Highlands facing $5M deficit in coming fiscal year

Highlands School District plans to use reserve money to cover a nearly $5 million budget deficit projected for the 2020-21 school year.

Contributing to the sizable deficit are an anticipated sharp decline in local revenues because of the coronavirus pandemic and a proposed $3 million increase in spending.

“It’s not a pretty picture from the revenue side,” Business Manager Lori Byron said. “Hopefully, with opening up the economy a little bit, things may not get as bad as they could, but I don’t think we want to be overly optimistic with our revenues.”

In a presentation to the school board during a virtual meeting Monday, Byron said the district’s proposed budget includes about $49 million in spending on revenues of about $44.1 million. The property tax rate would remain 24.88 mills.

Byron said the budget gap would be covered by the district’s reserve fund balance. The district started the fiscal year with more than $16 million in reserves but will use a little more than $1.2 million of it this year, she said.

Using $5 million in reserves next fiscal year would knock down the fund balance to just under $10 million, Byron said.

A study produced by the Pennsylvania Association of School Business Officials projected that Highlands could lose between $912,000 and $1.1 million in local revenue.

Byron said she followed PASBO recommendations in reducing what the district expects to collect from current and delinquent property taxes, earned income taxes, real estate transfer taxes and interest earnings.

Byron said she expects her forecasts to change between now and when the board adopts a final budget in June, but the reductions she expects now include:

• Earned income taxes collected: down by 15%, to $1.68 million from $1.98 million.

• Real estate tax collection rate: down 2.25%, to 85.75% from 88%.

• Real estate transfer taxes collected: down by 10%, to $180,000 from $200,000.

• Delinquent real estate taxes collected: down by 30%, to $1.4 million from $2 million.

• Interest income earned: down by 80%, to $33,000 from $165,000.

Byron said she expects state and federal funding to be unchanged.

Byron said the district’s proposed $3 million increase in spending includes a $2 million debt payment that has returned. It had not been in the budget the past two fiscal years because of a refinancing, she said.

District officials need to see whether the budget can be adjusted to reduce how much of the district’s reserves are needed to balance it, Byron said. The 2021-22 budget “could be just as problematic and be affected just as much” from the pandemic’s lingering effects, she added.

“If we’re using $5 million of the fund balance this year, we’re going to be using $5 million in the following year,” she said. “We’ve got to really look at our expenses and see if there’s any options to reduce some of our expenses.”

Superintendent Monique Mawhinney said administrators and principals will look for cuts that can be made without taking programming away from students.

“We’re going to have some difficult times ahead,” she said. “It’s sad, but it’s where we’re at.”