Pattye Benson

Community Matters

Reminder: School Board to Vote on 2010-11 Proposed Final Budget on Monday, May 10

This is a reminder that the T/E School Board will be voting on the 2010-11 proposed final budget at its regular meeting this Monday, May 10 at 7:30 PM, Conestoga HS; here is the agenda. The T/E School Board Finance Committee met on May 3 to discuss the 2010-11 budget. After discussing the tax rate and selected budget strategies, the Committee recommended a preliminary budget that included a tax increase of 2.9%, which results in $2.5 million in revenue, $5.3 million in expense reductions and $1.3 million in fund balance contribution to address the $9.25 million gap between revenues and expenditures. This meeting is one of the few remaining opportunities for the public to weigh in on the mix of program cuts, tax increase, expense increases and reductions, user fee increases and fund balance use that are being proposed to balance the 2010-11 budget. The proposed tax increase is 0.5 mills, and cost the homeowner an average of $128. The final adoption of the budget will be on June 14.

I hate to be repetitive, but much like Tredyffrin Township’s 2010 budget, the 2010-11 TESD budget will squeak by, with minimal effect to the taxpayer. The greater, more significant problem will occur with the township’s 2011 budget and the school district’s 2011-12 budget. During the next 6 months, it is doubtful that the economic climate in the country will dramatically improve, so hard decisions await.

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  1. This is actually only a vote to approve the preliminary budget. This gives the administration time to work out the final numbers. The final budget will not be approved until June 14th.

  2. Pattye, I found your last sentence very interesting and telling. Why won’t the country’s economic situation get better in the next 6 months? I happen to agree. But I would go out for 2 years… What’s your take on this… thanks

    1. Here are a few statistics illustrating the long term headwinds facing the economy that maybe Pattye had in mind:
      US Budget Deficit: 10% of GDP (Greece 14%)
      US Public Sector Debt: 80% of GDP (Greece 115%)
      US Total Debt: 300% of GDP
      Present Value of Unfunded Social Security and Medicare liabilities: $46 trillion
      Short term interest rates: ~0%
      General economic forces: De-Leveraging, Re-Regulation, De-Globalization

      From a McKinsey study on financial crises, quoted by Bill Gross of PIMCO:
      “Typically, deleveraging begins two years after the beginning of the crisis (2008 in this case) and lasts for six to seven years. In about 50% of the cases the deleveraging results in a prolonged period of belt-tightening exerting a significant drag on GDP growth. In the remainder, deleveraging results in a base case of outright corporate and sovereign defaults or accelerating inflation.” (A particular country’s fate being determined by the degree of leverage going in.)

      My own view is that the only possible solution is for the Fed to inflate away the debt, making those that don’t hold real assets pay the price for the 2000s financial bubble and its wealth transfers to, e.g., public sector unions or Goldman Sachs. This may take five years, not two.

  3. Thanks Ray for your explanation. It is a frightening scenario, with the only difference I see between the US and Greece, for example is that we control our own currency. There have been concerns about inflation here for awhile, and I am wondering when we will start to feel the effects of it? Isn’t real estate in a deflationary cycle? Inflation or deflation, it seems to me if people don’t have jobs, or are worried about their jobs, then even at deflated prices, there will be few buyers. So I think until the federal government ends their war on our economy, and there is some meaningful and sensible regulation where necessary and the private sector gets stronger and starts hiring, nothing good will happen, inflation or deflation, Am I on the right track? thanks

  4. And. to stay on point of this thread, with the feds and states in a spending and borrowing and overtaxing cycle, it seems to me that local governments will be under a high caliber gun to stay lean and mean….

    1. Chet, I think you are completely right. There will be a great advantage to those localities (or states, or countries….) that can figure out how to deliver acceptable service levels while controlling costs and keeping budgets balanced.

      TESD is shifting to the bond market to fund capital expenditures. The rate and availability of those funds depend on the market’s assessment of our capacity pay the interest and repay the principal. Just like Greece, if we let expectations and entitlements get out of control (or if we try too many accounting deferrals), money will dry up, there will be “austerity measures” and “riots in the streets”.

      If we cut our coat according to our cloth now, then confidence of bond holders and equity holders (homeowners and parents) will remain high (as will house prices) and the tradition of excellence can continue. It would be nice to think that all constituencies recognize this and are prepared to do their part, but I think we are in for a divisive debate.

  5. If the district does not freeze non-contractual salaries for this year — setting the tone for the next contract negotiations — we will have lost the momentum necessary to develop the tools to manage for the long term.

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