Board proposes 2.1% tax increase EASD hopes to lower hike over next month; feels it is in ‘good shape’ but has concerns down the road

By on May 16, 2012

By: GARY P. KLINGER Review Correspondent, Staff Writer

It now appears likely that real estate taxes will rise for those living within the Ephrata Area School District.

But by how much? That remains a question not to be answered until the next regular school board meeting in June.

At Monday night’s meeting, board members unanimously approved a preliminary final budget which sets a maximum tax increase of 2.1 percent, raising the millage rate from the current 19.02 to 19.41. This would translate to an additional $39 per year for every $100,000 in assessed real estate value. According to district officials, the average value of residential real estate within the school district is $137,685.

Board President Timothy Stayer and district business manager Kristie Reichard, explained that with regard to the assessed value of local real estate, Ephrata is in the enviable position of seeing those values increase slightly over the past year, at a time when other district have seen those values continue to decline as the effects of the economic slowdown continue to be felt. They attribute the increase in the tax base to new construction, additions, and improvements made throughout the district.

"Assessed values have grown over the years," said Stayer. "This year it increased $14.4M, which is lower than in the past but pretty good for the district. It is also somewhat of an oddity locally."

Among other local Lancaster County schools, Ephrata’s proposed increase is not the highest or the lowest. Columbia Borough is the highest, proposing a 10.68 percent increase. Conestoga Valley is lowest, proposing a 1.69 percent increase. Closer to home, Cocalico School District’s budget mirror’s Ephrata’s 2.1 percent proposed increase while Warwick School District is proposing a 3.35.

The proposed budget calls for total revenues of $54,696,795 with expenditures set at $55,921,791. That would leave a budget deficit of $1,224,996 which would be made up through a contribution from the general fund to bring the budget into balance.

On the revenue side, 60.9 percent comes from real estate taxes. Only 1.3 percent comes from the federal government. The Earned Income Tax accounts for 5.2 percent, other local sources accounts for 4.2 percent with the rest coming in different forms from the state.

The problem with so much coming from the state, however, is that there is no guarantee of when the state will pass its final budget or how much actual money will be allotted for the local school districts.

"We have no choice to make our best, most educated guess based on the governor’s proposed budget," noted Stayer. "If it is more, that’s better for the school district. If it is less, then it comes on the backs of the local tax payers."

The state senate recently passed Senate Bill 1466 which would increase local funding by $500,000. However, the measure has yet to clear the House of Representatives, leaving the matter of how much the local school district can count on from the state up in the air.

On the expenditure side, salaries account for 44 percent of the budget. By function, basic instruction accounts for 41.2 percent of expected expenditures at an estimated $23,064,542. Of that, $6,489,729 is set aside for special education programs.

And while the budget includes a modest tax increase and a contribution from the general fund, directors emphasized that the budget does not cut positions or programs.

"Remember, we are not filling 13 open positions this year," said District Superintendent Dr. Gerald Rosati. "These 13 openings were met through transfers within the district instead of new hires. Last year, there were 28 positions that were not filled."

Rosati pointed to attrition through retirements and other career decisions as a key way the district has been able to reduce the budget without having to take the painful step of cutting programs or furloughing staff. The 2012-13 budget decreases nine professional staff, three support staff and one administrator through attrition. Stayer added that building operational budgets have been held stable with no increases for the past five years.

While it is never easy for any school board to propose a budget which includes both a tax increase and a contribution from the general fund, Stayer pointed out that the district is not in bad shape overall. Last year the district adopted a budget without a tax increase and with a general fund balance contribution of $861,442. And while the district could have opted for an increase as high as 4.5 percent (or .86 mills), board members did not feel that was the right thing to do, opting out of measure which could have allowed that back in January.

What directors stressed, however, was that through careful, pro-active planning on the part of the administration, the district expects to weather the growing storm of unfunded state mandates, especially those associated with PSERs with less pain than many other districts.

The district projects the impact of PSERs (Public School Employees’ Retirement System) alone could cost the district an additional $1M per year over the next three budget years, unless the state legislature steps in to provide relief.

