Lehighton SD faces $3.8M deficit

A nearly $3.8 million deficit faces Lehighton Area School District in its proposed final 2019-20 budget.

Lehighton’s school board unanimously approved the proposed final budget Monday night.

Business administrator Patricia Denicola said the district plans to hold a public budget workshop to go over the spending plan line item by line item in early June. The board is scheduled to take a final vote on the budget on June 24.

“The board has had a desire to spend down the fund balance without a tax increase or cutting programs,” she said.

“If that number holds true, we would have to look at a tax increase in the future, look at our programs to see what we’re offering and take a hard look with each retirement to see if we need to fill that particular position.”

The proposed 2019-20 budget does not include a tax increase, however, a $3.8 million deficit would take the district’s fund balance down to about $200,000.

At the end of 2017-18, Lehighton used $2.2 million of its fund balance to level the budget.

It is projected to use $203,000 at the end of the 2018-19 fiscal year.

Director David Bradley asked the board to postpone the vote until the public could review what he dubbed “a $44 million entitlement program.”

“To approve this without stakeholder review is just another big rubber stamp,” Bradley said.

Several factors have added up to the projected deficit.

Medical costs, Denicola said at a finance committee meeting last week, have gone up dramatically, including specialty drugs, which have skyrocketed 107 percent, or a $222,000 increase.

Lehighton’s broker got a stop loss insurance increase down to 28 percent from 40 percent.

“We were fortunate for that, but it’s still a substantial increase,” Denicola said.

Seven high-cost claimants have reached the district’s specific deductible this year.

Lehighton’s board hired Denicola in February 2019 after Brian Feick, who was business administrator for five years, took the same position with Schuylkill Valley School District. The projected 2019-20 deficit, Denicola explained, can be partly attributed to different accounting practices between the two. In the past, she said, the district underbudgeted for real estate tax revenue and overbudgeted for delinquent tax collection.

“The district historically collected more tax revenue than it budgeted for, but with delinquent collections, it budgeted $1.5 million, but only took in around $875,000,” she said. “I can’t budget a number I don’t believe we will get. The budget I built takes into account how I feel we will actually perform.”

The district’s special education subsidy dropped from $1.6 million to $1.4 million without a decrease in enrollment numbers, leading staff to resubmit that information to the state Department of Education.

“I don’t know if there will be a correction window with the state for the 2019-20 budget, but we’re trying,” she said.

Lehighton also lost one-time revenue sources such as the sale of two elementary school properties, East Penn and Mahoning, it no longer uses. Both schools sold for $350,000 in 2017. The district has two elementary schools, Franklin and Shull-David, it is still looking to sell.

Despite the revenue challenges the district is facing, Denicola seemed confident the projected $3.8 million deficit should see some level of reduction.

“I do think we can work day to day to bring that to a more reasonable number,” she said. “Again, that comes through things like looking at retirements to see if we really need that position, and looking at our medical benefits. Negotiations with carriers, especially on the pharmaceutical side, could help us trend things in the right direction.”