State College Area School District is planning a 3.5% tax increase as part of a $221.6 million budget for 2026-27, according to a presentation at Monday night’s school board meeting.
The proposed increase, which is the maximum allowable this year under the state’s Act 1 index, equals about 1.85 mills and would provide an additional $4.6 million in revenue.
The budget projects $214,497,441 in revenue, a 3.4% increase from 2025-26, and $221,559,604 in expenses, a 4.4% increase, according to the presentation by Finance and Operations Officer Randy Brown and Assistant Business Administrator Joe Viglione. The ending unassigned fund balance would be about $13.2 million.
On the expense side, personnel costs remain a primary driver of increases. Contracted wages have grown by about 5.5% per year since 2023 and are projected to be $99 million in 2026-27. Health insurance costs, meanwhile, have increased by about 10% per year during that time and are expected to total $22.3 million in the new budget.
“The growth in personnel costs, whether through the addition of staff or contract increases, impacts the dstrict’s ability to remain competitive in the employment market,” Brown, Viglione and Superintendent Curtis Johnson wrote in a memo to the board. “The district’s investment in staffing enhances its ability to retain existing employees as well as attract new employees. The inflation that occurred at the exit of the pandemic has significantly impacted the wage levels for the district.”
Special education enrollment increases and mandates that the state does not provide additional funding for also contribute to the budget pressures, according to the presentation. State funding grew by only 9% over a period in which special education enrollment grew by 26% within the district, Viglione said.
The district anticipates it will need to hire one to four new staff members to meet ratio mandates for special education, Johnson said.
The budget includes an increase of about $1 million for deferred maintenance. Five new positions are also proposed: a 0.17 full-time equivalent middle school science teacher to cover an additional science class; two new custodians to maintain the additional 40,000 square feet added at Mount Nittany Elementary School as part of a renovation and expansion project to be completed in August; and co-ed hockey and co-ed rugby club coaches.
For income, local revenue makes up nearly 80% of the budget at $170.3 million, with $134.5 million from real estate tax, $24 million from income tax and $11.8 million from other local revenue.
With the commonwealth’s budget not expected until the end of June at the earliest, total state funding — which represents 19% of the district budget — is assumed to increase by $300,000 to $42.7 million, with the basic education subsidy of $13.88 million remaining unchanged. The increase is largely due to an adjustment in state employee retirement and Social Security reimbursements.
Federal support is anticipated to decline by about by $217,000 to $1.475 million.
One-time injections buoyed the district’s 2024-25 revenue above projections, including the highest real estate transfer tax and interim tax revenue of the past decade, higher-than-budgeted investment returns and an additional basic ed subsidy from the state in its late budget.
But those can’t be counted on for the future, and reverted to align with projections in 2025-26.
The growth rate for assessed values used for real estate tax is dropping due to assessment appeals “by various commercial businesses,” Brown said, resulting in a $1.1 million revenue decrease in 2026-27. State funding has not kept pace with inflation, and federal funding has gone back to historical levels after a multi-year spike because of the COVID pandemic.
Combined with rising expenses and limitations on revenue sources, the district, as it has for several budget cycles, expects to face continuing budget pressures in the coming years.
“We’re not talking to you about a budget problem. We’re talking to you about a budget challenge,” Viglione said. “We’re still in a solid place, but there are challenges ahead of us and decisions that are going to need to be made over the course of the next year or years to make sure we stay in line and meet what our responsibilities are not only from a district lens, but also from a state and federal lens.”
The school board is scheduled to vote on approving the proposed budget at its April 20 meeting. A public hearing on the final budget will be held on May 18, and the board will vote on adopting the final budget on June 1.
