Archived Budget Resource Page

The page is being archived as a record of the issues Southern Columbia Area, and many other Pennsylvania schools schools, faced when building the 2014-2015 School District budget. Listed below you will find a financial history of the District and other information that is still relevant in understanding current budget processes.

Informative Links to Useful Financial Information Pertaining to Pennsylvania's Schools

 
 
History of the 2014-2015 Budget
 
Note: The 2014-2015, Final Budget was approved by the Board of Education on June 16, 2014. The information below was originally posted in the months leading up to the passage of the District's budget.
 
The 2014-2015, proposed preliminary budget is projecting the District will have operating expenses of $19,408,114. It is also projecting the District will receive revenue from local, state and federal sources totaling $18,392,353. Unfortunately, expenses are far outweighing revenue, thus the Southern Columbia Area School District is facing a projected budget shortfall of over one million dollars ($1,015,761).
 
There are a variety of reasons why the District continues to face money woes despite ongoing efforts by administration, staff, Board of Education members, and taxpayers to reduce operating expenses and generate revenue. This page was created to provide information explaining the budgeting process, the obstacles the District faces in meeting operating expenses and measures it will take to balance the budget, as required by law. It will be updated on a regular basis, through the final adoption of next year's budget in June.
 

PSERS

One of the biggest drivers in school budgets the past few years has been the increased costs of funding the Public Schools Employees Retirement System, commonly referred to as PSERS. As the charts below show, rates have increased over 4% a year since the 2011-2012, school year and are projected to do the same through 2019-2020, before leveling off. Unfortunately by the time these planned increases slow, rates will be at a level out of reach for all but a few Pennsylvania school districts.
 
 
 
 
 

During the 2011-2012, school year Pennsylvania's schools were required to contribute 8.65% of their school's payroll to the PSERS fund. For Southern Columbia, this expense totaled $773,639 which was a $234,739 increase from the previous year's contribution. Since then the following impact has been felt:


Year                       Rate                       Expense                            Increase                             

2012-13                12.36%                  $1,102,945                          $329,306

2013-14                16.93%                  $1,549,344 Projected           $446,399

2014-15                21.40%                  $2,028,573 Projected           $479,229

 

 

Fund Balance

When planning a school budget, a starting point is identifying and projecting expenses for the coming year, and doing the same with revenue. Section 687 of the Pennsylvania Public School Code of 1949 requires schools to prepare a "balanced budget."  When projected expenses outweight projected revenue, schools must do what any homeowner or business does in the same situation: cut back on expenses, find ways to generate more revenue, or dip into savings accounts. They can choose to take one approach or any combination of the three. While schools do not have actual savings accounts, they do have "reserve funds."  The following chart shows the fund balance history of  the District since the 1996-1997, school year:
 
 
 
While the District's fund balance ebbed and flowed from 1996 through 2008, the District has come to increasingly rely on its reserve funds to balance the school budget. The fund balance includes items such as money due but not received, including subsidy payments from the State. The fund balance grew in 2012-2013, thanks in large part to the payment of overdue tax money owed to the District. This however, followed a year in which delayed subsidy payments forced the District to take out a short-term loan to cover its payroll and pay other bills. While a fund balance can sometimes be used as a "checking account" a school district is better served when it uses this money as a savings account to meet emergency situations, which could include uninsured loss, major repairs to heating systems, and replacement of damaged educational equipment prior to its scheduled change. At the conclusion of the 2010-2011, school year, Southern Columbia ranked 457 out of 500 schools in fund balance reserves.
 
What is the recommended level of a fund balance? This differs depending on the circumstances of a school district, however, the Pennsylvania School Boards Association recommends using the one of the following guidelines: One relies on a formula where a predetermined number of months (usually one to three months) of operating expenditures are used;  The other is used by the three major bond rating agencies - Moody's, Standard & Poor's, and Fitch. The rating agencies recommend between 5% and 10% of current period operating expenditures (budget);  Section 688 of the school code says that when the fund balance exceeds between 8 and 12% of expenditures, depending on the size of the budget, the district must consume any fund balance in excess of 8% prior to increasing taxes.
 
