E-town weighs no-tax-hike budget
BY CHAD UMBLE, Staff Writer
Elizabethtown area property owners could yet see what has become a rarity for local school districts: a year without a tax increase.
Even as the Elizabethtown Area School District faces some potentially costly renovations of its school buildings, officials are considering the possibility of holding the tax rate at its current level in 2013-14.
At a meeting of the school board's finance committee on March 5, officials discussed how the use of various fund balances, reserves and reshuffling of staff could close a $2.2 million budget gap, negating the need for an increase in real estate taxes.
"This year would be the year that we could do a zero-percent increase," said Louisa Clark, chairwoman of the board's finance committee.
As of now, the district's $51.6 million spending plan for next year has expenses exceeding revenue by $2.2 million.
The district's current tax rate is 17.89 mills. At that level, the owner of a property assessed at $100,000, pays $1,789. A 3.35-percent increase in the tax rate -- adding $60 to that property owner's bill -- would bring in an extra $898,054.
This year's state index, or cap, would hold an Elizabethtown school tax increase to 2.2 percent, unless the district receives exceptions to go higher.
The district has applied for leeway from the state for a 3.35-percent tax increase in the preliminary budget the school board adopted last month, even as officials consider ways to drop that number.
Clark is among those making a case that it could drop to zero.
"At this point, we have enough reserves that if we go ahead and do zero percent for next year, we still have a little bit of a cushion going forward," she said.
The surpluses that could be used to close the budget gap without a tax increase come from a year-end budget carryover as well as reserves the district carries to fund health claims, because it is self insured.
George Longridge, the district's business manager, explained that the roughly $3 million set aside for those health claims may only need to be half that amount.
Nevertheless, on March 5, Longridge cautioned board members about the perils of using reserves to close budget gaps.
The problem, he explained, is that using reserves or fund balances to pay for ongoing expenses -- such as increases in teachers salaries and benefits -- means that while the reserves eventually will be depleted, the expenses will continue to rise unabated.
"Delving into fund balance too much could get the district in trouble, not just this year, but down the road," he said.
Replacing retiring teachers with lower-cost new hires is another way the district can reduce personnel costs and close its budget gap.
Michele Balliet, district superintendent, said that seven professional staff -- representing specialists and teachers at a number of grade levels -- have retired. Going into next year without rehiring for those positions would mean a reshuffling of duties that would change how some programs are delivered, she said.
Also at the meeting, the finance committee heard about the possibility of refinancing $9.8 million in bonds, a move that could annually save between $40,000 to $70,000 in interest payments and, in one scenario, result in a lump-sum payment of $761,000 that could be used for future capital projects.
After the discussion about getting to a zero-percent tax increase and the possible bond savings, Caroline Lalvani, who chairs the school board's buildings and grounds committee, wondered about the wisdom of passing up additional tax revenue as the district is facing costly repairs to some of its buildings.
For example, district officials have estimated that it could cost $656,000 to fix the roof at Bainbridge Elementary School, an expense that has prompted the school board to begin looking at arguments for closing the 176-student school instead of paying to fix the roof.
"I guess I question looking at a zero tax increase when we know we have these expenditures over the next couple of years, particularly this next year," Lalvani said.