Hanover Area board member warns of budget shortfall

By Mark Guydish - [email protected]
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HANOVER TWP. — Hanover Area School District is likely facing a shortfall of at least $400,000 in the 2019-20 budget, even if taxes are raised to the state-allowed maximum, board member Vic Kopko warned.

He made the prediction Tuesday morning while explaining his decision to vote against a motion Monday that will keep any tax increase under the state limit.

Asked to elaborate, Kopko expressed frustration that his warnings seem to be falling on deaf ears, and said his no vote was intended to make a point.

“I don’t see a path to a final balanced budget,” he said. He estimates escalating costs — driven largely by increased pension fund payments and health insurance premiums — could put the district in the hole by as much as $1.5 million. He said even if the board raises taxes to the maximum allowed by the state, that will still leave a shortfall of $400,000 to $500,000.

The state law known as Act 1, which legalized gambling, uses some money from gambling to offset school property taxes. In exchange, the law sets an annual “Act 1 index” for each district. Districts cannot raise taxes above the index unless they get voter approval via a spring referendum or state approval for a narrow list of exemptions.

Hanover Area’s index this year is 3.3 percent. On Monday, the board voted to keep any increase within the limit. The move gives the board until the end of May to complete a preliminary budget. Districts that do not vote to stay within the limit must complete a preliminary budget by the end of February.

In both cases, the law requires final budget approval by the end of June. The fiscal year for school districts runs July 1 through June 30.

‘Make that decision’

Kopko has been pushing for changes in fiscal policy for more than a year. He took partial credit for debt refinancing moves that he said freed up millions in cash flow last year. He has warned in the past of escalating deficits, a problem confirmed last July when the Temple University Center on Regional Politics looked at district fund balances statewide and found Hanover Area had a negative balance in the millions.

In March 2017, the board declined to renew the contract for then-Business Administrator Tom Cipriano. After he left, the board and newly appointed Superintendent Bill Jones claimed they discovered multiple problems with district finances, including learning a projected surplus was actually a deficit.

But by last summer, they were claiming a corner had been turned and the district was on the path to solvency, something Kopko essentially agreed with.

On Tuesday, however, he said a surplus that had been built up under his tenure as finance committee chair has dissipated and a deficit is looming again. Kopko cited some of the same problems other districts have mentioned in warning about escalating costs, two of which are largely out of the board’s direct control.

The amount the district pays into the teacher retirement fund has risen dramatically over the past decade to cover a shortfall in that fund. The rate is set by a state agency, which oversees the money. The district’s health insurance premiums continue to climb as well, Kopko said, and those are set by the Northeast Pennsylvania School District Health Trust, a regional consortium. Member districts have representatives on the board of the Trust, and rates are set separately for each member district based on recommendations from a contracted actuarial firm.

Kopko predicted a majority of the board will vote to raise taxes by the state maximum and still need to find savings.

“Since it is their choice not to absorb what I’m attempting to say, someone else is going to have to figure that out and make that decision.”

Board member Kevin Quaglia also voted against he motion regarding the Act 1 index.

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By Mark Guydish

[email protected]

Reach Mark Guydish at 570-991-6112 or on Twitter @TLMarkGuydish

Reach Mark Guydish at 570-991-6112 or on Twitter @TLMarkGuydish