Octorara Area School District 2017-2018 Budget Presentation Update January 16, 2017

Octorara Area School District Items to Consider: Act 1 Index Opt-out Resolution Apply for Exceptions and Pass Preliminary Budget State Funding – Budget no Increase in 2017-18 Use of Fund Balance/Tax Increase/Budget Reductions Elimination of Property Tax Revenue In December we saw the first iteration of the 2017-2018 budget. We reviewed the increases in costs and growth of revenue within the act 1 index and decided to pass an opt out resolution that any tax increase would not be higher than the act 1 index. We also discussed budgeting for revenues and saw that our act 1 index raises an additional approximately $1,000,000 of revenue, however we also discussed the budget strategy of budgeting for no increase in basic education and special education state subsidy. We then ended our discussions at item number 3, how to address the budget deficit…. Through use of fund balance, tax increase, budget reducitons or a combination of all three. Now we have a new item to consider as we work on the 2017-2018 budget, the elimination of the school property tax.

Early Estimate of State Funding Currently the budget includes no increase in State Funding for Basic Education Subsidy, Special Education Subsidy, and the Ready To Learn Block Grant. State Budget is more than $260 million behind in revenue for the current fiscal year PASBO projections range from $0 increase to no more than $100 Million in Basic Education Funding combined for all schools. ($100 Million increase = Approximately $115,000 increase for Octorara) Lets go back to the state funding to review what we know about increases in state subsidy. Currently our budget includes no increase in state funding for basic education subsidy, special education or the ready to learn block grant. The Pennsylvania State budget for this fiscal year is more than $260 million behind in revenues. Projections show that the state could run $600 million short in revenues for the fiscal year. So, how does this effect us? PASBO leadership is recommending that we continue consider budgeting for no increase in state fund, however at the best we would see a $100 million increase in basic educaiton subsidy state wide which would = approximately $115,000 in new subsidy.

Debt Service Savings Also have new information about our long term debt since we last discussed the budget. The closing of the 2016 and 2017 bank notes, along with the refinancing finalized last fiscal year we will save a combined $1.4Million in net debt service over the next 15 years. Our net debt service savings for this current fiscal year is now $576,596. for the 2017-2018 budget year we were originally estimating the savings to be close to $300K however with the structuring the way it finalized our savings are $231,510 however in total we are saving $1.4 Million compared to the $1.1 Million we expected this fall.

2017-18 Final General Fund Budget Summary Total Revenues $52,370,890 General Fund Budget Document Total Expenditures $53,605,175 Deficit ($1,234,285) Anticipated Budget Results Budget Contingency $350,000 Debt Service Savings $231,510 Anticipated Use of Fund Balance ($652,775) The finalization of the debt refinancing does not change our budget document, however our anticipated budget results do change. With a 3.2% increase in real estate taxes our General Fund budget will show $52.4 Million in revenues and $53.6 Million in expenditures with a budgeted deficit of $1,234,285. However we do not anticipate having a $1.2 million deficit since we know that we will have approximately $230K in one time debt service savings and we do not anticipate using the budget contingency of $350,000 resulting in a deficit of $652,775

Elimination of the State Property Tax Last time this was voted on in the State Senate session the school property tax elimination bill lost by one vote Two Senators who did not support the bill have been replaced Both Chambers of the General Assembly (in particular the Senate) have indicated that school property tax elimination will be a priority issue in the new session Current state property taxes raise approximately $14 billion annually Possible tax increases in new legislation include raising state sales taxes from 6% to 7% also the sales tax will be applied to a wide rage of services and products now exempt The personal income tax would increase from 3.07% to 4.95% for all state taxpayers Property tax elimination

Elimination of the State Property Tax School Districts will still send out annual tax bills for current debt service only (approximately 19% of current tax bills for Octorara Area School District) School Districts will be PROHIBITED FROM INCURRING NEW DEBT without a referendum – little chance for short term borrowing for cash flow purposes Very little new information about costs as of our last Board meeting in December. However we do have some news regarding our revenue budget. Currently our budget includes no increase in state funding for basic education subsidy, special education or the ready to learn block grant. The Pennsylvania State budget for this fiscal year is more than $260 million behind revenues. Projections show that the state could run $600 million short in revenues for the fiscal year. So, how does this effect us? PASBO leadership is recommending that we continue consider budgeting for no increase in state fund, however at the best we would see a $100 million increase in basic educaiton subsidy state wide which would = approximately $115,000 in new subsidy.