Nearly five years after adopting a plan to address a staggering deficit and fast-declining enrollment, officials with the Penn Hills School District say the district is finally financially stable.
Pennsylvania Secretary of Education Khalid Mumin visited the district Thursday to announce that Penn Hills has met the state’s requirements to graduate from Financial Recovery Status.
“This is a process where we have changes in leadership and changes in school board membership,” Mumin said. “You have to maintain your focus so this would be something that's sustainable.”
The state’s Department of Education will continue to monitor Penn Hills’ financial and academic progress over the next five years. John Mozzocio, the district’s superintendent, said educators in the district will continue working proactively to secure the district’s future.
“The end of financial recovery is not the end of our journey. It is a new beginning,” Mozzocio said. “It’s an opportunity to build on our successes and what we've learned through this process.”
According to the district’s chief recovery officer, Dan Matsook, Penn Hills’ five-year financial projections show that the district — after teacher furloughs, bond financing and strategic investments to address enrollment drops — has achieved enough stability to weather unexpected setbacks.
“We have finally broken that cycle where we’re counting on one-time funds to pay our bills,” Matsook said.
During the 2018-2019 school year, the district faced a negative fund balance of $18 million and a total debt of $288 million. Officials had repeatedly taken out millions of dollars in bank loans and asked the state for cash advances to stay solvent.
As a retired school superintendent, most recently at Central Valley schools in Beaver County, Matsook worked with administrators and the school board in his state-appointed role to end the use of advance funds and create a sustainable cash flow. He said doing so required the district to reduce its teaching staff and bolster revenues by raising real estate taxes.
As of the 2022-2023 school year, the district had a positive fund balance of $19.6 million.
“The phoenix has risen,” Matsook told school board members last month. “From self-inflicted financial distress to a unique renewal and new hope. That’s what’s happened here.”
Resolving more than a decade of financial tumult
The first step in securing the district’s future, according to Matsook, was “rightsizing” the district’s facilities and payrolls. While in 2008 Penn Hills served close to 5,000 students, according to the district’s recovery plan, enrollment had dropped to 3,360 by 2018.
“They reduced their buildings from, from 8 to 3 — six elementaries to one elementary — but yet the adjustments weren't made in the budget,” he said. “So we took some of the low-hanging fruit there to rightsize.”
During the 2019-2020 school year, the district reduced its teaching staff by 31 positions through furloughs and attrition. The second step, Matsook said, was addressing its long-term debt: the district eliminated about $25 million in debt by twice refinancing bonds during the first two years of its recovery process. Refinancing also allowed the district to avoid a $3 million spike in debt service payments annually.
Much of the district’s debt was amassed during the planning and construction of two new buildings: a high school, completed in 2012, and a central elementary school, finished in 2014. A scathing report from Pennsylvania’s auditor general in 2016 found that the outstanding long-term debt jumped from $11 million to $167 million over the eight years preceding.
A subsequent Allegheny County grand jury report called the construction plan an “egregious example of abuse of public trust.”
“The dire financial condition is the result of years of poor leadership, inept decisions made to promote personal interests and ineffective oversight by those entrusted to serve the interests and ineffective oversight by those entrusted to serve the interests of the students of taxpayers of Penn Hills,” the 2019 county report stated.
Matsook said that school board members during the period of construction made matters worse by choosing not to raise taxes for five consecutive years while construction was underway.
To remediate the damage, the district’s board-approved financial recovery plan recommended tax increases to the maximum allowed by the state without voter approval. While board members initially resisted a tax increase, they eventually approved an amendment to the financial recovery plan to instruct tax raises and establish a fund balance policy to inform future tax considerations.
In May 2023, the board also approved a tax relief program for senior citizens — who make up roughly 20% of district taxpayers — with specific qualifications as a means of mitigating the local tax burden. According to state data for the 2023-2024 school year, Penn Hills has the third-highest local tax effort rate in all of Allegheny County.
“It's painful to raise taxes, and I think everybody in this system, from top to bottom, they acknowledge that,” said former Penn Hills superintendent Nancy Hines. “That’s a last-ditch effort to balance the budget.”
But Hines, who retired after nearly a decade as superintendent last October, said that raising taxes was also a strategy needed to keep the district afloat.
Pandemic aid significantly accelerated Penn Hills’ recovery progress
Penn Hills is the third district to exit Financial Recovery Status in the past 18 months. York City schools were removed from the financial distress list in December 2022 after 10 years in recovery, and Scranton School District graduated from the designation after three and a half years in January 2023.
According to Matsook, Penn Hills would not have met the state's recovery criteria without the significant savings realized while schools were closed due to the pandemic, as well as the influx of $18.1 million in federal pandemic relief aid received by the district in recent years.
“Moving forward would never have happened in five years because we just didn't have that kind of money on hand,” he said. “We managed it correctly and we got to continue to do that.”
The district spent those funds on capital projects and expenditures related to COVID-19, as well as the hiring of additional reading specialists to help students recover from pandemic learning disruptions. Those funds, however, are set to expire in September.
While districts nationwide are preparing to withstand the impact of those disappearing federal dollars, Matsook said significant increases in state education funding over the past couple of years have made that reality easier for Penn Hills to manage.