The information below provides additional information regarding fund balance accounts:
For the 2013-2014, school year the District's fund balance percentage is 5.7%.  This figure was determined by taking the $1,031,279 in the Unassigned Fund Balance and dividing it by the projected 2013-2014, Budgeted Expenditures which equals $18,076,395.  Under the Act 48 rules listed above, the District would be permitted to have a fund balance of 8.5%.
 
 

Revenue Sources

In Pennsylvania, property taxes are the primary funding source for school districts, counties, and municipalities. In 2011, according to the Urban Institute-Brookings Institution Tax Policy Center, property taxes accounted for more than 70% of all local tax revenue in Pennsylvania. Local school property taxes accounted for $11.5 billion, or 69%, of all local property taxes in 2011. Four out of every five local tax dollars collected to fund Pennsylvania schools in 2011 came from property taxes. The following is a comparison of regional schools showing the breakdown of local, state and federal revenue which encompasses their respective budgets:
 
 
Of the schools listed above only Benton, Millville and Mount Carmel receive less total revenue than the Southern Columbia Area School District. In terms of total local revenue, Southern ranks above 5 schools on the thirteen-school list (Benton, Millville, Line Mountain, Mount Carmel, and Warrior Run), meaning the other schools generate more monies from local taxes. On the flip side, Southern Columbia Area relies on its citizens to supply 54.51% of its revenue, the second-highest behind Danville's 59.27%. State funding accounts for 42.77% of the Southern Columbia Area School District's revenue with state monies funding a higher percentage of the budget of 8 schools on the above list. In terms of actual state aid, only Benton and Millville received less state dollars than Southern Columbia. The complete list of funding sources for all Pennsylvania schools (2011 data), as reported by the Pennsylvania Department of Education, is available at the following link:
 
 
The District's 2014-2015, budget is projecting revenue of $18,392,353. Of this $10,266,777 would come from local sources; $7,827,240 from the state; and $298,336 from the federal government.
 
According to the “2011 Annual Survey of School System Finances,” conducted by the U.S. Census Bureau, Pennsylvania ranked 8th highest in the nation in the share of school funding coming from local sources: http://www2.census.gov/govs/school/elsec11_sttables.xls
 
 

Recent Tax History

In November 2001, the residents of the District approved implementing the Act 50 Tax Reform structure for local taxes. Implementation began with the 2002-2003, school year and involved the repeal of the Occupational Assessment, Per Capita, and Occupational Privilege taxes. These taxes were replaced with an increased earned income tax, with the school tax rate increasing from 0.5% to 1.5%. Residents also paid 0.5% to either their borough or township.

Act 50 limited the ability of the District to increase local taxes without prior voter approval. Any proposed property tax rate increase that would cause growth in budgeted local tax revenues to exceed the percentage growth in the Statewide Average Weekly Wage (SAWW rate) required voter approval in a “back-end” referendum. Certain exceptions to the requirement for a back-end referendum required permission from the Court of Common Pleas or from the Pennsylvania Department of Education. Initially, five districts had referenda for local tax reform on the November 1999 ballot. Voters in three districts, Central Dauphin (Dauphin County), Hazleton Area (Luzerne County), and Williamsport (Lycoming County), approved the optional tax structure, while Cambria Heights (Cambria County) and Dover Area (York County) rejected Act 50. In 2001, Southern Columbia and Oley Valley (Berks County) held referenda. As mentioned, Southern Columbia approved Act 50 while the Oley Valley voters did not.
 
