Preliminary NASD budget has deficit
The first look at the 2021-22 preliminary general fund budget for Northampton Area School District reveals a deficit of $2.6 million.
The preliminary budget, unveiled Jan. 11 to the board of education by NASD Superintendent of Schools Joseph S. Kovalchik and NASD Business Administrator Matthew Sawarynski, has expenditures of $114,852,606 and revenues of $112,245,223 - for a deficit of $2,607,383.
The preliminary budget includes using $2.6 million from the district fund balance, which would leave an estimated ending unassigned fund balance of $5.7 million, or 5 percent.
The revenue of $112,245,223 is a decline of $1,406,258, or 1.24 percent, in revenue from the $113,651,481 for the 2020-21 budget because of reduced state, federal and other funding.
The school board, which met in person Jan. 11, will be asked to approve the preliminary budget at its next scheduled meeting, 6:30 p.m. Jan. 25 in the cafeteria of Northampton Area Middle School, 1617 Laubach Ave., Northampton.
The school board meeting is open to the public. Face masks, social distancing and hand sanitizing are required.
The school board will also be asked to approve exceptions for the 2021-22 Act 1 Index of 3.7 percent, which is the highest percentage of tax increase allowed for the district by the Pennsylvania Department of Education. NASD has applied for and received Act 1 exceptions, allowed for school construction, special education expenditures and retirement contributions in previous years, but has never implemented them.
The 2020-21 exceptions approved by the PDE totaled $2,230,103 for special education expenses. None was used.
The 2021-22 budget is dependent on COVID-19 contingencies.
“We are going to have multiple changes because of the COVID-19 situation,” Kovalchik said.
The Coronavirus Response and Relief Supplemental Appropriations Act, signed into law Dec. 27, 2020, and the Elementary and Secondary Emergency Relief Fund are expected to allocate $2,035,368 for NASD, approximately four times the CARES Act funding of $495,782 that NASD received in spring 2020. This $2 million-plus in funds is not included in the preliminary budget.
“We’ll have a clearer understanding in the next few months,” Kovalchik said.
Anticipated revenue of $1.4 million from warehouses and housing and reverse appeals revenue estimated at $950,000 is included in the 2021-22 preliminary budget.
Kovalchik vowed he and Sawarynski would continue to work on reducing the budget. The school board can expect monthly updates. School districts must finalize budgets by June 30.
One way to close the deficit gap would be to use more money from the fund balance and/or raise taxes. The 2019-20 NASD budget had a millage of 54.8 mills, which did not increase. Based on the average NASD residential property assessment, the tax bill was $3,263.48.
In the 27-page budget proposal, five tax options are presented, based on the district average residential assessment of $54,600, which comprises 50 percent of taxpayers’ properties.
In the first option, a 4.1-percent tax increase of 2.27 mills would generate $2,607,383, with no additional fund balance use, which would leave an ending unassigned fund balance of $5,745,840. The average annual residential increase would be $123.
In the second option, a 3.7-percent tax increase of 2.03 mills would generate $2,335,570, with $271,814 from the fund balance, which would leave an ending unassigned fund balance of $5,474,026. The average annual residential increase would be $111.
In the third option, a 3-percent tax increase of 1.65 mills would generate $1,893,705, with $713,678 used from the fund balance, which would leave an ending unassigned fund balance of $5,032,162. The average annual increase would be $90.
In the fourth option, a 2-percent tax increase of 1.1 mills would generate $1,262,470, with $1,344,913 used from the fund balance, which would leave an ending unassigned fund balance of $4,400,927. The average annual increase would be $60.
In the fifth option, a 1-percent tax increase of 0.55 mill would generate $631,235, with $1,976,148 used from the fund balance, which would leave an ending unassigned fund balance of $3,769,692. The average annual residential increase would be $30.
One catch with options two, three, four and five is that the fund balance would dip below the 5-percent unassigned fund balance of $5.7 million.
Fund Balance Policy 620, which was adopted Sept. 13, 2010, stipulates the district must maintain an unassigned general fund balance of no less than 5 percent and no more than 8 percent of budgeted expenditures.
Based on the 2020-21 budgeted expenditures of $84.8 million, the unassigned fund balance of 5 percent was $4.2 million.
Based on the 2021-22 budgeted expenditures of $114.8 million, an unassigned fund balance of 5 percent would be $5.7 million, an unassigned fund balance of 4 percent would be $4.6 million and an unassigned fund balance of 3 percent would be $3.4 million.
The school board would apparently have to vote to change the fund balance policy. It’s uncertain if the policy can be changed.
“It’s a district policy. But before we fiddle with it, we have to make sure we can,” NASD Solicitor C. Steven Miller said.
“We’re not recommending you go below the 5.7 percent,” Kovalchik said.