HONESDALE — It's a complicated matter with no easy solutions.
"We know we are knee-deep in negotiations."
Those were the words of Wayne Highlands School District Superintendent Greg Frigoletto during a special meeting of the board Friday which focused on the preliminary budget.
The meeting was called to give board members an idea of what to expect for the 2013-14 budget, which will not formally be adopted until June.
However, as business manager Jeff Firmstone pointed out, the district is required by law to do a preliminary budget by the end of January.
That complicates matters even more, he said, because the governor doesn't even release the state budget plan until sometime in February. And that budget is subject to wide changes by the Pennsylvania Legislature.
"There's more that we don't know than we possibly do know," said Firmstone.
Firmstone called this time period "very early" in the budget process.
However, it is not so early that the board can't put all the options on the table — including tax increases.
With that, the board did keep that possibility open under two special exceptions available through the state. One involves special education funding and the other has to do with required contributions to the state retirement system.
Three formal motions were made by the board. One was to print the preliminary budget and make it available to the public by Jan. 31, the second was the board's intent to adopt a preliminary budget at the February board meeting and the third was to apply for the two exceptions which could mean an increase to the taxpayers.
The motion was to show a preliminary increase of 2.68 percent.
That reflects a tentative increase of 2.623 percent in the general fund with a total of 15.0907 mills. It also shows an increase of .2522 mills for the exception of retirement benefits and an increase of .044 mills for the special education exception.
All three motions passed by a unanimous vote.
The major issues facing the school district focus around the current contract negotiations with the Wayne Highlands Education Association.
Though both sides are extremely tight-lipped about the negotiations process, there was at least a hint of a major issue which may be on the table.
Firmstone called health insurance a "hot-button" issue during his presentation to the board. He also noted it has been a major issue in districts all around northeast Pennsylvania.
Currently, taxpayers pay the full premiums for life, health and vision insurance for district employees.
Firmstone, in his presentation, informed the board that insurance premiums are projected to go up considerably in the next budget.
Page 2 of 3 - "We've had some pretty high claims in the last six months," said Firmstone.
Information shows that currently, the district pays $13,000 per year, per employee for insurance. Firmstone said the projected premium for the next budget is $14,691.
What they don't know
During the presentation, Firmstone and Frigoletto outlined several issues which are still uncertain when it comes to the next budget.
The biggest involves negotiations. The level of salaries and benefits will have the biggest impact on the budget.
Other factors include retirement funding, kindergarten enrollment, state and federal revenue funding, the cost of cyber/charter school enrollments and special education costs.
One factor involved also includes staffing.
According to the information released at the meeting, there is a projection that 12 professional staff members may retire at the end of this school year. The tentative plan is to replace them with 10 people, meaning a total savings of $621,174, which involves fewer staff members and lower pay for those new people who are hired.
Frigoletto also showed "down the road" projections for retirements, which includes seven the following year and five in 2014-15.
By the numbers
The presentation also included a breakdown of projected expenses for the 2013-14 school year.
Under the current budget, projected expenses are $44,414,895. The preliminary budget for the next year shows spending totaling $45,522,671, or an increase of 2.49 percent.
When you add in Title I and Title II spending, that takes the total projected budget to $46,500,492, or an increase of 2.68 percent.
Frigoletto pointed out that budget reflects an increase of $1.5 million in health insurance and pension contributions. The rest of the budget shows a decrease of $300,000, he said.
Salaries are shown at $22,618,131. Benefits, which include retirement and health insurance, are projected at $11,876,878.
Salaries reflect 47.1 percent of the total projected budget and benefits are another 24.9 percent.
As for revenue, the bulk of it comes from real estate taxes. The projections show a total of $27,034,215 from property tax revenue, an increase over the current budget of $852,450.
State revenue projections are shown at $15,318,608, or an increase of $617,831 over the previous year.
Federal funding is estimated to be $46,500,492, an increase of $1,215,782.
But as Firmstone and Frigoletto both pointed out, those numbers could change depending on what lawmakers do at the state and federal levels, which is always an unknown.
The information reflects that 64.7 percent of funding comes from local sources, 39.2 percent from the state and 2.5 percent from the federal government.
One of the biggest issues facing Wayne Highlands — and districts around the state — are the required contributions to the Public School Employees Retirement System (PSERS).
Page 3 of 3 - By state mandate, those contributions are going to increase over the next several years.
The percentage required by the state is from the gross payroll of the district.
For the current budget, the contribution by the taxpayers is 12.36 percent of total payroll. For 2014, that contribution balloons to 16.93 percent. The following year it goes to 21.31 percent and continues that upward trend through 2023 when it will be 30.93 percent.
In actual dollars, that means an increase of $461,971 for 2013, it goes up another $613,168 by 2016. Though the increases vary over the next 20 years, all of them reflect increases.
As part of the district's way to plan for this issue, board members have set aside funding from its reserve accounts each year.
Even with that, the mandated increase will likely mean major tax increases in the coming years to fund the retirement system.
"The taxpayers still face a huge obligation for increased taxes," said board member Lothar Holbert.
"They sure do," said Firmstone.
The information released on Friday shows that by the end of June of this year, the district will have $3,859,880 set aside to offset the obligations of the pension fund.
Even with that, it is unlikely that tax increases can be avoided for several years solely for the purpose of funding the pension fund.
Because of the exception given for funding the retirement system, the allowable amount the district can raise the fund without a vote of the people is $451,513, which reflects the .25222 mills tentatively passed by the board at the meeting.
The same formula applies to special education funding and under the proposal, the district can, by a vote of the board, increase taxes by $79,123, or .0442 mills.
According to the information released during the presentation, should the board vote to increase taxes as proposed, for a house valued at $135,000, it would mean an increase of about $50 per year.
Firmstone also emphasized that senior citizens can apply for a property tax and rent rebate through the state.
"This is an important program, an underutilized program," said Firmstone.
Depending on income levels, households can get rebates from $250 to $650.
The bottom line
For the school district, the bottom line reflected in the preliminary budget shows the need to raise an additional $695,895 for the next budget.
One mill equals $1,947,227.
Frigoletto stressed throughout the meeting that it was a tentative budget but the state requires the board to take action by the end of January.
He cited the "tentativeness of a preliminary budget" and said the administration was asking for the board to approve the motion to apply for the exceptions to raise taxes "to keep that door open."