TESD: Proposed Tax Increase of 4.3% Drops to $3.875% — School Board to leave $20 in taxpayer pockets

Tax-increaseFor the 13th year in a row, it looks like the TE School Board will vote to increase taxes to its residents.

At the District’s budget workshop last night, the public learned that the proposed 2016/17 tax increase has decreased – the tax increase has reduced from the 4.3% contained in the preliminary budget approved in January.  The proposed tax increase is now 3.875%.  This ‘decrease in the increase’ means homeowners will keep roughly $20 of the proposed tax increase in their pockets.

T/E School District has one of the largest fund balances in the state – in 1996/97, the District had a fund balance of $4,333,661 and in the last decade we saw the fund balance increase to more than $28 million.  The total fund balance as of June 2015 was $32,381,047 – that’s $32.4 million in taxpayer dollars. Continuing to grow the fund balance, the District shows a budget surplus for the fifth year in a row yet residents continue to feel the sting of an annual tax increase.

Ray Clarke and Neal Colligan were in attendance at the budget workshop and their comments from the meeting are appreciated.  Thank you both.

If residents care about the proposed ‘thirteen years in a row’ tax increase, they should plan to attend the TE School Board meeting of April 25 and voice their opinion.

Budget Workshop Notes from Ray Clarke:

Three hours of discussion at last night’s TESD Budget Workshop culminated in some good news for taxpayers – although you’d need a microscope to see it.  The Board will vote at its April 25th meeting for a “Preliminary Final Budget” that includes a tax increase of 3.875% – down from the maximum allowable by a token 0.4% (worth about $20 for the average taxpayer, who is still faced with an increase of more than $200).

Notwithstanding well-articulated positions from members Dorsey, Sweeney, Burger and Hotinski (and from the audience) for a lower rate, more considerate of the increased fees to families and the fixed, inflation-linked incomes of retirees, the outcome seemed pre-ordained, driven by the same majority that voted for the senseless VFMS fences.  That majority seems pre-occupied by risk and unable to appreciate that every number they are given by the Administration is conservative.  For example:

–  Half of the adjustments to the Preliminary Budget could arguably be higher – most notable being the use of approved rather realistic estimates to budget the impact of staff retirements.

–  There was much lamentation of the possible impact of the next union contracts (due in 2017/18), without recognition that the projections already include 7-10% increases in the benefits costs (worth 1-2% in total compensation).

–  Revenue projections are especially murky.  This year’s transfer tax is already $1 million over Budget, as are even base real estate revenues – the most predictable of all line items!  It’s not at all clear if next year’s Budget, developed months ago, considers these developments.

Years of operating outcomes favorable to Budget show that the Administration is skilled at managing its resources.  Superintendent Gusick read a scripted plea for the Board to set the District’s tax parameters and pledged to implement a process next Fall to conduct the oft-advertised “deep dive” into expense strategies that would address any apparent operating deficit that resulted.

The April 25th Board vote is not final, but is nevertheless significant.  Anyone that believes that our School District should be managed more like the County Intermediate Unit, which also last night presented its Budget and a commitment to live within the Act 1 2.4% Inflation Index, should come out in support of our Board members who are trying to hold the line here in TE

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Budget Workshop Notes from Neal Colligan:

-Current Year operating projections now show an estimated $984,000 Surplus for the District for the 2015-16 fiscal year (this year).  Current year’s budget was passed with an anticipated deficit of $1.654 MM.  It’s a miracle…a $2.5 MM swing!

-This “miracle” of Deficit Budget morphing into an Actual Surplus has now happened in EACH of the last five years.

-As a result of these Surpluses; the District has added almost $12 MM to its Fund Balance over the last 5 years…that’s a pretty profitable operation!!!

-With over $32 MM in Fund Balance (about to be over $33 MM with this year’s Surplus); at what point is that adequate?

-The growth of the Surplus is remarkable as we always seem to be “up against the wall” when it comes time to set a new tax rate.  Possibly this pattern is a result of the budget forecasting methods employed when looking at the next year’s budget.  On average (10 years); the District collects a bit over 100% of budgeted revenue and spends about 95.5% of budgeted expenses.  Perhaps this speaks more to the budget estimates used at tax setting time than actual operational changes employed during a given fiscal year.

-At 3.875%; the tax increase this year will be higher than the 3.84% increase imposed on the community for this year.  Not sure the new Board Members ran to increase taxes.

-Perhaps it is time to look at using a small amount of our Surplus (88% funded by local sources) to dampen current tax increases?  One could certainly argue that the Fund Balance is now super-adequate and it is taxpayer money that they were told would go to education….!!!???

6 Comments

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  1. Hi Ray,

    I did not attend the meeting. Thanks to you and Neal for going and for posting this report.

