Act 1 index, investment income starting to shape 201920 budget

Finance committee meeting later this month could give clearer picture

LANSDALE » The 2018-19 school year has not officially started yet, but North Penn School District officials are already looking ahead

to 2019-20.

Director of Business Administration Steve Skrocki gave the board an update Thursday night on the district’s financial picture, and what could be a costly ruling from the state.

“The projected Act 1 index for the 2019-20 school year is 2.3 percent. The current Act 1 index is 2.4 percent, so it’s actually ticking down a notch for next year,” Skrocki said.

“That’s in contrast to the Independent Fiscal Office of Pennsylvania, who actually projected a 2.7 percent Act 1 index - it’s four-tenths of a percent less than what IFO projected,” he said.

In June, the school board voted to pass a $260 million budget with a tax increase totalling 3.4 percent, with 2.4 percent determined by the state under Act 1 of 2006 as the maximum amount allowable without a voter referendum, and the remaining one percent from Act 1 exemptions approved by the state.

Skrocki told the board that, building on current levels, a tax increase of 2.3 percent at the new 2019-20 Act 1 level would generate an additional $4.1 million in tax revenue, and a 2.7 percent index, as projected earlier this year by the IFO, would have generated an additional $700,000.

“The Act 1 index is finalized in early September, but based on the data that actually is used, it’s pretty much set at 2.3 percent for the upcoming year,” Skrocki said.

Talks on the 2019-20 budget will begin at the next meeting of the board’s finance committee, which is comprised of all nine members, on Aug. 27, and Skrocki updated the boards on other trends staff have seen so far that could help clarify the financial picture.

Since the 2010-11 fiscal

year, Skrocki said, staff have been using procurement cards similar to credit cards to make payments for large expenses such as utilities, since using certain payment methods can earn credits back from vendors.

“We try to make as many payments with our P-cards as possible, because we get rebates back. For the most recent fiscal year, 2017-18 ,we received rebates totalling $76,287, which basically would fund a starting level teacher here at North Penn,” Skrocki said.

“That’s the highest rebate amount that we ever received. Back in 2010-11, the first year of the program, we received $4,500. Now, we’re up to $76,000, the third-highest in the state,” he said.

Investment income has also continued to increase with changes in interest rates triggered by the Federal Reserve, Skrocki told the board, and the district’s highest rate of return this July was 2.05 percent, nearly double the 1.1 percent high at the same time last year.

“Clearly, interest rates have ticked up quite a bit in the last 12 months,” he said.

As of the end of June, the district’s cash balance on hand was just shy of $70 million, about $3.8 million higher than the year before, and with roughly $12 million of monthly expenses approved by the board, Skrocki said staff continue to shop for high rates to park the rest of the funds.

“This is the period of time where the school district is very cash-rich. By the end of July, we’ll have cash reserves of over $100 million,” he said.

“That’s why we are really looking at investments that return as much as possible, the highest rate of return with 100 percent safety, as we can, to try to derive as much investment income as we can,” Skrocki said.

Ten-year treasury bond interest rates are tracked most closely by staff, Skrocki said, since most district bond borrowings for school renovation projects tend to be ten-year issues. Staff are planning further talks on Aug. 27 about a possible ten-year borrowing of roughly $10 million to fund a renovation of Knapp Elementary School, and after that borrowing is done, could discuss options for a larger borrowing to fund similar renovations of North Penn High School, which have been estimated to cost over $100 million.

“At the August meeting, we’ll just be talking about a potential bond issue for 2018-19,” Skrocki said — “the future issues could be much larger.”

Staff have also received over 125 applications for the district’s new property tax rebate program, by which eligible low-income seniors can receive up to $162.50 in discounts on district taxes if they have gotten a similar rebate from the state.

“We’ve actually processed over $8,000 in payments so far, so I’m really pleased. Considering it’s only mid-August, that’s a, really, just tremendous response,” he said. North Penn’s school board next meets in their capacity as the finance committee at 6:30 p.m. on Aug. 27, and as a full board at 7:30 p.m. on Sept. 4, both 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.