The Bethlehem Area School Board got its first look at a state-mandated preliminary district budget on Monday night and did not like what they saw: A $15 million budget hole for the 2011-2012 school year.
A hole that large necessitates nearly a 14-percent real estate tax increase to balance the budget, though it is clear this will not happen. Short of a tax-increase initiative on the May primary ballot, Pennsylvania will only permit a 1.7 percent increase without state-approved exceptions on specific line items.
The budget projection prepared by Stacy M. Gober, the assistant to the superintendent for finance and administration assumed that ¾ -mill tax increase.
“It’s going to be a challenging year,” said Superintendent Joseph J. Roy, who told the board he is recommending that the district apply for state exceptions that will allow a somewhat higher tax increase.
The district may be eligible for exemptions related to increasing debt service costs and higher payments to the state employees’ pension fund.
Most of the budget hole is being caused by a severe drop in district revenue due to the loss of federal economic stimulus funds to the tune of more than $8 million, Gober said.
Assuming no changes to the number of employees, there would also be nearly $8 million in expenditure increases. Most of that would be generated in salary raises and the increasing costs of health and retirement benefits, which together accounts for nearly 77 percent of the district’s costs.
“This is a moving document. It’s going to be fluid. It’s going to change,” Gober told the board. “We will close the gap because that is what we are required to do.”
Roy and Gober emphasized that Monday’s presentation was only the beginning of a lengthy six-month budgeting process. Though, the board does not need to adopt a final budget before the end of June, under state law, all school boards are required to adopt a preliminary budget 90 days before the May 17 primary election.
Currently, the board is scheduled to vote on the preliminary budget on Feb. 7, though several members said they are not comfortable doing so with the proposal in its current shape.
Directors Irene Follweiler and Loretta Leeson both insisted on budget workshops before Feb. 7 to try to close the budget gap and lower the apparent 14-percent tax increase this budget proposal presents. A meeting has been scheduled for Jan 26.
“I have a problem with the whole preliminary budget process,” Follweiler said. “It’s insulting to put out a huge tax increase like this in the press.
“I won’t vote for this budget,” she continued. “I won’t vote for anything above the index.”
Leeson said she believes the board needs to start looking at large-scale cuts to school district costs immediately. “We need to be looking more globally,” she said.
Director William J. Burkhardt said it might be time to examine whether a realignment of school-to-school boundaries could save money.
Follweiler, Leeson and other directors were also upset that the loss of stimulus money helped to create a hole. They believed, apparently mistakenly, that this money covered one-time expenses that would not be repeated.
“Whatever we spent the stimulus money on is gone. We should take it out,” Follweiler said.
“I would philosophically agree with that,” said Gober, “until the Pennsylvania Legislature decided it was going to fund their basic education subsidy with that money.”