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Methacton Discusses a 2.1 or 2.5 Percent Tax Hike

Melissa S. Treacy

Tuesday, May 27, 2014 • 2:00pm

During last Tuesday’s board of directors meeting of the Methacton School District, the big news that quickly spread was that the district decided to outsource busing by hiring First Student, Inc. What went less noticed was that the district also heard from Director of Business Services Stuart Whiteleather about the 2014-15 proposed final budget.

“This is a follow-up to our last presentation in March,” explained MSD Superintendent Dr. David A. Zerbe. “Since then, we have had a finance committee meeting in April, and the subsequent finance committee recommendation that a budget be prepared and presented.”

The former school board member, whose resignation was officially accepted at the same May 20 meeting, Joyce E. Petrauskas, headed up the finance committee. Due to her resignation, two consecutive finance committee meetings were cancelled, as Petrauskas was the chair.

Nevertheless, the board continued forward accepting the committee’s recommendation to set a tax increase not to exceed 2.1 percent, or the state index for recommendation for MSD.

“The budget process started in September [2013], well before I started here,” said Zerbe. “It is our fiscal responsibility in Methacton School District to establish a responsibility to our taxpayers, while continuing a high-level of academics for our students.”

Zerbe said the proposed final budget took into account six key points, including:

·      Expenditure reductions; operating efficiencies

·      Consider new academic program where data shows need

·      Create a five-year plan to manage finances

·      Replenish fund balances, to address recommended state levels

·      Focus on a five-year capital plan

·      Establish escrow funding for PSERS accounts

Up until May 20, the board was aware of the first five initiatives. The newest addition was a plan to save funds for “PSERS” or the Public School Employees’ Retirement System. The Pennsylvania organization is operated by the state government to cover at total of 766 educational centers’ employees’ retirement funds.

As Whiteleather explained during budget proposals and the outsourcing of transportation, those fees for PSERS are increasing to nearly 30 percent in the coming years, requiring participating school districts to contribute more each year. While the state reimburses half of that contribution, the district has tried to come up with ways to accommodate the ever-increasing cost.

For the current 2013-14 school year, the total budget (spent costs) included $95,248,072. The proposed 2014-15 budget will aim to spend $99,557,372. Initial budget proposals had a tax increase of 4.52 percent. After reductions were figured in, including 10 percent per building cost reductions, the outsourcing of transportation, and a laundry list of cuts proposed by Zerbe and Whiteleather, now have the estimated increase to be 2.1 percent. The recommendation of a 2.1 percent tax increase includes around a $103.73 per year increase for the average homeowner in the district.

Zerbe and Whiteleather also created a second version of the proposed budget to show a creation of an escrowed account to begin planning for future increases in PSERS costs. That budget would have forced a 2.5 percent tax increase.

“It would not be responsible of us to not consider it,” said Zerbe. “We know that the finance committee made a recommendation to the board to keep the tax increase not to exceed 2.1 percent, and we worked hard to provide that for you this evening.”

With a 2.5 percent increase, creating the PSERS savings fund, the average house owner in the district would see a $123.50 annual increase.

The board president, S. Christian Nascimento, asked if selecting a 2.5 increase versus 2.1 increase was also asking the board to make a “philosophical decision” about PSERS savings.

“Are you asking the board, with the 0.4 percent escrow, to make a philosophical decision that, going forward, we are going to start doing this?” he asked.

“The question ‘Is this the right thing to do,’ and I’m not certain,” said Zerbe. “It is not of the nature of this board to raise taxes jut to put it into a saving account, but by no acting on this pending problem, as I do not see a lot of movement from the legislature or governor on this matter, to get the problem under control, with the obligations we have as a district, it should be something we talk about.”

Zerbe said, should PSERS increases continue to occur annually, the choice would likely be whether to gradually increase taxes (in this year’s example of 0.4 percent additional) each year or in four years be “ready to go off a cliff with a large tax increase.”

“This was a way to eas into the process to make it more palatable for the board and the public,” said Zerbe. “You can certainly chose not to do it, if we cannot financially afford to.”

Many board members expressed concerns about increasing taxes so greatly to add funds to a savings account that may or may not be needed. Others asked about current savings account much like this, such as a budgeted account being held over a litigation matter with Shannondell.

Board vice president Herbert Rothe III asked Whiteleather how much was currently being held in the account, which is pending an ongoing litigation matter. Solicitor for the district, Frank Bartle, said further discussion could not continue, as the matter is still in the courts, but that Whiteleather may answer the finance question as it pertained to the proposed budget.

Whiteleather said that the account currently holds $1 million, and the 2014-15 proposed budget would add another half million to that fund. It was unclear what exactly the funding or litigation pertained to.

“There is no vote or action tonight,” explained Nascimento of the proposed budget. “But I am getting the sense that the board wants to approve a budget that does NOT have the escrow in it. At least, that’s the sense I’m getting.”

Zerbe agreed to bring a budget without the escrowed PSERS fund to the May 27 meeting, adding he hoped to see “action in the state” legislature on the matter.

The upcoming steps for the proposed budget include:

·      May 27: Approve final proposed budget

·      May 28 – June 16: Public advertisement/review

·      June 17: Board approves final budget

·      July 1: Start of the 2014-15 fiscal year

Residents of the school district are permitted to share thoughts at upcoming school board meeting's designated courtesy of the floor public speaking times, including:

·      June 9: Finance committee meeting 6 p.m.

·      June 16: Property committee meeting 7:30 p.m.

·      June 17: Policy committee meeting 6:15 p.m.

·      June 17: Board Work Session/budget approval: 7 p.m.

A full calendar of the board’s meetings are available on the district’s website here. For a look at what expenses are expected and what cuts were made (hint: there will not be a full-day Kindergarten program) to the 2014-15 budget, review Whiteleather’s slide images attached to this story.

The increase, which will be voted on a the May 27 meeting as a proposed budget and finalized on June 17, comes on the heels of a 1.85 percent increase for the 2013-14 school year. That 0.50 millage increase created an additional cost of $89.62 per year for the average home owner in Methacton.

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