South Middleton school budget includes a proposed 2.6% tax increase

May 19--The South Middleton School Board Monday approved a preliminary budget for 2020-21 that includes a 2.6% real estate tax increase.

The board voted 6-2 to advertise a $38.3 million budget that would increase the tax rate by .2812 mills from the current 10.8182 mills to 11.0999 mills. The owner of an average home in the district can expect to pay an additional $61 next year in school taxes, said Nicole Weber, district director of business and operations.

Edyie Rob and Bethanne Sellers voted against the motion while John Greenbaum, William Hartman, Stacey Knavel, Denise MacIvor, Elizabeth Meikrantz and Jonathan Still voted in favor of advertising the budget. Board President Liz Knouse was absent.

Final adoption of the budget and tax increase is scheduled for June 15. The tax hike would generate about $526,186 in new revenue to help offset a projected $1.7 million deficit.

The district faces a deficit next year that is almost double what was anticipated in early March due, in large part, to economic fallout from the COVID-19 pandemic. Before the outbreak, the deficit was expected to be about $905,972.

To contain the spread of the virus, Gov. Tom Wolf issued executive orders in March that closed nonessential businesses and directed most Pennsylvanians to stay at home. One result has been a surge in unemployment claims that could result in a drop in earned income tax revenue for school districts of at least 15% next year.

"This has been a very fluctuating budget," Weber told board members Monday. "It has been very hard to pinpoint and to provide you with data on a consistent basis. That makes your job harder."

During a typical budget cycle, most major issues in the fiscal plan are resolved by the time the board votes to advertise a preliminary budget in May. Come June, the vote to adopt the final budget is often a formality with little to no adjustments. This time around, rapid changes brought on by the pandemic make it difficult to predict trends in revenues and expenditures.

During a budget workshop in early May, administrators presented a strategy that combined the $526,186 in revenue from the proposed tax hike with $801,608 in savings in expenditures. The resulting total of $1,327,794 cut the deficit from $1,698,599 to $370,805.

About $500,000 of the savings came from a decision to transfer only $250,000 in general fund money to the capital project fund next year instead of the pre-COVID-19 plan to shift $750,000, Superintendent Matthew Strine said. As a result, some projects and major purchases planned for future years would have to be delayed.

The administration also decided to cut two positions, a social worker and a teacher, Strine said. This combined with other cuts resulted in the $801,608 in savings. Following the workshop, administrators conducted another review of expenses to close the remaining $370,805 deficit.

District teachers received a 2.6% salary increase during the current 2019-20 fiscal year. The board and administration is in contract talks with the South Middleton Education Association, the local teachers' union.

Though one proposal on the table calls for a 3.3% salary increase, the administration is recommending the school board carryover the 2.6% rate into next school year to help offset the shortfall, Strine said.

Before the vote Monday, Weber said the administration had originally built into the budget an 18% increase in health insurance costs. Updated information has become available that has allowed the district to adjust that to only 12%, Weber said.

The recommended salary increase combined with the adjustment in health insurance costs leaves the district with a deficit of about $202,858, Strine said. He recommended that the board use savings from reserve funds to cover the remaining shortfall.

Before voting against the preliminary budget, Rob asked the administration to schedule another workshop prior to the June 15 vote on final budget adoption. "There are a lot of things that could change," Rob said. "So long as we have room to have the final vote, I don't want to be wed to this current budget."

What the board voted on Monday was a conceptual plan so that the district could keep to the timetable of submitting a balanced budget to the state Department of Education by June 30.

"You still have time to make changes," Weber told the board. "There are some moving targets."

Email Joseph Cress at [email protected].

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