East Penn not Alone in Debate About Budgetary Reserve
Districts statewide have large stores of cash in reserve funds and have differing opinions on whether it’s time to dip into those “rainy day” accounts.
According to a report in the PA Independent, some Pennsylvania school districts are looking to their budgetary reserve funds to achieve a balanced budget for 2012-2013, while others, like East Penn, have voted to raise property taxes, keeping budgetary reserves intact.
Those districts say that even tougher economic times are coming and it’s prudent to keep those budgetary reserve accounts intact to cover looming expenditures like ever-increasing pension costs for public school employees.
The PA Independent report says that the rule of thumb offered to school districts by the Pennsylvania School Board’s Association is that reserve funds should be used to pay for one-time expenditures since they represent one-time revenue. It also sites prevailing financial wisdom, which suggests that pulling more than 10 percent from savings in a given year is a potentially dangerous move.
School director Lynn Donches Monday night presented three alternatives to the 2012-2013 budget prepared by the administration – each of which proposed to use what she termed the “budgetary excess” in the ending uncommitted fund balance to mitigate a property tax increase.
Under Donches’ plans East Penn taxpayers would see a “more substantial tax cut,” a “modest tax cut,” or a zero-tax budget. “These are monies taken from tax payers that are not needed to use in the budget,” she said.
It’s been the policy of the East Penn Board of School Directors to maintain a minimum of 5 percent of the operating budget as a budgetary reserve, which is about $5 to $6 million.
Donches said the district's budgetary reserve of $5.8 million would remain intact under each of her plans and that no programs would be cut under any of her three scenarios
School Board President Charles Ballard took issue with Donches' claim that she could avoid raising taxes and leave programs intact. "Proposals like this are window dressing, they are chicanery, they are snake oil sales," he said. "This is all bogus."
Board member Alan Earnshaw said that delving into the budgetary reserve to avoid a tax hike this year would ultimately leave taxpayers facing much larger tax increases in the future.
State law prevents districts from raising taxes if they have more than 8 percent of their overall budget in unassigned reserves, according to the PA Independent report.