In the midst of packing to leave for a family holiday, Ray Clarke was still able to attend last night’s School Board’s Finance Committee meeting. We are all grateful that Ray attends the meetings and then kindly supplies his notes. Thank you my friend and happy travel! Below are Ray’s notes and I think you find them interesting! With the looming deficit, we are not surprised at the direction of our school taxes . . . but tax increase vs. elimination of school buses or support for athletics? Don’t think those options are likely to be approved.
There was a well-attended meeting of the TESD Finance Committee on Monday night. There was much material to cover, though, and not much time for input from the 30 or so community members present. Since the size of the problem and contentiousness-level (sorry!) of some of the ideas is off the charts, all the Finance Committee could really do was kick the can down the road.
No surprise, the Committee voted to recommend that the full board vote on January 3rd to apply to the state for Exceptions to be able to increase property taxes by 2.8% on top of the Act 1 increase of 1.4% – total 4.2% increase. This would also involve publishing a preliminary budget at that time that shows a budget deficit (after the tax increases) of somewhere in the $4-5 million range (depending on whether any expense reductions are included).
Important to note: this recommendation keeps options open. On the revenue front, the Board could 1) still ask for a higher tax increase through a voter referendum (but could not now ask for an EIT), 2) ask voters to approve any tax increase beyond 1.4% (and not apply for Exceptions), 3) hold the increase to zero or 1.4%. On expenses, there seem to be $1-2 million of “Level 1” and other strategies that could reasonably be implemented for 2011/12. The gap between revenues and expenses that results from the final choices on the above dimensions would be met from the fund balance. Kevin Mahoney and Debbie Bookstaber seemed to be favoring revenue option (2).
A few numbers that caught my eye:
1. This year’s operating statement is being strongly fortified by delinquent tax collections and by reduced PSERS contributions that are each projected to be ~$750,000 favorable to budget, resulting (with other puts and takes) in a reduction of the expected contribution from the fund balance from $1.5 to $2 million.
2. The district is finally publishing and using figures that reflect TEEA increases closer to the effect of the actual salary matrix. The aggregate salary increase for 2011/12 is projected to be 7.33%, and may go higher with more movement across the matrix.
3. The projections use historical rates of increase for medical and prescription costs (10-15% per year); it seems possible that current experience will turn out to be more favorable.
4. The “base case” used for starting points includes the Act 1 tax increase of 1.4%. This is different from other years when the base case is the current tax rate. With no tax increase and no additional expense reductions, next year’s gap would be $8.8 million. This includes $470,000 add back of “one-time” strategies used last year.
5. Options to close the close the gap with no tax increase include things like: elimination of school buses ($2 million) and of support for athletics ($1.5 million), outsourcing custodial services ($0.95 million), further reducing aides ($0.8 million). There was no indication that the Board would seriously consider these, although there was commentary about transportation inefficiencies observed by some Board members. Interesting that the option to hold administration salaries flat (impact $150,000) was included with these “Level 2” strategies. There is also a set of strategies to eliminate teaching positions that if approved by the Education Committee/Board and if staff attrition occurs would eventually save $3 million/year ($525,000 of this will be up for approval at the 1/32011 Board meeting).
6. Going forward, the problem compounds – even with a model that includes no TEEA compensation increases (none!). The issues are flat assessed values, healthcare costs, and PSERS (no, Harrisburg didn’t fix it!). One audience member cited research that predicts that property values and employment don’t reset and resume growth until 2016. That ~$5 million in earned income taxes paid to other jurisdictions seems pretty important, as do healthcare benefit cost-sharing programs and index-linked compensation in future union contracts. Maybe we will continue to look to the state for PSERS help, but there is clearly a lot that can be done at the local level.
There was much talk of the educational value delivered by the T/E program. Dan Waters compared Lower Merion expenditures and Kevin Buraks asked for comparisons of tax rates of neighboring districts (but this blog knows we need to look at rate times assessed value too).
Finally, there was an interesting aside that the Great Valley School district has asked for support for a County-wide property reassessment. Not sure what that means, except at the least a correction of imbalances that have built up over the years.
Hopefully, there were other CM readers at the meeting who can amplify and raise things I’ve missed here.