State College, PA - Centre County - Central Pennsylvania - Home of Penn State University

SCASD Prepares for Revenue Losses, No Tax Increase in 2020-21

by on April 07, 2020 3:21 PM

State College Area School District is preparing for millions of dollars in revenue losses over at least the next year and a half as a result of the economic impact of the coronavirus pandemic.

District administrators are in the process of planning for ways to offset a $2 million drop in projected revenue for the current fiscal year, as well as about a $9 million decrease in projected revenue for 2020-21, finance and operations officer Randy Brown said during Monday night's school board meeting. For next year, the district is now proposing no real estate tax increase, as opposed to the previously planned 2 percent increase, which in itself will create a multi-million dollar loss in projected revenue.

For the current fiscal year, earned income tax revenues are expected to decrease by about $850,000, from a projected 2.5 percent growth to a potential 2.11 percent loss. The remainder of revenue loss is expected from decreases in transfer tax, delinquent and interim tax collections, CEEL revenue and miscellaneous revenue mostly related to facilities rentals.

Administrators have used data from previous economic downturns and have worked with tax office professionals to identify projected losses, but much still remains to be determined.

"We would like to say this would be worst-case, but we are not sure," Brown said. 

Lost revenue won't be able to be transferred to capital reserves, and administrators are no longer recommending a $7.3 million transfer to capital reserves. Instead, $1.3 million will be transferred and the remaining $3.9 million in available fund balance generated this year will be assigned and remain in the general fund to help with shortfalls in 2020-21.

For 2020-21, no tax increase combined with reductions in assessed values and a 2 percent drop in collections is projected to result in $4.9 million less revenue than previously anticipated. Other losses come from projected continued decreases in earned income tax revenue, transfer tax, delinquent and interim tax collections and interest rates.

Brown said the longer Penn State does not have students on campus, the greater the ripple effects will be.

"We believe the longer… Penn State University is out of school and there are not students in town, or prospective students in town, or Blue-White attendees in town, we will have problems with real estate, with earned income tax. We will have transfer tax issues."

In addition to having no capital reserve transfer next year, the district is planning to eliminate $1.1 million in proposed additions. It is, however, planning to add $500,000 to health care insurance in anticipation that spouses may need to return to an employee's plan because they lost their own coverage. An additional $300,000 is allocated for instructional costs for remote learning, particularly for special education students.

Even with the expense reductions, the proposed budget as it currently stands would have a $2.5 million shortfall between revenues and expenses. Brown said that the administration is "committed to reconciling that" and will begin presenting additional proposed cuts and expense changes to balance the budget at the next board meeting on April 20. School districts in Pennsylvania are required by law to pass a budget by June 30.

Superintendent Bob O'Donnell said that as a first step the district's administrative team has voluntarily agreed to forgo the salary increases in their contracts for the next year. That includes 36 administrators: O'Donnell, Brown, assistant superintendents, and all directors and principals.

"Just like when we went through some really tough times in 2011, we want to keep the negative impact away from the kids," O'Donnell said. "We’ll continue to look around the district as best we can to have the least impact on student experiences."

Because of the statewide stay-at-home order and social distancing measures, Monday's school board meeting was held virtually, with members attending via Zoom. The meeting at 7 p.m. on April 20 also will be held virtually, and the public can join by registering here. School board meetings are also broadcast live on C-NET's education channel, which can be found on cable channel 98.

Geoff Rushton is managing editor for Contact him at [email protected] or find him on Twitter at @geoffrushton.
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