Northgate budget blues

No matter what the Northgate School Board decides to do with the property tax millage rate in 2019-20, the district remains headed towards financial insolvency, perhaps even sooner than originally projected.

At a special meeting held Monday to discuss the upcoming 2019-20 budget, board members (minus Tim Makatura) and the three private citizens who attended received a break down of the current 2018-19 bud-get and projections for spending in 2019-20. With expenditures outweighing revenue, much of the focus was on how the district will use its reserve fund balance and how soon those back-up funds will be depleted.

Last year at this time, Northgate projected a $2.5 million budget deficit, and chose to make up the revenue with some of the projected $11.5 million fund balance. According to the report by business manager Chris Ursu, board member Amy Joy Robinson and finance committee chair Dan O’Keefe, Northgate ended up pulling $2.7 million from a fund balance during the current fiscal year that turned out to be less than the expected $11.5 million – only $10.3 million. Not all of that was to cover a budget deficit, however. Ursu noted that $1.6 million of fund balance money was spent on capital improvements, primarily the roof and lighting work at the high school. The total budget for 2018-19 was $25.3 million.

By the end of June, officials anticipate that the fund balance will be at $7.5 million. The preliminary 2019-20 budget totals $26.6 million, and concludes it will be necessary to pull $3.1 million from the fund balance, although not necessarily to make up a general fund revenue deficit. The board already has committed to spending $1.3 million in capital funds on the rehabilitation of Alumni Stadium and a new transformer that also will serve the adjacent Bellevue Elementary School. Ursu said that the budget anticipates using $1.8 million from the fund balance for capital improvements in the next fiscal year.

Last year, officials projected that the fund balance would be in the red within five years, leaving Northgate with no way to make up general fund deficits. They are now projecting that by the end of the 2019-20 fiscal year, the fund balance will be at $4.4 million, with $2.4 million of that sum set aside to cover a potential budget deficit in the 2020-21 fiscal year.

Ursu said that the fund balance will go to zero in 2022 even if the school board raises the property tax millage rate each year until then.

Although Northgate’s millage rate has not been increased since 2014, Ursu said, the district continues to boast one of the highest rates in Allegheny County, although other districts are closing the gap. Northgate’s rate is 24.79 mills, with each mill producing $442,640 in revenue for the district. Despite anecdotal evidence that property values in Avalon and Bellevue are increasing, the report indicates that the total assessed value of real estate in the district has decreased some $6.8 million since 2014. Officials attribute much of that decline to successful assessment appeals that followed Allegheny County’s re-assessment of properties in 2013.

Due to the state Act 1 limits on school district millage increases, Northgate can increase the property tax rate for 2019-20 by a maximum of 3 percent.

So how did Northgate get in this position? A number of factors come into play. The most frequently cited contributor is the lack of state and federal funding for programs mandated by the government. The gap between what revenue is received from the state and federal governments and the actual cost of providing the mandated programs and services is sizeable, and requires all school districts to rely heavily on local income, primarily from property taxes.

Northgate’s declining student enrollment also is negatively impacting the amount of funding received from the state.

Another drain on school districts across the state is the Pennsylvania School Employees Retirement System, which is underfunded. That has led to additional costs being passed on to school districts. Ursu said that the state has projected that the PSERS fund will not be balanced until 2044.

Finally there is the cost of charter school tuition. The home district is required to pay the tuition of any student who chooses to go to a charter or cyber-charter school. Northgate currently pays for 63 students enrolled in charter schools and budgeted $1.6 million for the 2018-19 fiscal year to cover that tuition. The amount is expected to increase to $2 million in the 2019-20 fiscal year, Ursu said. Of Northgate’s 63 charter school students, 13 are enrolled in special education programs. Ursu said the district also pays about $400,000 per year for students with severe disabilities who must attend private schools such as D.T. Watson.

And the solution? That is not quite as concrete as the problem. During the past year Northgate officials have begun working with the state school boards association in an attempt to generate grassroots lobbying in Harrisburg that could change how schools are funded. The district also has been attempting to supplement local funding with grants, and announced this week that Northgate has been awarded a $300,000 state grant for safety and security upgrades in its schools.

Christine King was the only board member who suggested an idea for increasing local funding. She said that she understood that property tax increases are a “significant burden” on people with fixed incomes and even those trying to sell their properties. She suggested some type of homestead exclusion program that might allow the district to increase taxes on commercial properties while shielding those that are owner-occupied.

The board is expected to present a preliminary budget at its May 13 meeting, at which time it will have to decide on a proposal for the tax millage rate. The final budget must be adopted by the end of June.