The first draft of the preliminary 2022-23 North Penn School District general fund budget was presented to the district finance committee Tuesday night by district Chief Financial Officer Steve Skrocki, revealing a $15 million deficit and a projected increase in expenses over last year by 3.56 percent — or $10 million more, to total out at $302 million.
Revenues show a 0.35 percent increase over last year, with $286 million in revenues.
“This is a very preliminary view of where we are at with the budget,” Skrocki said. “The school board did approve a resolution not to exceed the Act 1 index for the 2022-23 fiscal year, which allows us more time to develop the budget. “
Skrocki said the district is on track to approve a proposed final budget in May, and the final budget in June. A more in-depth look into the budget will occur at the special finance committee meeting later this month. The finance committee will give a final recommendation on the proposed final budget May 10 and will be on the agenda for the regular school board meeting that night for final approval.
“We’ve been working very hard over the past couple of weeks to come up with the first draft of the budget and we’ve also made multiple changes to the first draft of the budget, so this is kind of draft number one version two of the budget,” Skrocki said.
He said the budget is not “just throwing a bunch of numbers together” but is an expression of district values and aspirations.
“Let’s cut to the chase – we’re in the 2021-22 fiscal year and our approved budget had a $5.8 million deficit, and we expect to break even at the end of the year,” Skrocki said. “The current budget with no tax increase reflected, has a $15.2 million deficit. That’s quite substantial. So, when we’re talking about our health care, premium holiday, and some other items, it’s really important that we examine every possible option we have available to us, to try and get down to that $5 to $7 million deficit number, which is our target that we would be comfortable with.”
Items driving the expenditures increase include $3.6 million in salaries, $3.1 million in health care benefits, $1.8 million in retirement costs, $468,000 for 1,500 new Chromebooks, $459,000 in pharmaceutical benefits, $403,000 for utilities, and $312,000 for charter school tuition.
Skrocki said salaries comprise the largest portion of the budget and increases are not covered under federal services, like Title funding. Retirement, he said, is a big increase, even though the retirement rate increased by a small percentage.
Chromebooks, he said, are not covered under Elementary and Secondary School Emergency Relief funding next year.
“I’m concerned about the utility number, especially the cost of natural gas. We may have to revise the figure again,” he said. “Natural gas is going through the roof. Today it closed at $6.50 per Mcf. At the start of the fiscal year, it was around $3, so it more than doubled in 12 months.”
When it comes to the charter schools, Skrocki said the $312,000 figure assumes the district is going to have a reduction in the number of students attending charter schools.
“We have 250 now, and in the latest iteration of budget, we have 25 of them returning to North Penn School District,” he said. “If we don’t recapture those students back to North Penn, that number would need to go higher.”
If the school board raises taxes by the maximum amount of 3.4 percent, it can generate $6.6 million in additional revenue, but would leave a deficit of $8.5 million. In contrast, a 1 percent increase in taxes would generate $1.9 million in additional revenue but leave a $13 million deficit.
“If we can get to a deficit of $5 to $7 million, we’re kind of in the sweet spot at 3.4 percent,” he said.
A 3.4 percent increase would also bring with it a homestead exemption of $139.
“The average rebate is far in excess of the highest amount of $139,” Skrocki said. “North Penn has a rebate match of 75 percent next year. So, I would anticipate that average rebate next year could be close to $300 in total. For those eligible, any rebate received would certainly more than offset any increase to an average homestead.”
Skrocki said the early numbers in the budget do not reflect potential $1 million in savings in retirements and a potential $2 million in savings by moving to a health care premium holiday plan.
“So that’s $3 million right there. So that $15 million deficit on the slide right now can come down to $12 million,” he said.
Although the district is breaching $300 million for the first time, Skrocki said the 3.56 percent increase in expenses is well below Tuesday’s inflation figure of 8.5 percent.
“We are paying lot of inflated prices for goods and services we purchase,” he said.
As far as the $42.2 million fund balance breakdown for the current fiscal year, Skrocki said there is roughly $1 million set aside as “non-spendable” inventory and prepaid items. About $2.7 million is assigned to self-funded insurance in the current budget, and $16.8 million is earmarked for the Public School Employees Retirement System, or PSERS.
“That has been sitting there for quite some time, and we need to have a discussion about reallocating that, and that can happen by school board resolution,” Skrocki said.
Then, there is a piece of the general fund not targeted for any purpose, also referred to as “unassigned,” in the amount of $21.7 million.
“That represents 7.46 percent of our current year expenditures,” Skrocki said. “The unassigned fund balance cannot exceed 8 percent.”
In terms of fund balance percentage of the budget, the district sits at 14 percent at present. It had been hovering around 17 percent over the last eight years, Skrocki said.
“That’s a good spot to be at. Our fund balance is not too high, not too low, it’s just right,” he said. “Maybe if it were 16 percent notches higher, it might call for a bond upgrade.”
Skrocki said the finance committee would need to make a recommendation on a tax increase by the special finance committee meeting in two weeks.
“No one likes paying taxes,” he said. “It’s important to keep things in perspective as North Penn compares to its peers in the county. We provide outstanding education and offer a lot of opportunities for students. We have the fifth lowest taxes in the county, 17 percent below the county average, which is substantial.”
Skrocki said there is a 3 percent increase baked into the budget for basic education funding and special education funding.
“Perhaps that is overly optimistic. I was hoping we could have the state budget pass by early June, but it’s probably not going to happen. In all likelihood, the state budget will be passed after our budget is passed,” Skrocki said.
School Board President Tina Stoll was the only board member to comment on the budget presentation.
“Thank you, Mr. Skrocki, for your presentation. Or, Professor Skrocki, as it’s a Masterclass once again. Thank you for the information,” Stoll said.
See also:
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