Pattye Benson

Community Matters

Tredyffrin Easttown School District Facing $9.2 Million Deficit . . . What's This Mean for Taxpayers?

In today’s Main Line Suburban Life newspaper, writer Blair Meadowcroft gives an update on Tredyffrin Easttown School District’s severe economic situation. There have been a number of postings and ongoing comments on this blog about the school district budget, but I think we need to bring the commentary back to the front page.

I know that the TESD budget is not a simple problem nor is there a simple fix but I want to pose a question to some of you who regularly comment on school district matters. If you could only offer one suggestion as to how to make a major impact on the budget, what would it be? I know that there is not much chance of re-opening the union contracts for the teachers but if that were possible would that be your solution? Would cost-cutting measures include teacher/staff layoffs? Would you suggest cuts in specific programs (if so, where — foreign language, sports, theater?) Decrease costs with increase in class size? Additional or increase in student activities fees (sports, after-school programs, parking charges) OK, it’s a perfect world and anything is possible (including re-negotiating of teacher contracts). What is your suggestion to the $9.2 million deficit in the TESD budget?

As we have all agreed, there seems far greater resident participation in the township government process than we have noticed with the school district — so I’m suggesting that we get TESD back on the front page of Community Matters. Some of our regulars — Ray, Andrea, Mike of Berwyn, Kate, Sarah . . . I invite your personal suggestions, help the community understand what this deficit means in real dollars to the taxpayers.

Taxing times are ahead for T/E board

By Blair Meadowcroft

The Tredyffrin/Easttown School District is facing a potential $9.2-million deficit for the 2010-2011 school year.

The shortfall comes from the fact that the proposed budget for the upcoming academic year, effective July 1, has expected revenues of $101.9 million and the projected expenditures are $9.2 million more at $111.5 million. According to district business manager Art McDonnell the $5-million increase in employee fringe benefits was the major factor increasing the deficit but there were others.

“The loss of revenue, the loss of transfer taxes due to the loss of sales, commercial mostly, the loss of interest income,” he said. “That’s been ongoing; we’re experiencing that now. And the increase in benefits costs comes from health-insurance coverage, and some from retirement and salaries.”

Increases in health care are to be expected, explained McDonnell, but on average the rates have increased 10 to 15 percent in the past, and this year the increase to the premium rate was 28 percent from Blue Cross.

“We did not expect that much of an increase,” said McDonnell. “This was the first time in a couple of years that the increase was way above what we were planning on. We were also expecting an increase to the retirement rate but not to the extent that it went up.”

The preliminary budget will be discussed again and voted on by the school board Jan. 25. The board however will not be voting on a final tax rate. According to McDonnell, by law the tax rate needs to be set by June 30 and will be voted on in June when the final budget is passed.

But at the Jan. 25 meeting, the board will vote to take one of three actions on the tax rate, according to McDonnell.“Pass a resolution to certify that the 2010-2011 tax rate will be at or below the Act 1 index of 2.9 percent; apply for exceptions to the Act 1 index, which will allow the district to raise taxes above the index without voter referendum; or authorize the administration to begin the process of seeking a voter referendum in May to increase taxes above the 2.9-percent state index,” said McDonnell.

If the board votes to tax higher than the limit set by the Act 1 index, there is the potential for $3 million more in revenue. That would come from an additional 3.73 percent.

However, in an effort to try to not raise taxes, Kevin Mahoney, chair of the finance committee, has asked the administration to come up with different ideas for reducing costs or increasing revenue, and any proposed strategies will be discussed at the Feb. 8 finance-committee meeting as well as at upcoming education-committee meetings.

So far a potential reduction of $2.35 million in expenses has been identified but nothing has been voted on or put into the budget yet.“We have some recommended strategies for the committee to look over and we are going to put together a presentation to show at the Feb. 8 meeting,” said McDonnell. “Hopefully we’ll find a way to combat the $9.2-million deficit.”

Whether or not the board decides to increase taxes, the potential for a deficit of some kind exists for the 2010-2011 academic year. The preliminary budget will again be discussed Jan. 25 at 7:30 p.m. at the school-board meeting and Feb. 8 at 7:30 p.m. at the finance-committee meeting. The June school-board meeting to vote on the budget is scheduled for June 14. All meetings are to be held at the Tredyffrin/Easttown Administration Offices at 940 W. Valley Road, Suite 1700, in Wayne.

