Penn Hills School District officials claim no tax hike necessary in next school year's budget

Penn Hills School District officials may have an opportunity to do something almost unheard of the past several years: not raising taxes.

“There won’t be a tax increase this year, and you can take my word on that,” board President Erin Vecchio said during a finance committee meeting Jan. 18. “People got $400 gas bills. Food is off the charts. They cannot afford (another hike).”

The board raised taxes three straight school years including a 0.5-mill hike for the current budget. The tax rate is 30.5965 mills.

The formerly financially distressed school district has some figures to back Vecchio’s declaration.

Recently hired Chief Financial Officer John Zahorchak said the district has a $14 million fund balance, or reserve fund. It also had about $36 million in the bank as of the end of last month.

Zahorchak reported district revenues came in $8 million higher in December compared to 2021 and expenses came in $5 million higher, leaving an estimated $3 million surplus.

State Sen. Jay Costa, D-Forest Hills, delivered the district a $1 million grant earlier this month. That money has yet to be added to the general fund.

Administrators are leaning heavily on the district’s fund balance policy, which states, in part, it will maintain at least 5% of its approximate $105 million operating budget in reserve, as a main reason a tax hike would not be necessary.

“The evidence does not support a tax increase,” Zahorchak said.

The 2023-24 school year would be the third straight year the district’s fund balance was above its policy.

“I think it’s fantastic,” Vecchio said. “I think it shows how hard we worked over the last five years. We’ve turned this district around. When I first got back on the board, they didn’t have enough money to pay for the light bills or anything. Now we’re sitting pretty. It’s all because of Jay Costa helping us.”

Zahorchak cautioned the board about financial planning for the 2023-24 school year being in its very early stages. He plans to provide several budgets with different scenarios so they can make an informed decision on the final spending plan.

“I think we have a due diligence to show them what it looks like without a tax raise, and what the impact of that is versus what it looks like over the next five years with a tax raise,” he said.

Zahorchak, Plum School District’s former business manager, joined Penn Hills in December. He took over for business manager Eileen Navish, who retired in late November.

Expected action

The school board was expected to adopt a resolution at its Jan. 25 meeting to keep any potential tax hike within the inflation-based state limit known as the Act 1 index.

“This is a very important first step in kicking off the budget process for the upcoming school year,” Zahorchak said.

Act 1, passed in 2006 to provide property tax relief, sets a tax cap for school districts to cover normal inflationary costs and still pass a balanced budget.

The maximum the district could raise taxes under the index is by 5.7%.

A hike to the max would be about 1.744 mills and increase the rate at about 32.3405 mills.

That means property owners would pay nearly $32.34 in taxes per thousand dollars of assessed value.

The district still has $2 million in federal Elementary and Secondary School Emergency Relief funds.

Zahorchak said the district’s preliminary budget, which is still being crafted, would have a $1 million shortfall without the ESSER money.

He told the board he was confident in being able to cut $500,000 in expenses and it exploring various options to raise revenues without a tax increase.

A preliminary budget is expected to be voted on in May. State law requires school districts to formally adopt their budgets by June 30.