    You say,

    Notwithstanding well-articulated positions from members Dorsey, Sweeney, Burger and Hotinski (and from the audience) for a lower rate, more considerate of the increased fees to families and the fixed, inflation-linked incomes of retirees, the outcome seemed pre-ordained, driven by the same majority that voted for the senseless VFMS fences. That majority seems pre-occupied by risk and unable to appreciate that every number they are given by the Administration is conservative.

    Did anyone ask the same majority that voted for the fences (that no one wants) President Doug Carlson, Virginia Lastner, Kate Murphy, Todd K, and Kevin Buraks to justify the 3.875% that is higher than this years increase of 3.84%? What is their explanation for this action when the surplus grew over $12M over the past 5 years showing that tax increases are unnecessary?

    What is the reasoning behind carrying a 33M surplus now, when in the late 90’s it was $4.3M?

    [Reply]

    Ray Clarke Reply:

    SL: You ask an important question. My own take-away is that the taxing majority is convinced more by the projections of future deficits than by the history of past surpluses.

    They are catastrophizers – hyper-imagining negative outcomes. For example, a claim was made that $10+ million of the Fund Balance is needed because of the chance that Harrisburg will decree that TE is too rich and will reduce the 50% match to our PSERS contribution. I leave it to CM readers to imagine what might happen to Rep Kampf in that event! On the same lines, Mr Buraks predicted devastation to the education program if the tax increase were 3.3% not 3.875%.

    I thought it was really significant that Dr. Gusick appealed for direction. It’s up to the Board to decide if they want to set taxing parameters that stimulate a diverse residential and business community or that drive economics that favor only families and where property taxes spiral up to overwhelm mortgage payments.

    Example of catastrophizing:
    Joe sat, stuck in traffic, and he began to catastrophize missing delivering the perfect sales pitch, losing the commission that he planned to spend on his new outfit that he would wear to the club to meet the perfect girl. He fell into despair as he realized how pointless his life was because of the traffic.

    [Reply]

    Shining Light Reply:

    Thanks Ray,

    Something is seriously distorting the budget process driving our taxes unnecessarily higher and higher resulting in a huge surplus fund that continues to grow year in and year out.

    Reality shows that none of the tax increases are needed to fund the operations of the School District.

    Yet they continue to use the same budget process that projects a deficit resulting in a surplus growing the fund balance to a colossal amount.

    What is the real strategy? A new school in Easttown where the ESC building was torn down? If so, just tell us.

    Thanks for letting me know that Mr. Buraks predicts devastation if not for a 3.875% increase, but Mr. Burak’s law firm is in a financial relationship with the district disqualifying him in proceedings because his impartiality is always in question. It does not benefit Mr. Buraks professionally or personally to use the fund balance to avoid tax increases. His prediction is predictable.

    Virginia has revealed her bias. She is from the state of CT and as she stated, “If you want to see high taxes, go to CT. This is nothing.” The problem I have with Virginia’s statement is that it runs exactly opposite to what she said when wooing Easttown voters (me) with talk about keeping taxes down. I feel dooped! We all now know that a vote for Virginia is a vote for tax increases, no matter what she says.

    I don’t understand the others.

    [Reply]

    Shining Light Reply:

    I’d like to offer my prediction.

    The next time the citizens of TE experience a minimal to no tax increase will be right before the next election cycle when Virginia, Doug, Kevin and Scott are up for reelection.

    [Reply]

  2. A few comments:
    .
    One way to use the fund balance safely is to defease debt. The one time money (fund balance) is used to fund one time expenditures (debt). The result is lower yearly debt payments which should allow lower yearly tax increases over multiple years. Downingtown has used this technique.
    .
    The 3.85% tax increase is a direct result of the recent teacher contract. We all know that 50% of the budget goes to teacher compensation and their raises influence another 25% that goes to administrators and support personnel.
    .
    The TE budget process always overestimates expenditures and underestimates revenues. On paper it looks like there will be a deficit and it misleads the public into thinking a large tax increase is needed. In reality, as Neal points out above, there is an actual surplus at the end of the year. Some board members might call this “conservative” budgeting. I call it “fictitious” budgeting as it purposefully misleads the public. There is no need to ever mislead the public as it is their dollars that fund the district’s operations. If the board wants to budget conservatively, estimate revenues as accurately as possible and put a “buffer” in the Budget Reserves line item. That way the size of the contingency fund (Budget Reserves) is visible to the public and they can give feedback on the appropriate amount.
    .
    UCF is adopting a tightened budgeting process.
    http://www.unionvilletimes.com/?p=28764
    “Board members sought to move away from the decades-old conservative approach that often led to budget surpluses at the end of the school budget year — and the administration shifted to a new budgeting process.”

    [Reply]

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