Phila School budget chief: Swap financing acceptable

    By Aaron Moselle

    The Philadelphia School District disagrees with the Auditor General’s view that it is involved in risky financial investing.

    By Aaron Moselle

    The Philadelphia School District disagrees with the Auditor General’s view that it is involved in risky financial investing.

    The state’s Auditor General Jack Wagner recently says more than a hundred of the state’s 500 school districts are engaging in complex financial swap agreements with investment banks that amounts to nothing more than gambling.

    Michael Masch, Chief Business Officer for the Philadelphia School District doesn’t see it that way.

    Masch: The debt policy that the school commission adopted last year recognizes that there can be a place in a diversified portfolio of a public institution for some level of variable-rate debt. But it has to be managed carefully.

    Masch says the Philadelphia School District currently has $1.1 billion dollars tied up in swap agreements. The money is for new construction and building renovations.

    He says no money has been lost as a result of the investment bank agreements brokered between 2004 and 2005, but that the District doesn’t plan on making any new ones.

    Pennsylvania’s Auditor General says he wants to repeal the law that allows schools to get involved in these swaps. He says, the Bethlehem Area School District has already lost $10 million dollars using swaps.

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