Last month, when the Penns Valley Area school board approved a proposed budget with a tax increase, district officials said they would spend June working to eliminate that plan.
On Wednesday, it became clear they accomplished that goal.
The school board approved a final 2013-14 budget at a regular meeting Wednesday that calls for no tax increase, holding the district’s millage rate at 43.23 mills.
The $23.7 million spending plan does, however, carry a shortfall of $210,575. The shortfall is roughly equal to the amount the district must pay its health care consortium this year to reduce an underfunded premium account.
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Officials said they hope they have budgeted conservatively, and that there will be funds left over at the end of the year — as was the case with the 2012-13 budget — to cover the deficit. If not, the district will dip into reserve funds it has saved in recent years to help pay for rising retirement and health care costs.
Increases to retirement contributions and medical insurance were the two major drivers in a 2.3-percent increase in the 2013-14 spending plan from the previous year. Retirement contributions increased $440,000, or 39 percent, and medical insurance costs jumped $266,000, or 14.5 percent.
In a proposed final budget the board approved last month, officials figured in a real estate tax increase of 1.62 mills, which would have generated about $404,000 in revenue, according to the district’s numbers. And that still left a shortfall of $170,000 in the proposed final plan.
On Wednesday, business manager Jef Wall unveiled the final version of the budget, which eliminated the need for the tax increase.
Instead, officials closed the gap by budgeting an additional $360,000 in what they predict the district will receive in earned income tax.
Superintendent Brian Griffith said the district has seen a significant increase in the past 18 months in the amount it collects in earned income tax.
“We still don’t know why,” Griffith said. “We don’t know why there is an increase. We don’t know whether it’s a timing issue, whether we were missing revenues before. That is the fly in the ointment.”
But the increase has been significant and — and perhaps more importantly for the sake of the budget — consistent, Wall said.
“I kept waiting for the bubble to burst,” Wall said. “I kept waiting for it, and waiting for it, and waiting for it. Talking to surrounding districts and other municipalities, they are not experiencing what we are experiencing. I have no idea why we are seeing a 12, 14 percent increase in those revenues over the last four of five years.”
Board member Carl Gaffron expressed concerns at the meeting about passing a budget without a tax increase in light of concerns over retirement costs, which are expected to continue to rise in the coming years.
“Carl, to be perfectly honest with you, I think we’re pushing the envelope,” Wall said. “I really do. But I don’t feel that we’re pushing the envelope to the point of our future demise.”
But one board member suggested that feeling is part of the budget process.
“I think if you are trying to balance the burden on the taxpayers with what the school district wants to do ... you are never going to be completely comfortable,” Troy Ott said. “If you’re completely comfortable people might argue you’re overtaxing. I think that’s where you live when you budget appropriately.”
Allan Darr, chairman of the board’s finance committee, couldn’t attend the meeting Wednesday but wrote in a letter to the rest of the board that he is confident the district can sustain its five-year budget without raising taxes in the 2013-14 spending plan.
Other members said the bump in earned income taxes being collected, coupled with increases in assessed property values in the district, gave them the confidence to pass a budget without a tax increase.
The spending plan passed 7-0. Darr and Amy Niewinski were not present and did not vote. Niewinski was set to take part in the meeting via phone, but technical difficulties kept her from the budget discussion and vote.