Increases in pension payments, special education and other costs are forcing school districts in York County to take a serious look at using money stashed in savings accounts to cover upcoming budget deficits.
School districts in York County had surplus fund balances ranging from $1.4 million at York Suburban to $17.8 million at Spring Grove at the end of the 2011-12 school year, the latest official numbers available from the state Department of Education.
The York City School District had a negative balance, with a deficit of $3.1 million.
School district officials say those numbers have changed since the last report, and in many cases those funds have decreased. And they're falling at the same time school officials might have to dip into them to balance their budgets.
Dropping funds: Just three years ago, the West York Area School District had the highest surplus fund balance in the county, with $15.6 million after the 2010-11 school year. But that number has dropped steadily since that time, said Superintendent Emilie Lonardi.
Lonardi said there was a time a few years ago when she thought the district would never face serious financial woes.
But the district has used more than $1 million from its savings in each of the past four years to balance the budget, and she estimates that by the end of the 2014-15 school year, the district will have only about $6.9 million.
"I totally don't have that sense of security anymore," Lonardi said.
Based on pension projections, Lonardi expects the balance to drop to $4.1 million by the end of the 2015-16 school year. Because the school is self-insured, the district puts aside about $2 million for insurance claims. That leaves just more than $2 million for any unforeseen costs.
Lonardi said she will grow uneasy if those predictions hold true. The district will have little to fall back on in case of a lawsuit or an unexpected maintenance expense, or if a company in the district winds up paying lower taxes because of an assessment appeal.
State trend: The pattern of dropping surplus funds in York is the opposite of the statewide picture, said Tim Eller, spokesman for the state Department of Education. In the 2011-12 report, schools put an extra $250 million in their collective savings accounts, taking the balance to a $3.5 billion surplus in Pennsylvania, Eller said.
That growth happened despite a state-imposed 8 percent cap on surplus funds without a designated use. The cap was set in 2003 to prevent school districts from raising property taxes while also sitting on a large stash of savings.
Keeping some savings for emergencies is a good idea, Eller said, but not when the stockpile is millions of unused dollars.
"The department believes that it is prudent to have surplus funds for emergency purposes," Eller said. "But they're sitting on a vast amount of money that is intended for economic downturns."
Eller reiterated that a healthy savings account is good for a district, but he added the level of being "healthy" is up for debate: That money, after all, is largely from excess property tax funding.
"The money (taxpayers are) putting into the school district is being put away," Eller said.
But in York County, the surplus funds are dropping.
Half of York County's school districts showed a drop in their undesignated fund balances, with the average dropping from $4.5 million in 2010-11 to $3.8 million in 2011-12. The average total surplus dropped from $7.8 million in 2010-11 to $7.6 million in 2011-12.
School savings: But some school districts have been able to continue saving money. Red Lion's total surplus has grown consistently over the past five years, from $3.1 million in 2007-08 to $13.8 million in 2011-12.
About $5 million of that is available for general use. The remaining balance is already set aside for costs such as retirement contributions or debt service, said district business manager Terry Robinson. Robinson said the school board has a policy to keep 5 percent of the district's budget in unassigned reserves, in case of emergency costs. Above that, Robinson said the board reviews options for committing the funds to pay for specific projects.
For example, the school board committed $500,000 saved in the 2012-13 school year to pay for required paving at the Larry J. Macaluso Elementary School building because of a housing project near the school.
Robinson said the paving won't occur until the housing project is finished. But rather than raise taxes at that time, the school district put the money aside ahead of time.
In Dover: The Dover Area School District has also managed to save additional funds in the past several years. The district has $3.8 million in undesignated funds and $6.8 million in committed funds, designated to help pay for retirement costs and debt service, among other things.
The savings that are sometimes unpopular with taxpayers are now keeping the district from making tough decisions like furloughing teachers or cutting programs, said business manager Belinda Wallen.
By the end of this school year, the district is projected to use $1.7 million from its fund balance, Wallen said. The district also most likely will use a combination of committed and unassigned funds toward the $6.1 million deficit the district faces for the 2014-15 school year, she said.
Projecting to the future, Wallen said she expects the fund balances to sustain the district until the 2017-18 school year "without a problem."
Wallen said using the savings will help to maintain Dover's quality of programs despite the increasing costs to the district.
Surplus strategy: The general goal for surplus funds is to use them to cover one-time, unexpected costs, said Corinne Mason, director of finance and support services for York Suburban School District.
Typically, Mason and other school finance officials don't view pension contributions to the Pennsylvania School Employees' Retirement System as a one-time or surprise cost.
But with those contributions expected to grow by more than 21 percent in the 2014-15 school year, and leap again the next year by more than 23 percent, school districts have few options for covering the cost aside from using their general fund surpluses.
Offsetting costs: Spring Grove might need to use those funds this year to offset pension costs, said business manager George Ioannidis.
In the first draft of Spring Grove's budget for the 2014-15 school year, the budget increased by almost $2.4 million, in large part because of rising employer contribution to retirement expenses.
Ioannidis said school districts now have a balancing act between rising costs and the tax caps that limit how much additional revenue a district can collect from the public.
Having a surplus fund to help cover rising pension costs buys a district time before making cuts to programs, Ioannidis said. Otherwise, school officials would have to make cuts "under duress" without the time to fully analyze the effects, he said.
Using savings to cover a deficit gives school officials more time to decide which programs go first if cuts are necessary, Ioannidis said.
But no matter where the money comes from, school officials say the budget forecast ahead is a challenging one.
"It's going to be more and more difficult to reduce costs and maintain a level of service that is commensurate with what the community expects," Ioannidis said.
— Reach Nikelle Snader at firstname.lastname@example.org.