Thomas Hayes warned fellow South Middleton School Board members of an impending “fiscal cliff” back in June 2013.
Hayes was in favor of levying an incremental tax increase that was voted down by the majority, The Sentinel reported almost five years ago.
This past Monday, acting Superintendent Bruce Deveney cited Hayes’ prediction as proof that the district has not only reached that cliff, but is dangling over the edge.
If nothing is done to change this course, the district could be looking at a projected deficit of $4.5 million for 2022-23. That is more than three times the red ink as the $1.4 million budget deficit projected for 2018-19.
“We are at a situation where if we don’t take hold, we are going to fall off that cliff,” Deveney told board members Monday. “We cannot afford to assume away this issue. You have to take some action that is going to add to the foundation of the budget.”
Normally school districts facing budget deficits have three options to work with: hiking the real estate tax to generate revenue, cutting back expenses to save money or drawing from savings to offset shortfalls.
South Middleton administrators focused their budget presentation Monday on a strategy that combines a 3-percent tax hike with cost-cutting recommendations designed to turn a $1.4 million deficit into a $205,325 surplus.
The most controversial recommendation is to outsource instructional aides and custodians to a private contractor to generate pension and health insurance savings of almost $500,000 in 2018-19 alone. Almost 30 local residents spoke out against the outsourcing, saying this approach could backfire on the district and result in higher turnover, greater long-term costs and a disruption in the education of special needs children.
At a budget workshop in April, Operations and Business Manager Matthew Ulmer said the board could use about $300,000 in uncommitted fund balance to bridge the projected deficit. He also suggested the board restructure the $3 million in committed fund balance it has allocated toward debt service in the hope of freeing up money.
Neither the $300,000 nor the $3 million were mentioned in the budget presentation this past Monday, but Deveney touched on the hazard of using savings to offset deficits.
“If we spend one-time money throughout the years to balance budgets, that money is gone and no longer there for the next year to support the budget,” Deveney said. “That brings us to the point where we are now.” He said the key to long-term fiscal stability and sustainability is to address reoccurring costs.
Salaries and benefits make up about 70 percent of the district budget. By removing the aides and custodians from the district payroll, district administrators are addressing the two main cost drivers of pension and health insurance. The hope is that savings from 2018-19 could be carried over into subsequent years, giving the district a temporary buffer against having to cut any curriculum programs that impact teachers and students.
“When you eliminate programs, you eliminate staff,” Deveney said. “Those positions are gone. You no longer have the millage supporting it. This is a tough decision we are heading here. How can we preserve the same number of aides and custodians and come out with that much of a budget help not only for this year, but future years?”
While administrators see the outsourcing as a possible solution, current school board members are less optimistic. Steve Bear, who has been on the board six years, expressed frustration at the prospect of outsourcing hardworking support staff employees.
“All of a sudden this is dropped on our laps and our backs are against the wall,” Bear said. “I’m tired of having my back against the wall.”
Bear repeatedly asked Ulmer whether every possible option has been explored, including a hybrid approach where only new hires among the aides and custodians are subjected to the outsourcing package offered by Mission One. But administrators said the cost of retaining the current staff with seniority on the payroll would not generate enough of a savings to help close the deficit for 2018-19.
The administration hopes the majority of the current aides and custodians take advantage of the right of first refusal offered by Mission One and apply as employees under the outsourcing package. The public is skeptical that most of the current support staff would apply given that jobs are available at Cumberland Valley School District where there is no outsourcing and higher pay. This prompted many of the concerns residents have of a disruption in the education program of special needs students.
Bear suggested the board look at approaching local companies and businesses for support in replacing the high school stadium track and artificial turf instead of holding back $200,000 in the 2018-19 budget.
Michael Berk was on the school board when Thomas Hayes made the “fiscal cliff” prediction in 2013. “We had very good times when money was flowing and Act 1 was not around,” Berk said. “We had fund balance and the ability to do a lot of great things.”
Act 1 is the state law that restricts the ability of school districts to raise the property tax beyond the rate of inflation. Berk was referring to the annual cap in tax increase percentage that has proven to be insufficient for most districts to balance budgets.
“We had a plan and we did not fulfill that plan,” Berk said. “We did not raise taxes when we should have raised taxes. We are now tied and forced to deal with an austerity budget.”
Board president Randy Varner agreed. “In the past, when taxes were not raised incrementally, that millage is lost forever. It can’t be made up. We are limited by Act 1 each year.”
