York County school districts brace for $1 million or more budget hits
York County school districts are grappling with estimated losses of between $1 million and $3 million in local revenue for the 2020-21 school year.
Hannah Barrick, assistant executive director of the Pennsylvania Association of School Business Officials, said in the best-case scenario, districts across the state will collectively see an $875 million loss in revenue.
But that total could reach more than $1 billion — out of the $18 billion in local revenue that districts receive annually in Pennsylvania, she said during a media call in May.
In York City, the school board is considering increasing taxes to its state-assigned cap of 4.2% — the first tax increase since 2012 — and making a number of tough cuts.
Those include eliminating 44 positions, freezing salaries for most employees and eliminating some programs. The York City School District's preliminary budget is up for approval Wednesday night.
Most districts are expecting the biggest losses in earned income taxes, with additional losses in interim, transfer and real estate taxes and interest earnings.
"The biggest challenge we are facing this year is the uncertainty of the economic impact on revenues," West Shore Superintendent Todd Stoltz said in an email. "When people are unemployed, they are not contributing earned income tax and may be delinquent on real estate taxes."
Dallastown Area, estimating a local revenue loss of about $1.9 million next year, noted this would be the first time in 10 years revenue has fallen.
PASBO officials weighed in on the impact of local revenue on school districts, noting local sources make up the majority of district revenue, at 57.6% on average.
The districts most vulnerable to the economic effects of COVID-19 will be those that take the largest chunk of local funding, said leadership adviser Jay Himes.
These will likely be in largely suburban areas in the southeast or central part of the state, such as Allegheny County, he said.
In York County, many districts fall slightly higher than average — with between 60% and 70% of their budgets made up of local revenue. Central York at 73.6%, Dallastown at 71.9% and West Shore at 71% are even higher.
Real estate taxes typically deliver most of that revenue, Himes said.
“We are a property tax-driven state, and more than three-fourths of local revenue comes from property taxes,” he said.
Tax collection rates are projected to fall about 2.25% statewide — a $326 million decline overall — and it might not all happen in one fiscal year, but that does not change the dollar amount, said PASBO's director of research, Tim Shrom.
“This really is going to impact every district differently,” said Barrick, the association's assistant executive director.
Though 11 districts so far — including Southern, Dallastown Area, Red Lion Area and South Western — are considering, or have passed, budgets with no tax increase next year, not all districts are in a position to do so.
Spring Grove Area, Eastern York and York City were all considering maximum or near-maximum tax increases to preserve fund balances or prevent crippling deficits.
The first two have since walked back those considerations in favor of budgets with no tax increases. Spring Grove approved a final budget with no tax increase Monday, and a final budget for Eastern York is up for approval Thursday.
Legislation on a property tax freeze was approved in a state House committee earlier this month, but as of May 11 was not taken up by the House.
"The more important thing right now is to not make rash decisions until we see how it weighs out," said Dover board Treasurer Steve Cook, of planning a final budget.
Some districts locally have been modeling their budgetary projections based on data from the Great Recession of 2008, but what makes the COVID-19 economic downturn significant is its suddenness.
The Great Recession came on gradually between 18 months and three to four years, Shrom said. Historically, it was one of the longest recessions, and slowest in terms of recovery, he said.
And state statistics show Pennsylvania has already reached or exceeded many of those 2008 metrics in just six weeks.
Interest earnings for districts in the state fell from about $350 million in 2006-07 to about $25 million in 2013-14.
But Shrom projects the $145 million earnings in 2019-20 will fall to $34 million or lower in just the next year, based on federal interest rates dropping.
Northeastern noted that recent rate drops "wiped out" more than $300,000 of its earnings on investment revenue.
One thing that hasn’t changed is mandated costs — which are unaffected by economic downturns. Those costs have been rising for years and will continue to increase in 2020-21, as they were calculated based on budget numbers from 2019-20.
Two of the most pressing budgetary strains on local districts — charter tuition and special education costs — are expected to spike by $200 million and $300 million, respectively, Barrick said.
For example, Dallastown Area will see an increase of $220,000 in charter school tuition next year, and York City will see an increase of $2.5 million.
Barrick said districts will see some savings from temporary school closures, but they will be minimal — about 10% on total expenditures in 2019-20.
— This is part of a regular series at The York Dispatch. Periodically, Dispatch staffers will delve into a new topic that we believe deserves a Closer Look.