#385 Budget 18-19
The human species has often asked the question, “Are we alone in the universe?” This week, I’m not going to answer that question but, I can tell you this: When it comes to coming up with new revenue to meet our normal annual increases in our district operating costs, we’re pretty much alone. Most new money will have to come from local taxes.
In last year’s budget address, Lancer Letter #328, I outlined that our 2017-2018 budget was not going to require a tax increase. This was due to the retirement of a debt payment. But in that letter, I warned that it would only be a temporary respite as just one year has confirmed. I explained in that Lancer Letter that the new fair funding formula has dropped our annual increases from the state from the range of $250,000 – $350,000 to only around $75,000.
This amount does not come close to meeting normal cost increases. Just a 1% increase in our budget would require an additional $327,000 for a year. So next year, to balance our budget we are asking for a .12 mill tax increase. This translates to $12.00 on a $100,000.00 home. So if your home is worth twice that, it will cost you a little less than what a pizza night may cost for your family. In my world economy, that translates to a little over 6 small Snicker flurries.
One of the curve balls we’ve been thrown is that our share of pension costs is still rising. At the beginning of my tenure as superintendent, the projection was that the percentage the state and district shared was going to level off at 28% but alas, it is increasing instead – to 33.43% next year. The district is responsible for half of that which is 16.72% of our payroll. Last year
Act 5 was passed to “solve” the pension crisis. Employees hired after July 2019, will only have 2.25% contributed to their pension fund with the balance of our 16.72% payment going into the fund to address the pension shortfall. While that helps assure people currently in the system will be paid, it doesn’t change a thing for the district until many years down the road.
We also face increases in our payments to charter schools. In Lancer Letter #382, I outlined how a recent court decision may contribute to even greater costs for charter school tuition. We also will be spending about $60,000 more on mental health/school safety enhancements.
Another increase that jumped out at me in next year’s budget is in the area of special education. These are programs that serve students with autism, mental challenges, emotional challenges, learning deficits and speech difficulties. The total increase for all these programs is $425,408.86. Considering that the increase in our expenditures over last year’s expenditures is $422,890 and our tax increase will only bring us $103,440.00, that indicates that we are managing operating costs pretty well.
As I outlined in Lancer Letter #382 a few weeks ago, good budgeting should end with an operating surplus at the end of the year to go into savings to do the expensive building projects that are necessary to maintain buildings. The replacement of windows and HVAC units at Edinboro Elementary this summer is an example (a 2.5 million dollar project). A disturbing trend we are seeing is that our surplus numbers for the last three years have dropped. This is representative of the decrease in state funding over the years. This is something that must be watched carefully for two reasons. First, lack of surplus to keep buildings in good repair becomes a slippery slope that creates a facility crisis that costs even more to address. Secondly, as we are learning in school safety seminars, the appearance of your buildings makes a huge contribution to the positive climate and culture of a building which are foundations to school safety.
Districts that end up in financial crises begin by watching the surplus evaporate, then fund balance is depleted and reserves drained leading to insolvency. Will we be able to prevent that going forward? Hopefully, yes, but we will have to do it on our own.