Increased expenses and the expiration of key grants have Palmerton Area School District facing a $1.41 million 2025-26 budget gap in the early fiscal planning stages, officials said during a Tuesday night school board workshop.

Current projections show total expenditures of $41.95 million, Business Manager Ryan Kish said, marking a $2 million, or 5.1%, increase from the previous year.

Staffing, Kish said, remains the largest expense, consuming 65% of the budget at approximately $27.1 million. Tuition and outplacement costs, including cyber and charter school fees, account for roughly $7.2 million or 17% of the budget. Additional major categories include departmental costs at $2.4 million (6%), debt service at $2.1 million (5%), transportation at $1.2 million (3%), and infrastructure and insurance at $1.1 million (3%).

“Salary and benefits remain the primary cost drivers, with salaries expected to rise by $562,000 and medical costs increasing by $471,000,” Kish told the board.

The district has proposed several new positions, including a certified school nurse, a dean of students, a STEM teacher, an ESL aid, a social worker and a part-time secretary.

A major concern in the budget discussion was the expiration of Elementary and Secondary School Emergency Relief funding, which previously supported curriculum initiatives such as the “Leader in Me” program, as well as some district summer and after-school programming. With the loss of ESSER grants, the district must now absorb a $245,000 increase in curriculum costs into its general budget.

The district’s technology replacement cycle also factors into the budget increase, with a $126,000 increase allocated to replacing aging student devices.

“We do have to have a replacement cycle, because (the Chromebooks) do go home with students and get used heavily,” Dan Heaney, who heads Palmerton’s technology department, said.

The district, he added, follows a five-year replacement schedule, and this year’s cycle is a “big hit,” requiring a full grade’s worth of devices to be replaced.

Revenue projections indicate that local sources will contribute an additional $462,000 over last year, primarily from assessments, interest earnings, and earned income tax. State funding is expected to increase by $655,000 to $16.2 million, largely due to Social Security and retirement reimbursements. However, Kish said the district does not yet account for potential changes in basic or special education funding proposed by the governor.

Federal revenue remains uncertain, with the budget currently reflecting $507,000 from federal sources. If all federal funding were lost, Kish said, the district’s budget deficit would rise to $1.9 million.

Under Pennsylvania’s Act 1 Index, the maximum legal tax increase allowed for the district is 5.4%, which would generate roughly $1 million in additional revenue.

One of the most significant ongoing expenses is cyber and charter school tuition, which is expected to rise by $346,000.

“Charter school and cyber school costs increase like they do every year,” Kish said.

He estimated that the district will spend over $2 million on charter tuition alone.

The district plans to hold additional budget workshops in the coming months, with a more detailed presentation scheduled for May 6. The proposed final budget will be up for adoption on May 21 and made available for public review, with the final budget set for approval at the June 17 board meeting.

“These numbers are going to change a lot,” Kish said Tuesday. “The budget remains a work in progress as we evaluate spending priorities and potential revenue sources.”