Preliminary budget shows $4.5M deficit

LIMERICK >> Only four months into the school year, Spring-Ford School District officials have already put together a preliminary $171 million preliminary budget for the 2018-2019 school year that shows a deficit of $4.5 million that would require a 4.2 percent tax hike to close.

Monday night, the school board voted unanimously, and without comment, to make the preliminary budget public.

The preliminary budget was outlined at the Nov. 19 meeting by Chief Financial Officer James Fink.

He told the board that the $4,456,260 deficit exists after $4 million in reserve fund balance is used toward closing the $10.1 million gap between revenues of $160.7 million and projected expenses of $170.9 million.

However, that deficit number can be deceiving.

Firstly, both the expense and revenue side of the budget

is likely to change significantly as the budget process moves toward final adoption in June 2019.

“We’re only four months into the fiscal year and only two months into the school year, so there is not a lot of budget versus actual data to compare,” Fink said.

Secondly, $1.7 million of increased expenses is due to the mandated 4.1 percent hike in pension payment costs, about $1 million of which will be offset by an increased state contribution.

And while the current forecast calls for a 5.25 percent increase in costs for medical and dental insurance, it is “a conservative” projection and is likely to be less when actual figures come in.

An assumption that all expenses will go up by 2 percent each year adds another $1 million to the $6.5 million increase in spending forecast in the preliminary budget, said Fink.

And part of the increased

spending will be offset by a 1 percent increase in revenues, driven largely by the increased property assessments in the SpringFord housing market, adding $880,000 to the bottom line, and a $400,000 increase in the delinquent property tax line.

The primary cost driver in the budget is salaries and benefits, which account for 70 percent of the budget’s expenses, said Fink.

The state has imposed a 2.3 percent cap, called

an “index,” on how much Spring-Ford can raise property taxes for the coming year without going to the voters for approval. But the Act 1 process also allows for “exceptions” to that limit for things like construction and special education costs.

Fink said current plans call for applying for some of those exceptions, which would allow a tax hike of 1.23 percent beyond the 2.3 percent index limit.

That Act 1 process requires the school board to adopt its preliminary budget in February, about the time the Governor traditionally proposes the state budget, the specifics of which represents one of many large unknowns about which school districts must guess at in their preliminary budgets.

In between now and the final budget adoption in the spring, “we will do our deep dive on the $4.5 million deficit and shave as much as we possibly can,” Fink said.