Friday, January 14, 2011

P-G: No big tax rate increase foreseen in Mt. Lebanon

Mt. Lebanon School District taxpayers can probably expect a small -- or no -- property tax rate increase for the next school year.

The district should be able to keep its tax rate increase for 2011-12 within the 0.37-mill maximum allowed by the Act 1 index, finance director Janice Klein told the school board Monday night.

That is her recommendation after initial budget planning for the coming school year.

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5 Comments:

Anonymous Anonymous said...

The School District will be
permitted to submit referendum exceptions to PDE or the Court of Common Pleas. PDE will
only approve referendum exceptions if the school district demonstrates a need for exceptions
by adopting a balanced preliminary budget that contains a tax rate increase in excess of the
school district’s index.

The Court of Common Pleas does not require the same demonstration. David Huston

January 14, 2011 11:43 AM  
Blogger Bill Matthews said...

"Small -- or no -- property tax rate increase" is a welcome outlook for 2011-2012.

Dr. Steinhauer's plans to accomplish this will be of great interest.

Will the expense categories he forecast just a few months ago with 0.0% increases hold at 0.0% or will we find that the 2010-2011 budget has enough room in it to cover all (or some) of the actual expense increases for 2011-2012?

Historically, we have seen significant surpluses fall out of School District budgets at year end. These surpluses go into our piggy bank, but because the surplus generating Revenue is baked into the budget, the following year(s) Expense lines have an opportunity to bulge a bit. While the District says things like this (from Ed Kubit, just about 1 year ago):

Being fiscally frugal, the Board has limited tax increases to 1% in each of the past two years and 0% the year before while maintaining the high quality of our educational programs.

Frugal -- Shmugal

Expenses continued to grow each of these years, but the millage rate was held down (in part) because of over taxation in earlier years.

So when the District says "No New Taxes" -- look at the details -- If expenses are increasing at the same time -- we might consider ourselves previously "Overtaxed."

As Mr. Allison once told me: "there are no magic beans" in the Superintendent's desk drawer.

January 15, 2011 9:18 AM  
Blogger Bill Matthews said...

Being Saturday morning and with the recent opening of School District Budget season, it is time to dust off some old analytics and see how things have changed since last year.

I do not yet have this week's budget forecast. But based on the Flag of Transparency flying over 7 Horsman Drive, I look for it to be posted on the website soon.

Not to be deterred ... for starters ... based on the September 14, 2010 ESTIMATED 5-year forecast ...

I took a look at the Compounded Annual Growth Rate (CAGR) for both Real Estate Tax (RET) revenues and Earned Income Tax (EIT) revenues from Fiscal Year 2000-2001 through ESTIMATED 2015-2016 (15 years).

Last year, based on early forecasts, I projected the CAGR at 4.82%. This year, based on the District's September forecast, I am projecting 4.56%. Ever so slight, there is a downward bending of the RET revenue curve. But remember, this is based on estimated 0.0% increases in several significant expense categories, a little early to be breaking out the champagne.

Now for EIT revenue. Last year I projected EIT CAGR, based on the District's forecast to be 2.53% for the same period. This year I project 2.45% using the District's September ESTIMATES. Ever so slight of a decline again --- and the direction is no cause for celebration.

The relationship between RET and EIT is the real issue that the District does not seem to get.

EIT revenue is a proxy for the real income of MTL taxpayers. RET revenues are a proxy for the School District expenses (as expenses go, so go real estate revenues).

RET growing over 15 years at a rate 186% greater than EIT is the "smarting" we all feel when we pay our school tax bill or the mortgage company ups our escrow. It is not just one year here and one year there that does it. It is the cumulative effect over all the years.

The divergence of EIT and RET is not sustainable and by the time the District wakes up it may be to late.

January 15, 2011 11:31 AM  
Blogger Bill Matthews said...

A final thought for this morning as I reflect on Real Estate revenues outpacing Earned Income revenues.

When someone suggests the District use "reserves" to hold down tax increases the District becomes indignant.

Newsflash Guys & Gals

If incomes are not keeping up with real estate taxes - WE have no choice but to dig into our reserves.

When the shoe is on the other foot ... why would one think it would fit any better?

January 15, 2011 11:47 AM  
Blogger Bill Matthews said...

"The Board has given (the) administration direction to further refine the budget so that it does not reflect any millage increase next year."

Whoopee.

Now, if the Board had given the administration direction that the budget -- taken as a whole -- should not reflect any EXPENSE increase in 2011-2012 vs. the 2010-2011 ACTUAL spend, that would be a very big deal.

This does not appear to be the case. The Board's direction only serves to indicate the Board is very much aware the 2011-2012 budget can still expand and be satisfied by the existing millage.

I am all for limiting the tax increase to zero - just don't tell me the Board is being frugal, unless we are actually reducing expenses as well.

January 19, 2011 11:19 AM  

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