Answers to Frequently Asked Questions About Financial Watch, Recovery, and Receivership
Financial Recovery Law
Act 141 of 2012 (2012 school code bill) – amended the Public School Code to provide for a system of support and identification of school districts in Financial Watch and Financial Recovery (including Receivership).
What is a Financial Watch school district?
The Pennsylvania Department of Education (PDE)'s Involvement/Process:
PDE must notify any school district identified for Financial Watch
PDE can request, from the district, all information needed to fully review the financial situation in the district – the district has 15 days to respond
PDE may visit or correspond with employees at the district as part of the review process
PDE shall provide technical assistance to a school district identified for Financial Watch status, which may include contracting with a financial consultant, to help the district avoid falling into Financial Recovery status
What is a Financial Recovery school district?
Average Daily Membership greater than 7,500 AND receives an advance in basic education subsidy at any time; (moderate) OR
Receives an advance of its basic education subsidy at any time AND is either subject to a declaration of financial distress OR engaged in litigation against the state where the district is seeking financial assistance to continue operation. (severe)
Designated under 22 Pa. Code Chapter 18 (related to Financial Recovery). Chapter 18 sets forth criteria that the secretary may consider in determining whether to issue a declaration that a school district is in financial recovery status and whether a school district in financial recovery status shall be deemed a moderate financial recovery school district or a severe financial recovery school district.
No more than nine school districts may be under a declaration of financial recovery status at any time.
- PDE must make a public declaration that a school district is in Financial Recovery status
The Secretary of Education may decline to issue a declaration that a school district is in Financial Recovery status, if in the last five years an emergency has caused the financial situation
The Secretary of Education, within five days of the declaration of Financial Recovery, must appoint a Chief Recovery Officer (CRO) – This individual works with PDE and the district to create and implement a Financial Recovery Plan
What is Receivership?
The Secretary of Education shall petition the Court of Common Pleas, in the county where the largest part of the district resides, to appoint an individual to serve as a Receiver for the district if:
The school board rejects the CRO's Financial Recovery Plan;
The school board does not comply with directives issued by the CRO;
The school board does not satisfy the objectives in the Financial Recovery Plan during a period of time after its designation of financial recovery is terminated; or
In certain instances, related to severe financial recovery school districts, the school board votes to move to receivership.
When the Receiver is approved by the courts all duties of the CRO and the school board transfer to the Receiver, with exception to the ability to levy taxes
The Receiver must implement the Financial Recovery Plan which is attached to the petition provided to the Court of Common Pleas
A Receivership shall expire three years after the initial appointment of the Receiver – the Secretary may petition the courts for an extension
When a school district exits receivership, the school board will resume full control