Understanding the Budgeting Process

Posted by Richard H. Faidley on 4/1/2016

Understanding the Budgeting Process

As we work to develop the District’s 2016-2017 budget, I thought it would be helpful to provide an overview of the budgeting process.  For more information on this process click on following link - https://www.youtube.com/watch?v=72hP9HUQQ6w

When looking at the budgeting process it helps to start by first looking at the revenue side. Funding for public education comes from local, state, and federal sources. Traditionally, federal funding sources represent a relatively small portion of total education funding. For the Boyertown Area School District federal funding represents a little over 2% of the annual budget. Approximately 30% of the Boyertown Area School District’s revenue comes from the Commonwealth. This compares to an average of about 43% in other states.  The balance of the Boyertown Area School District’s revenue, approximately 68%, comes from taxpayers in the form of various taxes including property tax, earned income tax, and local services tax.

For the Boyertown Area School District the four largest expenses are salaries, benefits, debt service, and transportation. It is important to note that these expenses are either contractually negotiated, such as teacher salaries and benefits, or are mandated by the State, including the Public School Employees’ Retirement System (PSERS). For the 2016-17 fiscal year, the employer contribution rate will be 30.03%, up from 25.84% in 2015-16.  The good news is that the state does provide a 50% subsidy to the Boyertown Area School District to offset the expense of the employer contribution.   The net expense to the District next year is $1.3 million.

Another costly benefit for the Boyertown Area School District is health insurance. In 2010 the District made the decision to become self-insured. In becoming self-insured, the District collects its own premiums and is financially responsible for paying claims for medical and prescription expenses. Since becoming self-insured the District has been able to keep premium increases to the single digits. We anticipate a 5% or approximately $565,000, increase in the cost of health insurance for the 2016-2017 school year.

In October, the Boyertown Area School District’s Board of School Directors passed a resolution to not exceed the State’s Act 1 Index of 2.9%. If the District does raise taxes to this index, the total amount of revenue is estimated at $1.6 million.  By doing this, the Board and Administration not only promised taxpayers that they would keep any tax increase to under 2.9%, they established a realistic timeline for developing the District’s 2016-17 operating budget considering the 2015-16 budget difficulties in Harrisburg. The preliminary budget is scheduled to be adopted by the Board by May 2016 with a 30-day community review period to follow. The final operating budget will adopted at the June 14 board meeting.

To help residents further understand the budgeting process, we will be creating a series of YouTube videos called Budget Basics. Links to these videos will be posted on the District’s website and Facebook page.