West Chester Area School District 2007-08 Budget Message
The West Chester Area School Board adopted the district’s final budget for 2007-08 on June 5, 2007. Totaling $185.6 million, the budget represents a 5.2% increase over last year’s budget of $176.4 million. The real estate tax rate for Chester County is set at 15.79 mills, or a 4.1% increase over the prior year’s tax rate of 15.16. For the average Chester County homeowner with an assessed value of $189,000, the new rate equals a $119 increase in taxes.
The district’s tax rates have historically been among the lowest in Chester County. For example, the tax rates this year in the other 11 Chester County school districts range between 3% and 100% greater than the rate for West Chester.
It is also important to place the 2007-08 tax increase in historical perspective. The chart on the next page shows a comparison of the average annual increases of all school districts in Chester County over the past eight years. West Chester was third lowest among all districts in the county with a 4.6% average increase over that period. At 4.1% next year, we are only slightly above that average.
The district’s comparatively low millage increases are especially noteworthy given the major high schools’ renovations and construction projects that got underway in 2001-02 and reached completion last year. This capital improvement program was the largest undertaking of any school district in the state. Not only did the district fund construction totaling $238 million, it also funded staff, equipment, and other costs required to open our new third high school.
The school district also serves students in Thornbury Township, Delaware County. The state-set formula for dividing the millage between Chester and Delaware Counties resulted in three tax decreases in Thornbury Township over the past five years, including a 5.4% tax decrease for last year.
In 2007-08, however, the formula requires an increase from 11.02 to 11.87 mills, or 7.7% for residents of Thornbury Township, Delaware County. For the average homeowner with an assessed value of $285,000, this equates to an increase of $242.
It is important to note that tax increases in Delaware County, when spread out over the past six years, compute to only .53% per year, or $17. It is also important to keep in mind that Thornbury Township residents pay far lower taxes than their counterparts in other Delaware County school districts. In fact, the 2007-08 millage rate ranges from 16 % to 65% lower than the 2006-07 rates for other Delaware County school districts.
School District Budget Complies with Act 1 Mandates
Act 1 of 2006 places a 3.4% cap on real estate tax increases for 2007-08. This cap represents an inflationary index that is the average of the SAWW, or Statewide Average Weekly Wage, and ECI, or Employment Cost Index for Elementary and Secondary Education. Budgets that exceed this cap must go before the electorate for approval.
In setting the cap, however, the state legislature recognized that school districts cannot control costs in some areas. These costs have historically outpaced the rate of inflation in the general economy, with every expectation that they will continue to do so. Therefore, Act 1 permits school districts to seek exceptions to the cap in specified areas only. The district budget qualifies for exceptions related to cost increases in special education, Pennsylvania State Employees Retirement System, contractual health care benefits and debt service. To stay within the 3.4% millage increase cap it was only necessary for the district to utilize the exception for special education services. The state approved a $1.1 million exception for special education in which costs are expected to exceed $22 million or 7% over current year.
District Aims to Minimize Costs
Including the costs for which exceptions are sought, increases to the overall budget are reflected in several key areas. Through strategic management of financial resources and other initiatives, the Board and Administration have reduced these increases as much as possible.
District Focuses on Employee Benefit Costs
The district has worked aggressively with our health care providers to obtain the best possible prices available in the industry. To better manage our risks, for example, we are paying only for actual claims and for services rendered in connection with those claims. We have also lowered the costs of our prescription drug plan by adding a mail order component. We have improved the management of worker’s compensation claims through the creation of a Work Safety Committee. These changes have been coupled with negotiated contracts that include employee cost sharing of benefits. As a result, our employee cost sharing currently ranks among the highest in Chester County. By December 2008, 10% of our benefits costs will come from our employees.
As a result of these efforts, costs in the health care area are budgeted to rise only 9% in 2007-08 over projected costs for 2006-07. By contrast, the overall economy is experiencing double digit increases in this area.