In 2007, the Center for Rural Pennsylvania, a bipartisan, bicameral legislative agency that serves as a resource for rural policy within the Pennsylvania General Assembly, studied the impact on Act 50 on the four school districts which adopted it. Through 2004, the last year of the study, it found:
  • Act 50 caused a change in the local tax structure for the four districts.
  • It eliminated certain Act 511 taxes, increased the EIT rate, and limited the budgeted increase in local tax revenues.
  • In the first year, real estate taxes in the districts either decreased or had very small increases; EIT revenues were up sharply with the higher permitted tax rates; and per capita and occupation taxes under Act 511 were eliminated. 
  • The analysis of first year differences indicates that the changes in total local tax revenues ranged from a 3 percent reduction to a 7 percent gain; all Act 50 districts were below the 10 percent state average gain in local tax revenues for that year. 
  • For the 2004 school year, the final year of the analysis, Central Dauphin (29 percent), Southern Columbia (5 percent), and Williamsport (9 percent) had real estate tax increases, while Hazleton (-7 percent) still had lower real estate taxes after four years. However, except for Central Dauphin, the real estate tax increases were well below the  statewide four-year total increase of 28 percent.
  • As expected, the EIT revenues increased substantially and certain Act 511 taxes were eliminated entirely. Overall, Hazleton, Southern Columbia, and Williamsport had total local tax revenue increases in the 7 percent to 10 percent range, well below the statewide average of 26 percent during the same time period, while Central Dauphin was a bit above the state average.  
In May 2005, the Southern Columbia Board of Education adopted the provisions of Act 72 which took the place of the Act 50 tax system. The local EIT increased 0.1% (to a total of 2.1%) and residents who live in an approved Homestead or Farmstead property, received a reduction in their school real estate taxes. During a special legislative session in 2006, the Pennsylvania General Assembly adopted Act 1, which requires school districts that wish to raise the property tax rate above the index to seek voter approval through a referendum.  Act 1 is the the current system that Southern Columbia, and all Pennsylvania schools, operate.
 
 

Southern Columbia AreaSchool District Tax Millage Since 1998

Fiscal Year 

1998-1999

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

Columbia County Millage

18.6

21

23.2

24.4

24.7

24.7

24.70

25.10

26.10

27.30

27.40

28.03

28.07

29.53

34.20

35.80

38.37**

Northumberland County Millage

62.6

71.2

75.2

77.4

78.9

77.7

38.0

37.5

38.0

39.6

41.1

43.1

45.7

47.9

50.0

52.9

54.3**

 

3-Year Phase-In for Renovations

 

  Act 1 Index

5.1%

4.4%

5.8%

5.3%

3.8%

1.8%

2.2%

2.2%

2.7%

** The millage rates for 2014-2015 represent the maximum permitted before factoring in exceptions

 

The Act 1 index (shown below), is used to determine the maximum tax increases for each tax the school district levies (without PDE exception or voter approval). The base index is calculated by averaging the percent increases in the Pennsylvania statewide average weekly wage and the Federal employment cost index for elementary/secondary schools.  Additionally, for school districts with a market value/personal income aid ratio (MV/PI AR) greater than 0.4000, the value of their index is adjusted upward by multiplying the base index by the sum of 0.75 and their MV/PI AR. 
 
The following is the formula as it applies to Southern Columbia Area:
 
In 2014-2015, the District's base index is 2.1%. The School District's MV/PI AR is 0.5459. The District's adjusted Act 1 index is 2.7%. This was determined by using the aforementioned formula: 2.1% x (0.75 + 0.5459) = 2.7%.

If the District raised taxes in 2014-2015, up to the Act 1 adjusted index of 2.7% it would generate approximately $170,362 in additional revenue.  Act 1 also allows school districts to apply for three exceptions to increase taxes above the index without voter referendum. These exceptions are:

  • School Construction (Grandfathered Debt) or (Electoral Debt)
  • Special Education Expenditures
  • PSERS
 
Southern Columbia did not qualify for school construction or special education exceptions. It did, however, qualify for the PSERS exception. As a result, the Pennsylvania Department of Education has authorized the District to raise taxes beyond the 2.7% index, if desired. The PSERS exception would generate an additional $ 126,000 in revenue. While the District has the potential to generate approximately $300,000 in additional local revenue through increasing real estate taxes, this will not allow the District to keep up with rising, annual expenses.
 

 

Links and Documents Related to the 2014-2015 Budget