It's The Economy, Stupid!

From the BCCT.

That was James Carville's famous strategy in the Clinton campaign of 1992. I doubt there's anyone out there who is NOT concerned about the economy and the impact on the bottom line. "Today’s economy will affect the preparation of school budgets as far ahead as 2012 and 2013, he added." Perhaps so, but let's be a little more focused on the immediate: What's the state of revenues and expenditures in 2008-09?

Economy has schools concerned
A lag in tax collections and underperforming investments means schools might need to do more with less in the coming years or find support for a tax increase.
By THERESA HEGEL

Like the families that help to support them, school districts in the area have entered a period of belt tightening.

District business managers already dealing with drops in tax revenue and dwindling investment returns say the budget for the next school year likely will be difficult to prepare.

But most districts said administration and school boards were committed to keeping property tax millage increases at or under the 4.1 percent mandated by the state.

“The whole community is suffering,” said Pennridge Superintendent Robert Kish, noting that his district wasn’t interested in adding to the burden.

Real estate transfer taxes and interim real estate taxes — levied when properties are bought and sold or when improvements are made to an existing property — are, in many cases, down from last year’s levels.

“Homes aren’t selling,” said Robert Reichert, director of business affairs for Hatboro-Horsham School District. “People aren’t doing renovation work like they were.”

In terms of real estate transfer taxes, Pennridge received 81 percent of the level of revenue this July, August and September, when compared with last year’s intake in those months, said business administrator Bob Reinhart.

Last year’s transfer tax total of $1.6 million already represented a dip from years when the housing market was hot. Back in 2005-06, the district reaped $2.1 million from transfer taxes, he said.

So far this school year, the district is receiving 54 percent of the interim taxes it received last year, Reinhart said.

“If [the housing market slump] deepens, the issues are going to get worse than they are today,” he said.

Today’s economy will affect the preparation of school budgets as far ahead as 2012 and 2013, he added.

Bensalem School District built lower revenues into its budget, including a 30 percent decline in interim taxes and a 25 percent drop in transfer taxes.

“I’m pleased that we did take a conservative stance with respect to projected revenues,” said Jack Myers, Bensalem’s director of business operations.

By September, Bensalem had already collected $300,000 of its budgeted $1 million in transfer taxes, which Myers called a “pleasant surprise.”

Still, being on target is more a reflection of the district’s downward projections, and there are still eight months left in the fiscal year, he said.

“At this point, I’m not panicking, but I’m worried,” added Myers, who said he is constantly monitoring and “fine-tuning” the budget.

Central Bucks business manager Dave Matyas was also concerned about the 1 percent earned income tax going south if unemployment levels rise and workers don’t receive raises or bonuses because of the economy.

“Who knows where that’s going to go?” he wondered.

An unstable stock market and cuts in federal interest rates have taken their toll on districts’ coffers.

In its current budget, Bensalem assumed a 40 percent drop in interest returns for the year, Myers said.

Reichert said Hatboro-Horsham, which invests conservatively, has seen its returns cut almost in half from last year. “That’s having an effect,” he said. A deficit and subsequent spending freeze in Harrisburg also has district officials worried. Last month, state revenues fell to $565 million below expectations, and Gov. Ed Rendell outlined $311 million in spending cuts. As part of those cuts, the state Department of Education froze about one-half percent of its budget, said Leah Harris, department spokeswoman. Matyas and Reinhart both voiced concerns that the state’s budget woes would lead to lagging subsidy payments. “They’ve done it in the past,” Reinhart said. However, Harris dismissed the business managers’ concerns.

“The schedule of payment has not been affected as of right now,” she said. “We don’t anticipate that there will be a delay.”

In many ways, school districts’ financial strains mirror the situation at private-sector businesses across the state and country.

The difference is that public schools have fewer avenues for cutting expenses.

“We can’t reduce staff because our student population is not declining,” said Matyas of Central Bucks. “That’s the problem we have as a public entity.”

Instead, Hatboro-Horsham’s Reichert said, schools must become creative and “focus on doing more with less.”

For districts like Bensalem, that translates to delaying the replacement of furniture and equipment and implementing cost-effective energy strategies, such as the geothermal heating system installed at the newly renovated Snyder Middle School, Myers said.