BELLEFONTE — During the Bellefonte Area School District’s last meeting, Ken Bean, BASD’s director of fiscal affairs, presented the district’s five-year financial plan. While the plan takes a conservative perspective, it projects a positive financial outlook for the district through the end of the 2020s.

“We try to keep (the five-year financial plan) conservative, we underestimate revenue slightly, maybe overestimate some expenditures – it’s a guess,” Bean explained. The actual results of the financial plan are subject to numerous factors that become less concrete the further into the future the plan looks. Built off a series of educated assumptions, the plan is meant for long-term forecasting.

Based on that forecast, the Director of Fiscal Affairs suggested that minor tax increases should be expected in the future to support the continued improvement and maintenance of the district’s educational quality.

The financial plan assumes the district’s fund balance will remain at 7 percent and that real estate assessed value will grow at a rate of 1.5 percent per year. Bean explained the actual growth in value is always hard to pin down, but that the increase has consistently been exceeding expectations.

“It fluctuates greatly some years, and that’s where we lose out as opposed to like a State College that has a lot of commercial properties added,” he explained. Although the increase is modest compared to more commercially oriented communities like State College, a 1.5 percent increase in real estate value would bring in $460,000 in revenue each year.

In terms of earned income tax, the district estimates they can expect $7 to $8 million in revenue.

“Every year that number has been really growing, and every year I keep getting surprised that it’s growing as much as it is,” he said. The director noted the district is “still very strong in that regard,” in part due to the efforts of the tax collectors in collecting back taxes. The 1.05 percent earned income tax is not projected to change.

“One of the big changes is in the federal taxes; you’ll see a big decrease. That’s because the ESSER funds are no more,” said Bean. With the depletion of Elementary and Secondary School Emergency Relief (ESSER) funds, which were used to address the impact of COVID-19 on schools, in September, federal funding has decreased from $2.57 million to $505,000. The remaining federal funds come largely from Title I, II and IV grant revenue, and are expected to remain level with little increase.

The financial plan also projects that the Basic Education subsidy will remain flat for the 2025-26 school year, with a 1 percent annual increase thereafter. The Special Education subsidy will range from $2,000,000 to $2,150,000, RTL funds will stay at current levels ($698,833) and the Transportation subsidy will remain unchanged at $650,000.

In terms of expenditures, the district’s debt profile changed most dramatically.

“Basically, we’re at 5.6% with a 4.9% max. That sounds really bad, but in this scenario it’s not that bad at all,” Bean said. Inflated by borrowing for the new elementary school, the district’s debt includes nearly a million dollars in surplus. However, the director expressed confidence that the district could reduce that amount easily, even while overestimating expenditures and underestimating revenue.

The district has allocated additional funds not only to cover the standard, half-million-dollar investment set aside for capital projects across existing buildings but also to provide extra resources to bring whichever building remains open up to a standard comparable to Marion Walker and the newly constructed elementary school building.

Over the five-year period, the funds ranging from $500,000 to $1 million, will benefit either Pleasant Gap or Benner Elementary.

The financial plan does not however account for the cost reductions the district anticipates with the opening of a new facility and the closure of one or more less cost-efficient buildings.

“It’s still too early to even guesstimate what those savings – if there are any – could be,” Bean said.

The changes in the debt profile are primarily attributed to the issuance of bonds in the recent past and potentially again in 2025. While two of these bonds were used to refund existing bond issues, at least one provided new funding for the district.

In 2025, the board plans to seek approval for an estimated $10 million bond. While interest rates may fluctuate, the bond is anticipated to result in a half-million-dollar annual expense, according to Bean. He said he hopes the full $10 million will not be needed for the new building, allowing any remaining funds to be allocated to improvements for whichever other building remains open.

“Again, this is all speculation,” he reiterated.

“Our biggest expenditures every year are salaries and benefits,” he explained.

Health insurance costs, for example, had to be increased last year due to several high-claim cases. According to Bean, most of these high claims have since ended, though at least one new claim has been submitted.

“I have to look at those rates as we go forward and see if we’re going to have to look at another increase next year or not,” he said.

As the budget extends further into the future, expenditures on items such as staff become more uncertain, as contracts are set to expire in the coming years, and pay rates and staff numbers are likely to change.

Bean said that, “Hopefully we’ll be able, through attrition, to maybe pare down some positions as well.” He assured the board that it would not necessarily require layoffs or increasing class sizes in the future. Instead, the district would look at reducing positions as employees leave.

The financial plan also assumes CPI tuition will increase 5 percent, but notes it may decline if Penns Valley and Bald Eagle Area send ninth grade students to CPI, as has been discussed.

Charter school tuition costs will be $3,700,000, $3,900,000, $4,000,000 and $4,250,000 per year, and likewise, special education costs with the Intermediate Unit (IU) will continue to increase over time.

Overall, Bean said of the fiscal situation, “It’s not terrible, but we’re not swimming in funds. I don’t want people to think we have all this money laying around, because we don’t.”