The Big Spring School Board voted recently to pass the preliminary budget with a 2.5 percent property tax increase.
The motion passed 6-3 after lengthy discussions revolving around the school district’s projected revenue loss amid the coronavirus pandemic.
Directors William Piper, Bob “Sharpe” Over and Richard Roush voted against the proposed tax increase, while Directors William Swanson, Todd Deihl, David Gutshall, John Wardle, Frank Myers and Alexis Blasco-Hurley voted in favor of the increase.
Business Administrator Richard Kerr said at the May 18 meeting since the May 4 Committee of the Whole Meeting that discussed the budget at length, the administration has since cut $1.3 million from expenditures and will still cut another $35,000 from athletics prior to the adoption of the final budget to take place on June 22.
“The biggest item was the loss of five teaching positions,” Kerr noted on the budget cuts. “The special education and student services budget went down by $364,000, which included seven aide positions and efficiencies in special education tuition. The maintenance and custodial budget lost $156,000. The technology budget lost $116,550. Curriculum & professional development lost $62,000. And some other smaller supplies & services.” Kerr said the cuts to the athletics budget aren’t finalized, but will affect mostly supplies, clinics, game help and some fees and transportation.
At the May 4 meeting, Kerr said one concerning number in the budget is an 8.35 percent increase in cyber charter school tuition. Fry added they do not need to make cuts to cyber charter school budgets unless they lose students. He also noted the cost for a special ed student in cyber charter schools is $32,000 per student. In Kerr’s report, he projected a $150,000 increase in special ed costs and transportation, a $145,784 increase in teacher salaries despite losing the five teaching positions, and a significant increase in medical insurance and professional and tech services.
Kerr said the 2.5 percent tax increase will cost the average taxpayer roughly an additional $37 per year.
Kerr told the board at the May 4 meeting that the district is looking at a $1.6 million loss, or 4.89 percent, in revenue due to the coronavirus pandemic. The proposed budget of $53,713,822 reflects a 3.3 percent increase in expenditures, Kerr noted.
“Those increases are driven by several mandates that without legislative relief will continue to rise, such as cyber charter school tuition, special education services and pension costs. Adjustments in our health care provide some one-time costs for this budget as well. That imbalance continues through the five-year projection and the excess spend consumes the fund balance (reserves). Without charter school reform at the legislative level or additional pension reform, the only way to decrease the impending deficit spending model is through personnel.”
“The virus will directly impact revenues for this year and deplete the fund balance with long-term impact,” Kerr said. “Looking at the revenues, there are lots of red figures showing year to year loss of approximately $1 million, with an overall revenue increase of 1.1 percent. However, the overall increase in expenditures is 3.3 percent per Q5 – resulting in a deficit of $1,378,345. As you can see, the district made $410,412 in investment income in 2018-19 from its fund balance and that will crash to around $25,000 in this environment. We project that our collection rate for taxes will go down by 2 percent, that EIT will go down by 10-15 percent and we’ll be lucky if the state subsidy can hold at last year’s rate. This severely constrained revenue picture sits in contrast to mandated increases at 3 percent or above.”
Kerr proposed the board increase taxes by about 3 percent this year, with another 2 percent increase each year through 2025 to keep the district from depleting its reserve funds. Kerr showed the board that if taxes were only increased by 1.5 percent for the 2020-21 school year, he is projecting a $1 million deficit in the fund balance by 2025.
“We see that revenue is severely restrained by the current COVID situation, and possibly could even regress depending on the commonwealth’s budget situation, the increase in tax appeals and unemployment driving down EIT,” Kerr explained. “The commonwealth provides about 37 percent of our revenue – a big chunk. With the poor fiscal management driven by the legislature, the districts are in a precarious position on the
revenue side. As a people business, our district spends over 60 percent of our budget on salary and benefits. With salaries going
up by the required 3 percent in our agreements, that also drives up our benefits by 3 percent for social security and PSERS retirement. Except, the PSERS rate increases by 1 percent, creating a double increase. In addition to PSERS, you can see that we are looking at a 24 percent increase in medical costs. Other big increases out of our control are the average 8 percent increase in special education services along with the charter school tuition we must pay for those who choose charter school. Special education is a permissive environment created by the mandates of the courts and the legislature. As the district
searches for the right services for our students, we face complex service arrangements driven by advocacy and supported by the commonwealth mandates – without a matching subsidy.
