When the Corbett administration and Republican lawmakers criticized school districts for raising taxes while sitting on fund balances, they were pointing fingers at a district like Bensalem.
The district in the southwest corner of Bucks County with a $121 million budget will have a fund balance of just under $30 million when the 2012-13 school year begins. The money is held in different accounts to pay for things like debt service, future severance and the pension spike that districts were advised to save for.
There’s also an “uncommitted” fund that some people describe as “rainy day” money. Jack Myers, Bensalem’s business director, calls that one-time cash “to help you out of a real jam that is not going to recur.”
The state’s school code limits a school district’s “uncommitted” reserves to no more than 8 percent of their budget. And Bensalem, which will spend less in the next school year than it has this year, will have $8.2 million in that fund after using $800,000 to make budget. That’s 6.75 percent.
It also plans to raise taxes by about $60, just under 1.5 percent.
In a struggling economy, lawmakers are pushing for reserve money to be spent rather than raise taxes on homeowners.
State Rep. Mike Vereb, R-Montgomery County, during a news conference in Harrisburg last week with Rep. Mario Scavello, R-Monroe, had Bensalem on a top 10 list among Pennsylvania’s 500 school districts for the amount it held in reserve.
“We’ve been getting kicked in the teeth the last two budget cycles about cuts in public education by these same school boards who are sitting on these major surpluses,” said Vereb, a Republican. “We’re asking them to ... tell people what they have and stop raising taxes unnecessarily and blame Harrisburg for their need to raise the taxes.”
Vereb said a school district’s reserve account “should range between 5 percent to 7 percent of its operating budget. The fact that many school districts in Pennsylvania are sitting on additional millions in cash that exceeds that rule of thumb, all while threatening to increase property taxes and cut school programs, is simply ludicrous.”
As of last June 30, districts statewide were sitting on more than $3.2 billion, he said, of which at least $2 billion is above what was needed to pay expenses for the 2010-11 fiscal year.
Vereb and Scavello hinted at the possibility of introducing legislation in the near future to put a cap on the amount of money schools can “hoard” in their reserve funds.
Gov. Tom Corbett’s Department of Education is also pushing for schools to drain their reserves before raising taxes.
“These funds are intended for rainy days. It’s raining,” said Tim Eller, a spokesman for the Department of Education. “Instead of demanding more from local taxpayers, they should be using their savings accounts to reduce the burden on taxpayers.”
Playing off the “rain” analogy, Myers said he treats the district’s budgeting process more like the biblical story of Joseph. “I’m expecting seven years of this,” he said.
While he wouldn’t criticize the lawmakers, saying only “we’ve got cards dealt to us and we’re dealing with it,” others did jab back.
Jay Himes, executive director of the Pennsylvania Association of School Business Officials, said new accounting rules and pension payment increases of 45 percent and 40 percent the next two years make the creation of reserve funds “the fiscally responsible thing to do.”
Mark Miller, a Centennial School Board member and vice president of the Pennsylvania School Board Association, said the state told districts to put money aside. “Now that we have, they use it as a club,” he said.
Of Vereb’s $3 billion figure, when divided by 500 districts, Miller said the reserves held by schools makes sense. “That’s about $6 million per district,” he said.
Centennial, with a $96 million budget, has $12 million in reserves. Much of it has been spent, Miller said, but has yet to be paid out. He said projections show the district’s reserves will run out in four years.
That’s something Myers doesn’t want for Bensalem, which is why “the past 12 years have featured prudent financial planning,” he said, as money from Harrisburg has not kept up with the district’s growth and rising pension costs.
For example, back in 2008-09, he said, state funding accounted for $25.5 million of Bensalem’s budget. Next year, he figures that number will be $25 million. But when you take into account that the district’s pension costs will rise from $1.2 million in 2008-09 to $3.4 million next year, he said the district’s share of state funding has taken an 11 percent hit.
And when you add in that the district’s number of students has increased by 8 percent over that same time period, Myers figures the cut of state money has been 17.5 percent.
Bensalem has put aside $6.4 million “to soften the blow of future (pension) adjustments,” Myers said.
Another aspect that has cost districts is record low interest rates. In 2007-08, Bensalem generated $2.25 million in interest income. He’s projecting $200,000 next year. The $2 million loss equals 3.3 mills of tax or $72.50, he said.
Myers said under the Act 1 exceptions for raising school taxes, the district was entitled “by the state’s own calculation” to a $3 million exception for special education costs. “You would have seen a $200 tax increase,” he said, describing that as “absurd.”
Reserve funds vary depending on the needs of districts. Central Bucks calls them Capital Fund “Buckets” and has them for capital projects, technology and transportation, health care and the pension spike.
Palisades also has several reserves and plans on using $542,701 next year for it’s share of the replacement of masonry walls and windows at the technical school, technology infrastructure, and energy/building improvements throughout the district, according to Jill Ruch, its business manager.
She said reserves and long-term planning are the “major reasons” Palisades has a “AA” rating from Standard & Poor’s and that helps it borrow money at a lower interest rate.
Calls to several districts shows all dipping into their “uncommitted” reserve funds to fill budget holes for 2012-13.
Bristol Township is using $4 million in savings while raising taxes $71 or 2.1 percent.
Hatboro-Horsham plans a 1.7 percent tax increase — about $50 — while pulling about $3 million from its $7.2 million reserves.
Pennsbury has said it is working to whittle down an $80 tax increase — 1.7 percent — while using $2.8 million of a nearly $7 million fund balance.
Quakertown is taking $1.25 million from $6.15 million in savings while raising taxes by $35, just under 1 percent.
Pennridge won’t raise taxes and is unique in that it is pulling $1 million from money previously committed to paying for future salary increases rather than from an uncommitted fund.
Area lawmakers said they were not familiar with how much money schools in their district held in reserve and believed the message sent by Vereb and Scavello was a fair one.
“It’s the peoples’ money and those taxes are collected with the intent for services to be delivered,” said Rep. Frank Farry, R-142.
Rep. John Galloway, D-140, said a 5 percent to 7 percent reserve is “reasonable for an emergency. Higher than that I think it should be justified.”
Rep Todd Stephens, R-151, said he would not be for legislation Vereb and Scavello talked about as “we have placed enough mandates on elected school board members.”
He did say that a year ago during the budget process the General Assembly used $50 million from its $120 million reserve fund to provide Accountability Block Grants to schools.
“If it comes down to raising taxes or using reserves,” he said, “I’m for using reserves.”
