Staff could recommend transfer from reserves to balance budget
While the North Penn School District’s 2017-18 budget looks like it will turn out better than anticipated, the news is not so good for the following year.
Director of Business Administration Steve Skrocki gave an update Thursday on the deficit for next year, and a recommendation he’ll make later this month to
start tapping into reserves.
“At our next finance committee meeting, we’re going to talk about the retirement rate stabilization fund, and using our PSERS balance,” said Skrocki, referring to reserves set aside for the Pennsylvania Public School Employees’ Retirement System.
“To give you a sneak preview, we will be recommending utilization of at least $1 million from the PSERS reserve,” he said.
Since last summer, the school board and finance department staff have warned of a growing gap between district revenues and expenses, largely attributable to growing salary and retirement costs. Last June the school board approved a budget with a $4.5 million budget deficit, which would have been made up by spending from reserves, and early estimates put the budget for the 2018-19 budget at roughly $9.7 million with no tax increase or cuts in spending.
Earlier this week Skrocki reported that new revenues from increased commercial activity have narrowed that $4.5 million deficit for the current year to essentially zero, but said Thursday that the news for next year is not so good. New revenues from economic growth have been roughly offset by growing costs elsewhere, Skrocki told the board, and several other factors are coming into focus.
“We had a $9.7 million deficit with our preliminary budget. With the changes, both up and down, over the past month, we’re pretty much ended up back around $9.8 million in a deficit,” he said.
New information has come in this week regarding the costs of certain medical expenses for district employees, and those new numbers project to trim roughly $734,000 off of the deficit.
“That has not yet been baked into the budget, but we will do so,” he said.
Starting with the $9.8 million figure and subtracting the medical expense reduction leads to a projected deficit of roughly $9.1 million, Skrocki told the board, with several other factors still to be considered. Each year the district sees staff retire during the year and reduce the corresponding costs of salaries and benefits in future years, and Skrocki said an additional $1 million can be taken off of the early deficit projection from savings from retirements, bringing the preliminary deficit figure to $8.1 million.
Finance department staff are also projecting workers compensation expenses to drop by roughly $200,000 below projections next year, so Skrocki said that could bring the deficit projection down to $7.9 million — but Superintendent Curt Dietrich warned those figures could still fluctuate slightly.
New information has come in this week regarding the costs of certain medical expenses for district employees, and those new numbers project to trim roughly $734,000 off of the deficit.
“We just need to be careful with that (number). We can’t say exactly that yet — it’s a little bit premature to count in all of that,” Dietrich said.
Last month the school board voted to authorize staff to seek exceptions from the state’s Act 1 of 2006, which sets an annual limit on the percentage of tax increase that can be approved without a referendum. Those documents were formally filed this week, Skrocki said, and the current Act 1 limit for 2018-19 would allow a 2.4 percent tax increase, which would generate roughly $4.1 million in new revenue, while the exceptions for North Penn would add an additional $1.7 million in new revenue and an additional one percent tax increase.
“That would basically nearly cut what the projected deficit in the budget is going to be, by half. With the projected total increase of roughly 3.4 percent, that would generate a grand total of about $5.9 million in tax revenue,” Skrocki said.
Board President Tina Stoll asked what the impact on the average taxpayer would be of passing either, or both, increase, and Skrocki said based on a median homestead assessed value of $143,000, the average homeowner would see an $87 tax increase with just the Act 1 level, and a $124 increase if the exception was also included.
Applying the $5.9 million in new revenue from the tax increase, to the $7.9 million estimated deficit before it, would result in a remaining gap of roughly $2 million, and Skrocki said that remaining $2 million could then come from reserves: the dedicated retirement reserve fund set up several years ago, the general fund balance if a surplus appears by the end of the current budget year, or elsehwere.
“This is based on what we know now. There are other things that could change: state funding, final health care costs, new positions that are not included in here,” he said.
Starting Monday night each district department has given the school board an in-depth presentation on their proposed 201819 expenses, and wish list items they would like to see included if funding is available. The draft deficit includes none of those, Skrocki said, except for five placeholder figures for new elementary school teachers meant to allow for smaller class sizes.
“The positions we discussed this evening” in elementary, secondary and special education - “none of those are in this budget.”
North Penn’s school board next meets at 7:30 p.m. on March 6 and 15, and the finance committee next meets at 6:30 p.m. on March 26, and Skrocki said each of those meetings will also bring further updates on the 2018-19 budget.
“Every meeting, really, from now until May when we have a proposed final budget, we’ll be doing some component of a budget presentation,” he said.
All of those meetings will be held at the district Educational Services Center, 401 E. Hancock St. For more information or meeting agendas and materials visit www.NPenn.org.