Due to last night’s Board of Supervisors meeting change (due to Election Day), I was unable to attend. However, I have received an update about the township’s proposed 2011 budget. (Here is a link to the proposed 2011 budget). It is my understanding that the proposed budget includes (1) no increase in taxes; (2) no reduction in township services or personnel; and (3) restoring of fire company contributions to 2009 levels. Considering that Lower Merion’s residents are facing a 12.7% tax increase in their 2011 budget, last night’s news is particularly good for Tredyffrin residents!
Having not see the proposed budget and having not attended last night’s supervisors meeting, I do have a question for anyone who did attend — how was the township building’s HVAC capital expense factored in to the 2011 budget? If you recall, there has been much discussion about valve and duct work replacement in the HVAC system and the associated costs. Does anyone have information how the needed HVAC work was treated in the proposed 2011 budget?
Although last night’s supervisors meeting was over by 8:15 PM, it seems that there was more discussion at TESD’s Finance Committee meeting. I counted on my friend, Ray Clarke to provide notes from the meeting and as usual, his detailed notes did not let me down. Thank you Ray!
TESD Finance Committee Notes from Ray Clarke —
Monday’s TESD Finance Committee meeting was largely devoting to laying the groundwork for property tax increases.
This year’s revenues and expenses are largely in balance, with the shortfall in transfer taxes offset by Harrisburg’s deferral of PSERS costs and many smaller ups (eg salaries) and downs (eg FTEs). The projection for next year remains for the moment at a $6.9 million deficit, but a detailed review of the assumptions in the model revealed another $1 million of overly optimistic assumptions: a 1% increase in assessed value and a 2% return on investments. (The $1 million over-generous (in today’s times) transfer tax formula was not discussed). The model will be re-worked with new assumptions (a 0.26% assessment decline and a 1% investment return, not done at the meeting), but it seems clear to me that the deficit is going to be north of $8 million, as discussed here last month.
Leftover 2010/11 budget strategies likely to be implemented in 2011/12 could be worth a benefit of $0.8 million, although they would have to be phased in only as attrition allows.
The Board then reviewed the timetable for the processes required to a) define and request available exceptions to the increase property taxes beyond the Act 1 limit ($1.2 million) and b) prepare a referendum question for a property tax increase beyond the probable [Act 1 + Exception] limit ($2.8 million).
What this means is that the proposed preliminary budget must be discussed at the next Finance Committee meeting on December 13th if the School Board is to vote on requesting exceptions at its January 24th meeting.
If there is any intent to raise taxes above the Act 1 limit, the 2011/12 budget must be adopted by mid-February.
So, the pressure is on in the next couple of months. If the Board voted against even considering whether to ask the community to implement an EIT that 40% are already paying, can they really ask for a referendum to increase property taxes by a greater amount? The alternative is likely to be raiding the General Fund for the $5 million shortfall (bringing it down to $23 million), and thus pushing off the problem until 2012/13, . Likely still OK for the bond rating.
In that year, of course, the PSERS problem will hit hard under the current formula – a $5 – 6 million net cost increase. Plus of course another 4.5% TENIG increase and a new TEEA contract. A deficit, after more property tax increases, of $10 million, say. That would take the fiund balance into tricky territory. There was much discussion of the need for a state fix to PSERS and the spectre of School District bankruptcies (not TESD!) was raised.
Maybe it will actually take defaults and bond-holder restructuring to force the kind of constitutional changes needed to reform current pension plans. Dealing with the problem by squeezing new hires may solve long run accounting, but will there be enough cash to get through the short term, and if we do, how will we be able to attract a next generation of teachers of the needed caliber?
There’s probably more to comment on, but I’ll stop with the interesting sidebar that the average wage cost of a teacher used in calculation of budget strategy savings was raised from $73,000 to $80,000 – a 9.6% increase. This recognizes the actual individual year-on-year salary increase built in to the current contract and hidden in the 5% numbers much publicized officially.