Keystone eyes tax hike to cover rising costs

Health care insurance up 11%, but board wants to invest in more security, CTE staff

MILL HALL -- A majority of Keystone Central School Board members appear poised to approve a 3.83% property tax hike next fiscal year to help pay for more staffing, more school safety measures and higher employee health insurance costs.

And while the board did not vote on a preliminary budget or tax hike at its meeting this week, all board members present essentially agreed to the tax and budget increase. All told, the proposed preliminary expense budget comes in at about $89 million.

A 3.83% increase would generate about $999,981 and would represent, on average, a $55 rise for residential property owners in Keystone next year, according to an estimate released by the board.

Superintendent Dr. Jacquelyn Martin opened the meeting by clarifying that there would not be a vote, just a review of three budget and tax scenarios.

Those scenarios are as follows:

-- No tax increase.

-- A 2.55% increase, or an average hike of $36 annually per household.

-- A 3.83% increase, or an average hike of $55 annually per household.

-- An additional option not considered by the board would impose an about 5% tax increase, as allowable for Keystone under Act 1 "Taxpayer Relief Act."

"There isn't any one thing that is contributing to all of the increased expenses," Dr. Martin told the board and audience. "The budget increase is being proposed because the tax increase generates revenue to close the budget gap without dipping into reserves. An increase would present a balanced budget."

Martin said because of inflation, the cost to operate schools in the district has increased.

"The school district has not raised taxes in three years; the last time we did an increase was for the 2019-2020 school year," she noted.

The board was given three options.

Specifically, the 3.83% increase to take effect this July 1 would help pay for:

-- Added staffing at the Career and Technical Center (CTC) costing about $340,000 (salary/benefits focusing on Homeland Security Education).

-- More "school safety support" at a cost of $180,000 (salary and benefits).

-- To maintain the district's $17 million budget reserve.

-- Pay for the projected $1.15 million increase in health care insurance for employees (11.9% increase over last year).

-- Help fund $2 million in Renew America Schools program.

-- Help pay the district's bond (loan) obligation of $250,000.

"Prior to tonight, we'd been bringing forward four different financial pictures, but after the last finance committee meeting, we were asked to eliminate the scenario which had a tax increase to the maximum available expenditure because we felt we could balance our budget without going to the maximum increase. Consequently, the finance committee directed us to come up with these three potential scenarios for you," Dr. Martin said.

District Business Manager Joni MacIntyre presented the budget increase.

"The first scenario is the zero percent tax increase. This would leave you a deficit, a shortfall of $835,907."

Dr. Martin asserted, "In order to balance the budget, though, you would need to tap into the funds balance; to use the reserves in order to balance the budget."

MacIntyre continued with the second option, stating, "This picture shows a 2.55% tax increase; 50% allowable as per Act 1. This would bring the shortfall down to $347,997. It uses the planned general fund to balance this budget. So if you would choose to go this route, you would use about $350,000 out of the general fund balance. This would have a median assessed (property) value of $99,500, and on average, it would add about $36 per household per year."

Martin said her administration recommends the 3.83% increase.

"The impact would be, again, we've not raised taxes in three years. It adds in the expenditures for that additional staffing for CTE programming and those for additional security support, which was requested by the board. It allows us to include the matching grant funds of $2.1 million. We can maintain this without taking out any general fund balance with this option. The (tax hike) generates about $999,981 (additional) annually, which means year over year, you'll see that increase. Again, that's about an average of $55 per year per household," MacIntyre explained.

Of note, the "level up" state subsidy to Keystone for next fiscal year will be $1,741,727, while the basic education appropriation comes in at $1,472,915 and the district will receive a $268,713 increase for special education.

While the administration is suggesting a property tax increase, school board members didn't hesitate to express their views on the proposed 3.83% increase.

In attendance were Roger Elling, Tracy Smith, Butch Knauff, Jeff Johnston and Rick Schulze, while Polly Donahay and Wayne Koch attended virtually. Absent were David Dietrich and Elisabeth Lynch.

Knauff addressed the need for funding to improve school safety and security,

"I know personally I'm not in favor of raising my taxes by $55 a year, but I think that we all have to bite the bullet. We promised that we're going to do something to help with the security in school, and if it's going to require me to spend $55 a year, so be it. We have to bite the bullet and do something. A big part of this is going to be additional staff hired. We know we have to do something to help with security. To do that, we have to pay for it. So, part of paying for it is budget money. We're going to have to budget money to pay for additional staff, along with some other items we're looking at."

Johnston provided his comments in support of the 3.8% tax increase, and explained, in part, why he believes it is necessary.

Johnston said the district has done a good job over the past three years of maintaining the budget without tax increases; however, the district is now facing maintenance issues with school buildings, such as the need for a new HVAC system at CMHS.

"This has obviously been a crazy year for everybody as far as inflation rates. We're trying to manage the cost to make sure that the buildings are adequately maintained and we're also seeing an increase in health insurance costs," he said.

Johnston also addressed the cost to strengthen school safety and security measures.

"We also need to handle the safety issues. There are a lot of things there that we have to fund and we need to have the dollars to do it."

Elling, who is board vice president, provided his view, saying, "I've been approached by numerous constituents saying, 'You know, why don't you just do little increases at a time instead of doing these huge increases?' I hate taxes as much as the next person. Trust me, I hate them. But unfortunately, for us to have to keep the school district running and for it to be safe and for our employees to be taken care of as far as their health goes, I think this is what we're going to need to do."

"We're looking at the increase in health insurance. We're looking at (rectifying) safety and security issues. It's just -- we've been lucky the last couple of years that we haven't had to have a tax increase. The unfortunate part is that it has finally come back. But like I said, now we do have to do it. So hopefully, if we have to do this again, it's not going to be anywhere near this amount," Elling added.

After more than one board member mentioned the need to replace the HVAC system at CMHS, Dr. Martin added, "We're spending a lot of time and energy and dollars maintaining the units just to keep them running. You can talk to anybody who works in this facility; the temperatures are not easily controlled because of the failing equipment."

The cost of operating and maintaining Keystone schools comes amid a continued -- albeit slight -- decrease in enrollment. March saw total district enrollment of 3,447 vs. 3,570 in March 2022. Secondary (middle and high school) enrollment stands at 2,244, down from 2,325 last year, while elementary student population is at 1,203 vs. 1,242 last year.

Following Thursday night's presentation of the proposed tax increase and discussion among board members about their respective positions on the proposed 3.83% tax increase, Dr. Martin concluded, "The board is in favor of us presenting you with a balanced budget that includes a partial tax increase with a 3.83% impact in order to provide you with a balanced budget."

The board is scheduled to vote on the budget at its May 11 meeting, and then adopt it by June 15.