Preliminary schools budget includes tax hike (Downingtown) - Daily Local News 2/2/2011

The Daily Local (dailylocal.com), Serving Chester County, PA

Preliminary schools budget includes tax hike
Downingtown Area plan would increase taxes 3.3%

Wednesday, February 2, 2011
By ERIC S. SMITH
Staff Writer

UWCHLAN — The Downingtown Area School District's finance department presented a preliminary budget to the school board's finance committee on Monday night.

The school board will need to approve a preliminary budget at its Feb. 12 meeting. The budgeted administration presented on Monday includes a 3.3 percent tax increase. Under Act 1, the district can only increase taxes 1.4 percent unless it asks for two exceptions: one for special education, and the other for the Pennsylvania School Employees Retirement System (PSERS).

In the presented budget, the administration is asking the board to seek both exceptions.

Under state law, the tax rate that the board includes in the preliminary budget it adopts sets a ceiling for the final millage rate. So if the budget is passed as it was presented on Monday, the district would be able to have a tax rate up to 3.3 percent but nothing higher. The board could lower the rate, and nothing is permanent until the final budget is approved around June.

"For the first time in the history of the Downingtown Area School District, projected revenues for the next year are less than this year's revenues," said Richard Fazio, chief financial officer for the district.

The projected revenues are expected to be about $3 million less than this year's revenues. The shrinking revenues are due to lower transfer taxes, less interest on district investments and a growing number of tax appeals. Fazio said each appeal in the district costs taxpayers about $65.

Fazio said the current budget as of Monday also "reeks of uncertainty." He said federal and state budgets have yet to be presented and thus the district cannot accurately predict those revenue streams. He said a new governor increases that level of uncertainty.

The district is also involved with negotiations with its teachers union and since the pay rates have not been resolved it makes budgeting salaries difficult, Fazio said. The district has made an offer to the union, he said. That offer is what is reflected in the current budget as presented on Monday.

With the current union offer rates as well as the contractual salary increases for some support staff, salaries are expected to increase by about $1.6 million for 2011-2012, Fazio said. Benefits are also expected to increase by about $3.1 million because of health care increases and PSERS benefits, he said.

Fazio said the district has reduced or flatlined all "controllable" spending. However, uncontrollable expenditures continue to rise, he noted. Uncontrollable costs include salaries, benefits, STEM Academy costs and the cost of students in the district attending charter schools. He said the district expects to pay about $6 million for charter students in 2011-2012, which is about $1 million more than it is spending this year. Those costs are mandated by state law.

With the current expenditures and expected revenues, the district would be about $9 million in the hole without a tax increase or using its fund balance, Fazio said. He incorporated using $2.5 million in reserves into the budget he presented on Monday.

"No district wants to continually use its fund balance, because it will dry up eventually," Fazio said.

With that and the proposed 3.3 percent tax increase, the district still needs to fill a nearly $2.2 million gap.

No board members commented on whether or not they would approve the preliminary budget with a tax-increase ceiling of 3.3 percent.

To contact staff writer Eric S. Smith, send an e-mail to esmith@dailylocal.com.
URL: http://www.dailylocal.com/articles/2011/02/02/news/srv0000010820877.prt
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