Other Cost Savings Initiatives
The district has managed the cost of salaries through a process that combines attrition with the employment of staff who are highly qualified but on a lower step of the salary scale. Still, this area in combination with benefits continues to occupy the largest portion of the expense budget. In 2007-08, 63% of the budget is allocated to salaries at $86.2 million and benefits at $31.0 million for 1,474 employees. Salaries are up $3.8 million, or 4.6% over last year. In addition to negotiated contractual obligations, the increase funds 14 additional special education staff, close to 8 regular classroom teachers to support enrollment increases on the high and middle school levels, and other instructional supports to help the district meet the mandates of No Child Left Behind.
General economic conditions have impacted other areas of the budget. Included are utilities, which are up 10% in the 2007-08 budget. The district is not permitted to seek exceptions in this area, which includes electric, water, sewer, and fuel. Some fuel costs have been offset for next year by putting transportation services out for national bid and negotiating far more competitive contracts as a result.
Curriculum upgrades and the staff training that accompanies them are scheduled on a rotating cycle to ensure not all areas are subject to revision in the same year. Thus, the impact of this major budgetary item in any one year is minimized as much as possible. Proposals next year are budgeted at $1.4 million and cover curriculum improvements in various subject areas at the elementary, middle and high school levels.
The district’s secondary schools’ additions and renovations project has also impacted the budget, but the cost has been phased over a number of years to avoid a large increase in any one year. As illustrated in the chart, the district has adhered to this phase-in plan with some modifications beginning with the 2002-03 school year. The phase-in continues through 2009-10 to cover not only the high schools’ renovations and expansion plan but major renovations to Fugett Middle School as well.
The cost of debt service in general has been minimized as much as possible by the district’s ongoing high Aa1 rating from Moody’s Investors Service. This rating, which is a testament to the district’s financial health, places it among the top five in the state in terms of credit risk. It has enabled the district to borrow new money at the lowest possible interest rates. In addition, sound fiscal management of our financing program has resulted in a number of refinancings of our bond issues. Last school year, savings from these refinancings totaled $2 million.
District Compensates for Lower Revenues
The 2007-08 budget reflects a declining loss of revenues due to a significant slow down in the real estate market. At the highpoint in the real estate market, reached in 2002-03, the district experienced a $280 million increase in the tax base. This year the increase is budgeted to be only $89.4 million, a 68% decrease over that highpoint. Some of the district’s local tax collections related to real estate activity have fallen significantly as a result.
The state also has not kept pace with increasing costs in its subsidy to school districts. In 2007-08, student-based subsidies from the state are up $377,000, or 2.1%. This increase is below the cap of 3.4%. Costs in necessary services to our students, if they fall above the cap, must be cut in order to make up for the shortfall from the state.
On the plus side, the district has funded improvements to programs and services through several grants, including one that has supported initiatives in educational technology and another that has funded the purchase of equipment to make our buses more environmentally friendly. These grants have enabled the district to introduce major improvements without a corresponding increase in the local tax rate.
The district has also maximized its cash flow for local tax revenues through a change in the procedure for collecting earned income taxes. This change has permitted the more efficient use of financial resources.
Budget Retains Reputation for Excellence
In the overall budget, the School Board and Administration have met the challenges of increased costs and reduced revenues through sound fiscal management. The resulting budget builds upon the district’s historic reputation for excellence while taking into account the needs of the taxpayers and the requirements of Act 1. The district’s continuing health is illustrated through numerous student, staff, and program awards every year. Most notably, for the second consecutive year in 2005-06, West Chester was among the top 16% of all school districts nationally to receive the top rating of “Gold Medal District” by the monthly Expansion Management Magazine, directed to executives of companies actively looking for a place to expand or relocate. In 2005-06 West Chester was also one of only two districts chosen by the Pennsylvania School Boards Association for a Schools of Excellence in Technology Award. These are two of many distinctions that point to a commitment to excellence. The community can look forward to continued prosperity with a public education system that is well positioned to meet student needs for years to come.