“Public input will absolutely be considered and is encouraged,” said McDonnell. “We always have public-comment times at various points during and at the end of the meetings.”

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  1. The article nicely summarizes the dilemma. I agree with the Finance Committee’s request to the Administration to come up with ideas to come up with ways to resolve the entire $9.2mm with cost reductions or increased revenue(fees, reassessment of certain properties). Not that the community would be willing to accept cuts that would really impact the core educational program. As for the $2.35mm in reductions identified so far, the Administration has presented the rationale and it makes sense to me.

    Ray says:
    “And those income limitations clearly point to the need to control expenses, and that means programs in the short run. Let’s take FLES. One recent data point on that comes from Robert Xu’s letter in today’s Spoke. He remembers only “reciting the alphabet in Spanish, staring at images of food and learning to say ‘My name is Paco’ in Spanish.” As implemented, the program was not achieving its goals. In today’s climate it’s especially right to explore ways to achieve the goals more efficiently.” I agree with this point and this reflects the experience my kids had with FLES.

    Ray also says:
    “What about other “discretionary programs? For example, do we need so many AP offerings? Colleges take great pains to tell potential applicants that what counts is not how many APs they’ve taken, but what they’ve made of the opportunities that they do have. I actually believe that.” Another excellent point. CHS offers roughly 30 AP courses. The highly competitive colleges tell kids and PARENTS, “We expect you to take the most challenging courses offered at your high school.” So, there are kids and parents that think they have to take 5 or 6 APs per year. If we offered 15 or 18, like Radnor for example, our kids wouldn’t feel the pressure to take so many APs. Are we doing the kids any favors by putting them under this type of academic stress? Do high school seniors need to be taking AP Microeconomics, for example? Notwithstanding the cost of staffing and facilities for these additional courses.

    The Board seems committed to balancing the interests of the students and the community at large. In the end, my guess is we will end up with a tax increase at or near 6.63% (CPI + allowed exceptions) and cuts of +- $3mm. The looming big issues are contractual (salary, benefits, PSERs) and will need to be addressed in the next negotiation.

  2. This is a tough one because there are so many considerations, and as a taxpayer/resident, I don’t have all the facts.

    To start, I think the School Board has done the right thing in first asking the administration to suggest substantial budget cuts. Tredyffrin taxpayers will be more amenable to any tax increases if there has been a significant effort by the administration and staff to save without negatively affecting the quality of education.

    AIso, I think taxpayers are more likely to accept a tax increase if teachers show a willingness to make concessions in their next contract consistent with the private sector.

    I understand that teachers have accepted (relatively) small annual pay raises in exchange for a full range of benefits – benefits which in the current economy, represent the “Cadillac” of plans, while most of us have had to accept periodic decreases in benefits while having to pay significantly more for them.

    The incredible and unpredictable rise in healthcare costs plus the huge pension obligations now required by school districts as the result of the drop in pension fund balances have wreaked havoc onschool budgets. Going forward these uncertainties have to be minimized.

    Neither can be changed without opening the teachers’ contract. And that’s not gonna happen. So short-term the district will have to cut where it can – even if it involves eliminating programs like FLES or laying off teachers. The district does have a substantial reserve to draw from as well, and it is there for times like these.

    Longer term, teacher healthcare benefits should be trimmed and/or teachers should contribute more to their cost. A higher percentage annual pay raise could soften the blow while representing a more manageable and predictable expenditure for the District.


    Reality bites, but the terms of teachers’ pensions should be changed as well, so at some point, the District will no longer be responsible for an open-ended defined benefit expense instead of the more affordable defined contribution expense. Taxpayers should not have to take the hit for market downturns both in their own investments and teachers’ pension plans. It’s just not fair or equitable.

    For all new teachers, a defined contribution plan. For teachers with less than X no. of years in the district, it should be a matter for negotiation. But for those close to retirement, I think it would be unfair to fiddle with their pensions.

