- to one per day per student instead of two per day, leading to a reduction of 11 teachers.

n Reduce or eliminate extra duty pay for teachers. Teachers are paid $22.50 per hour when they are pulled from their planning period to cover a class without a substitute.

n Reduce senior staff through attrition and other administrative reductions, a savings of $760,411 for 2018. Reduce the number of administrative secretaries, a savings of $175,746 for this year.

n Require use of a district-wide insurance discount card, a savings of $589,000 for this year.

n Eliminate health insurance coverage for spouses.

n Mandate generic prescription coverage and increase deductibles.

n Eliminate payment for health insurance opt-out. Teachers receive $1,500 per year if they do not take the insurance.

n Hold professional development after school, eliminating the need for substitutes during the school day, a yearly savings of $80,764.

n Stop using Kelly Services for substitute teachers, and instead use laid off employees to fill in for absences, a yearly savings of $844,000.

n Evaluate school consolidation options.

n Explore joint purchasing with the city of Scranton or sharing administrative services with other school districts.

n Eliminate field trips unless outside funding is secured, a yearly savings of $27,000.

n Renegotiate the bus contract -- the subject of criticism from the state auditor general -- and other contracts.

n Pursue payments in lieu of taxes from nonprofit organizations that don't pay taxes.

n Postpone curriculum implementation, a savings of $450,000 for this year.

n Partner with the Greater Scranton Chamber of Commerce to create a 501(c)3 to fund key enrichment activities. This month, the board added a development committee, which Director Paige Gebhardt Cognetti will lead. The committee will encourage the community to fund academic initiatives for the district, Kirijan said.

'Completely disgusted'

Board President Barbara Dixon said that school directors are continuing to try to come up with solutions to balance this year's budget.

"We're looking at all options," she said.

Some of these suggestions will be discussed at negotiations for a new teachers contract, Kirijan said. For example, the district cannot change teachers' health insurance without their approval. Teachers have worked under an expired contract since September and have authorized union leadership to call for a strike if necessary.

Rosemary Boland, president of the Scranton Federation of Teachers, said she remains frustrated by what she sees as the district not inviting the union into conversations about savings. Teachers remain unsure whether they will have jobs for the next school year.

"They're totally and completely disgusted," Boland said. "There is no solving this without us being included in the solution."

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After Pennsylvania's auditor general criticized the Scranton School District's no-bid contract and busing costs with DeNaples Transportation, businessman Louis DeNaples commissioned his own audit. Louis DeNaples claims Pennsylvania's auditor general got it wrong.

The audit, obtained by The Sunday Times, is now being reviewed by DePasquale's office, a state spokeswoman confirmed.

In October, DePasquale claimed the audit by his office was the worst he had ever seen and that, in the 10 school years from 2007 through 2016, the district paid DeNaples $26.1 million -- including more than $4 million in questionable fuel surcharges. Those surcharges were the result of a 2006 addendum, never signed by the board, that gave DeNaples an additional 4 percent fuel surcharge yearly. The company continues to get the yearly increases, though the board never voted on the surcharge, according to the state audit.

Auditors also found the district's transportation expenditures exceeded "final formula allowance" by more than $11 million during the 2012-13 through 2015-16 fiscal years. Though DePasquale admitted the formula is "antiquated" for urban districts, other urban districts do not exceed the formula at such an alarming rate, he said in October.

The DeNaples audit from the accounting firm of Robert Rossi & Co. of Olyphant disputes many of those findings. A contract addendum and extension actually saved the district money -- about $1.1 million from the 2011-12 to 2015-16 school years. DePasquale came to a "misleading conclusion" that the fuel surcharge cost the district $4 million, and the company did not charge the district for additional fuel increases, according to the DeNaples audit.

The company also provided the district with $1.7 million in interest-free financing, and the board was also aware of the terms of the contract and fuel surcharges because they were detailed in an addendum, the audit states.

District Superintendent Alexis Kirijan, Ed.D., said the district received a copy of the DeNaples audit but does not have a comment.

-- SARAH HOFIUS HALL

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