Posted: | May 23, 2024 04:05 PM |
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From: | Representative Valerie S. Gaydos |
To: | All House members |
Subject: | School Borrowing Limits |
Dear Colleagues, In the near future I plan on introducing legislation that will lower the debt cap for school districts. Currently, schools can borrow up to 225% of their “Borrowing Base”, which is a rolling three-year average of their revenue collected. Property taxes in Pennsylvania are higher than the national average and vary significantly from county to county and even within each school district and municipality. One reason is that schools are permitted to borrow significantly more than they take in as revenue each year. According to Forbes, when evaluating individuals for loans most banks want an individual to maintain a debt-to-income ratio of 28%, meaning that no more than 28% of an individual’s monthly income goes towards paying off loans and other debt. This is done to keep individuals from overextending themselves and ending up not being able to pay back the loans that they have taken out. Thus, schools should be held to similar borrowing standards set out by most banking institutions, essentially, not being permitted to borrow more than they take in as revenue each year. Therefore, I am proposing that the limit be scaled back to 100% of their borrowing base to keep school debt in check. Please join me in sponsoring this important legislation. |