    Teachers’ unions cannot be completely insulated from market forces. Their (unions’) demands have become unsustainable.

  3. Much to agree with in these comments. I do agree with John about the travesty of trading off educational programs for above-market compensation structures, but I offer a couple of extenuating circumstances. First, it’s really important for all parties to future negotiations to see that the community is totally committed to achieving fair value for its educational dollar. Second, the initial expense reductions will hopefully remove more icing than cake.

    Hopefully, the administration is in a much better position than all of us (certainly than me!) to know where that icing is. Mike has shared a couple of my thoughts from the last thread. One caveat about the AP programs: some part of the savings would presumably come from requiring less advanced teachers, and that will take some time to work through. Efficiencies in scheduling and class sizes from the reduction of options would show up sooner.

    One thing I would say, is that no action should be too small if we are to set up the right mindset in the system. Take taxpayer and parent mailings, for example: are there any that could be combined, posted on the internet or eliminated altogether?

    I would be interested to get more data on class sizes. How close are we to any regulatory limits? Are there any classes where sizes could be increased with little detriment?

    Increasing fees may be OK in some instances for truly discretionary tings like parking at CHS, but I think we should be very careful not to go too far. Those are only tax increases in another name, and I wouldn’t want to exacerbate any distinctions amongst the students. Better to have a consistent, effective set of programs.

    Long term, the issues around teacher compensation have to be addressed. Salary increases, health benefits and pension plans should be in line with those of the taxpayers that provide the compensation. The salary matrix should be changed to have much less reward for mere longevity. Salary increases could be indexed, pension plans evolved to defined contribution (and individual contributions to grandfathered defined benefit plans increased), health benefit cost increases should be capped, and achieved through higher contributions or co-pays. That way, we’ll get to the predictable expenditure pattern that Kate advocates and that will allow for realistic revenue planning.

    I think Mike’s sense of the Board’s current thinking on the tax increase and expense reductions is right on. That may only be changed if the community responds forcefully one way or the other to the proposals presented at the February 8th Finance Committee

  4. America is a polarized mess right now. Why? Because people only talk to like minded people with like minded ideas who will reinforce their ideas.

    When I read this blog I see the same six to seven people who believe the schools are a mess, teachers are greedy low lifes, the board is terrible, taxes are excessive. A few comments from someone who has a completely different viewpoint.

    1. The blog is titled “Community Matters.” What happened to our communities? We have become obsessed with complaining about taxes as we sit in our expensive homes. Look around you! You are lucky to live where you live.

    2. If you think the Board is doing such a rotten job….why didn’t you run? Perhaps because it would take away from the time you need to write your daily rant.

    3. If teachers are greedy and overpaid, why don’t you put down your laptop and teach for 8 hours a day…grade papers for 2 hours per day…..and prep for tomorrow’s lesson for 2 hours per night. Perhaps because it would take away from the time you need to write this daily rant.

    4. You want to cut the district budget and the school district to the bone because you don’t want to raise taxes the equivalent of a price of a cup of coffee per day? That is BRILLIANT! Let’s cut everything! Perhaps we can stick all the kids in the auditorium and you can have a single teacher for the school. Cut the schools to the bone and your property values will go down the tubes.

    Community matters…..I think not. I never read such unadulterated drivel in my life. How you became so bitter about this community and your number 1 school system I will never know. Conestoga is one of the best schools in the country. If the board approves your suggestions it will be nothing more than a third rate school…..but at least you can sit back and pat yourselves on the back. Your taxes are the 491st lowest in the state….perhaps you can get them down to 501st. You will have done your job. You should be proud.

    1. education taxpayer —
      I’m sorry that you feel this way. If you believe that Community Matters is “unadulterated drivel” — why bother to visit the site or comment? Personally, I believe that there is merit in discussing community issues and based on the 15,000 visitors to my blog in less than 2 months, I guess there must be some who think that my undertaking is worthwhile. Sorry that you don’t share the sentiment.
      Pattye Benson

    2. Actually it seems to me that the commentators on this Board do generally have a mix of perspectives and affiliations. There is perhaps more alignment over the schools issue because the prospective increase in our taxes are out of all relation to the recent experience and outlook for incomes, regardless of our situations.