"We could freeze everything else and still have to deal with this $1M," added Stayer. "We are at the mercy of the legislators. We know labor costs will increase. Utility prices will be uncertain. Benefits and insurance will rise. And we have the threat of Obamacare on the horizon. Special Education costs are going up as are transportation costs. We still need to transport our students. Yet the governor could propose less in the future. These are all factors that are completely beyond our control."

Rosati weighed in on the matter of labor costs.

"Through wise people management, we have saved over $1M in labor costs but an increase in PSERs funding makes this pretty much a wash," added Rosati.

Stayer also pointed out that the district had made wise use of federal stimulus funds when they were available, by not creating new programs which could create an additional burden on the taxpayers when the funds ran out. Instead, the district was careful to invest stimulus funds in projects already on the books, especially capital-type projects.

According to the five-year budget projections presented by directors, Ephrata Area School District could face a budget shortfall in excess of $3M by the 2016-2017 school year.

"This is the gap we must close," pointed out Reichard. "Attrition will only go so far. How do you do that year after year?"

Yet, Stayer and Reichard pointed out that not all the news was bad.

"All that to say we are not in bad shape," said Stayer. "With foresight, we were able to anticipate this, but we cannot rest on our laurels, nor can we ignore the growing storm. In the past year, some savings over projected costs have helped to build the fund balance. But, when that fund balance is exhausted, there is no rebuilding it. There are no other savings to put back into that account."

Reichard added that the they Keystone Opportunity Zone which encompasses the former Mountain Sprints property, including the Hampton Inn, Applebees and newly renovated Mansion House is set to expire in 2013, meaning those properties would return to the local tax rolls for the 2014-2015 budget year.

Monday night’s meeting was not the first public discussion of the new budget. A nearly two-hour public committee meeting was held last Monday night, May 7. This month’s committee-of-the-whole was scheduled earlier than usual in order to be able to advertise the budget for public review and comment, for a period of 30 days prior to a vote to ratify the final budget in June.

And while the school board’s proposed budget calls for a 2.1 percent increase, Stayer and Reichard stressed that was a maximum amount and that the final budget could set the tax increase somewhat lower. In fact, some board members have already expressed some thoughts toward a final budget with a lower amount of tax increase.

"We recognize that people’s budgets are already stretched," commented Stayer. "The last thing we want to do is make that worse so we will do what we can to keep any increase as low as possible. We are in good shape but we cannot be looking only at next year. We need to look four, five, six years ahead and consider the fund balances. Many districts have huge shortfalls and are facing huge budget cuts and tax increases. Rather than let the tail wag the dog, (we) want to control our destiny."

"We are blessed to have Dr. Rosati at the helm," said board member Bob Miller of his high praise for the district superintendent. "He has thought a lot about how we fund all this while keeping the bottom line on the students. He has remained student-oriented but also financially savvy. We see other districts in fear and panic while we prepared for the changing environment. We are in uncharted territory but because of his astute leadership he has been proactive. I feel we are in extremely good shape, so the students will not be harmed."

Board member Jenny Miller similarly sung the praises of the district administration.

"I appreciate that we don’t have to make some of the hard decisions other districts are making," said Miller. "I’m willing to approve a preliminary budget at the maximum right now because that is a better move. But that is not my final decision on the final budget. We need to consider a lower number next month understanding that we are still waiting to see what kind of numbers the state approves. I feel Dr. Rosati is doing a fantastic job."

Local resident Brian Hoffman was one of only three members of the general public on hand for Monday night’s meeting. Hoffman objected to the fact that there was no final amount listed in the posted board agenda, stating that the public had no knowledge prior to the start of the meeting what the board was considering.

"It is very unfair that there are only three citizens and two press," said Hoffman interjecting his comments during the meeting.

Jenny Miller reminded those present of the public work session held the week before, during which the matter of the 2012-13 budget had been discussed for nearly two hours. She added that another public work session would be held on June 4 to further discuss the budget prior to the final vote being taken at the next regular school board meeting.

Member Ted Kachel concurred.

"That was a public meeting and it was advertised and posted on the district website," said Kachel.

For additional information on Ephrata Area School District, including a copy of the budget presentation, visit Gary P. Klinger welcomes your comments, questions and suggestions via e-mail at More BUDGET, page A6

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