Governor Josh Shapiro’s budget proposal sets the district up to receive millions more in state education funds targeted toward districts with the greatest financial need. But Matsook said that after last year’s budget impasse, the district can’t count on additional state money “until we have it in our hands.”
He said current budget projections rely on typical increases to state basic education funding, but “if we can get more, that's gravy for us and makes us even more stable.”
Maintaining stability, and improving student outcomes, requires “fidelity”
Matsook said that while the district has faced tough cost-saving decisions over the past few years, school leaders have worked hard to ensure that the district’s academics would not suffer because of it.
Part of the recovery plan included reducing kindergarten class sizes, lengthening instruction time by implementing a block schedule and growing the district’s professional development offerings for teachers.
Despite workforce cuts early in the recovery process, the district has added back 21 positions in the time since, and with pandemic aid added reading specialists to the elementary schools as a way to bring all students to grade level by third grade. The district has spent close to $2.5 million on the “Bee Ready” reading program over the past two school years.
Matsook said doing so has helped the district make up some academic ground lost during the pandemic, but he adds that much progress remains to be made. While test scores demonstrate academic growth among the district’s elementary school students, high school Keystone scores remain mostly below state averages.
“Fidelity is our challenge. We have to be consistent across the board in every classroom with the great things that are happening,” he said.
Matsook said he hopes to guide the district in doing so through additional professional development, “because it doesn't do us any good if you have 200 teachers, and 20 of them are great and the rest of them are struggling.”
In response to high staff absenteeism rates, the district has instituted incentive programs to reward attendance, though educators note that absenteeism remains a challenge.
“I think that is the hard piece because nobody wants to be culpable. Nobody wants to take the blame. But that's the key, just really looking with an honest lens at what are the contributing factors and being able to modify the system,” Hines said. “To change the system, you have to change the organizational culture. That's the hardest part.”
The issue has also affected the district's restorative justice programs, implemented as part of its recovery process. According to the exit petition, the district’s Youth Engagement School Specialist (YESS) team at the high school level is rarely fully staffed due to absenteeism, staff turnover and unfilled vacancies.
Still, preliminary data on disciplinary incidents and de-escalations show the YESS program is making a difference. Incidents at the elementary school level between September 2023 and January 2024 dropped nearly 16%, and incidents at Linton Middle School declined by close to 36%.
Over the past two years, Penn Hills has invested more than $1.7 million in the YESS program, which was first implemented at Linton during the 2020-2021 school year. Staff are trained in de‐escalation and mediation skills.
District officials said Thursday that they plan to bring the restorative justice program, which was first piloted through a partnership with Pressley Ridge, in-house next school year.
“It is my hope that, whenever the district is looking at bringing the programming in-house, that that same focus and that same intentionality on having the right people engaged with our children is part of that process,” said Dawn Golden, Penn Hills’ assistant superintendent.
The district has also replaced its in-school suspension model with the New Directions program, in which students facing disciplinary measures receive therapeutic counseling to address the root cause of inappropriate behaviors. An additional $906,000 was funneled this school year into the district’s private security team, which primarily works to secure building entrances and assist in morning student check-in, according to the district’s exit petition.
Enrollment loss to local charter schools remains a threat to stability
Despite these improvements, the district has lost more than 320 students in the past six years, with many families opting to attend local charter schools instead.
Declining enrollment has resulted in the district losing the equivalent of one grade‐level class over each of the past four years. According to the exit petition, one out of four school‐age children in the community attends schools outside of Penn Hills School District.
Charter tuition payments made up 22% of the district’s 2023-2024 expenses — the second largest expenditure behind salaries.
“The biggest threat to Penn Hills from a purely financial perspective is controlling the charter school expenses,” Matsook said. “Until they get that under control, we always got to hold our breath.”
Because of that, the district is working with outside partners to recruit back students who have left the district to attend charters. In collaboration with the Allegheny Intermediate Unit (AIU), the district was able to sway 99 families to re-enroll last summer by having teachers canvass families door-to-door.
“Because the key to it is not just knocking on the door one time,” Matsook emphasized. “The key to it is repeating it and following up with it, and then following up again, and making relationships.”
But, according to the exit petition, those gains were offset by charter enrollment by families who opted to move their students from private schools to charters, as well as charter students who moved into the district through the summer months. For each Penn Hills student attending a charter, the district pays $11,681, and $35,476 for special education students.
Its largest competitors are the nearby Propel charter schools and the Penn Hills Charter School of Entrepreneurship. Leaders of that school plan to open a high school campus, known as Dominus High, in 2025.
“We're concerned that they're going to maybe grab another 20 or 25 kids per grade level,” Matsook said. “But that remains to be seen.”
For the moment, the district is working diligently to invest in its middle school to attract eighth graders and their families back, Matsook said. That includes $12 million in building renovations.
"We’re working on making sure that we don't overstretch how we handle that building, but we want it to be as attractive as the other two,” he said.
The district also hopes to win more families back through another round of canvassing this summer. Five teachers knocked on doors last year alongside district public relations staff and the AIU.
Matsook said that by offering pay incentives, roughly 25 teachers have stepped up for the summer ahead. The hope is that with more teachers involved, the district can bring back more students.
Even with the progress made, school leaders say that without effective strategies to control charter school enrollment, further real estate tax increases or programmatic cuts could be inevitable.