      This commentary reminds me of the firefighter discussion (sorry everyone!). A change at the margin to reflect the realities of the economic environment does not mean any less support from the community. Just reasonable people trying to make a limited number of dollars go around to maximize the aggregate utility.

    3. Ouch. I understand your view of taxpayer rants, but I don’t think you need to write it off as unadulterated drivel. Your comment #3 sounds like you are or are married to a teacher. You need to take off that hat and help to educate the public. Your information about TE’s ranking in the state as far as local tax effort is about right, but it would be more helpful if you talked about your source.

      I am a numbers person and have been for as long as I was associated with the school board. Earlier I posted the revenue per student in several neighboring districts — but that left a gaping hole in the information because some expressed the reality that commercial/residential mix affects enrollment numbers so tax revenue per student could be misleading. We agreed to disagree. But I do have some other figures to contribute here to keep the discussion focused on what seems to be the consensus primary issue: Yes, we can find some ways to reduce costs in the district, and I wholeheartedly agree that the salary schedule has lost its way under the direction of a local union that takes its marching orders from Harrisburg — but I truly believe that TESD cannot and should not attempt to redesign its curriculum and the program of studies to respond to this. We need to look at the truly BIG picture of living in this community — and our local effort to producing the educational program which clearly plays a role in property values in this community.

      Here’s some information on property values and taxes that gives you (hopefully) a clearer understanding of our level of taxes for schools:
      Let’s buy a $500,000 house — in any of several neighboring districts. When we buy that house in Tredyffrin, the school district gets 1/2 % and the township gets 1% (most townships, including Easttown, only get 1/2 %). That income is the epitome of variable revenues — it only comes in when properties change hands.

      Now — the State Tax Equalization board annually reviews assessed values relating to market values in every tax community (county based for the most part) and standarizes the values statistically. They produce a ratio known as the CLR – common level ratio — that reflects the percentage that your equitably assessed value is of the market value. Assessment appeals use this number in decision making.

      Without bogging down here, you can go to the steb website to see these CLRs. They are done by county. Chester County’s CLR is 53. 0 Delaware County is 61.3 Montgomery County is 54.0 and Bucks County is 9.7 . In each case, the predetermined ratio for these jurisdictions is 100 — which means they would like to think assessments are at full value. The CLR fixes that annually to be sure new properties are assessed correctly.

      So, our house that has a fair market value (sells for) $500,000 in the above four counties would be assessed as follows: (fair market value x CLR%)

      TE, Great Valley, Unionville — $265,000
      Radnor – $306,500
      Lower Merion, Upper Merion $270,000
      Council Rock, Central Bucks – $48,500

      Knowing these assessed values on our $500,000 purchase house, (make it new construction for the sake of understanding how the assessed value is reached), school taxes on this house based on this fair assessment would be as follows:

      TE – 17.47 mills – $4,629.55
      GV – 18.22 mills $4,828.30
      Radnor – 20.2731 mills $6,213.71
      Lower Merion 21.4015 mills $5,778.41
      West Chester 17.85 mills $4,730.25 plus EIT
      Council Rock 107.96 mills $5,236.06 plus EIT
      Upper Merion 15.24 mills $4,114.80

      The mills I use come from the most recent (2009) county tax roles. If you find an error, please advise as I am relying on the information publicly available.

      So — you can ignore any effort at comparing revenue and mills and revenue per student. These figures are the school property taxes paid by a resident in a $500,000 market value house across these districts. If you bought your house a long time ago, thedifficult fact is that the economy may have given you lots of equity, but not necessarily income to support your property’s value. You made a good investment but you may not be able to keep it unless you are willing to tap into your equity.

      TE can and will make cuts, but as Mike said earlier, families investing in homes here to send kids to our schools have invested in educating kids today and into the future. You have been rewarded for the district’s achievements in the value of your home. We need to find a balance between income (which has nothing to do with the way we tax for schools locally) and the value of your property. The issues of teacher compensation are a state wide issue — collective bargaining when combined with the power to strike (and teachers do not lose one dollar of income if they strike) does not serve an ideal purpose. PA has the highest percentages of teachers strikes in the country. Many states do not allow teachers to shut down an education system.
      So, let us continue. I don’t think this is any kind of drivel (though I apologize for being long-winded, but it’s a fairly complicated topic and deserves more than sounds bites). In 3 terms on the school board, the only budget hearing that ever had a crowd was when we discussed the options of an income tax — presuming that income reflects more reliably a resident’s ability to afford schools — and we all know how those studies end up. NO MORE TAXES.

