STATE COLLEGE — The State College Area School District is facing between a $1.4 million and $2.7 million budget gap, based on assumptions the district’s business administrator presented to the board Monday night.

Board members David Hutchinson, Jim Leous, and Dorothea Stahl called those assumptions “conservative,” but board member Jim Pawelczyk disagreed with that assessment.

“The term’s realistic,” said Pawelczyk. “It’s not a conservative budget.”

Board members don’t have to pass a final budget until June, but under Act 1 of 2006, leaders there have to approve preliminary budgets by the end of January. Business Administrator Jeff Ammerman recommended the district use reserve funds to make up the $1.4 million to $2.7 million difference for the January preliminary budget and then work to close that gap in the following months.

“There are quite a number of unknowns,” Ammerman said.

In the presentation, Ammerman estimated that the district will lose $500,000 in basic education funding for the 2012-13 school year from the state. He based that estimate on the fact that the amount of money the state pays the school district for retirement costs is expected to increase, and he expects the state to offset that loss by cutting basic education funding. He’s also currently estimating that health insurance costs will rise by 12 percent.

Board members may be able to raise taxes as high as 3.3 percent, Ammerman told them, saying that they could be eligible for exceptions to the state-mandated Act 1 index for retirement and special education costs. Raising taxes to 3.3 percent would mean a projected budget shortfall of $1.4 million. But if they stick to the Act 1 index of 1.7 percent, the projected budget shortfall would be $2.7 million.

Ammerman said the district is going to focus on eliminating positions by not filling vacancies left by staff members who resign or retire.

Board members are currently negotiating new contracts with both its unions for teachers and support staff. And during Monday night’s meeting, board President Ann McGlaughlin said that the district needs to focus on controlling two of the expenses that historically increase the most year-to-year: salary and health care costs.

McGlaughlin also said district leaders need to move faster than they did last year to identify cuts, and that they can’t wait until Gov. Tom Corbett announces a proposed budget in March.

“If we wait until those things are known, then we are out of time,” she said. “And the problem with being out of time is that even though we’ve been working on it, everyone else who it impacts — whether they’re an employee, a student or a taxpayer — that’s not enough time,” she said. “So it’s impossible to do it, but we have to do it.”

Ed Mahon can be reached at 231-4619.