North Penn School District Chief Financial Officer Steve Skrocki presented a summary of the proposed budget for the 2021-22 school year during Thursday night's finance committee meeting.
The proposal includes several budget scenarios, including tax increases anywhere from 0 to 3%.
Highlights include:
“I hear quite often, ‘How can you be considering a tax increase when you have $38 million in reserves?’ That’s another legitimate question,” Skrocki said. “It’s a balancing act that we’re trying to do. And if you use up all those reserves… the one thing that’s left at that point are cuts, and they could be deep.”
By way of explanation, Skrocki said the district expects revenue to increase in 2021-22, but that expenses are also increasing at a rate that outpaces revenue, hence the deficit.
Assuming there is no tax increase, he expects revenues to increase by 1.61% — about $3.4 million — and expenses to be up 3.41%, or $9.4 million.
NPSD Board Member Jonathan Kassa was concerned about the potential $11.5 million deficit, and the cuts that would be required to offset it, suggesting a tax increase might be the lesser of two evils.
“I think the community needs to understand, 0% means $11 million out of the budget,” Kassa said. “Athletics, what’s that [expenditure], $5-6 million a year? So that gives everyone an idea. What’s it gonna be? Teachers? Athletics?”
Board President Tina Stoll concurred.
“I will go on record and say that I am comfortable with the proposed [2.85%] tax increase amount for this year if that’s what will help keep us on track with our long-term plans for the district,” Stoll said.
One thing leading to the deficit is that the annual “natural growth” of real estate assessed value in NPSD is about half of what was anticipated this year.
“Our increase in assessed value is only .23% next year, so the total number of assessed value increased for next year is $16.5 million… so that is less than half of the 10-year average for next year,” Skrocki said. “And that has an impact on our budget. That has a strain on our budget. That doesn’t bring in as much revenue as much as it normally would. So based on that, our revenue increase for this… ‘natural growth’ is about $427,500 for next year. That’s less than half of what it typically is.”
Real estate taxes account for 67% of the district’s $276 million annual revenue, along with 21% from the state and 2% federal funding, as well as 10% “other” local funding, which Skrocki explained includes local earned income tax, real estate transfer tax, and investment income.
Another contributing factor is the fact that the state’s basic education subsidy, the measure of state funding, hasn’t increased since 2017. In addition, the difference between the state basic education funding per student and the regular education expenditure per student - in other words, the gap between the amount the district receives from PA to pay for basic education and the amount the district actually spends on basic education - is widening further ever year.
“Almost 80% of the school district’s funding comes from local sources, 20% from the state,” Skrocki said. “If the state isn’t keeping up its share, where else does the district go to generate revenue?”
Governor Tom Wolf has proposed the equitable Fair Funding Formula, which will reform the way state education funding is distributed - based on quantifiable metrics, for example districts with greater poverty would receive more funding, as well as districts with higher enrollment.
“It’s a more equitable formula,” Skrocki said. “Because really, quite frankly, before the Fair Funding Formula was developed a couple years ago there was no formula… Meaning that, if the state gave a 3% increase, everybody got a 3% increase, even if the district’s enrollment was declining over the years, they continue to get whatever that percentage increase was year after year.”
North Penn stands to receive an additional $8.4 million, a 76% increase in basic education funding, if the Fair Funding Formula is implemented. Skrocki said this would solve the district’s budget concerns and eliminate the need for a tax increase.
The cost of funding the district’s pension plan has also gone up exponentially. The rate for the upcoming year will be 34.94%, $48 million, up from 1%, back in 2001-02. The projections are that the rate will cap out at 38% in 2027-28. The rate is set annually, based on the health of the pension fund.
Skrocki said the district doesn’t have a choice but to contribute to the fund.
“If we don’t pay it, the state just takes it from us,” Skrocki said.
Skrocki did say that the revenue from earned income tax is up 5% for 2021-22.
“I’m scratching my head on this one,” Skrocki said. “Which is quite amazing when you consider the pandemic.”
The federal stimulus funding the district received, more than $17.6 million, allocated over the 2020-24 school years, will help the district’s bottom line.
The board moved to propose a 2.85% tax increase so that the business office can reuse and update data and present a final budget proposal for them to consider. The board will have a worksession on May 10 or 11 to discuss the tax rate and budget, then at the June 17 action meeting, the board will vote on whether to adopt the final 2021-22 budget.
Skrocki also highlighted a number of points of pride at the April 21 NPSD school board special finance committee meeting, including the district’s low tax rates.
“No one likes real estate taxes,” Skrocki said. “I don’t like real estate tax.”
According to Skrocki and departmental benchmarking data he presented at the meeting, North Penn has the fifth lowest real estate taxes in Montgomery County, by a considerable amount.
“If you take a look at the countywide average, we are 22% below the countywide average,” Skrocki said. “So high student achievement, low taxes - that is an outstanding return on investment for those that live in the North Penn community.”
Skrocki also announced that the NPSD Nutrition Services has distributed 1,445,823 free meals to children since March 17, 2020.
The U.S. Department of Agriculture recently announced that the free meals program for all children 18 and under will continue throughout the 2021-22 school year as well.
Finally, the NPSD business offer earned the Meritorious Budget Award through the International Association of School Business Officials, for the sixth straight year.
“We are only one of 10 school districts in the Commonwealth of Pennsylvania to receive this award,” Skrocki said. “What I’m most proud about this award is the fact that this demonstrates to our community a tremendous amount of transparency and plain-English reporting about the school district’s finances.”
See also:
North Penn School Board Votes To Waive Fees For Summer School Programs
North Penn High School Addresses Families After 6 Students Recently Test Positive For COVID-19
Editorial: Infrastructure Repairs At North Penn High School Are Necessary
North Penn School Board, Rep. Ciresi Discuss Charter School Reform
North Penn School Board Issues Statement Supporting Asian American, Pacific Islander Communities
