School property taxes to rise

Board approved preliminary budget with 1.99% hike; reserves to help cover shortfall

A 2017-18 budget with a 1.99 percent tax increase for North Penn School District taxpayers is one big step closer to reality.

The district’s school board voted Tuesday night to adopt a $252 million proposed budget, and final approval could come next month.

“I originally was going to vote ‘no’, because I thought we should be going to our full max of 2.5 (percent), or at least 2.25 which is our increase in expenditures,” said board member Suzan Leonard.

“But after you said that we kind of found $6 million, and the difference between the 1.99 (percent) and the 2.5 (percent) is about $800,000, I can approve this budget, and so my vote is yes,” she said.

Last week, the board’s finance committee heard details of a proposed budget that has been up for discussion since last fall, when the board voted to stay within the state’s Act 1 index, which sets a limit of a 2.5 percent tax increase that could be

approved without a public referendum.

Director of Business Administration Steve Skrocki gave a detailed description of the proposed budget to the full board Tuesday, describing how growing pension and salary costs have led to a roughly $3.5 million deficit that will be covered by reserves in the 201718 budget, in addition to the roughly $3.4 million in new revenue from the tax increase of roughly $71 per

year for the average district taxpayer.

“We outlined a pretty good plan to utilize the rate stabilization fund and kind of wean us off of these increases. Once the (pension) rate increase wears off, that’s the perfect time to be exhausting that fund,” said Skrocki.

Over the past decade, the district has accrued roughly $14.4 million in a reserve fund set aside specifically for pension expenses, and the proposed 2017-18 budget would use roughly $2 million from that fund, and roughly $1 million from other reserves. The current

year’s budget looks likely to produce a surplus of roughly $6 million, largely from one-time increases in property assessments, and Skrocki said at least part of that surplus could go back into the pension reserve for future years.

“There is a possibility that we’ll be recommending assigning another $2.5 million to that fund, so that could take us out another year, or maybe two years, to get us to a seven or eight year period” before the pension reserve is exhausted, he said.

The approved budget for 2016-17 began with a roughly $3.3 million deficit that would have been covered from reserves, but the district saw a net gain of roughly $9 million in unplanned revenue from three sources: roughly $7 million from tax assessment appeals and the release of escrows held for those appeals, roughly $1.1 million in retroactive reimbursements from the state for construction projects done several years ago, and $938,000 savings from a bond issue refinancing in January.

“We’re projecting a $6 million surplus this year. That’s one-time money, and we’re planning on tapping into that by $1.5 million in next year’s budget, to buy the Chromebooks,” Skrocki said.

That $1.5 million will purchase 3,600 laptop computers for students in sixth, 11th and 12th grades, and should be approved and bid out over the summer,

according to Skrocki. The remaining roughly $4.5 million in surplus one-time funds from 2016-17 will likely be split between the pension reserve — roughly $2 million to $2.5 million, Skrocki said — and the district’s unassigned reserve.

“Some districts don’t file reverse (property) appeals. They basically say, ‘We have no control over what the county says,’ but you do,” Skrocki said. “It makes a big difference. We’re going to be generating roughly $7 million in additional revenue.”

The board voted 7-2 to approve the proposed budget Tuesday, with board members Frank O’Donnell and Ed Diasio the only votes against. O’Donnell said afterward he voted against the budget was because personnel costs may change due to negotiations currently underway with the district’s teachers and support personnel unions on their next contracts.

“We are still in contract negotiations with the two unions and the administrators, and a number was budgeted for increases that I disagree with,” O’Donnell said.

Diasio said he voted against the budget because he would rather see more work done to cut expenses, like lowering spending on professional development, using more in-house resources, bidding out professional service contracts for district consultants, and looking at ways to streamline the district’s transportation operations.

“It’s unsustainable. There’s a structural deficit in the budget, and if we don’t correct the structural deficit, we will run out of money in a couple of years,” Diasio said.

After Skrocki presented details of the budget, Diasio asked how the following year (2018-19) is starting to take shape, and Skrocki said that year is more of a concern if the pension obligations keep growing.

“I’m far more worried about the 2018-19 fiscal year than I am the ’17-18 year,” Skrocki said.

District finance staff are projecting the Act 1 index to jump to roughly three percent for 2018-19 and level off for the next several years. The pension obligations are projected to slow their rate of increase over the next several years, and Skrocki said any decrease will be a huge help to the district’s bottom line.

“The hope is that in seven years, we’re now leveled out. Maybe we can even get a down tick — we’ll take any kind of levelling or decrease,” Skrocki said.

Funding formulas for teacher pensions were set by the state legislature in the early 2000s, but changes to the local, national and global economy have combined to increase that obligation considerably, and the district had no control over any of those factors.

“The reason we’re in the situation we are now has nothing to do with the school district not paying what it was supposed to pay,

or employees not contributing what they’re supposed to contribute,” Skrocki said.

The 2017-18 budget also eliminates funding for a total of 15 employees, eight of which are instructional and seven are support positions. District Superintendent Curt Dietrich said the eight classroom positions are being eliminated because of changes in the sizes of certain classes of students, with the number of graduating students this year much larger than the number entering the district.

“We do have some shifts in enrollment, and smaller class sizes of 790, 800, or 850 kids coming in, and we had some classes of more than 1,000 coming through and graduating,” Dietrich said.

“As that occurs, and depending on where those classes are, grade-levelwise, it does result in different levels needed. We haven’t changed our class size guidelines, but that does mean we’d be able to reduce the number of classroom positions,” he said.

With the vote to adopt the proposed budget Tuesday, district staff will now advertise the budget for public review, and a final vote to adopt could be held at the board’s June 15 meeting. The board’s next meeting will be held at 7:30 p.m. on May 18 at the district Educational Services Center, 401 E. Hancock St.; for more information or meeting agendas and materials visit www.NPenn.org or follow @NPSD on Twitter.