Questions remain on use of reserve funds, revenue projections
By Mike McGann, Editor, The Times
EAST MARLBOROUGH — If the final number is all but set, how exactly to get there remains a bit up in the air, as consensus seemed to form amongst the Unionville-Chadds Ford Board of Education Monday night around a blended tax rate increase of about 2.66% for the 2014-15 school year budget.
But the big question and one likely to come into sharper focus by next Monday night’s board work session is how much of the pension reserve fund to use during the 2014-15 budget year — a discussion that came to the forefront during the annual public budget hearing. Superintendent of Schools John Sanville and the district’s Director of Business and Operations walked the board and audience — which was made up of largely of district employees and a single district resident — with the theme “Keep Calm and Take One Step at a Time.”
With a averaged increase of 2.66% (2.76% in Chester County and 2.26% in Delaware County — the difference relates to the differing relative overall property valuations in the two counties) the average home in Chester County (with an assessed value of $263,000) would see a yearly tax increase of $186.78 (or about $15.57 on a monthly mortgage bill). For Delaware County homeowners, the average annual increase would be $127.10, based on an assessed value of $259,000, or $10.59 a month.
The board will give preliminary approval to the final budget on May 12, with final approval likely on June 16.
Much of the discussion revolved around continuing the district’s conservative approach toward budgeting, one that generally has resulted in surpluses at the end of the budget year — and whether it makes sense to budget more tightly and ease the size of tax increase.
Board finance committee chair Keith Knauss argued that the time has come for “a more realistic” budgeting process, noting that in recent years, surpluses have run as high as $1 million — although Cochran noted that it was unlikely that the 2013-14 budget would have much of a surplus at all. Knauss wasn’t arguing for changes in expenditures, but rather reworking some of the financial assumptions the district makes on revenue, boosting anticipated transfer and interim taxes and tweaking the anticipated tax collection rate slightly upward. An adjustment, downward, on the cost of new bus purchases — roughly about $120,000 — would figure into the equation as well.
“Whatever we do here, we’re giving the administration what it wants (in terms of program)” Knauss said. “I just don’t want us to have to leave the taxpayers bankrupt.” He said he would support a tax rate closer to the state Act 1 limit of 2.1% this year (the district was approved to go beyond this number due to increases in pension and special education costs)— and would back a higher tax rate next year, if the district ran a deficit this year, which he said he felt was unlikely.
Not everyone was sold with that logic, though.
“Unfortunately, we might have to have a 4.2% increase next year,” member Eileen Bushelow said.
Knauss’ opinion appeared initially to be in the minority — and board member Michael Rock especially objected to changing the methods the district has used to date, methods he noted have left the district in better shape than many of its neighboring districts as pension and health care costs have skyrocketed.
“We’re well-managed, and I’d prefer that we stay well-managed,” Rock said.
However, a number of members expressed concerns about dipping into the PSERS reserve fund — fund the board set aside earlier, in part funded by savings from bond refinancing efforts to help cope with the current three-year spike in rates, expected to increase by more than $1.5 million per year over the next three years — wanting to save those funds to spread out the impact of adding a cumulative total of millions of dollars in pension spending to the budget during the current five-year period.
Board members Kathleen Do, Carolyn Daniels as well as Bushelow expressed concerns about pulling some $329,000 from the PSERS reserve fund.
“Using the PSERS reserve fund is dangerous,” Bushelow said, noting that the economy appears to be picking up and that it would be smart to hold onto the funds against future increases. After initially seeming cool to the idea of using more aggressive estimates for revenue, a number of board members — including Do — warmed to the idea of using those methods, rather than spending down the reserve funds.
Board member Jeff Hellrung countered that the fund was set aside specifically to manage the three-year spike in costs — with 2014-15 being the first year — and that the $329,000 earmarked represents less than 15% of the funds set aside. He also pointed out that the funds used were the administration’s best estimate of the need in the current year.
After the discussion, Sanville and Cochran assured the board members that they could generate a number of scenarios with an approximate tax rate of 2.66%, using a number of funding and projection scenarios. In addition, the board will have the option, moving forward to transfer funds as needed in the budget, in the fall, if need be. The May and June votes really only lock in the tax rates, they noted.
As presented, the 2014-15 isn’t expected to make a material changes — no cuts to program and only a modest investment in technology infrastructure, as well as starting a 10-year program to effect repairs at the six district schools. While the nearly $76 million spending plan is expected to increase by about $3.4 million, the vast majority of that increase comes from two categories: about $1.6 million in additional funds to the Public School Employees Retirement System (PSERS) and a more than $690,000 spike in estimated health care costs. Other cost increases come from special education, a $238,000 increase, insurance, up $122,500, and fuels and utilities, $108,666.