These forces will deplete our fund balance, which is a vital emergency fund. For example, each year fund balance must be used to make payroll in the spring/summer when state subsidies are paid out, but taxes are not yet due. It is also used to meet physical plant challenges – such as cleaning & disinfecting – along with unseen student needs.”
Superintendent Dr. Richard Fry noted the 2 percent increase through 2025 might be a generous estimate.
“The indexes could go down,” he said. “That may be on the high side, but it’s the safe projection to make. We don’t know that adjusted index until later. The state has to adopt it and send it out to us.”
Big Spring School District is expected to receive $368,000 in federal stimulus funds due to the pandemic, but that is a one-time payment that is not being included in the budget because the district is going to lose some of the balance to private schools.
Director Frank Myers asked about the student activity fund that is currently around $250,000. Kerr explained those funds continue to pay for coach salaries and anything else required by Act 13, like teachers with extra duties and activity sponsors. He added those accounts are closed to spending because there is other money there that was raised through fundraisers.
During the May 4 discussion, Wardle said the district needs to do everything it can to show dedication to students to keep them from leaving the district to attend cyber charter school. Fry noted there are going to be parents who aren’t comfortable with sending their children to school in the fall amid the pandemic.
“We are going to become a player in that cyber game. We have to,” he said. “Our teachers have grown immensely through this.
That’s an area we would benefit from if we keep a student.”
Kerr said there are other districts that are worse off than Big Spring, and warned next year’s budget will be even worse.
Piper was adamant that he was not in favor of imposing any tax increases this year due to the health crisis, and the fact that many families continue to struggle with income loss. He asked Kerr to give him the numbers for a zero percent tax increase for the 2020-21 school year. If the board opted not to increase taxes for the upcoming school year, Kerr is projecting the fund balance to be minus $2.2 million by 2025.
Wardle asked what each department could do to help cut costs, including looking at equipment expenses and electricity. President Swanson said the future without tax increases now will be very grim, with the district having to cut important basic programs if action isn’t taken now.
Kerr added there have been cuts made at every building in the district, and working on more cuts across the board.
At the May 4 meeting, Over suggested reviewing numbers for a 1.5 percent tax increase, though he didn’t want to raise them at all.
“We have to consider what’s going on in the communities around us,” Over said. “We are fortunate sitting in this group here. There are people who are not as fortunate as us.”
Swanson suggested a 2.5 percent increase at the May 4 meeting, adding he remembers the late Wilbur Wolf “saying he never wanted to place future boards in a situation that they could not recover from. I want to say 3.2 percent, but that’s almost too much.”
Piper said, “Based upon what’s happening in our community and our world right now, I cannot support a tax increase for next year. I vote for a zero percent tax increase.”
“I know you are doing all you can do, and I know you don’t want to cut everything,” Over added. “The people on this Zoom right now, we are the lucky ones. We have jobs, we are getting paid. But there are people that are not, and I think it’s going to get worse for them. We have to look out for our kids, our staff, our parents, but we also have to look out for our taxpayers, too, and I don’t think we do. This is a family here! This community has supported that family for how many years. It’s time we show them, ‘Hey, we care too!’”
Gutshall said at the May 4 meeting he wouldn’t go lower than 2 percent for the tax increase, and said the projected increase was about the same cost as one trip to the movies.
At the conclusion of the vote on May 18, Piper gave a resounding NO vote, and Roush said, “Certainly not.”
“Shame on us,” Over added.
The final budget will be adopted at the June 22 meeting.