Under Act 1, school districts have the option of pursuing a larger tax increase through voter referendum or by seeking exceptions that account for higher special education, pension and debt service costs. South Middleton has not pursued a referendum, but has been successful with exceptions.
Budget deficits projected out to five years present a less than rosy picture for South Middleton, Berk said. He believes the figures may actually be too conservative. “There is no good decision to be made here,” Berk said.
Local resident Joe Knouse was offended by the way board members are handling this crisis. “I think it’s shameful that, as a group this evening, I have seen you up here as victims,” Knouse said. “You are playing the victim. This is the situation we are in. Our backs are against the wall. That is not leadership. You were elected as leaders of the community, as leaders of the school. I don’t see leadership up there.
“It’s your job to figure this out,” Knouse said. “It’s also your job to take into consideration the students and the community.”
Jonathan Still, a new school board member going through his first budget cycle with the district, said, “Strategic leadership is about making hard decisions. It’s about opportunity-cost. It’s about understanding what you give up in order to gain what you really value the most. My priorities as a member of this board are students, student programs, teachers, support staff and facilities in that order.”
HARRISBURG — This year’s legislative races in Pennsylvania have drawn extremely high levels of interest, with reports of activists swamping normally quiet organizational meetings and an unusually large number of candidates making it onto the ballot.
Republicans hold strong majorities in both chambers, 121-82 in the House and 34-16 in the Senate, so they correspondingly have more turf to defend. Democrats have made a push to challenge as many Republican seats as possible in swing areas, and they hope to capitalize on a national political tail wind.
In some areas, the voting on Tuesday will be of particular interest, with multiple candidates taking on incumbents or seeking their party’s nomination in areas where the general election in November is unlikely to be competitive.
The retirement of eight-term incumbent Rep. Adam Harris, R-Mifflin, in a conservative and rural district near the center of the state, has prompted nine Republicans and a single Democrat to place their names on the primary ballot.
Although the Republican field is large, there is not a wide range of ideologies, forcing voters to make their choices on other grounds, said Monte Kemmler, a retired bakery owner from Mifflin County who is active in county and state GOP politics.
“There isn’t that big of a difference, so it’s going to come down to the all the strategy of the candidates, name recognition, who can get out the vote, who can put their name out there the most,” Kemmler said.
A similar dynamic is at play in heavily Democratic Philadelphia, where five Democrats are seeking to succeed Rep. Curtis Thomas, and four are running in the district of Rep. Bill Keller, who’s retiring.
After news reports about his chronic absenteeism during session days in the Capitol, and a divorce that included claims of physical abuse, Rep. Kevin Haggerty decided to forgo re-election in a Scranton area district. That prompted five fellow Democrats to jump in, including a pair of brothers.
As one of just two Republicans in the state House from Philadelphia, Transportation Committee Chairman John Taylor’s retirement has resulted in four Democrats seeking the nomination, along with one Republican.
Two Democrats whose legal troubles have been in news are seeking re-election but have primary opponents: Reps. Tom Caltagirone, of Berks County, and Vanessa Lowery Brown, of Philadelphia. Caltagirone’s alleged sexual misconduct toward an employee caused the House Democratic caucus to settle with the woman for $250,000 last year, and Lowery Brown awaits trial on charges she improperly accepted cash from an informant.
Rep. Nick Miccarelli, R-Delaware, announced in March he would not seek another term after two former girlfriends accused him of sexual and physical abuse, claims he vigorously disputes. He has withdrawn from the ballot.
No matter how the incumbents do, this year’s races are certain to bring lots of new faces to the Legislature. Nineteen Republicans and six Democrats in the House are retiring, and there are three vacancies that will be filled on Tuesday through special elections in Washington, Bucks and Bradford counties.
Among the notable retirements are Majority Leader Dave Reed, R-Indiana, whose plans to run for Congress were derailed by the redistricting lawsuit that put him into the district of incumbent U.S. Rep. Glenn Thompson; Minority Whip Mike Hanna, D-Clinton; and Rep. Joe Markosek, D-Allegheny, the ranking Democrat on Appropriations.
In the Senate, where half the 50 seats are up, all four vacancies because of retirement are Republican: Chuck McIlhinney of Bucks County, Stewart Greenleaf of Montgomery County, Scott Wagner of York County and John Eichelberger of Blair County. Wagner is seeking the gubernatorial nomination this week, while Eichelberger is running for Congress.