As the calendar turns to May, directors in school districts across the state dig in their heels for final budget discussions. What many of them are finding out this year is the fallout from COVID-19 reaches far beyond the classroom.

“This is one of the most difficult budgets I have had to work with,” said Dr. Alan Lonoconus, interim Palmerton Area School District superintendent. “There are so many question marks, even more so than we had with the economic downturn in 2008. We just don’t know what is next.”

Paying employees

The Pennsylvania Legislature passed Act 13 shortly after schools closed down in March, which meant all school employees, including secretaries, custodians and maintenance staff, as well as third-party contractors such as the bus transportation company would continue to be paid.

“We get a lot of people thinking that districts are saving all of this money because the schools shut down,” Lonoconus said. “There are some savings, but they are not fantastic by any stretch. The Legislature made it very clear that districts continue to pay everyone.”

Palmerton did renegotiate the remainder of this year’s transportation contract with bus company George’s Transportation. Lonoconus estimated that savings to be around $90,000.

“If this does extend into the fall, we don’t know if we can reopen those contracts for next year yet,” he said.

Savings on things like supplies, conferences and the like should trim department budgets as well, but that would be utilized to offset other cash flow issues.

While it’s far too early to pin down the local revenue that Palmerton will lose due to the economic effects of the COVID-19 pandemic, state organizations such as the Pennsylvania Association of School Business Officials are painting a grim picture. Fewer people working means fewer earned income tax dollars and more homeowners waiting longer to pay their property tax bills, if at all. If that cash isn’t coming into the district’s accounts, neither is the interest it would normally accrue from it. Nearly 60% of Palmerton’s revenue comes from those local sources.

“Talking to our contacts, we’re projecting somewhere between a $784,425 and $1.22 million loss of local revenue,” Ryan Kish, Palmerton business administrator, said. “We know it’s going to be bad. At this point we just don’t know how bad or for how long.”

The 2020-21 budget

Based on numbers presented during a workshop Tuesday night, Palmerton is projecting $34.03 million in expenses for 2020-21, and $30.92 million in revenue. That assumes a $1.22 million loss in local revenue, the worst of the two scenarios outlined to the board.

Given the budget gap that would leave, directors discussed a potential property tax increase Tuesday night. For the sake of discussion, Kish presented the board with three estimates; a half-mill increase, a 1-mill increase and a 3.4% increase, which is the most the district could raise taxes per the state’s Act 1 index.

A 1-mill increase was the consensus of the board. A taxpayer with an average property assessment in the district would see their bill increase by $44 under this scenario. It would generate an additional $291,000 for the district.

“I can’t see us doing nothing, but a top-of-the-line increase is an insult to the people who are not working right now,” Director Kate Baumgardt said.

Audrey Larvey concurred, stating that the board can’t make the same mistake it did by holding the line on taxes two years in a row.

“I think 1 mill, which is the middle of the road, is fair and reasonable,” Larvey said.

While nobody likes a tax increase, board member Sherry Haas said, it may be the only way to prevent a bigger hike in future years.

“I wish we would have been able to look into the future to see what we would be doing to ourselves when we didn’t raise taxes the last few years,” board President Kathy Fallow said. “We tried to be fiscally responsible, but unfortunately we put ourselves in a hole.”

Director Earl Paules agreed with the 1-mill increase, but said the board needs to be cautious with how aggressively it leans on taxpayers to cut into the deficit.

“There might be a point where the taxpayers just don’t pay their bills and then we’ll be hurt far more than what we are now,” Paules said.

If the board continues with a 1-mill increase, the district is projecting a $2,378,394 use of its fund balance for 2020-21.

“This is a huge guess because of so many unknowns,” Kish said.

Two of the biggest increases in Palmerton’s 2020-21 budget, as they are every year, are salaries and benefits. Salaries are set to increase by $164,000, while the district will kick in an additional $148,000 to the Public School Employees’ Retirement System over 2019-20. Kish is also projecting a $150,000 increase in tuition for nonpublic schools such as Behavioral Health Associates.

Tuition to cyber and charter schools are also a concern, as Lonoconus pointed out that more families may be looking at that option if school doesn’t return to a traditional setting in the fall.

The district asked each of its departments to cut budgets by at least 5 percent from the preliminary budget presentation in February.

A majority of the district’s budget is already set, either through prior negotiated contracts or mandates from the state, such as the PSERS contribution.

“It’s hard for a district to keep its revenues up with its expenses,” board member Barry Scherer said. “Even if you raise taxes to the index, you’re barely able to pay for the fixed increases you see each year. That’s just a fact of life with the way it is set up right now.”

CARES Act Funds

The Pennsylvania Department of Education submitted its Elementary and Secondary School Emergency Relief Fund application to the U.S. Department of Education this week to obtain approximately $523.8 million in emergency, one-time funds to help schools respond to COVID-19 impacts.

Under the federal Coronavirus Aid, Relief and Economic Security Act, at least 90%, or $471 million, of the funds must flow through to traditional public schools and charter schools. Each entity will receive an amount proportional to federal Title I-A funds received in 2019 under the Every Student Succeeds Act.

“We’re projecting to get $266,000 from that here in Palmerton as a one-time shot in the arm,” Lonoconus said.

He advised the board to think about using the funds to purchase additional Chromebooks, which would put the district in a better position should students not return to the classroom as expected in September.

Dan Heaney, the district’s director of technology and curriculum, said the pre-COVID-19 plan was to gradually move to a one-to-one program where each student receives a laptop for the school year.

“We were going to start that with the junior high next year and the entire high school the year after that,” Heaney said.

When the school shutdown hit, however, Palmerton distributed around 300 Chromebooks to students across all grade levels who needed them to participate in online learning.

“If this extends into the fall where students are not back in school, I can’t pull those laptops back and give them to junior high students just to say we are in a one-to-one program,” Heaney said.

Heaney told the board it would take purchasing around 750 additional Chromebooks to get one in the hands of each student in grades 7-12, and every elementary student who needs one to participate in online learning.

“Then when we do come back to school, we would have the one-to-one program rolled out at the secondary level, and the laptops we gave to elementary students to participate in online learning would go back into the elementary classrooms.”

While nobody knows for certain what will happen in the fall, administrators are preparing as if online learning will continue in some form.

“If you took a poll across the state right now, I think you would find the opinion is we won’t have a traditional school opening like we normally see,” Lonoconus said.

Timeline

Palmerton is scheduled to vote on the proposed final budget at its May 19 meeting, and the final budget on June 16.