Sep 3, 2025 By Karen Mansfield 5 min read

MetroCreative

As the state budget impasse continues, some school districts are being forced to take out loans to cover payroll and student services.

As the budget stalemate in Harrisburg continues, educators across Pennsylvania are urging state lawmakers to end the impasse.

School districts have been left in limbo, unsure of what funding they will receive this year.

The Pennsylvania State Education Association last week raised the alarm about the financial strain on Pennsylvania’s 500 public school districts, saying some are taking out loans, while others have missed payments due to the deadlock.

PSEA estimates public schools in Pennsylvania are starting the new school year without $1.75 billion in state funding.

“Our students should not be political ammunition – they deserve a quality public education across the commonwealth, regardless of zip code,” said Dr. Laura Jacob, superintendent of California Area School District.

About 58% of the school district’s revenue comes from the state, and Jacob said the district’s healthy fund balance has helped it navigate short-term finances, but the delay “is impacting long-term planning and confidence in state support for our schools.”

The financial impact is already being felt in districts like McGuffey Area, where state subsidies and grants account for about 55.2% of the district’s revenue.

“Because our real estate tax dollars, which make up about 33% of our revenue, do not really start to come in until late September or early October, we will struggle,” said Charlene Hobberchalk, business administrator at McGuffey. “Our expenses do not stop or get put on hold while the state tries to balance their budget.”

At this point last year, the school district had already received $3.2 million in state education and non-education subsidies, which helped pay the district’s teachers, support staff, and all contracted services, such as transportation. But the district had to take out a loan to cover payroll and student services.

“The lack of state funding has caused us to seek out a short-term line of credit to ensure that we do not miss any payments,” said Hobberchalk in an email. “This, of course, will cost us due to incurring interest on those borrowed funds, while the state holds onto millions of dollars in state subsidies, gaining thousands of dollars in interest on those funds.”

Rural school districts like Southeastern Greene -where 70% of the annual budget comes from state and federal funding – are facing significant financial strain.

Said Heather Grandel, business officer at Southeastern Greene, the delayed disbursement has forced the district to rely more on local revenues and reserves to sustain daily operations.

“Without timely state payments, we must carefully monitor and prioritize expenditures to ensure essential services remain uninterrupted. Rising costs for utilities, transportation, and supplies must still be met, and the absence of state funds forces us to defer or scale back in other areas,” said Grandel. “These prolonged delays with the budget impasse could erode our financial reserves, reducing our flexibility to address emergencies or future needs.”

In Fayette County, Dr. Jesse T. Wallace III, superintendent of Laurel Highlands School District, said 57% of the district’s annual budget is made up of state and federal funding.

“This means that when those dollars are frozen, we must either borrow funds to bridge the gap or dip into reserves, which were never intended to sustain long-term operations,” said Wallace via email. “Borrowing comes with interest costs that divert money away from classrooms, teachers, and student support services.”

At the Uniontown Area School District, almost 50% of funding comes from the state. On Tuesday’s agenda was an item to approve a $5 million Tax Anticipation Note to ensure cashflow until the state budget is passed.

Dr. Melissa Schell, Uniontown’s business manager, said it will be challenging to make the district’s scheduled Oct. 1 debt service payment, so as a cautionary measure, the district initiated Act 85 of 2016 that provides authorization to use Commonwealth funds to cover school district debt service expenditures or intercept payments when an absence of a timely state budget impacts funding.

“Overall, the Uniontown Area School District is using every available resource to continue operations throughout the first quarter of the school year as we wait on an official state budget,” Schell said via email. “With approximately 50% of the district’s budget being withheld, it is imperative that legislative action finalizes the state budget as soon as possible.”

As the impasse drags on, the Pennsylvania Association of School Administrators and the Pennsylvania Association of School Business Officials say it is costing taxpayers, schools and communities across the state each day. They also noted that no official sessions are on the schedule until Sept. 8 for the state House and Sept. 22 for the Senate.

Hobberchalk has a message for legislators and the governor: “Release the educational subsidies so we can continue to provide the best education and opportunities to our students.”