BASD weighs tax increase, other solutions to address rising costs

BETHLEHEM, Pa. — Early in its budget process for the 2024-25 academic year, Bethlehem Area School District is facing a significant gap between revenues and expenses, officials said Monday.

The school board was told the district projects revenues of $342 million and expenses of $353 million, making for more than an $11 million gap in the budget.

The board pondered what the future holds — a tax increase, dipping into the district fund balance or cutting expenses to balance the budget — or even a mix of all three, depending on state aid amounts.

It’s only March, so nothing is final just yet.

Another budget update is expected to come April 15, with the plan potentially seeing preliminary approval on May 13 and final approval by June 17.

Here are a few highlights of potential school district spending for next school year, as told by Chief Financial Officer Harry Aristakesian:

• Salaries and benefits are the biggest line items, followed by charter schools and debt service
• $8.5 million more in overall state revenue
• 98% of funding coming from state and local sources
• $15-20 million in debt for new Fountain Hill Elementary School
• “Huge potential" for more money through state Basic Education Funding, as well as through an additional $50 million in statewide special education funding with Gov. Josh Shapiro's proposed budget plan (See pg. 3)
• BASD cyber charter tuition in FY25 expected to be $15,314 per student and $35,104 per special education student
• Cyber charter reform proposal from state could mean tuition cap of $8,000 per year for each non-special education student
• The district in the meantime accounted for a potential $10,000 cap on cyber charter tuition, which, if fulfilled, could lead to $2.5 million in savings
• BASD special education tuition could drop from $35,104 per student to $27,790 per student — including a $3.5 million savings from the governor’s proposal

Potential tax increase

The school district hasn’t raised taxes in four of the last five years.

Aristakesian said a 1% millage hike would come with $2.645 million more revenue for the district, as well as average a property tax increase of $36 each for Northampton County taxpayers and $26 for Lehigh County taxpayers.

A rough consensus on Monday showed board support for a potential 2% increase for the incoming year’s budget.

Board President Michael Faccinetto said he felt the cyber charter tuition estimates in the preview budget were “overly optimistic.”

And he said that since state lawmakers didn’t finalize education spending until nearly the end of last year, raising taxes would be the proper move, considering the potential uncertainty.

“I’m leaning toward that we need to increase taxes at some modest rate, and two percent is where I’m thinking at the moment,” Faccinetto said.

“Maybe we end up at one [percent] because we get more commitments out of the state.

"And it would be wonderful if they could pass an education budget or commit to it by June, but I don’t think that’s going to happen.”

Aristakesian said more dialogue would take place internally and among legislators in the meantime.

Looking at a mix

Board member Michael Recchiuti said he agreed with Faccinetto, saying a mix of a “modest” tax increase, dipping into the fund balance and decreasing expenses could be a reasonable solution to the budget gap.

“If you’re envisioning about eight million additional dollars through Basic Education Funding, that’s the equivalent of [a] four-percent millage rate increase,” board member Karen Beck-Pooley said.

“If I’m reading that right, that’s just an important comparison to point out.

"And the reason why these additional state dollars are so important [is] that has real implications for the burden that’s placed on our own taxpayers.”

Extra money from increasing taxes could cover capital projects to prevent some future borrowing, especially in the case of more money than expected coming from the state, officials agreed.

“I’m glad to say I don’t see [a tax increase] as a need for regular operating expenses,” Superintendent Jack Silva said.

“Any tax increase I would suggest would be a year-over-year planning of subsequent budgets to be able to get to the capital plan.”

Current spending

For now, officials agreed the current year’s spending has the district in good shape.

Here are some highlights in that regard:

• About 50% in federal funding used
• Brought in 80% of anticipated revenue
• 95% of local revenue, meaning majority of real estate taxes have been collected; delinquent taxes could fill the gap
• Just under 66% of expenses covered
• About 51% of state revenue sources; transportation subsidy is lower on the revenue side than expected, but an increase in investment earnings and local revenue could fill that gap.

“Given that we have a third of the year left, we’re right on par where we should be,” Aristakesian said.

“So barring any emergencies, again, we should be in pretty decent shape.”

Silva said the budget falls in line with the district's priorities, which include maintaining positive school safety and positive culture, strengthening grade level achievement, improving attendance, supporting college and career readiness of graduates, honoring labor agreements and operating within the long-term facilities plan.