The Octorara Area School District Board of Directors held its monthly Regular Meeting and Finance Committee Meeting on December 8, 2014. There was no Policy Committee Meeting for December. Eight members were in attendance. Hank Oleyniczak was absent.
During the Regular Meeting, the Board approved all listed recommended action items. In addition, Nelson Stoltzfus, Chair for the Facilities Committee, made a motion to vote on buying a F550 truck with plow and spreader. The motion included paying for the truck out of the Budgetary Reserve, since it was an unexpected, non-budgeted cost.
The issues, with the District’s existing truck, were brought to the Facilities Committee last week. Dr Newcome was requested to bring cost information to the Regular Meeting. Mr. Stoltzfus decided to make the motion to vote immediately because there is a long delay between the December and January Regular Meetings, and the chance of snow created a sense of urgency.
♦♦♦ 2015-2016 Budget Presentation ♦♦♦
The District ended 2013-2014 at just over $47 Million in Actual costs, or $581,303 under Budget. Additionally, the District received $474,136 of additional Revenue, more than originally expected. The combined total is a little more than $1 Million in the District’s favor.
However, despite these positives, Actual Costs did exceed Revenue, causing a Deficit of $123,681. This was because the Board had decided to balance the 2013-2014 Budget using the Reserve Fund rather than raising taxes. (numbers include Athletics)
Revenue from Local (non-Real Estate) sources (such as Earned Income, Transfer Taxes, and Interim Taxes) fell year-over-year. The lowest point for these sources (over the last 8 years) was in 2010-2011.
State contributions reached a new high, and increased by approximately $1 Million compared to the previous high in 2010-2011. However, State contributions were $115,929 lower than originally expected.
While you may hear complaints about State funding having been cut over the years, in reality, over the last five years, 2011-2012 was the only year to see a slight drop year-over-year. It is true that Revenue from certain programs were reduced or eliminated, but overall State funding is close to $1.8 Million more than in 2006-2007.
Federal funding was $304,462 lower than expected. Federal monies coming to Octorara is less than $1 Million. #ThanksObama😉
The District ended the year with a Reserve Fund Balance of $8.2 Million, lower than the previous year. This balance is split between $4.7 Million assigned, and $3.5 Million unassigned. The District’s highest Fund balance was $8.3 Million in 2012-2013.
Plan-Con has made a catch-up payment to the District for Bond Reimbursements, adding $360,000 to the 2014-2015 Revenue.
The District’s Bond Refinancing will lower Debt Service payments by $382,154.
Combined, the positive impact is $742,154 for the District’s 2014-2015 financial position.
2015-2016 Draft Budget
A decision to take the opt-out resolution would mean the District will be limited to the Act 1 Index. Therefore, the tax for Chester County homeowners could not exceed 37.5398 Mills, currently 36.66 Mills. The maximum tax for Lancaster County, also influenced by re-balancing, would be 27.2035 Mills, currently 26.43 Mills.
The District’s 2015-2016 Draft Budget is $50.7 Million, and is an increase of just less than $1.5 Million over the 2014-2015 Budget, or an increase of 3.04%.
Option 1: If the District does not use Reserve Fund to keep taxes low, the full impact of the Budget would be a tax rate of 39.64 Mills in Chester County, or 8.129% higher than the current rate. In Lancaster County, the rate would be 28.76 Mills, or 8.816% higher.
Option 2: In order for the District to keep the tax rate flat at 36.66 Mills in Chester County, and 26.60 Mills in Lancaster County (a 0.643% increase caused by re-balancing), the District would need to use $2.4 Million of Reserve Fund monies.
Option 3: A balanced approach to the Budget, without spending cuts, would use $1.7 Million of the Reserve Fund with a tax increase in Chester County to 37.50 Mills, or an increase of 2.291%, and Lancaster County becoming 27.20 Mills, an increase of 2.913%.
Given the current environment, I would presume the “Option 3” will be the most likely to face taxpayers. However, it places Chester County on the trajectory of reaching 40 Mills within 3 years.
Is it possible between now and June that the Budget will decrease? Sure, anything is possible. However, the 2014-2015 Draft Budget was $48.3 Million, and increased to $49.2 Million by the time the Final Budget was presented to the Board.
Just last week, I was told by the Administration to expect a Draft Budget that was at or near a zero tax increase. However, Dan Carsley, Octorara’s business manager, did not package the Draft Budget in that way, nor did he make that specific recommendation. He did show us what that option would look like, which places our Reserve Fund in jeopardy.
Buying More House Than You Can Afford
This Reserve Fund was built during the Great Recession, a time of great hardship when local taxpayers really could not afford it. I was not on the Board at the time, and would have preferred the District live hand-to-mouth during this time, like most of the citizenry. The taxpayers suffered to create the Reserve.
Now that the Reserve Fund exists, it needs to be protected and insulated. When a family starts using its Savings for regular expenses, it spells disaster. It means needing to revisit the household budget, and eliminating unnecessary expenses or luxuries. The purpose of having Savings is planning for the future and unexpected expenses, not your daily spending.
However, this is what happens when one buys more house than they can afford… or in the District’s case, builds buildings without a tax base to support them. Our Budget is a reflection of an unwillingness to face the consequences of past decisions.