Pa. budget uncertainty makes planning tax rates a headache for Alle-Kiski Valley schools
Alle-Kiski Valley school districts will be able to increase property taxes between 2.4 percent and 3.6 percent for the 2016-17 school year, under inflation limits set by the state.
Whether any school districts will raise their taxes remains to be seen.
The limits are established by the state's Taxpayer Relief Act, commonly known as Act 1. They're the highest they've been since the 2010-11 school year, when they ranged from 3.4 percent to 4.3 percent. While the higher limits may give districts more breathing room to cope with rising costs, they are being forced to work on next school year's budget while this year's state budget remains in question, and sooner than usual this year.
“This budget year is going to be unprecedented,” said Jay Himes, executive director of the Pennsylvania Association of School Business Officials, a group of school business managers.
“We've never had a situation where you had the Act 1 time frame layered overtop of a fiscal year in which the state budget has yet to be decided. It's simply not happened before,” he said.
“It makes budgeting much more difficult,” Himes said. “It certainly puts districts in a position of having to be extremely cautious, because they're very unsure what may happen. It's not a good situation.”
The higher index rates are a reflection of the nation's strengthening economy, according to Himes.
Two factors go into determining the index:
• The federal “Employment Cost Index,” which measures the change in elementary and secondary school employee wages and benefits. A higher increase here is largely driving the index up.
• There was a smaller increase in the “Pennsylvania Average Weekly Wage,” which is a measure of the wages for all workers statewide.
The Act 1 base index rose to 2.4 percent from 1.9 percent for the 2015-16 school year. The 2.4 figure is the highest since 2010-11, when it was 2.9 percent. The highest ever, 4.4 percent, was in 2008-09; the lowest was 1.4 percent in 2011-12.
“The last four years have been the lowest since the creation of the index” in 2006, Himes said. “It's only getting back to what may be more normal levels.”
Despite repeated phone calls to the state Department of Education, no representative was made available to discuss the issue.
The index is adjusted for each school district; wealthier districts are set at the base, while it is increased for poorer districts.
Allegheny Valley is the only district in the 10-district Alle-Kiski Valley area at the base. The highest rate, 3.6 percent, is seen at New Kensington-Arnold.
The Allegheny Valley School Board in December declared it would keep any tax increase within its limit, Business Manager Brad Rau said, adding it's too early to know if taxes will be increased.
“Our goal every year is to try to provide a balanced budget without a tax increase,” Rau said.
School districts must approve their 2016-17 budgets by July 1.
Primary deadline looms
School districts are deciding if they'll stay within their limits a month earlier this year because the state's primary is in April instead of May. By the end of January, districts will have to pass resolutions stating they will not raise taxes higher than their index limit, or make public a preliminary budget.
While the law gives districts the option to get voter approval for tax increases greater than their limit, that's rare. Himes said fewer than two dozen budgets have gone on ballot statewide. Voters have rejected every one.
Himes said the trend has been for fewer districts to ask for exceptions, but he said more may seek them now because of the uncertainty created by the state budget impasse.
Most districts that seek exceptions receive them, although not all that do actually use them.
Some districts, such as Freeport Area, routinely apply for exceptions just to keep their options open.
“It's just prudent planning,” Business Manager Ryan Manzer said.
For the 2015-16 school year, Freeport Area sought and used exceptions for pension and special education costs that allowed it to raise taxes districtwide by about 4 percent, exceeding its 2.6 percent index limit.
Manzer said the district will seek exceptions for the same reasons for 2016-17.
Manzer said the district's 2016-17 budget has a deficit of more than $1 million, driven largely by costs for retirement, health care, salaries and debt payments.
“We haven't had a discussion with the board yet on how they want to handle closing that budget gap,” Manzer said.
Manzer said he's hoping for a resolution to the state budget just to clear uncertainty over the district's state funding.
“The only avenue to count on additional funds is through our assessed valuation increasing or our millage rate going up,” he said. “There's no anticipation of additional state funds at this point.”
Kiski Area raised taxes to its limit for 2015-16.
“We're doing everything we can to not have a tax increase this year,” Business Manager Peggy Gillespie said. “We're hoping for some additional funding through the state like everybody else.”
With reserves of $3.9 million, Gillespie said Kiski Area is “comfortable” with staying within its index. But on top of an uncertain state budget, the district has an expired teachers contract and contracts for secretaries and custodians expiring in June.
“We really have a lot of unknowns,” she said. “Put that in the same pot with not having a real state budget yet, and it's a little bleak for projecting '16-'17 at this point.”
Gillespie said money from the district's entire tax index could be swallowed up by rising pension costs alone.
“The state really needs to enact meaningful pension reform,” she said. “No Band-Aids — something that has meaning and lasts over time.”
Brian C. Rittmeyer is a Tribune-Review staff writer. Reach him at 724-226-4701 or [email protected].