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City schools avoid newly pricey loans for now

Jessica Schladebeck
505-5438/@JessDispatch

Should the budget stalemate press on for another few months, some of the state's poorer school districts — including York City's — may be unable to borrow money to keep their doors open.

In this file photo, bilingual English Language Learners (ELL) Aid Marianela Rosario, left, a former student and William Penn High School graduate, works with students Junior Severino, 15, center, and Kevin Ramos, 15, right, at William Penn High School in York, Pa., on Tuesday, Nov. 17, 2015. (Dawn J. Sagert - dsagert@yorkdispatch.com)

New York-based Standard & Poor's credit rating agency said it has withdrawn its ratings based on a state government program that can help school districts get more favorable loan terms by giving a guarantee to repay bondholders because they cannot ensure the timely repayment of the debt due to the stalemate.

The York City School District as well as some of the biggest in the state — Philadelphia, Reading, Bethlehem, Scranton, Erie schools — stand to be affected by the decision.

"Standard & Poor withdrew ratings because the intercept is no longer in effect," said Richard Snodgrass, the business manager at York City Schools. "This is an important element of our rating because, essentially, it's a method of the state guaranteeing our bond. So at this point, with the budget impasse going on, (the state) doesn't owe us any subsidy."

The York City School District, which has not needed to take out a loan to stay open during the impasse, would only be affected by the credit agency's decisions should they need to do so, Snodgrass said.

"Other than the potential of going out to borrow some money due to the shortfall of cash in the next couple months to get us through the budget impasse, I don't see it affecting us," he said.  "We don't have any intention of borrowing money for any kind of projects or something like that."

The effect, should lawmakers continue to disagree on a budget, would also differ on a district-by-district basis, said Auditor General Eugene DePasquale.

"If the budget passes tomorrow it wouldn't have any affect at all," he said. "But if it doesn't pass and a district needed to borrow money tomorrow it would be significantly more expensive, and down the line some may not be able to borrow at all."

The Associated Press contributed to this report.

— Reach Jessica Schladebeck at jschladebeck@yorkdispatch.com