EASD agrees to 2 percent tax increase

By on June 23, 2016

School board’s 2016-17 budget is $63.63M, boosted by $1.4M increase in retirement funding liabilities to the PSER’s program

Ephrata Area School Board has adopted its 2016-17 budget which includes a 2 percent take hike.

With a new budget ratified at Monday night’s meeting, property owners will see an increase of .40 mils to a total of 20.45 mils. The hike will add an extra $56 to the annual property tax bill on the average home in the district valued at $138,000.

The $63.63 million budget had been projected to include a tax hike of as much as 2.9 percent during preliminary budget discussions at last month’s meeting.

Board President Tim Stayer noted the 2 percent figure represents a compromise among a deeply divided board where directors varied on supporting an increase as high as 2.9 percent and a low as 1.5 percent.

Prior to the vote, Stayer walked those present through an update on the budget process, stating that little had changed in the weeks since the last meeting, especially with regard to expenditures. There had been some update with regard to revenue. Since the May meeting, district officials were able to get Title II figure from the state which indicated a $2,442 reduction from last year.

About 69 percent of the projected $64,028,540 in revenue are slated to be raised by local taxes of $44,109,911. The state is projected to fund $19,001,796 while EASD gets only $916,833 from federal funds.

EASD is facing a $1.4M increase in retirement funding liabilities to the PSER’s program. Projected PSERs contributions go up to $2.1 million in 2017-18 and to $2.4 million in 2018-19.

PSER’s funding has been at the center of school district funding struggles statewide. For EASD, for the past seven years from 2009-2010 to 2015-2016, the district has been force to fund an increase of $5.8M with only $4.4 increase in taxes.

“Even if we passed the maximum 2.9 percent Act I limit in taxes it would not cover this year’s increase in PSER’s funding,” added Stayer.

Even with the 2 percent tax hike, the district will tap into its fund reserves to balance the budget.

At the agreed upon rate, the district’s reserve could theoretically fund the district for 1.19 months. Stayer equated the district’s reserve fund as the same as a family’s rainy day fund.

“You often hear that you should have at least four months of funds set aside for an unplanned emergency,” said Stayer. “Trending these different percentages out you can see what these percentages do to our own budget.”

On the surface, a fund balance appears to be cash on hand which the district could use to avoid a tax increase. However, in past meetings Stayer has explained that a strong fund balance is critical not only to the district credit worthiness, it is essential to maintaining operations beyond the districts control arise that that affect cash flow.

Unexpected repairs to school buildings are often pointed to as key examples. Most recently, state budget impasses which have created significant delays in funding from Harrisburg have forced school districts to either fall back on those reserves or borrow. Without strong fund balance or strong credit worthiness or both, schools can find themselves in a pinch.

EASD has carefully managed its fund balances throughout the years which helped maintain strong credit worthiness and the ability to offer zero tax increase to tax payers two out of the last five years.

Discussions among directors revealed a wide range of views on the matter.

While Tim Stauffer supported a 1.5 percent tax hike, both Jenny Miller and Chris Weber sought a 2 percent increase.

“Because of the debt service savings and our healthy fund balance, I feel this would be a year when we could help the residents with lower tax rates,” Chris Miller said. “I would propose a 2 percent increase.”

“The [preliminary] numbers have not changed enough for me to differentiate from that,” Weber said.

On the other hand, others felt that while nobody likes to pay taxes, there was solid justification for the higher rate. Ted Kachel was the first to support the higher rate.

Said Kachel, “Just as we would run our own home we would want to maintain a healthy emergency fund. I would be happy to go with a 2.5 percent or even a 2.9 percent”

Director Bob Miller noted that previous boards were frugal and created the fund balance from sound financial management therefore “2.9 percent (hike) makes the most sense.”

“I’m just not sure how wise it is to pull down that fund balance,” he said. “Pulling down the reserves for as far as the eye can see when we do not know what else can happen is not wise. If things change, we can always lower the rates. “

Glenn R. Martin said he initially favored a 2.9 percent increase but had walked that position back a bit since the district had the one-time benefit of savings on bond refinancing.

Board member Richard Gehman weighed in supporting the larger increases.

“I can understand not reducing the fund balance,” he said.

After considering the input of the debate, Stayer floated a trial motion for the 2 percent increase which narrowly passed on the first ballot in a 5-4 vote. Those voting yes included Richard Gehman, Jenny Miller, Chris Weber, Stayer and Glenn Martin. Those voting no included Robert Miller, Kachel, Beiler and Stauffer.

For additional information on Ephrata Area School District, please visit their website at www.easdpa.org. Gary P. Klinger welcomes your questions and feedback via email at klingerglobal@gmail.com.

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