      Good work folks. Let’s keep talking. Thanks Pattye for this forum.

  5. John — I cannot let your comments about superintendents being a commodity resource pass without some response. They are anything BUT a commodity. The level of eligibility is very, very slim because of the certifications required to achieve eligibility. Since superintendents come from the administrative ranks, and administrators are tenured, a person serving as a superintendent serves completely at the pleasure of the board on a contract of 3-5 years in duration. Dan Waters does not make too much since his compensation is completely under the discretion of the board. In my 12 years working with Dr. Waters, not once did he demand a raise or a benefit. Market studies priced superintendent packages. If you did a review of surrounding and comparable districts, you would find that superintendent packages for GOOD superintendents are lucrative and rewarding — because that person serves as the CEO of the District. 6,000 students, $100M budget. Skyrocketing ligitation for special education. Multiple unions. If you did a SEARCH for a superintendent, you would pay whatever it took to keep a person like Dan Waters in the job. (the superintendents in this district that preceded him were both very demanding, very focused on their own careers, and not particularly student-savvy….but that’s just my opinion). The sitting school board is responsible for the budget and the contracts. They need scrutiny, encouragement, and in the end — support for making a tough stand.

  6. Pattye…….I was NOT attacking you individually. I applaud you for constructing this blog. I was attacking the people who seem to be obsessed with reducing taxes at the expense of the educational program. IT MAKES NO SENSE!

    It also seems that many of you are unfamiliar with TE’s educational program and what would happen to it taxes are not increased. As Andrea has stated, more people should go to the EDUCATION committee meeting to see what is happening to the Program of Studies and the curriculum itself.

    1. The article in the paper makes it sound like this is an unexpected crisis — not a single thing the school board is talking about was not easily forecast. My understanding is that this 9 million has nothing to do with the retirement — last year’s budget said they had reserves to deal with that spike. While I don’t know enough about them personally to have an opinion, I do think that maybe it’s time people looked closer at the people that run and get elected on the school board. Being a hardworking volunteer does not mean you have the skills or education or even personality to work with a group of other people who have nothing in common necessarily except they live in this area. Do people with kids fight for better programs than retired people? Is it about taxes? Has TE ever had a strike?
      What can people do to make a difference?

  7. You’ve got it all wrong, education taxpayer. I don’t think any of the commenters on this blog wishes to see the quality programs offered in our school district cut or diminished. Personally, I am willing to pay higher taxes to maintain excellent schools. We have reaped the benefits of top-notch schools for better value than surrounding school districts, and we know it.

    But the reality of a $9.2 million deficit in 2010-11 followed by a ballooning deficit of $25+ million the following year requires some response besides raising property taxes to cover them. And we’re not talking about the cost of a cup of coffee here! There are people/families who will suffer or leave the community if their property taxes increase by 25+%.

    When 75% of the school budget is for teacher compensation and benefits, it is logical that these expenses get a closer look.. Teachers are now getting a better deal in terms of healthcare and pension benefits than most of this district’s taxpayers
    The future costs represent a huge burden.

    Finally, you trashed this site’s bloggers for their “unadulterated drivel”. I’d like to hear your wisdom…

  8. I beg to differ. For this year, you ARE talking about the price of a cup of coffee per day. According to info given out at the Finance Committee meeting, an average homeowner would pay $243 increase for about a 5% tax increase.

    Regarding the $9 m deficit
    1. Could you have predicted a 28% increase in health care costs?

    2. Could you have predicted transfer fees being severely reduced?

    3. Could you have predicted tax appeals at a level perhaps never seen before?

    NO ONE could have predicted this financial downturn and the impact it would have on the community.

