Southmoreland School District stays within state tax index
At the recommendation of Southmoreland School District Business Manager Bill Porter, directors passed a resolution to stay within the 4.1 percent increase index set by the state as part of Act 1.
"Under Act 1, during the initial process of planning the budget, we have to make one of two choices," Porter said. "We either have to stay within the tax index percentage increase (which for Southmoreland is a 4.1 percent increase over the previous millage rate) or we have to have a full-blown budget prepared and ready for public viewing by the end of this month."
To stay within the index this year, the district could raise the millage rate for residents in Westmoreland County as high as 2 mills (from 69.5 mills to 71.5 mills) and the rate for residents in Fayette County by no more than 6/10ths of a mill (from 13.8 mills to 14.4 mills).
Porter said Thursday that last year's increase was 5.8 percent, this year's is 4.1 percent and next year's will be much lower.
He added that if the district were to raise taxes to the allotted millage index set by the state, it would produce just over $289,000 in revenue to the district, but he does not believe he will propose a millage rate increase for the 2010-11 budget.
"Last year, I predicted that we would probably not need any tax increase in the 2010-11 budget," he said. "I still feel the same way, and in all probability (that) will be what I recommend."
While Porter said the district is financially sound for the upcoming fiscal year, there will be some real financial challenges in the 2011-12 and 2012-13 fiscal years.
In 2011-12, Porter said there are two questions that could have major financial implications on the district.
"Currently the district's funding from the state for basic education is about $8 million, with about $1.25 million of that propped by stimulus money," he said. "So when the stimulus money runs out and the state doesn't have funds, where are they going to come up with the balance of that money?"
The second question is, what will the next governor do concerning education when Ed Rendell's term is up.
"Rendell was a pro-public education governor," Porter said. "Whoever the next governor is, are they going to support education or are they going to cut it?"
As for the following fiscal year, Porter reminded directors that the current retirement fiasco will come to a head at that time.
"The situation is so dire that I can't even think about it anymore because the district can't meet the requirements that are going to be demanded," he said.
Districts currently are on a defined benefit retirement where, based on a formula, benefits for retirees of a district are determined.
For example, for someone who has been in the district for 40 years, based on the defined benefit retirement plan, their annual pension for the rest of their life would more than likely be what their final annual salary was, even if it was $75,000 a year.
A better solution, Porter said, would be for the state to go with a defined contribution plan, where there is no formula that guarantees a set amount but, instead, is based on investment return.
Unfortunately, it's a "political hot potato" that no legislators want to deal with for fear of losing their post, he said.
If things aren't changed soon, it will be just a few more years before as much as 30 percent of salary expenditures will be dedicated to retirement purposes.
"If this keeps up, there is no other solution to this than a major, major tax increase, and I don't even want to think about it," he said.