Northgate projects financial doom

With a reworked spread sheet that predicts financial doom for the Northgate School District even sooner than previously estimated, school board members heard another argument at their Monday night meeting for increasing property taxes this year and every year for the foreseeable future.

Last week the board voted 5-4 to maintain the current millage rate of 24.7867 mills, the eighth highest in Allegheny County, for the preliminary 2018-19 budget. They rejected a proposal by the finance committee to increase taxes by 3.2 percent this year, a year earlier than officials expected to start a series of annual increases to offset projected budget deficits. That increase would produce a mere $350,000 in additional revenue to chip away at a projected $2.5 million budget deficit in the upcoming fiscal year.

The estimated deficit can be made up with use of the district’s reserve fund balance, which currently stands at $11.3 million, or some 43 percent of the district’s operating budget. Experts traditionally like to see fund balances at the 20 percent level, although others argue that looking at the entire fund balance is misleading, because much of the fund is assigned or committed to future uses that are considered exceptions, such as pension contributions and capital improvements. Northgate has assigned all but $2 million of its fund balance, which is exactly where the unassigned balance has to be in order for Northgate to be allowed under state law to increase taxes this year. An unassigned fund balance of more than 8 percent of the general fund balance triggers state law's prohibition of a millage increase.

The new budget projections presented by finance committee chair Dan O’Keefe and business manager Chris Ursu add an assigned fund balance expenditure of $100,000 to capital improvements, the amount O’Keefe said is normally what the district pays for maintenance each year. The board currently anticipates a $10 million bond issue to pay for future capital projects. The current proposed budget sets aside $1.5 million for building projects deemed immediately necessary.

Despite the fact that the projections include 3.2 percent tax increases beginning in 2018-19 and continuing each year through 2024-25, it does not show Northgate financially surviving that period. With future budget deficits predicted to range from $1.5 to $2 million, the worksheet shows Northgate operating at a loss by 2023-24, when the fund balance is estimated to be $354,815 and the district lacking $2.1 million in funds necessary for a $27.6 operating budget. By the following year, Northgate is pictured with a $4.8 million operating fund deficit and no reserve funds to make up the difference.

O’Keefe admitted that increasing taxes this year simply buys the district one more year before it does not have the money to pay for its schools. Board member Michael Rajakovic said that the extra year, however, gives the district, and others across the state in similar financial straits, to lobby the state government for increased subsidies.

“Even one year can buy us a legislative change,” Rajakovic said.

O’Keefe added that there is always a legislative effort to eliminate property taxes and it is proposed that school districts will be locked into the current level of funding if that happens. “What rate do you want it to be?, he asked.

The alternative is the fate faced by any number of school districts in Pennsylvania. The options include a forced merger with another area school district, or closing one or more of Northgate’s schools and consolidating the schools or sending high school students to another school on a tuition basis. Solicitor Patricia Andrews said that while the state requires a school district to have an elementary school, it does not mandate there be a high school.

“I just don’t see putting it off a year benefiting anyone,” said board member Shannon Smithey, adding that the only reason she was hearing from those opposing a tax increase this year was that they just didn’t want to do it. Board president Gary Paladin said that his reason for opposing a tax increase was very clear, and it was because the reserve fund balance measures 43 percent of the operating fund budget.

The proposed budget is on display to the public through the school district. A vote on the final budget – and tax rate – will take place at the board’s meeting in June.