Preliminary budget shows $2.5 million deficit

The Northgate School Board got its first look at a proposed 2018-19 budget during a special workshop meeting Monday night. The $25.1 million general fund spending plan currently features a deficit of $2.5 million, which is likely to change before the final budget is adopted in June.

The board has not yet stated publicly whether it intends to increase property tax rates in the coming fiscal year. The current millage rate of 24.7867 is now the eighth highest in Allegheny County, according to business manager Chris Ursu. Under state law, Northgate can increase its tax rate for 2018-19 by only .7923 mills, which is projected to garner another $351,091 in revenue.

The current proposed budget shows the deficit being made up with revenue transferred from Northgate’s $11.5 million reserve fund, and also projects spending nearly $1.5 million from that fund on capital improvements.

The conservative budget is similar to those from past years that historically have projected deficits but later ended in budget surpluses. Ursu said that a deficit of more than $300,000 was projected for 2017-18 when, in fact, according to superintendent Dr. Caroline Johns, the district will realize a surplus of more than $600,000. In the 2016-17 fiscal year, the district ended with a surplus of nearly 1.5 million.

Ursu attributed the deficit to declining revenue – notably a decrease in federal contributions and the potential end of the five-year Keystones to Opportunity grant – and the increased cost of salaries and benefits, charter school tuition and Beattie vocational training fees.

He noted that the district relies heavily on local tax revenue, which accounts for about 60 percent of the funds received each year. The state contributes about 38 percent, while the federal government contribution is just over 2 percent.

The capital improvement projects the district hopes to fund this year are a small part of the roughly estimated $40 million cost that Northgate will face in the next decade. The district will pay off its current bonds in 2021, and officials anticipate additional borrowing to fund capital projects. The projects included in the 2018-19 budget are the roof, exterior lights, exterior doors, auditorium lights and electrical work at the high school, the transformer, air handlers and chairlift at Bellevue Elementary, and outside walls at Avalon Elementary. Johns said that these projects have been designated as a top priority for the district, and repairs cannot wait.

One item not included in the capital program for the next year is the replacement of the lights and light poles at Alumni Stadium. Last year the district rented the stadium in North Park so that the football season could roll out under “Friday night lights” after the light poles at the Bellevue field were determined to be unsafe. Next fall, the football team will play its home games on Saturday afternoons.

Of potentially more concern to district officials is a projection by Ursu that shows the reserve fund balance dwindling from its current $11.5 million to a potential $2.5 million by as early as 2023.

Fund balances are separated into committed, assigned and unassigned amounts. For instance, of the $11.5 million in Northgate’s fund balance, all but $2 million of it is assigned to expenditures such as making up the general fund deficit, capital improvements and pension obligations. Ursu’s projection is based on a variety of unknowns, such as future budget deficits, capital expenditures and additional sources of funding. He projects future budget deficits of between $1.5 and $2 million through the 2021-22 fiscal year. At that point, according to the projections, the total fund balance will be $2.5 million, and the unassigned total will be $816,614.