The 2026-27 preliminary budget for Northampton Area School District foresees a $12.7 million deficit, based on expenditures of $154.8 million and revenue of $142.1 million.

“Over the 20 years I’ve been working on the budget, that’s the worst deficit I’ve ever seen,” NASD Board of Education Vice President David Gogel said.

In his 2026-27 budget presentation at the school board meeting Jan. 12, NASD Business Administrator Craig Neiman said that, to offset the $12,661,117 deficit, one option could be a tax increase of 4.2%, which is the maximum Act 1 Index allowed for NASD in 2026-27, based on a 2.46 millage increase and use of $9,206,815 from the district fund balance, for a $154.84 average annual tax bill increase based on the district average 2025 homestead assessment of $63,000.

In his 28-page presentation and discussion that took approximately one hour, Neiman listed a budget expenditure summary of increases from 4.4% to 100% in 10 categories. The 2026-27 budget expenditures of $154.8 million are 10%, or $14.1 million more than the 2025-26 budget expenditures of $140.7 million, according to the presentation.

The 2026-27 budget revenue of $142.1 million is 1.4%, or $2 million more than the 2025-26 budget revenue of $140.1 million, the presentation stated. The 2026-27 budget deficit of $12.7 million compares to the 2025-26 budget deficit of $600,000.

“This is the first step in the final process,” NASD Superintendent of Schools Joseph S. Kovalchik said of the preliminary budget presentation. “We do not have any reductions, grant opportunities or staff reductions at this time.”

Kovalchik noted it will be the finance committee’s job to get the budget as low as possible now.

“I don’t know if the state will get their budget done, but by June 30, we will have to do that,” Kovalchik added. “We’ll talk about some of the ways we can reduce the budget.”

The state budget, which includes funding for education, is expected to be presented Feb. 3 by Pennsylvania Gov. Josh Shapiro.

Neiman presented 2026-27 initial tax options based on the $12,661,117 budget deficit.

The five options are:

• Tax increase of 1%: revenue generated, $822,453; millage increase, 0.59; fund balance use, $11,838,664; average annual tax bill increase, $36.87

• Tax increase of 2%: revenue generated, $1,644,906; millage increase, 1.17; fund balance use, $11,016,121; average annual tax bill increase, $73.74

• Tax increase of 3%: revenue generated, $2,467,359; millage increase, 1.76; fund balance use, $10,193,758; average annual tax bill increase, $110.60

• Tax increase of 4%: revenue generated, $3,289,812; millage increase, 2.34; fund balance use, $9,371,305; average annual tax bill increase, $147.47

• Tax increase of 4.2%: revenue generated, $3,454,302; millage increase, 2.46; fund balance use, $9,206,815; average annual tax bill increase, $154.84

A summary of district revenue includes:

• Local: $94.8 million in 2025-26 budget; $96.7 million in the 2026-27 budget, for an increase of $1.9 million or 2%

• State: $43.3 million in 2025-26 budget; $43.7 million in the 2026-27 budget, for an increase of $400,000 million or 1%

• Federal: $2 million in 2025-26 budget; $1.7 million in the 2026-27 budget, for a decrease of $300,000 million or 13.1%

• Total: $140.1 million in 2025-26 budget; $142.1 million in the 2026-27 budget, for an increase of $2 million or 1.4%

According to the presentation’s revenue highlights, assessment growth continues but at a slower pace, investment earnings are less than 2025 levels because of federal interest rate drawdown and earned income tax, real estate transfer, per capita returns to trend after multiple years of over-performance.

Basic education funding assumes a $500,000 increase over 2025-26, special education funding is assumed to be flat compared to 2025-26, and Ready to Learn funding is assumed to be flat compared to 2025-26. NASD does not qualify for equity funds.

Other subsides, including transportation, Social Security and pension, are funded at 2025-26 rates. State gaming funding is flat compared to 2025-26.

Federal funding is down $300,000 because of school-based access program drawdown. Title programs are assumed to be flat compared to 2025-26.

A summary of district expenditures includes:

• Salaries, $53.5 million, 2025-26 budget; $55.9 million, 2026-27 budget, for an increase of $2.4 million or 4.4%

• Benefits, $35.7 million, 2025-26 budget; $37.9 million, 2026-27 budget, for an increase of $2.2 million or 6.2%

• Charter schools, $7.4 million, 2025-26 budget; $10 million, 2026-27 budget, for an increase of $2.6 million or 35.2%

• Transportation, $9 million, 2025-26 budget; $11 million, 2026-27 budget, for an increase of $2 million or 22.4%

• IU-20 services, $5.4 million, 2025-26 budget; $7.2 million, 2026-27 budget, for an increase of $1.8 million or 32.2%

• BAVTS, $3.4 million, 2025-26 budget; $3.7 million, 2026-27 budget, for an increase of $300,000 or 8.7%

• NCC, $1.1 million, 2025-26 budget; $1.2 million, 2026-27 budget, for an increase of $100,000 or 9.4%

• Debt service, $12.7 million, 2025-26 budget; $13.7 million, 2026-27 budget, for an increase of $1 million or 8.2%

• Capital reserve, $500,000, 2025-26 budget; $1 million, 2026-27 budget, for an increase of $500,000 or 100%

• All other, $11.9 million, 2025-26 budget; $13,2 million, 2026-27 budget, for an increase of $1.3 million or 10.5%

Neiman analyzed the district’s financial situation.

“What’s good is that market value is going up. The assessment value is not keeping up with the market value,” Neiman said. “That goes back to the county and that they have not reassessed any properties since 1995.”

According to the presentation’s market and assessment value trend chart, “the 2024 market value increased 19% over 2023.” This provides a “negative correlation to many state subsidy calculations,” states the chart.

“The 2024 assessment value increased 3.7% over 2023,” the chart said. The market-assessment ratio is “down to 26% as of 2024.” This “leads to improprieties between similar properties,” according to the chart.

According to the presentation’s chart for assessment value by municipality, Allen Township has the highest assessment value in the district. A bar graph depicts Allen Township assessment value as appearing to have increased from approximately $60 million in 1999 to approximately $350 million in 2025.

Changes for the other NASD municipalities’ assessment value includes:

• Lehigh Township: increased from approximately $225 million in 1999 to approximately $300 million in 2025

• Moore Township: increased from approximately $200 million in 1999 to approximately $275 million in 2025

• East Allen Township: increased from approximately $145 million in 1999 to approximately $225 million in 2025

• Northampton Borough: increased from approximately $175 million in 1999 to approximately $225 million in 2025

• Bath Borough: increased from approximately $45 million in 1999 to approximately $50 million in 2025

• Chapman Borough: unchanged from approximately $10 million in 1999 and approximately $10 million in 2025

The presentation notes the average tax increase has been 1.3% over the last five years and 1.77% during the last 15 years.

Neiman cited “unfunded state mandates” as an overall reason for the district budget deficit.

According to the presentation’s Northampton County millage rates chart, “NASD remains in the bottom half of school district millage rates in Northampton County” and “on an equalized millage basis, NASD remains in the bottom half of all Lehigh Valley school districts.”

Neiman noted, “I have a lot of estimates in the budget. We will continue to refine it.”

“It looks like we have our work cut out for us over the coming months,” board President John Becker said.

The school board next meets 6:30 p.m. Feb. 9 in the auditorium of Northampton Area High School, 1619 Laubach Ave.