Palmyra Area School District is looking at a budget shortfall of more than $2 million, largely due to issues surrounding the coronavirus.
According to a statement issued by the superintendent’s office after Thursday’s school board meeting, “the COVID-19 pandemic has played havoc with district finances.”
Initially, school administrators said in an email, the board was looking at a preliminary budget of $56,969,902, with a proposed increase in the real estate tax of 4.3 percent. Prior to the change in circumstances in March, the administration cut expenses to $56,700,000 and reduced the proposed tax hike to 3.3 percent—a level that would “provide a near balanced budget for 2020-2021.”
Not any more.
Darcy Brenner-Smith, the district’s director of business affairs, said Palmyra stands to lose $2,026,500 due to fallout from the pandemic.
Breaking the numbers down, Brenner-Smith said shortfalls include a loss of $330,000 in anticipated earnings from interest, a reduction of earned income tax revenue totaling $725,000, a reduction in real estate transfer tax revenue totaling $160,000, and a potential $620,000 drop in real estate tax collections. Also, she noted, the district had budgeted an additional state subsidy of $171,500 for the next academic year, which since “has been reduced to flat revenue levels.”
The accuracy of these projections “is entirely dependent upon the severity and duration of the economic impact to our taxpayers from the pandemic,” the district noted in the release.
Palmyra may not impose a tax hike of more than 3.3 percent for the coming year, based on the Act 1 Index. The index, prepared by the state Department of Education, annually sets a cap on tax increases in Pennsylvania school districts.
It’s unclear if the state will relax maximum limits because of hardships caused by the pandemic.
The Palmyra school board this week pushed approval of its spending plan from June 11 to June 25, giving administrators more time to find areas to make cuts, school board president Chris Connell said in a statement Thursday.
The school board on April 9 began making budget cuts to help reduce the deficit.
“We have begun to brainstorm cost-cutting measures,” district superintendent Bernie Kepler said at the meeting. He noted the administration is also “contemplating raiding the fund balance.”
Cuts discussed April 9 include the elimination of new personnel requests, such as an additional school nurse, high school business education teacher and secondary special education teacher, as well as the associated support for students and computer science goals associated with the district’s comprehensive plan. Total savings of those cuts is $452,345.
Administrators also recommended cutting a budget transfer of $416,577 from the general operating fund to the capital projects fund, reducing the money available to replenish the capital project fund after projects at Northside Elementary School and the district’s new athletic complex have commenced.
Without losses tied to the pandemic, district officials said, “these cuts of $1,200,000 would have allowed the school district to balance the 2020-21 budget” with no real estate tax increase.
The administration is “working feverishly” to find additional means of cutting costs “while at the same time maintaining the excellent programs that the community has come to expect and respect,” officials said in the release.
On Thursday, the school board’s finance committee announced more proposed cuts, totaling $477,429, which includes eliminating the Outdoor Education program for seventh-graders, delaying the replacement of technology hardware replacement, reducing the number of library books and textbook renewals, and eliminating new equipment.
The committee also proposed more than $1.3 million in staffing cuts, which includes elimination of a school police officer, an elementary music position, a high school art position and additional summer hours for two social workers. Also, some vacant positions—including classroom monitors and aides, custodians, summer maintenance workers and technology supervisor—would not be filled.
The district is working to identify an additional eight teaching positions to cut, according to the release.
“It remains the goal of the district administration to review all current vacancies and enrollment in the district’s six schools to identify cost containment measures while minimizing impact to students and staff,” Kepler said in a statement.
Class sizes at the elementary level should not exceed those experienced during a districtwide growth spurt three to five years ago, administrators said.
Earlier this month, the Palmyra school board voted unanimously to continue moving forward with a $5.6 million turf fields project. “To stop now, with signed contracts, would cost the taxpayers more than it would to continue the project,” district superintendent Bernie Kepler said at the meeting.
Connell said the district “is working collaboratively with employee groups to identify potential retirement incentives or other means to reduce expenditures during these unprecedented times. The district is also looking to the state to provide financial guidance on state funding immediately as well as a comprehensive plan to deal with cyber charter school costs, which have a major impact on the financial health of the district and local taxpayers.”
The administration noted that a 1 percent increase in the real estate tax has an impact of $32 per year on the average home in the Palmyra district while increasing revenues by $304,000.
“The district remains cognizant of the impact of a tax increase on taxpayers and remains committed to minimizing the tax burden to the greatest extent possible, particularly during these economic times,” administrators said in Thursday’s statement.
But the outlook remains grim.
Brenner-Smith said the current concern for the 2020-21 operating budget “is only the beginning as fears of a slowly recovering economy are likely to negatively impact school budgets for years.”
Fiscal woes now, she said, are “setting the stage for perhaps an even more bleak budgeting environment a year from now.”
“We’re in unprecedented times,” Connell said during the April 9 board meeting. “This isn’t some hurricane that blew through, and you know when you’re going to have everything fixed.”
Board member Larry Geib also fretted at that meeting that the state officials “don’t seem to have a game plan … for how to put the school districts and the educational system back together again.”