Districts must decide whether or not to exceed state limits

Last updated: January 17. 2014 11:45PM - 2613 Views
By - mguydish@civitasmedia.com

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It’s that time of year when school boards must either vote to keep property tax hikes within state limits or seek state or voter approval to exceed those limits. This year, the maximum increase for Luzerne County districts range from 2.5 to 3.1 percent.

The annual budgeting season got into full swing locally on Monday, when Wilkes-Barre Area School Board voted to hold any tax increase within a state limit of 2.9 percent above this year’s tax rate, and the Dallas school district unveiled a preliminary budget that would raise taxes 4.6 percent, well beyond the district’s state limit of 2.5 percent.

The limits vary from district to district and year to year based on a complex state formula.

Other school boards will soon follow suit if they haven’t already cast similar votes or presented preliminary budgets, even though final budgets aren’t due until June 30.

Gov. Tom Corbett has yet to unveil his proposed budget that must then grind through the legislative sausagemaker before districts know how much in state aid they will get.

Under the state law known as Act 1, districts must annually announce their intention to either stay within the state tax hike limit or exceed it.

The decision must be made early enough to allow those planning to exceed the limit to either seek exceptions from the state — granted for a narrow list of reasons — or arrange a voter referendum for approval to exceed the limit.

Voting to stay within the limit, as Wilkes-Barre Area did, gives a school board more time to draw up and approve a preliminary budget. The Wilkes-Barre Area board had no discussion of budget numbers before or after voting to abide by the limit.

Exceeding limit

Deciding to exceed the limit, as Dallas plans, means a preliminary budget must be approved quickly to show why the district wants to raise taxes beyond the cap. Business Manager Grant Palfey provided a PowerPoint presentation at Monday’s meeting outlining the district budget.

Palfey singles out one slide in his presentation: The percentage of the district budget paid by the state. A blue graph line shows the inexorable decline since 1980, from 43.2 percent to 29.96 percent.

“This is the first time since 1980 that it has dropped below 30 percent for us,” Palfey said.

Palfey rattled off a few states for comparison: “Washington state pays 57 percent toward education. California gives $38 billion of a $68 billion total, for 56 percent. We give an average of 34 percent.”

The Dallas budget calls for spending to increase from $33.6 million to 34.7 million, Palfey said.

The two biggest causes are largely out of district control: Payments into the pension fund, determined by a state agency, are set to rise by $372,000 for Dallas, while special-education costs, which can vary widely from year to year depending on students’ needs, are expected to increase by about $360,000.

The state made some changes to the pension system, but any cost savings won’t kick in for years.

District contributions are calculated as a percentage of payroll, and — unless something changes — all districts will see the rate increase from 16.93 percent this year to 21.4 percent next year. Employees also contribute, at a rate around 7 percent.

Corbett proposed more radical changes to the pension system this year but the legislature did not embrace them.

The state has flat-lined special education money for years, prompting recurring criticism that state funding has become detached from actual district costs. A move is afoot in Harrisburg to revise the funding formula.

Accepted exemptions

The state allows districts to seek exceptions from the tax-hike limit for a handful of reasons, the two most commonly used locally are to cover sharp increases in pension or special education costs.

Palfey said Dallas will seek exceptions for both as it moves to raise taxes from 12.0413 mills to 12.5952 mills. A mill is a $1 tax for every $1,000 of assessed property value.

Palfey said the average assessed value for district residents is $157,000, meaning the increase will add about $87 to the average tax bill.

Like other business managers in the area, Palfey argues his district has done its share in trying to contain costs. One example: He took on the duties of transportation director when the last person to hold that spot retired.

“We’re also spending less on health care in 2013-14 than we did in 2007, and we’re spending less on transportation that we did in 2003,” Palfey added.

He echoed a sentiment almost certain to be heard in coming weeks from district administrators and school board members countywide: The state needs to fix the pension system to stop soaring contribution rates required from districts that had no say in it, and revamp special education funding. Palfey said both are problems “the state pushes off onto districts rather than fixing on their end.”

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