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EASD details challenges of its future budgets
GARY P. KLINGER Review Correspondent
, Staff Writer
Firm in its position that it wants to avoid years of tax increases, Ephrata Area School District officials took time recently before committee meetings to further discuss its ongoing budget challenges.
Two weeks ago, the Review reported that depending on a number of variables facing school districts, Ephrata had to plan for some worst-case scenarios down the road.
"I want to make it clear to the public that we have not committed to four years of tax increase," expressed board president Tim Stayer. "But like in family financials, we do look a few years down the road."
Ephrata is not alone in facing some very big and very serious unknowns when it comes to budgeting. An uncertain economy, a growing challenge to fund the state teachers pension fund or PSERS, and the looming implementation of the new national healthcare system are only a few of those challenges. Like other districts, EASD also faces rising health care and special education cost. And like other districts, EASD must pass a budget based completely on their best guess as to the level of state funding. This, because the district must adopt a final budget at its June 17 meeting, almost two weeks before the state is required to pass its own budget.
That state budget process, under Governor Tom Corbett has come in on time, even if that has meant coming in at the eleventh hour. Under Governor Ed Rendell, budgets could come in as many as two months late, leaving school districts all the more in the lurch to determine what funds will and will not be available to them.
As it now stands, PSER-funding will continue to jump in each of the next five years, accounting for between 25 and 30 percent of salaries.
Short of something being done at the state level, the district is anticipating large increase in PSER-funding obligations to continue for each of the next three years at a clip of an estimated $1.1M per year. The first such $1m increase took affect with the 2012-2013 school year.
Stayer explained that there are some efforts afoot in Harrisburg to cap PSERS at least for this year. But that does little to deal with the on-going issue of funding.
Healthcare funding will also remain a key concern to the district.
"Obamacare is on the horizon and we’re in the position of not knowing exactly what that will mean," added Stayer. "Some think it could change before it happens but we don’t know that."
Coming up as early as this January, the district, which is self-funded, will face challenges over how it offers benefits.
Stayer added that if the school district missed offering coverage for those working an average of 30 hours, it would face stiff penalties. Business manager Kristee Reichard said those penalties would amount to over $400,000 if just one person tried to get healthcare.
"That is a fine because it was not offered in an appropriate manner," she added. "But that’s why we do this forecasting. We have a lot of procedures in place to try and plan ahead. We are trying to avoid penalties at all cost."
And with the district being self-funded with healthcare, it keeps a very close eye on those costs. Last year alone, Reichard said the district saw a 15 percent increase in claims which the district currently had some fund balance to cover.
"We could see rates go up by 30 percent because of fees, costs and expenses," added Stayer. "It is not about affordable healthcare though some government agencies tell you it is."
With regard to any tax increases forecast, Reichard noted that the Act 1 index has been at about 2 percent and that has been the goal to stay within.
"The hard part right now is that the state budget is basically two very different, opposed budgets being looked at," explained Reichard of the challenges of knowing what state funding will be. "We never know until after our budget is passed what their actual budget will be."
The three also addressed increases in special education costs. Each year costs continue to increase despite the district’s best efforts to cut costs. Yet, while costs to the district have continued to rise, state funding has, at best been flat.
"Any student with special needs has an Individual Education Plan or IEP," said Reichard. "Once they hit that, there are a number of things they must meet because they have a special need. And those can be very costly depending on the student."
Those costs can include everything from speech therapy, life skill training, psychological care as well as enrollment in specialized schools outside the district. Stayer said that in the past that has included programs out of state including the room, board and transportation to get the student to and from the special school. He also confirmed that currently the district has no such students that he is aware of. However, he also pointed out that the district is responsible to cover such costs for any student living in the school district, even if enrolled in another private or parochial school.
"Last year we brought several classes back from the IU at a savings of between $400,000 and $500,000," added Stephanie Gingrich, director of community relations. "We were able to give those students the opportunity to be at home in their own district. The problem is that at one time funding was much higher. It has been flat for the past 5-6 years, yet the unfunded mandates have not stopped."
Reichard drove home that point that this uncertainty in state funding is part of why the district tries so hard to plan ahead.
"Again, that’s why we do projections," said Reichard. "We know this area (of cost) has continued to grow so we need to project those costs while funding at the state and federal levels have continued to drop."
Gingrich also discussed the costs associated with the growing cyber school movement.
"Even if a student is in another cyber than the one offered by our district, we need to foot the bill," explained Gingrich. "And those with IEP’s cost double."
Gingrich pointed out that with the districts’ Ephrata Virtual Academy (or EVA) the district has actually been able to drive down cost, even if slightly. She also said that with the advent of EVA, the district’s outside cyber school expenses are decreasing since the district is not having to pay that tuition outside the district.
She also pointed out that some expenses the district just cannot negotiate a better price on. Reichard agreed.
"We have not increased building budgets in six years now," noted Reichard. "They have been conscious of what and how they purchase."
The district has also moved to more of an "on-time" purchasing method, as needed.
Gingrich also pointed out similar purchasing practices with how the district buys power with consortiums for those district building not located within Ephrata Borough’s power grid.
Talk then turned to the importance of the fund balance. The group explained that having a fund balance or some degree of cash on hand has a huge impact on the school’s credit rating, its ability to borrow money and the interest rates the school would pay on that credit. It also has a big impact on things like insurance rates.
The challenge is that increases down the road will outstrip the district’s ability to balance the budget simply on the reserve fund alone. In fact, even with the possibility of future tax increases looming, contributions from the reserve fund will quickly dwindle that level down within just a few years.
"Our biggest line item in the budget is people," added Reichard. "We’ve done a lot through attrition, by looking at the best use of people, by not replacing those who retire or resign and moving people around to keep costs down."
"We are lean," he said. "And in future years we will face some of the difficult challenges and decisions other districts are already making."
Gingrich credited solid planning by the administration and school board going back ten years in anticipating what was coming down the road.
And as tax increases go, EASD falls right about in the middle of the county. Some local budgets may be proposing higher or lower tax increases, but Reichard and Stayer pointed out that the value of Ephrata’s mill is not the same value as other school districts’ mils.
The school board will vote on the final budget at its June 17 meeting at 7 p.m. in the district board room. The public is welcome and encouraged to attend. For more information on EASD, visit easdpa.org. Gary P. Klinger welcomes your comments, questions and suggestions via e-mail at firstname.lastname@example.org.
More BUDGET, page A18