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INDIANA: 2.6 mill increase possible next year

by on May 13, 2014 10:59 AM

The Indiana Area School District board of directors on Monday approved a tentative budget for 2014-15 that calls for increasing the property tax by about 2 1/2  percent, matching the local economic index figure set by the state Department of Education. A boost of 2.63 mills — from 105.59 to 108.22 mills — would add about $56 to the tax bill for a property of average assessed value in the district.

Business Manager Jared Cronauer said the budget lists $50.6 million of expenses including increases of more than $1 million in the district’s contribution to the retirement fund, $750,000 in health insurance and $335,000 in transportation costs.

The district will pay $600,000 less in salaries, Cronauer said, because several retiring teachers won’t be replaced and because of a lower starting pay rate in a teachers’ contract that takes effect at the end of June.

As prepared before the meeting, the tentative budget showed a deficit of $435,000 that would be covered by drawing from funds left over at the end of the current school year. That figure grew to $635,000 when the board voted Monday evening to allocate $200,000 for curriculum and technology updates.

Cronauer said the budget numbers are subject to change before the board votes for final adoption on June 23.

The tentative budget, which will be available for public review for the next month, was approved on a vote of 6 to 2: directors John Barbor, Deborah Clawson, Hilliary Creely, Julia Trimarchi Cuccaro, Brian Petersen and John Uccellini voted in favor, while board President Thomas Harley and Diana Paccapaniccia voted no. Director Robert Gongaware was absent.

The vote to allocate the extra $200,000 for curriculum and technology passed on a vote of 7 to 1, with Harley opposed.

District Superintendent Dale Kirsch said the money is available because this year’s earned income tax has raised $500,000 more than expected.

“This has been a long time coming to increase this,” said Petersen, chairman of the academic and extracurricular committee, which recommended the funding. “I’m glad we found the money.”

The district had put $160,000 toward curriculum updates for many years, but “this was very much inadequate years ago and even more inadequate today,” Kirsch said. “This will be a huge boost. ... It will be used very well across the district.”

The budget vote Monday followed a presentation on the district’s long-range financial position by William Hartman, a professor of education at Penn State University,

Hartman, who specializes in school budgeting and financial modeling, showed the board how changes in certain areas of funding can affect the district’s financial stability five years from now.

At current rates of increases in revenues and expenses, the district would operate at deficits ranging from $400,000 to $1 million and reduce its current $5.4 million fund balance to just $2.2 million by 2019, Harman said.

Hartman displayed the numbers on a computer spreadsheet projected on a screen for all to see, and changed certain numbers to show their “big picture” impact.

Although many budget numbers aren’t known years in advance, Hartman said his calculations took into account several key and predictable factors such as salary increases, pension contributions, state subsidies and local tax rates.

Hartman said between 75 and 100 school districts in Pennsylvania have used his model to analyze their long-term financial positions.

Hartman’s strongest advice to school boards is to understand the factors they can control and adjust them so the district maintains a healthy fund balance every year.

“The only revenue stream that the district and school board has limited control over is the local property tax,” he said. “You can’t control earned income tax, you certainly can’t control the state appropriation, you can’t control special ed subsidies, PSERS contributions or health benefits. You can at periodic times control employee salaries and benefits. You can make marginal changes to that, but the time of making wholesale changes is gone.

“So you need to do what you can each year to make sure you don’t fall behind the curve … in terms of getting the revenue stream up to match the known expenditure increases that are coming. Expenditures are pretty well known, much better than the state revenue side, and you’re quite vulnerable to that.”

Hartman recommended raising the real estate tax as much as allowed by the local economic index every year, rather than keeping tax rates steady and proposing large increases when the district faces high expenses such as building projects.

To make his point, he showed figures demonstrating that the lack of a tax increase in one year would have a snowball effect on deficits and fund balances in future years.

Indiana Area School District, so far, has avoided putting itself in that kind of position, Hartman said.

“You’re OK. You’re better off than other districts we’ve looked at,” he said. “Others burn through their fund balances in just a couple of years. You don’t.

“In my assessment, while you still have some work to do, it’s a doable kind of thing.”

To underscore another point — that a one-year freeze in state funding has a critical long-term impact on a school budget — Hartman keyed in a higher state subsidy figure for the current year and replaced zeros with 2 percent increases in future years.

Deficit-spending figures turned from red to black. Figures representing fund balances in future years increased.

“Go home and call your legislators tonight,” Hartman told board members. “Because frankly, that’s what it is. The legislators made the rules but the governor gets all the heat. The governor makes the proposal, but the Legislature — the House and the Senate — passed all these things. They passed PSERS, changed PSERS, changed PSERS again.

“They passed the charter school law with overly generous funding. They haven’t given money for special ed, and they passed Act 1 which controls how much money you can raise.

“So all those things, the Legislature enacted, and they’re the people who can change things. If there’s something you don’t like, a superintendent can’t change it, you as a group can’t change it, but the Legislature can. And that’s where the leverage has to be.”

Lacking flexibility in generating revenue, Hartman said, districts should raise the real estate tax as much as possible every year.

“I’m not telling you what to do, but from my perspective, it’s what you need to do. It’s what any district needs to do.”



Chauncey Ross is the Gazette’s fixture at Indiana Area and Homer-Center school board meetings, has been seen with pen and notepad in area police stations and courts, and is something of an Open Records Act and Sunshine Law advocate. He also manages the Gazette’s websites and answers your questions about them.
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