School piggy banks feeling the pinch
Balancing a budget during challenging economic times can be one of the more difficult tasks a family faces. Decisions usually boil down to making certain that the necessities are paid for.
Similar to Pennsylvania families, Governor Tom Corbett and the state legislature have had a variety of challenges in attempting to balance the state’s budget, and have cut funding to the state’s public schools for the second straight year.
A shell game?
In Pennsylvania, school funding is divided into three components, according to Dave Davare, director of Research Services for the Pennsylvania School Boards Association. Approximately 35 percent of public school budgets are derived from state money; 55 percent comes from local revenue; and 10 percent is federal money or miscellaneous, like philanthropic contributions.
Those percentages are averages. Some school districts—for example some of the more affluent communities in the Philadelphia suburbs—might rely heavily on local revenue, while some urban districts—like Harrisburg and York cities—may depend more upon state and federal money.
“There’s not been a formal funding mechanism for basic education funding since the Ridge administration,” Davare said. “In Pennsylvania, 74 percent of local revenue comes from local property taxes, and 48 to 49 percent of total revenue for the school districts comes from property taxes.”
One could conclude one logical solution would be to raise local property taxes in order to raise more school revenue, but it’s not that easy.
“With the introduction of Act 1 in 2006, the state dictates that you have an index that you cannot exceed when raising property taxes,” said Eric Wolfgang. He’s been a school board member for 13 years in the Central York school district. “You can vote not to exceed the index, you can apply to the state for an exception or you can put it (tax increase) on the ballot as a referendum for the public to vote on in the May primary. The index has been between 1.5 and 2 percent, and that’s barely kept pace with inflation for the past two to three years.”
The index for 2012-2013 is 1.7 percent.
Not enough to go around
And there are other devils in the budget details. Funding for charter and cyber schools is one, as well as the continually escalating costs to school districts for the Public School Employees Pension System.
“School districts were getting reimbursed between 30 and 40 percent for the cost of charter schools,” Wolfgang said. “That was all taken off the table in one fell swoop. That’s really hurt York City because they have a lot of kids attending and they’re paying millions of dollars to charter schools.
“The other issue that’s come into play is not allowing for continued proper funding of the pension plan,” Wolfgang continued. “They have ratcheted up the rate again, and it will distress school districts. It’s at 12 percent this year and will be 16.5 percent next year and 21 percent the following year. Central York’s employer contribution will jump from $1.5 million this year to $3 million to $6 million.”
PSERS is funded by contributions both from school employees and from school employers (essentially the school board through the taxpayers). School employee retirees are guaranteed specific pension payouts based on years of service and contributions made both by the employee and employer. These pensions are guaranteed regardless of economic conditions in the state and country and regardless of the health of the stock market.
Doing the math
What can school districts do to overcome these and other funding obstacles? According to both Davare and Wolfgang, each district is impacted in different ways, and some are better prepared than are others. Wage freezes for employees, drawing down fund balances (essentially a rainy day fund), raising taxes, and reducing the number of teachers and staff through program elimination are some alternatives. According the Pennsylvania school code, teachers can’t be cut for financial reasons. Yet, according to Davare, salary and benefits make up 74 percent of instructional costs.
“The last couple of years have changed the dynamics of how school boards look critically at all of their programs,” Wolfgang concluded. “There probably was some fluff, like in any business, but that’s gone now. We will have to look critically going into the future because the rules of the game have changed.”
Government mandates crush district budgets
The taxpayers of the South Western School District have paid approximately $4 million dollars more for school construction projects over the past several years than they should have paid.
That’s primarily because of the prevailing wage law passed in 1961 that requires for any public works project of more than $25,000, the workers be paid at prevailing wage based on the union wage scale.
The law, modeled after the federal law, came about through the Davis-Bacon Act, and was passed by Congress in 1931. The intent of the original law was to prevent African-American workers from the South from migrating north to take construction jobs at a lower wage than white construction workers in the North.
Two years ago, Jeff Mummert, business administrator for South Western, had a roof that required repair. Bids were mistakenly let for the job neglecting prevailing wage. The bid came back at $86,000. Mummert had to re-bid the project to include prevailing wage, and the project came back at $124,000—a 50 percent increase in the cost of the project.
According to Mummert, when the district built a new elementary school in 2005, it cost about $2 million more because of prevailing wage, and an extensive school renovation project more recently cost about $1.5 million more for the same reason.
“Pennsylvania is losing about $400 million a year because of prevailing wage,” Mummert said. “We’re not only talking about school districts, but roads and bridges, any project done at the municipal, town, or borough level. About 90 to 95 percent of school budget items are mandated.”
David F. Salter is a freelance writer based in York, a father of three daughters and blogs at www.fathersagainstdaughtersdating.com