STATE COLLEGE — School board members approved a proposed preliminary budget with a 3.3 percent tax increase, but not before a sharp debate over morality, ethics, special education and $269,000.

“There are very, very fundamental moral problems of using the special ed exception. And that’s not going to be fixed with time. It needs to be removed,” board member Jim Pawelczyk said during Monday night’s meeting. “It’s really simple. I don’t think we should be teaching kids that we take money from people twice just because we think we can.”

Fellow board member David Hutchinson cut in.

“That makes no sense whatsoever,” said Hutchinson

“Absolutely,” Pawelczyk replied. “Let me explain it to you. ... It’s right and wrong.”

The board won’t vote on a final budget until June, and there are several big unknowns that still have to be answered before then — the biggest being how much the district will receive in state funding.

But Monday evening’s debate highlights a split on the State College Area school board and shows how district leaders are grappling with a state law that was designed to lower property tax increases.

Under Act 1, passed in 2006 and amended in 2011, the state limits how much school districts can raise real estate taxes. If Pennsylvania school boards want to go above a state index, which is based on several economic benchmarks, they have two options.

They can seek approval from voters through a referendum or they can apply for exceptions for costs that are rising above the rate of inflation.

This year, the State College Area School District’s cap is 1.7 percent. But district Business Administrator Jeff Ammerman told the board that the district could raise taxes as high as 3.3 percent by applying for exceptions for retirement and special education costs.

The exceptions would allow the district to raise taxes to cover $1 million for retirement costs and $269,000 for special education costs.

School board members said they didn’t have a problem with taking some exceptions for retirement costs.

But four board members — Pawelczyk, Dorothea Stahl, Penni Fishbaine and board President Ann McGlaughlin — objected to the special education exception.

Their rationale? The state bases its calculations for special education exceptions on data from the 2009-10 and 2010-11 school years, and the district is not expecting its special education enrollment population to grow.

“The special education budget has increased $2.7 million over three years, about 24 percent. None of that is attributable to extra services. It all has to do with ... increased benefits for the most part,” Patton Township resident Don Gordon told the board at the beginning of the meeting. Stahl agreed.

“Just because the state has a — I don’t like to use that term — a kind of ass-backwards way of doing things doesn’t mean we ... should follow along and vote on it that way,” she said.

Pawelczyk said using a special education exception would also be double dipping.

The district, under the law, can take an exception for retirement costs. But the district can also take an exception for the entire special education budget of about $14 million — which includes retirement contributions for about 80 employees.

During the meeting, Pawelczyk made a motion to amend the budget so that the district would have to submit one to the state without a special education exception.

But five board members disagreed and the motion failed.

“I don’t know if it’s unethical if that’s the way the rules are,” said Vice President Jim Leous.

Leous also argued that approving a proposed preliminary budget with a 3.3 percent tax increase preserves the option of raising taxes that high, but it doesn’t guarantee that they have to do so.

Board members Amber Concepcion, Hutchinson, Gowen Roper and Laurel Zydney joined Leous in voting in favor of a proposed preliminary budget that uses the special education exception.

“I also do not appreciate the implication that if I think this is a legitimate way to fund our education I am immoral or unethical,” Zydney said, later adding, “My job is to try to get the best education we can get for our children within what is legal.”

Ed Mahon can be reached at 231-4619.