    The teacher contract was negotiated BEFORE the financial meltdown. They have a contract. No one beats up on executives with contracts. No one demands that they throw them out. And I don’t believe that anyone gave unions bonuses during the 1990’s when the economy was booming. No one said, “Hey teachers….we taxpayers are having a great year this year. You deserve a pay raise!!!”

    My idea of unadulterated drivel is the constant mantra that has become almost a religion of “no new taxes.” It is the default mode of people who don’t have to make real decisions. It is a convenient thing to say when you have no other argument to make. And I am tired of it.

    People expect services from their government and their schools. Gas goes up, special education costs go up, the price of paper and pencils goes up….and yet taxes should go down. Somehow…..that argument make no sense.

    That is my wisdom for tonight.

    1. At the risk of creating more controversy that has nothing to do with solutions — this “GOP” lead school board was 1) not GOP led and 2)not driven by GOP issues. I will stand by each and every budget decision made during my time on the board, and I can assure you that the largest component of tax increases related to staffing were a direct result of a community study we undertook in response to KIDS COUNT, an extremely well-funded group that pushed for and achieved class size targets well below anything we had ever experienced. During times of lucrative transfer tax revenues, and new development with a rising tax base, these costs were absorbed. Kevin Grewell was elected to the board as a Republican after switching parties to get the TTRC endorsement, presumably because there was no organized process for running as a democrat. In defeating an incumbent Republican for the seat (Rick Zagol), Kevin ran on a platform of spending more for smaller class sizes. MUCH smaller in some cases. There were several board members who had previous been associated with the Democratic party but switched to Republican registration absent any benefit to a Democratic affiliation.
      Services since 1996=2000 have not degraded….the size of the population has simply grown exponentially. And the cost of housing in this community has risen to levels that new residents who choose to purchase here come with many, many expectations.
      Can we please talk about the realities and not the theories. The issues on the table absolutely were predictable. The health care increases are easy to point to — but it has happened before and is the reason the district has a fund balance. $4M of fund balance right now is designated for “retirement obligations” which means severance and other issues for sitting and retired administrators. When I attempted last year to look at the contracts of these people, I was met with anger and changes in policy as to how to look at these numbers.

      To education taxpayer — it’s fine to understand the reasons behind the increase, but not okay to suggest that they were surprises. Assessment appeals are quite typical in a down market. Countiwide reassessment was done in 1998 — the CLR since that time has gone from the goal of 100 (meaning market value would equal assessed value) down to 53. Actually 2008 showed a rise to 53 from earlier levels — but since the CLR reflects the percentage of market value that the assessment should reflect, a steadily decreasing value ultimately predicts that the effort of reassessment is now worthwhile as the outcome would be significant enough to undertake it.

      1998 93.4
      1999 89.8
      2000 85.2
      2001 80.5
      2002 74.0
      2003 68.0
      2004 60.8
      2005 54.9
      2006 51.8
      2007 51.7
      2008 53.0

      I apologize that these are not “sound bite” comments, but as you know from previous postings, I have a great deal of information to share and would like us to all understand the implications of our current tax level.

      One other response, however, is that the teachers’ contracts are rarely done with any serious consideration for economic predictions — and the PSEA (if you read their website right now) advocate for growing the starting salary so that there is a shorter time to reach “career” earnings (the top step) and less “percentage increase” required per year….the local salary schedules reflect a competitive look at neighboring districts along with a formidable staff of PSEA staff running numbers and making offers or responding to district offers — all the while knowing that the elephant in the room is a strike. Board members know the damages of a strike — so the abililty to influence the outcome is severely limited and is only likely to come out less in the union’s favor with a willingness not to blink. Where would the community come down if our schools were closed for two weeks? (I have referred to this before, but due to some legal conclusions reached at the state level, teachers do not lose any salary or benefits during a strike…I can explain if you have any questions about it).


      1. This board has livened up since John P. resumed his role as equal opportunity insulter. John, you could save time by telling us the few people you like, rather than the many you dislike!

  9. John:

    My comments are half in jest. But of 9 school directors, none have done a good job, the jury is still out on Kevin B. and Rich? Of 7 supervisors, we know your opinions of KOL and EJ, the jury is out on Michelle and Phil, although you seem to be leaning negative, and it seems you think JD has done a good job?

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